All Forum Posts by: Paul Hitchings

Wholesale - the selling of goods in large quantities to be retailed by others.  

Hi Blake,

I didn't mean to suggest rental properties, but your post said you were focusing on them, and multi-family properties, by the best use theorem, are the best for cash flowing as rentals (unless you own a hotel or commercial property, etc..)

As far as how to fund the deal with a partner, that will be up to you. I simply put the idea out there so if you were thinking "how can I get the funds required for the next deal" you aren't stuck. You can also consider hard-money lending, but that is more of a short-term loan option, like for a flip or possibly BRRRR if you can get a bank to refi you out with no seasoning period.

As far as buying a home that you can do AirBnB from, it is certainly a creative strategy. Consider the "opportunity cost" of your investment, or the cost of investing in this home, vs. say a duplex of a similar price (which isn't fair b/c duplexes might cost more for a comparable quality). At any rate, if cash flow is the main goal, it makes sense to put your money where you get the most cash-flow. I don't know what the answer to that question is in your area. Quite often, the numbers on a quad, are better than a triplex, are better than a duplex, are better than renting a SFR. Though I don't include the AirBnB profits in that ordering. As a quick aside, moving the laundry is no big deal (relatively speaking, it will cost a few hundred dollars, maybe up to a few thousand)

Also consider that the AirBnB lifestyle will become a full-time part of your existence, especially considering you are living on site. Living with your tenants is not for everyone, short-term or otherwise.

Looking primarily at the AirBnB part, my question is what in the area makes your basement an attractive option for domicile? Are you near  a big city center or tourist attraction? Do you see many other rentals in the area, signifying some kind of demand? You have the supply but making sure demand is healthy is always the other half of a business proposition.

Sounds like your head is in the right place. Don't forget to talk to an accountant about the tax ramifications of your moves.

My 2 unlicensed cents :)

Good luck!

That is a really awesome project and result! I like that you had help with the down-payment and the 65% of ARV from a hard-money lender is also quite an achievement. I wonder what it would take for me, an unlicensed and underemployed person, to convince a hard money lender to give me 65% of ARV... Hmmmmm

How smoothly a short-sale will go depends on four things 1)buyer 2)seller 3)agent(s) 4)bank.  Let's presume that every option has three variants, good, average, awful. 3^4 = 81. There are 81 possible ways for your deal to turn out. Isn't math fun?

You will have to explain to the sellers the following; The key to selling a home, is for the buyer to envision themselves living there and enjoying their new life.  The more traces of "owner" that are present (including but not limited to the owners themselves), the harder it is for new buyers to see their future.  

In other words, you convince sellers that to get the most value, it is advisable that they are gone when  people look at the home. Some sellers, despite your best reasoning, will insist on being home. Okay, just be present with your buyers, keep things short and sweet, no big deal.

For added effect, tell sellers to put as much of their crap as possible in storage. Like everything. Every piece of art, every piece of furniture, as much as they can stand to get rid of.  No matter how nice they think their stuff is, better to have a blank wall than a picture of Aunt Betty. Now many sellers don't want to live like this, but every little bit helps in the real estate game. I ain't sharing no rookie tips, these are pro LPTs and are only for those with fire in the belly!

 Why not start small and offer to pay for moving and give him the entire deposit back no questions asked? No need to talk about large sums of cash unnecessarily. 

How much notice has he received and what kind of lease was he on?

Keep the home.  Invest in multi-family. Get a partner to help fund the next deal. Rehab your home and get an appraisal in a year or so and pull out equity to help fund the next deal.

Selling your home will not make a ton of financial sense at the moment and you haven't even begun to reap the rewards of home ownership.  Making a dollar will be harder tomorrow than today, and even worse, the dollar won't even be worth as much. So buying will become harder and renting will become a necessity. The market simply cannot keep up with demand, especially short spikes.  So even if demand is lackluster at the moment, give it time. Rentals will never go out of style in medium to large cities.  "But I want to sell it to get into another type of investment"  I know, but if you own it just a bit longer, you can leverage it to buy another investment anyways AND the more you own, the more the bank will let you get creative with your funds.  Just my 2c. Once talked to a tax professional who owns 150 homes. Buying and holding made sense for him. I often wondered if his tax knowledge led him to this conclusion... I met another guy who sold about 140 home during the peak of the market to start a foreclosure software company, which is only possible if you are a tech guru...so I vote buy and hold and buy and hold and flip and rehab and buy and leverage and partner and market and rinse and repeat :)

Your broker's counsel should be able to answer this. These are legal questions. As to how creative and effective they might be? I think the proof is in the pudding :)

If a buyer falls out, find a new one to take their place. It happens quite often and if the deal is moving smoothly, the new buyer might just appreciate not waiting for an entire 90 day escrow.  What are the legal ramifications? Depends on your contract and state laws. Do you have an attorney yet? As far as the 'non-competition', that can be tricky. You can have buyers sign pieces of paper, but they only hold up in court and only if your wallet can withstand the hourly rate of your attorney. Keys are typically received during closing, though every deal is different.  In general, I would make sure the investors are very interested in the home and not just kicking-tires.  You could also schedule showings when the owner is not there (generally it is best to avoid seller/buyer contact, when 3rd parties are involved).

I suspect your lease has a clause about criminal activity being grounds for termination. That being said, I suspect you still need to formally either evict the tenant or terminate the lease.  The details of the entire situation are such that only an attorney can truly advise on how to best proceed, but call an attorney you must, if you haven't already.  I would also fire your PM immediately. No reason to keep them around. The new one will work 2x as hard to earn your respect.  Especially given that you will likely file suit against the PM, dealing with them normally might cease to be an option.

Go meet with the neighbors of the property. Let them know that you are sorry for any weird activity and that you are taking a renewed interest in the property (and that you fired your PM). Give them your contact number and let them know you would welcome a call if anything suspicious ever happens at the property (especially because it will be vacant for a while, presumably).   I might go one step further and get a security system with cameras installed. Make sure power and at least one light is always on. Avoid boards on the windows, they are a dead give-away to a vacant home. Keep the home's landscaping kept. 

As to the PM liability, another attorney question. Very possibly and even if not directly, they might settle if you bring a strong suit and/or they are a large firm that wants to avoid negative publicity.

Best of luck and please do keep us updated. This can be a learning experience for all of us.