All Forum Posts by: P.J. Bremner

@Aamir H.

The bank isn't the one with the seasoning requirement, Fannie Mae/Freddie Mac is.  They are the ones who will eventually buy your loan after it is originated.  The banks have to abide by the rules set for by Fannie/Freddie, or else they will have to keep the loan on their books (it will then become a portfolio loan).  So by the very structure of how conventional loans work, no you cannot get around the seasoning issues to get ALL of the money back out.

You can look into DFE (Delayed Financing Exception) to pull out the equity up to the PURCHASE PRICE immediately (you will not be able to touch the rehab cash you put into it).  Once the 6 months are up, you can then cash out refi again to pull the remaining equity back out, but then you are paying loan costs for 2 loans in 1 year, which may not be worth the effort.

Just a side note, if the property is single family, you can get cash out up to 75%.  2 - 4 units you will be capped at 70% for the cash out.

@Phillip Gonzales

Like everything else in life, you have to figure out what works best for you in your personal situation.  People can give advice to you, but they also don't have to deal with the consequences so take it with a grain of salt.

I can tell you what I have done personally, in order to offer a different perspective on the matter.  I'm recently married and the wife wants the "final home".  We sat down and went over numbers on what it would look like as well as a few different scenarios if we were to continue investing.  We ultimately decided to continue to grow our portfolio until we have kids that are old enough to go to school.  Once they start kindergarten or 1st grade, we will have the house with the white picket fence,  sun room and all the other crap that she has been dreaming about since she was a kid (I don't get emotional about homes so it's her choice lol happy wife happy life).  

I had 4 rentals when we got married and have since then purchased 3 more (doing out of state now).  I have a good 4 - 5 years to buy up all the rentals my little heart can handle, at which point we will pull equity back out and purchase our "dream home" for cash.  Until then, we live in an upscale area at an apartment that is older and the owner is OLD and doesn't raise the rents lol.  We pay $1,300 per month for a 2br 2ba, have a roommate paying $800 and save save save.  Comparable 2br 2ba in the area go for about $1,500 - $1,800 and a single family home across the street just sold for $700k.

It's actually pretty funny filling out rental applications and having them look at your income and credit.  They are always perplexed at seeing over a million dollars in mortgages and tons of rental income, but not owning a primary residence.  It's also fun going into the bank at the beginning of the month and turning in all your rents and then getting back a cashier's check for your own rent to turn in.  I was asked once if I was paying someone else's rent lol they assume when you are a landlord that you wouldn't rent anymore.  I let the math make my decisions for me (until I have kids of course!).

@Edward Ottorino

Welcome to the forums!

First off, I would like to say that you are certainly on the right track with educating yourself, but inevitably you will get advice from all types of people telling you what you should do and what is the best way to start.  Real estate does not operate in a vacuum - what works for someone else may not work for you.  Take everyone's advice, mine included, with a grain of salt.  You need to find your own way in this game so that you can play to your own strengths and deal with your starting situation.

That being said, I would caution anyone trying to do a first deal as a sale.  Think of real estate like running... You can do sprints (flips) or you can do a marathon (buy and hold).  If you make ANY mistakes in a sprint, you're most likely going to finish last.  If you slip a little in a 5 hour run, you have plenty of room to make up the distance.  Same goes for real estate.  If you try to flip your first property and make mistakes, you stand to lose quite a bit of money.  If you make a mistake on a buy and hold, you have 10+ years to spread that mistake out over.  

Never say never about anything.  There is always a price for anything in life.  I have a single family home that currently turns out about $3,000 per month in net profits and I would never sell it... unless someone offered me enough lol.  If I stand to make $500k on a sale, it would take me many many years of cashflow to get that $500k saved up.  Also, if I sold and lost the $3k in net profit, how long will it take me to deploy the $500k and how much cash flow do I stand to gain?  It's really simple to calculate - I don't look at anything unless it gives me 15% cash on cash or more.  15% x $500k = $75,000.  Divide that by 12 months to get your monthly cash flow - $6,250 per month.  The math tells you what to do.  Would I ever keep the property and make $3,000 per month, or if I could make $500k and reinvest that at 15% to make $6,250?  It's really a stupid question, BUT you wouldn't know to even ask that if you didn't do the math.

As for your second question - I will revert back to my original statement and tell you that YOU need to come up with what is best for you.  A great question to ask people with experience is, "If you had to go back to when you first started, what would you have done differently in the beginning?".

