All Forum Posts by: Peter K.

Hi Vicky

That sounds interesting. I may have to check it out. I would consider using something like that in a lower income area.

In my market, saving a few thousand could cost double that in sales price, assuming that the neighborhood supports granite.

Thanks for the tip, let us know how the tests go.

Peter

Welcome Kenneth!

I feel your pain. I've had a couple of Mis-timings myself. Fortunately, only my Az rental is still underwater, but it's cash flowing (barely) so not a big bother.

This is a great site to connect, share and learn with other like minded individuals.

I will try to attend the East Bay meet ups in the future. Hopefully I'll see you there. @J. Martin

Good luck!

Peter

Hi Shaw

Congrats on the call.

My market is very different here in the SF Bay Area but generally speaking most any desirable and usable real estate will sell at the right price. On the flip side, $1 is too much to pay for a property that won't sell or rent at a profit.

Here are a few things to consider:

1 Call a couple of good local realtors and ask them their opinion. I wouldn't give much detail so as not to trigger them trying to go around you to get a listing. It can't hurt to network some local agents, anyway. Let them know you looking to buy fast for cash ( or whatever your strategy and criteria are). They may end up being good bird dogs for you.

2 If you can't find good comps or get an opinion of an agent you could look at what it would rent for. If it would rent for $700 per month for example, you can get an idea of value to you (or another buy and hold investor) based on what you'd be willing to make as a landlord. If you want $200 cash flow you can make an offer based on what numbers work for you.

3. If the sellers seem extremely motivated, I would ask them what is the lowest cash offer that they would accept. If it seems like a real deal, write up the offer with an inspection contingency. This will give you time to get a contractor to look at it and for you to determine if there is profit in the deal.

4. Once you tie it up ask your contractor what it would cost to add a couple of bedrooms and a bath. Also check with local city or county folks to see what it would take to get the permits. If the house is around 1,000 SF or more, you may be able simply move and add a couple of walls and plumbing to convert it. If you avoid changing the outside walls, it is usually much easier to get permitted.

It's a good idea to have multiple exit strategies, whenever possible. For example, If the comps say you can pay up to $100k and still resell at a profit but your rental numbers say that to cash flow you need to buy at $80k, don't go above $80k. That way if it sells, you make an extra $20k of profit and if it doesn't, you can rent it for cash flow. This is especially important in the beginning, since you are not so familiar with the market. You might lose a few potential deals but it's hard to argue with one of the greatest investors in history. Warren Buffet's first rule of investing is Don't Lose Money.

If you haven't already done so, I'd recommend reading the BP Ultimate Beginners Guide to Real Estate Investing.

Good luck!

Peter

Hey @Alex Duarte

Welcome to BP!

IMO, you are on the right track. One of the weak links in many investors business is deal flow. By bird dogging, you are meeting a need, getting paid and learning one of the most important parts of the business that will serve you the rest of your RE investing career.

I have a couple of bird dogs here in the SF Bay Area and looking to develop more. One of the better avenues that you can pursue as a bird-dog is door-knocking. If you have the ability/temperament to door knock, develop rapport and consult with potential motivated sellers, you will stand out...since relatively few are doing it. Some homeowners may never reply to mail/phone, but might respond to a face-to-face. If you can handle the "rejection", you will also learn a lot about what sellers are going through.

There are many potential ways to market for deals. If I were you, I would look at the menu of options for marketing: direct mail, door-knocking, driving for dollars, bandit signs, internet marketing, social marketing, Craigslist, etc. Decide which one(s) fit your personality/style and begin developing the strategy. Whether or not you ever find the perfect mentor/investor to work with, once you begin finding deals, opportunities will seek you out.

Meanwhile, you can search google for investors looking for bird dogs. I just searched "real estate investor orange county bird dog" and came up with some results that may be worth pursuing.

Good luck

Peter

@Chetan Tandon I am very curious to hear how the email campaign works. Response rates from emailing to a cold list are typically far less than 1%, so you'll want to build a larger list, but the price is right so you can't really lose.

I'm not sure where you are getting these leads, it sounds like you are scrubbing FSBOs from the web. You may want to add more WIIFMs (What's it in for me?) for the sellers. Fast closing, cash buyer, no agent commissions, no closing costs, etc.

@Michael Quarles is correct. If you send a large list via your standard mail system (Outlook, Gmail, Yahoo, etc) almost all will go to the SPAM folder and you may get banned by the provider. You'll want to use an email marketing service like AWeber, Constant Contact, Mail Chimp, etc. I haven't done an email campaign for motivated sellers, but I have done email marketing for other businesses. I've used used Constant Contact and Mail Chimp. I liked Constant Contact better. It's good, inexpensive and easy to learn. The downside is that it doesn't integrate with some website platforms. If you need web integration now or in the near future, you are probably better off spending a few more dollars and using aWeber.

Good luck and keep us posted!

