All Forum Posts by: Ray Johnson

@Krishna Chava I agree 100%, However I do see some caution among the experienced investors, It's those new to the industry throwing caution to the wind in an effort to get rich quick. I see a lot of post mentioning being new to the industry and having a goal of 20 houses within year 1 of their portfolio and their starting out with no money at all.

These are considered secured accounts and almost all the major financial institutions provide them, you're basically tying up your own money (forced savings) to show that you can manage credit at this point in your life regardless of what situation caused you to get into a bad credit situation.

Usually after a year or two it's helped the person improve their credit score by maintaining an active credit based account in good standing for a longer period of time.

First off, I’m a true believer in the saying “If you have a dream in life, you should seek and follow the path to obtain it!”

In late 2006 we saw the real estate bubble come into play and wreak havoc on the housing industry. The main focus of the cause was targeted at the financial industry for its relaxed lending requirements, banking regulations, and “predatory” lending practices. Most people seem to avoid the conversation about all the Real Estate risk takers that played the biggest part in the housing crisis.

A few years before the bubble burst I was encountering real estate investors, house flippers, and buy-and-hold participants everywhere I went, my waitress at The Cheesecake Factory, the two McDonalds employees talking deals on their lunch break, the clerk at the grocery store, everyone everywhere appeared to be a real estate investor in one form or another getting a piece of the housing boom.

The underlining problem I noticed was during the rush to get into the RE industry most of the people capitalizing in the industry never learned the basics of RE investing and were simply doing what their friends, neighbors, coworkers, or online postings told them to do to get a piece of the pie. A majority of all those RE acquisitions were closed without basic RE fundamentals as part of the deal causing them to play a major part in the housing crisis as they were not structured properly and/or in fragile portfolios that quickly crumbled with the first sign of trouble.

Flash forward 10 years to 2016, minus the banking industry’s participation, we are seeing the same industry practices that played a major role in the last bubble. I’m encountering wholesalers, real estate investors, house flippers, and buy-and-hold participants everywhere using the same knowledge base that played a part in the last crisis.

Here’s why I say history will repeat itself. An example can be found in the BP community when there’s not one day that goes by that I don’t see a post along the lines of:

“Help, I have a property under contract, I need help with the next step”

“I have a house under contract, what’s the best way to get financing?

"I got a cash advance on 5 credit cards for the EMD, I need help with financing the deal"

We’ve all seen these post and there are some far scarier than these. While I would never discourage anyone from trying to close a deal, I’m simply pointing out the similarities of 2006 in which the industry was saturated with far more uniformed participants trying to get rich quick than those who know what they’re doing when structuring deals.

@Brandon Hall thanks for the clarification. I see you're local in the DC area, I'd like to add you to my network for a future business connection. Thanks again

@Lucas Hammer As long as all of these expenses are legitimate and ordinary business expenses associated with your business, they are eligible to be expensed. If they are not tied to a particular property you purchased then it's an expense for the LLC or Sole Proprietorship. If you're in the Real Estate business, travelling to tour property is an allowable expense.

You stated throughout that Goldline Wholesale will "invest in ""acquire property" "purchase" Real Estate, If this is the case your company is a Real Estate Investment company, not a Wholesale company. The business model of a Wholesale company is different than that of a Real Estate Investment company, you seem to have a little of both models in your plan for a Wholesale company.

If you truly are going to be purchasing property as stated in your Company summary, I would suggest changing your company identity from Wholesale to an Investment company, industry people may see the inconsistencies and be cautious about dealing with you not knowing what your true nature of the deal at time is.

@Lynn Hill-Torres, I have property in Baltimore City one in Penn Lucy and one in Towanda Park, both are Class C areas and both pay electronically to my property manager, @George P. is 100% correct when he says you can expect people in Class C/C- areas to still be able to pay electronically. 

@John S., I agree with @Russell Brazil 100% You don't have to be in markets like Austin or Los Angeles to diversify, I'm very familiar with both of those markets as I lived in Los Angeles/Orange County, CA. most of my life, you can get the same type of diversity and ROI's in our region here in the DMV area. I have a range of property that falls within Class A property here in Northwest DC, Class B, and Class C in the VA, and MD area.

Research on the various areas here in the DMV will pay off if you understand the areas and what you're trying to achieve as your goal.

Kevin, I spent a great deal of time in Los Angeles and Orange County as a Project Account for a few large developers, When looking at land or land and construction deals in the area, I know you're going to need to account for a lot more than what you may be looking at based on this question. Different land parcels not only vary in purchase price, you also need to assess the land infrastructure cost which will change based on the property so your construction cost will be different based on each parcel of land you're looking at even using the same 4 unit set of building plans. Cost for the property associated with developing the land before construction will vary based on grading, sewer, electrical, roads, surveying depending on the location of the land, soil testing, etc... The upside is regarding the construction loan is you can capitalize the interest during construction increasing your basis in the project, The downside is you will need to bring a decent down payment and if you don't own the land or have any construction experience, and you'll need a partner with developer experience especially if this is your first project.

I would recommend a JV with a developer, maybe a reduction on the developer fee in exchange for something on the backend of project completion, there are a few good ones out there that do small projects as well.

Michael, You can only have one VA loan assigned at a time, If you purchase a 2nd property you have to refinance the 1st home with a conventional loan, Keep in mind that if you went with the No Down payment benefit of the VA loan, you'll need to come up with a down payment for property #1 when you exit out of the VA loan.

You can then use the VA loan and the No Money down benefit on property #2 if that's your goal. I'm not sure what the agenda is for wanting to use the VA loan 4 times in 4 years when you have to convert 3 of the 4 loans any way since you can only have one VA loan at a time for your primary home.