I will save you the time of asking me that lol - When I first started learning real estate I was about a year out from graduating from college.  I didn't know squat about flipping and wanted to be more conservative so I decided on the buy and hold.  California is really expensive to invest in.  Cash flow can usually range from a few hundred per month to negative, certainly not ideal.  I'm not patient at all... so I decided to get a huge single family house with tons of bedrooms and rent the rooms out while I lived there.  It really solved a lot of issues that I had with buy and hold.  I was working in the car business and was making six figures my first year out of college so I was fortunate to be able to buy homes quickly and expand my holdings.  

Now I would not change ANYTHING about how I first started, but I did make a few mistakes that I wish I didn't.  

- My 3rd property was a monster... 3,500 sqft with 7 bedrooms and a mother-in-law suite.  I swaggered into that dumpy house and "knew everything".  Fast forward a few months, I ran out of money for the rehab in a big way lol... I thought $50k was going to cut it, but I ended up needed $110k to finish everything.  I had to take a quick loan out to get it done.  I really learned a lot and would have bought that house again knowing what I know now, but I would have offered much less than I did to purchase.

- I quit my job after buying the 3rd property in order to start my own businesses.  It was the best decision I made in my entire life, BUT I wish I had held on another 6 - 9 months to save up some more cash and buy another home.  While the freedom was awesome, having another property or two would have been even better.  It's incredibly difficult to get financing once you lose that good w-2 income.

- If I had to go back to the start, I would have skipped the car business and gone straight into mortgage origination from the nationwide lender (at a call center).  While I cannot replace the knowledge I gained from being in a sales and management environment and the money was good, I would have been much better off in an industry that was tied to my area of interest.  I originated loans for less than a year (a few years back) and it was an amazing experience.  You really learn a lot about what goes into financing real estate, how to run comps, how to explain real estate math to others (trying to get your client onboard with a refi) and just being around real estate in general.  The money is crazy as well... Even the terrible sales people are making $15k per month.  The good ones can do well over $25k month.  The call center was ideal because the leads came to you, no need to network outside of your job to get loans (which takes years to do successfully - often unpaid along the way).  I ended up quitting because my Amazon business was quickly taking off and I couldn't juggle loans, my rental portfolio and my Amazon store.  In short, I would have loved to do loans right out of college because I would have made more money, worked less hours and learn the business that I wanted to get into.

Best of luck to you and I hope you find your way sooner than later : P

@Shantelle Evans

I used to work for Intelliloans down in Irvine and our biggest competitor was Quicken Loan (sometimes Loan Depot and a few others).  I can certainly agree with some of the previous posters about wanting to get a local lender for a fresh purchase because the listing agents will often discount offers with a national lender approval.

One thing I certainly will disagree with is the cost of doing the loans.  One thing I always do when I am getting advice is ask "Where is this information coming from?  Does the person giving the answer have anything to gain by saying this?  Could they be biased?"  While I cannot say for certain that loan depot loan costs are lower than EVERYTHING out there, I can tell you that national mortgage lenders are often the cheapest way to go.  I say this as an investor, not a mortgage originator who is trying to earn a living in that area.  

When I worked in the industry, we would absolutely CRUSH any bank or broker that would try to compete with us (I'm talking refinance only).  The only company that ever gave us issues was Quicken Loans and sometimes we could get an exception to match or beat their pricing and sometimes we had to let them loose.  

As I am setting myself up for 3 refinances in the next 4 months, I have already began the process. Think Regan - "Trust, but verify". I have a couple local lenders that will be able to price out the loans for me. When the time comes to lock in the rate and pull the trigger, I will get a GFE (Good Faith Estimate) from each to make sure they are quoting apples-to-apples. One of the biggest tools that a mortgage officer has in his belt is giving selective information. Beware of the LO's that want to quote you a rate without anything else (it's illegal by the way, but very common practice). You have to know everything you will be paying for to know if they are legit. Looking at the APR helps because it gives a much better picture of your actual cost, but I will typically tell them all to quote me the exact same way: Give me current market rate at cost - no points and no lender credits. This means they will not inflate or deflate the rate artificially. Once you get the lender with the lowest numbers, you can play with points or lender credits to match your desired situation (one of my favorite is to pay a higher rate, get lender credit to cover ALL closing costs and have $0 out of pocket).

@Shannon McKenna

I'm not sure how the solar market is out your way, but I spent a good 4 months calling around and trying to get quotes from contractors who were solar certified to install a system for me.  My plan was to purchase the system myself from a wholesale solar company and have them put the panels up, permits and all.  What I came to find is that every single contractor either doesn't want to do it, or wants to charge you more for the install than you can get from a typical solar company for both parts AND labor.  Ridiculous.  I even found a guy on BP that said he would install it for me, got plans ready, nearly ordered the system and he backed out saying he wasn't interested in the job anymore.