Peter

@Ahmed Moussa

Hello and Welcome! Yes @Jaren Barnes and I are planning a meeting for Weds the 21st of this month around 6:30pm to around 9pm, in the South Bay. Details are being ironed out now. Let's connect as colleagues and I'll keep you updated.

Happy Investing,

Peter

Hello @Tou V.

Here are just a few things that I would consider, if I were in your shoes. The big question is : How will this help or hinder my overall investing plan?

1. Are you wanting/needing to pull cash out, or refinancing the current balances? As @Joel Owens stated, it will take 27 months just to break even. Will there be any opportunity cost, meaning if you pass up a good deal because you don't have the $7,500 needed to close a deal, what will that cost you? On the flip side, can you pull cash out to accelerate your investing? If you have millions in the bank, that may not be a consideration... if so are you adopting? :-)

2. How long do you expect to own the properties without refinancing again? If you feel certain that you will not refi again and you plan on holding the properties for more that 5 years, then this is a good deal.

Have you thought about finding a no fee loan? You may pay a slightly higher rate but pay less (or 0) money in upfront costs.

Good luck...you have what is called a Quality Problem! :-)

Peter

Hello @Ken Bryant

Good question. If you are simply showing publicly accessible (MLS) deals to a wide unknown audience, there is the possibility that they may use the RE Agent that they've been working with in the past. Most ethical investors would likely use whoever offers up the deal, but it's something to think about.

Another approach is to reach out to successful investors in the area that you are targeting and seeing if they are open to working with you. You can meet them through BP or REI Meetings. You only need 1-3 "good" investors that will buy all of the "good" deals that you can find.

What's important in the current market is speed, as any real deal will be gone very quickly. So as you develop the relationships, I would recommend developing a system to instantly make offers that you know meet their criteria (with phone, text, email approval).

I offer a couple of RE Agents in our area the promise of a double-ended commission, they find a deal where the numbers work. They get the listing once I've rehabbed the property.

Good Luck!

@Account Closed

Sounds like you are on the right track. You may want to consider postcards, though. 460 letters at First Class rate of .49 each = approx $225 which is already over your budget, not counting paper, envelopes etc. If you are NOT planning on doing first class postage, you may as well do postcards, as the open/read rates get more similar.

Though you will get likely get a lower response rate from postcards vs. letters, as @Andy M. wisely offered, consistency is key. Most agree that mailing between every 4-8 weeks and the 3rd-6th mailing is where a list seems to peak. So plan your method and budget to capitalize on the cycle.

Also important is the quality of the list. Hopefully, you have a list that is likely to contain distressed/motivated sellers, like Non-Owner Out of State, or probate, or vacant, filtered for high equity, etc.

@Rafael Floresta , I really like your letter. It's conversational, polite and has a call to action.

Best of luck!

Peter

@Travis Hintzel

Congrats for taking some action. You will learn a ton by doing exactly what you are doing...evaluating deals.

I wouldn't get too married to any potential deal. You can start justifying why it's a good deal and possibly blind yourself to the realities. You can't lose money if you don't do a deal. If it's good enough to be Warren Buffet's #1 Rule, it's good enough for me. Unfortunately, two of my first three deals were break even or lost money. I'm glad I took action because I learned some good lessons, but had I been a little more patient I would probably be a few years ahead of where I am now.

IMO you do not want to start with a condo, especially if the numbers are borderline. As @Robert Zuccaro mentioned, HOAs can be very political (I know from experience, I was VP of a 100-unit HOA for years). It can be like trying to tap dance on quicksand. Knowing what I know, I would never purposely buy a condo/townhouse as a rental. Not to say that there aren't those that are doing it successfully, but you had better know what you are getting in to. For example, NEVER buy a property with an HOA without having an accountant examine the HOA's financials. Most are woefully underfunded...see special assessments, below.

HOA Pros: Not many:

1. Overall your insurance will be lower, since the condo/townhouse HOAs typically cover the structure from the paint inward...with some exceptions, like what if your tenant leaves the water running and it ruins the neighbor's unit?

2. HOA fees usually include water and garbage, exterior maintenance, amenity costs (pool, fitness center, meeting rooms) but your should confirm what is included and what is not.

Cons: Many already listed by myself and others. But here is a huge one:

Special Assessments. These fun potential surprises can come up unexpectedly in the thousands of dollar range or more, depending. If the HOA is not good at budgeting or a large unexpected expense comes up, guess who pays? My HOA had to do a $1,000 special assessment to cover legal expenses that arose because neighbors couldn't get along.

A better option might be to find a 1-4 unit. No HOA fees and no HOA politics, more control, less surprises.

One way to go about finding a good deal is to run the numbers on 1-4 unit properties that you want in the areas in which you are interested. Decide on a Cap Rate that you are happy with (typically between 10-15%+, depending on the area) then make offers based on the value that YOU (not the owner, realtor) put on the property.

Good luck!

Peter