All Forum Posts by: Joe Villeneuve

Quote from @John Henry:

Whichever way you go, the real challenge is finding the right deals. That’s why so many investors focus on building consistent, verified lead flow—without good deal flow, it’s hard to even compare equity vs. cash flow strategies.

What?

Kind of.  There's more to it that what he stated.  He touched on it a little bit when he alluded to the idea of reinvesting your equity.  That's the part most people miss. 

Building cash flow at the start is slow.  Building equity, if the equity remains "frozen" in the property, is slower.  It's dead money.  You have to accumulate equity (frozen cash), then as it builds to a point (not a lot more) where it can be cashed out and moved forward into growth, you move it forward.

Welcome back.  I see you came back where you left off.

I love the "AI" part.  I'm growing tired of AI being the answer, not the info to "help you" make a decision...and that applies to everything in life now.  Creativity is on the way out, and for those who think otherwise, you have no idea what creativity means.

Quote from @Mitchell McGuinnis:

So I’m a bit frustrated trying to find my first deal. I’m looking for a mid-term rental or fix and flip in my area but I just can’t seem to get the numbers to work out. I feel like I’ve found a couple of good deals where the numbers SHOULD have worked out but my calculators are telling me different. Am I doing something wrong or have I just not found a good enough deal? Here is an example of a deal I looked at the other day that I feel like it SHOULD have worked out:

Purchase Price: $150,000

Down Payment: $37,500 (standard DSCR 30-year fixed rate)

Loan Amount: $112,500

Closing Costs: $4,500 (estimated 3% purchase price)

Rehab Costs: $50,000

ARV: $230,000

Total Cash Investment: $92,000

Property Taxes: $1,759/yr

Insurance: $2,000/yr (estimated)

Monthly Payment: $748.47

Gross Rent: $1600/mo

Vacancy Loss: $96/mo (6%)

Property Management: $166.67/mo (8%)

Repairs & Maintenance: $128/mo (6%)

Cap Ex: $48/mo (3%)

NOI: $935.07/mo (Rental Income less Vacancy and Monthly Expenses, Taxes & Insurance)

Debt Service: $748.47/mo

Cash Flow: $186.60/mo

COC Return: 2.43%

I have been shooting for a COC Return of at least 8% and just can't seem to get the numbers to work. Any words of wisdom or advice would be appreciated!

Mitch

The first thing you're doing wrong, is basing your deal quality on a percentage.  Base it on a minimum cash flow, and minimum recovery of your cash in.
Base the cash recovery only on hard costs, not potential costs.  Take your annual positive CF, and subtract your annual mortgage payment, insurance and taxes from it.  Take that number, and divide it into the cash you put in at the start.  That tells you how long it will take to recover your cash in.  Keep in mind, your cost is your cash...that's it.

Here's the problem with people that want to start out with Birddogging, or wholesaling. Actually, it's problem with them even after they start out which is why they both get bad raps. A good Birddog or wholesale deal must contain the same research and analysis that the end REI is looking for. You have to analyze the property all the way to the point where the birddog would buy it on their own.

The other problem, is they look for whatever deals they find, tie them up, then offer them to anyone that will listen. That's backwards. First, find out what the end REI is looking for, then go out and find that property for them. If you follow the former method, you will end up frustrated holding properties that you can't get rid of, and pi$$ing off a lot of sellers.

Quote from @Ian Hutton:

@Joe Villeneuve 

Thanks for reaching out, my goal is to be at 20k per month per my current savings and reinvesting into more acquisition I'm suspecting this will take me around 10 years. I feel like with REI it's a snowball effect lol but man does it feel slow in the beginning. Also I agree with putting away funds for capx and other smaller expenses. You mentioned there's a better/faster way what did you mean by that?

PM me direct.  The answer is too long to place in this format.

Quote from @Mario Garcia:

So with a lease option the deposit is refundable?

No.  There is no deposit with either.  That's a big misconception.  The money up front is called the "option consideration".  It may look like a deposit, but it is actually the cost of the option.  That money is buying the option.  It's buying your ability to hold the property giving you exclusive right to purchase (at your option) during the agreed upon option period.  If you don't execute the option to buy, you lose the exclusive right to buy.  You can still buy it, but now there's potential competition.  You don't get the option consideration back since you got what you paid for.

Quote from @Mario Garcia:

but how is the obligation enforced in a lease purchase???

See  @Don Konipol

Where do you want to end up financially using REI? Actual numbers, not "I want to be financially free". Now, based on your timeline of how long it takes to get from one property addition to the next, and how much you are adding on in profit/CF from each property, how long will it take you to get to your financial goal?

Keep in mind, that all the rentals you keep will over time (shorter time than you would like) will have added expenses out of pocket...big ones.  You will need to subtract that from your accumulated total along the way.

What you will find out, is what you suspected, and why you wrote this question to begin with.  There has to be a better/faster way.  There is.

IF you buy without a plan, then figure out what your profit would be on a quick sale.  Then, take your projected cash flow, per year, and see how long that CF will take to equal the profit gained now.

This is important, because if you take the profit, you will most likely roll that forward into a new property, which should make you a higher profit.  Every RE transaction should be looked at as flipping your cash, not your property.  The property in question is nothing more than the vessel your cash is sitting in, while it waits for the next vessel.

Don't get blinded by high cash flow.  I love it, but there's a time and place for it.  Sometimes taking the profit is better at the time.  Later, that exact same choice might be the other.