It's not cheap to get someone to design the system, pull permits and install.  What I found was that if you negotiate with the big companies, they will often drop their price very low.  For example, I was having a huge system installed on one of my rentals because the college kids run up the bill in the summer to $1,000 per month and about $350 in the normal useage months.  I could purchase the system online for about $15,000 shipped.  The quotes I was getting for the installation with me providing materials was $40K or more (yes, I had more than 3 quotes).  I ended up getting a slightly larger system installed for $28,300 all in and didn't have to lift a finger to handle it.  Their original quote was closer to $40k (I think $38k if I remember correctly).  Shop their price, have the big companies compete and keep going until they give up.  That's when you come back and take the deal  : )  I now have solar on 75% of my rentals and it saves me A TON.

I forgot to mention the financing side of it: I was originally going to pay cash for the system and the install, but they found a local credit union that financed it for me 100% at 5.5% for 20 years.  I'm paying $198 per month so now my total bill goes to about $250 all in saving at least $100 in the off-months and well over $400 per month in the hot months.  It's a no-brainer...

This is a very interesting business to be involved in, but there is a TON of money flowing into it so you need to really be ready for it or you'll get wiped out before you even get started.  I watched an interesting show on it recently, figured I would share it:

https://www.youtube.com/watch?v=j-QPQSGfld0&t=2282...

If I recall, an outdoor harvest can be done a few times per year but an indoor harvest can be done every 2 weeks.  Indoor is much easier to control for pests, more efficient water usage (on the west coast, this is a HUGE deal because if you can have permits to do business, but if the state says you don't get any water, then you're done), higher quality product, etc.

My biggest concern would be that large funds (hedge funds, pharma companies, etc.) are not involved in the industry yet because of the political climate around it.  Once it is deregulated on a large scale, you are up to the mercy of these behemoth companies and their infinite pocket books.  For example, let's say you pick X city to set up shop.  You buy land, lease it out to some small business owner and life couldn't be easier.  Pfizer decides to get into the business and build a vertically integrated business around this industry and picks X city to develop as well.  They buy hundreds of acres in your area and within a year they have 40,000+ sqft warehouses with $100M in infrastructure with the latest in technology, manufacturing next door and a retail location in the city center selling their product lower than anyone else.  Your tenant will be out in a matter of months and you'll have to repurpose the area.

As with any industry, there will always be room for the little guys if they can find some niche that serves a market segment not covered by the big boys.  As someone had stated above, make sure when you do purchase that you have a backup plan for that investment in case something like this does come about.

Oh, I totally forgot to mention that these businesses are really difficult for most people to start because banks do NOT lend on them.  Anyone in this space currently is either self-funded or syndicated.  There are no SBA loans for grow operations (at least from what I have read from industry experts).

@JDee Moore

If you do your licensing education online, you can get your RE License including test cost for just under $1,000.  I think I spent $970 or so a few years ago, all in cost.  You have to pass it on the first try though lol otherwise it adds more cost obviously.

One word of caution if you're trying to get into real estate as a profession as opposed to an investor - It takes A LONG TIME to make money. I have a good friend that I used to work with in the car business that switched over into real estate and he had experienced this over the last year or so. He was by far the best salesperson I have come across in my years in sales, management and training. It took him 7 - 8 months to get his first sale and another 4 months or so to get his pipeline filled so he has monthly income coming in at a stable rate. He spent thousands of dollars advertising, paying for MLS access, paying for access to that communist organisation also known as the Association of Realtors (What a joke - it's pretty much required around here), errors and omissions insurance, etc. He had to pay for rent, living expenses, and all that while getting off the ground. If your wife is expecting you to make money within the next 12 months, then going retail RE sales is probably not going to work, at least not as a primary job.

I was very fortunate in that my line of work provided me with $100k+ per year right out of college.  I worked my butt off, no doubt about that BUT just because you work hard doesn't mean you deserve to make a lot of money.  You have to pick something that provides $100k+ worth of value.  For example, if I am making $100k in a year, then I have to be making $500k in profit for the person I am working for because that's the only way to justify my employment.  I worked in the car industry and made a ton of money because I was able to sell vehicles for a profit, generate millions in revenue per month for the owner, run a sales team, train the noobs, etc.

However, if I had to do it all over again, I would not have gone into the car business.  I eventually got into finance, which was a really cush job that made multiple six figures, but it was kind of soul crushing... (think of the worst car salesman stereotypes and multiply by 100x and throw in some illegal sales techniques, that's finance) lol.  In hindsight, I would have gone into mortgage origination at a call center.  Mortgage origination is where the money is at (assuming you aren't in a recession of course).  I worked for a company out of Irvine that did all of the advertising for us, we simply sat at our desks and waited for interested borrowers to be transferred to us.  It was the easiest sale of my life, actually benefitted the client and the pay was amazing.  My first month of doing mortgages, I originated 15 loans for over $4M in mortgages and if I recall correctly, brought home about $8k that month.  Had I hit the next tier (16 loans) my pay would have jumped up to about $14k lol and I only worked 5 days a week, 10 hours a day with ALL food paid for.  Most of the people there that weren't brain dead were making a consistent $15k - $20k per month...  When I worked in the car business, it was 7 days a week, 12+ hours per day, maybe 1 or 2 days off a month if I was lucky and the average sales person made $3k - $4k per month.  I was on my feet most of the day too.  Mortgages through a call center would be my preferred method if I had to do it all over again.

Kind of a longer post than I originally wanted, but to sum it all up: get a job.  Be smart about what job you take though... Careful with the advice you take from some people on here.  If you just take any old job, you will get any old paycheck and not learn squat about the things you need to learn.  Working in sales taught me so much that when it came time to transition into owning my own businesses, I was prepared.  Working in the mortgage industry taught me so much about real estate overall.  If you take a random job with subpar pay, then you need to ask yourself what the opportunity cost of YOUR TIME is.  What will this job teach you that will help with your real estate investing or owning a business of your own?  Any type of sales will teach you alot, certain kinds of sales will make you a ton of money along the way.

@Sawyer Dina

I made a list of about 30+ banks and credit unions and went through all of them.  Only one place did portfolio lending, but unfortunately for me they only were lending to in-state, local investors.  I still have the list, their company name is Pioneer Savings Bank.  They don't allow me to post their phone number, but it's easy to google.  Like I said, they wouldn't lend to me because I'm out-of-state so I didn't get into details but they actually only do portfolio lending from what I gathered.  Small bank, probably a great place to build a relationship with.

PM me, got a few details to discuss about some other related topics but prefer to not post them publicly.

@Luke F.

I purchased 2 duplexes a couple weeks ago, both properties required an accepted offer prior to interior inspection.  One property was completely vacant, the other had 50% occupancy.  One property needed only light cosmetic rehab and the other is pretty much needing a full rehab (not quite a gut, but close to it).  One property was negotiated lower after the inspection, the other was countered lower after inspection but the seller refused and so I went with the original offer.  It's common for properties that are being used as rentals.  Sometimes it doesn't really make any sense as to why they won't let you see the place prior to making an offer - vacant rental with a lockbox means the listing agent has no extra work to do.  I guess they just want to make sure people are serious before stomping through their client's property.  Make your offers subject to inspection, financing, appraisal, etc. (Whatever you need so that you have a way out if it's a bad deal).

Hope this helps, best of luck!

@Mel Hayes

Put yourself in your agent's and the listing agent's shoes.  They both want to know if you can perform so that they aren't wasting their time.  Your agent might know you well enough to know you can buy all-cash, but the selling agent certainly doesn't know anything about you.  I don't really get the previous comment about bank wire... sounds like a lot of work.  

I also don't agree with "showing your hand". You want the seller to see that you have the money and you're not some random idiot wasting time. I just bought 2 properties for cash this month, sent bank statements, line of credits, etc. that equated to WELL over 5x what the purchase prices were on the properties. They need to know that I am a professional and not just some kid messing around with a tight budget who "needs a low price because that's all the pennies i've saved up!". You make your low offer with logic backing it up (such as ARV minus rehab minus your profit) as a professional investor, not because you can barely afford it.

Just take a screenshot of your online bank account page showing the balances, or the HELOC statement showing enough limit in there to purchase and send that to your agent. They work just as well as any official document and you don't have to jump through hoops or pay for an official wire or whatever. Keep it simple!

As for the verbal offer from your agent; generally that is a waste of time.  Unless your agent personally knows the other agent - maybe they are in the same office or they have worked together in the past - then verbal offers don't make sense.  It takes only a few minutes to write up an offer, even less time because it is all-cash and less than 10s for you to click through eSign and have it sent back.  Once you have the first offer in, if they decide to counter they may do verbal back and forth until you reach an agreement, but I've never seen someone go verbal from the get-go unless they have a personal relationship already.

I hope this helps, best of luck with your purchase!