All Forum Posts by: Account Closed

It is hard to say what you should do to start. If you have already been reading tell us what else you have done.

Did you join a local REIA in your area if there is one?
Have you made any calls on FSBO properties?
How many properties have you actually toured to see what they look like inside?
Do you have a check list or other way to score what you are seeing?
Do you have any special skills that could be applied to a rehab project (trade skills or prior experience helping family fix up a property)?
Do you like dealing with the public and calling people on the phone?

Some of the above it to narrow down what you do or do not like to do. Part of the above is to understand what you have done rather than what you have studied.

Based on the books you did read is there anything that jumped out which you want to try?

John Corey

Jared,

If you think that $40 million is a lot then you are thinking too small. Just look at the commercial buildings in Boston. Some or many of those buildings are worth $40 million per individual building.

How about your model works for your company by using other investors to team up. Other people invest differently and would have no problem taking down all of your business with cash and then ask what to do on day 2. It is a matter of scale but the the scale issue is not the market or the law.

John Corey

"You can't depend on your eyes when your imagination is out of focus."
Mark Twain

“We see things not as they are, but as we are.”
Anthony de Mello

Nothing Down by Robert Allen. When I first read it the book was still on version 1. Soon after that point a Nothing Down intro seminar came to town. I attended the seminar and then signed up for the weekend course. 2 days in San Francisco over the weekend. The following Monday I walked to the closest real estate office and purchased my first property nothing down that afternoon.

I did not know that I was supposed to start slower. I was just doing what seemed to be the point of the book.

John Corey

PS. Yes, that was a long time ago. I still like to re-read the book as the way the math is presented is very clear.

While some communities are better than others I have found that most groups of RE investors who are actively investing (including those getting started) are very open to sharing information. They like to trade details, make suggestions and otherwise help each other do more and better deals.

Having a focus other than TV is certainly more likely to improve your financial future.

Good luck and enjoy the reading.

John Corey

The general plan is fine.

You may has issues with the land + log cabin if it is too different from other comparable properties. Hence the value could be impaired. Try not to make it so different that lenders do not want to lend on it. Not common but something to watch out for. Definitely happens when the lot size is large and potentially is a significant part of the total value.dormant

Your income is fine. It will service a certain level of debt. If you are expecting to borrower, fix and then repay the loan (by selling the rehab or by refinancing the rehab) then the balance on the debt will never be high for that long. You might find that a local lender will be more flexible once they get to understand your business model and you have had some success.

Consider getting the LLC up and running now. It can largely be left domant for a year. LLCs that are more than 2 years old are slightly better than a new LLC. Granted what they really want to see is 2 years or more of business but just the age can matter.

When funding your deals you might do better to borrow the funds and lend the money to the LLC. Then let the LLC buy the property do the work and book the profits. That way the LLC can show that it was doing deals in its own name, made profits, etc. It is slightly better than borrowing the money yourself and then putting it into the property directly.

Your focus on little debt and good credit will go a long way. Try to protect that credit by not over stretching once you start doing deals.

One rehaber who does a lot of volume uses an idea that is similar to what you have suggested. He fixes and sells most. Every 5th or so he holds but he keeps it free and clear. He has large Working Lines Of Credit (WLOC) that he can draw down when he wants to do a deal (over 8 million). One reason he can get the lines is he owns a number of rentals that are all free and clear so the lenders love him.

John Corey

Thanks for the reply.

Stamp duty is no fun. The UK has stamp duty. @ 500K Sterling the duty is 4% when you buy. Nothing when you sell. It is a big chunk of change in many deals.

Even leases of 30 years or more now have stamp duty attached.

Bulk purchases can be considered 1 transaction so they max out the stamp duty at the 4% level rather than having the stamp duty applied per property.

What part of the US are you investing in? What has been the biggest surprise?

John Corey

Having money for yourself is a bit of a mistake. I speculate that you will find a way to spend that money each month on yourself while continuing to have the debt noose around your neck.

1. The snowball idea is largely to take the extra and throw it at the highest interest rate loan until it is paid off. Then take the surplus cash and throw it at the nest highest. It will snowball as you reduce the balances and the debt gets paid off faster.

2. Do consider putting aside some cash savings but it has to be funds you will not use unless there is a really big emergency.

3. Get a 2nd job for a few months. You will have less time to spend money and more money to snowball your way forward.

4. Frankly there is an alternative that I have seen a few people use very successfully. You can invest in Manufactured Homes (MH). If you follow the plan outlined in Deals on Wheels you can do deals with very little cash and no major reserves. The reason is the home prices and the repair costs are very small numbers compared to traditional homes with land.

The book has been out a while. New it costs something like $30. You likely can find it used if you want to pay less.

5. While reducing the debt your credit score will improve. Make sure you stay current with everything. Your score might be good now but it will be better later when there is less debt.

As someone else said there will be deals when you are ready. I started investing a long time ago and the deals have been around the whole time. Deals come from motivated sellers and there are always sellers who find themselves in a bad situation.

John Corey

Anyone here using the ideas, techniques or materials from Jeffrey Taylor's Mr Landlord program? I have heard him speak a couple of times and he really has some innovative ideas.

John Corey

In many markets there is no way you are going to get as high as 1%. Never mind hitting 1.5% as someone suggested.

Now, you can conclude that the market is not for you and look somewhere else. That would mean that many investors in CA could not consider anything in the state (at least not the coastal sections of the state).

In some markets break even cash flow is a dream. The way to reduce the risk it to put more cash into the property.

Most investors use debt because they have to. That said the debt also provides leverage so if the property goes up in value they obtain a better return on their equity. When you look at total return it means that the investment can do very well even if the rent was not so good.

Your raw land is an example. You paid property taxes each year is my guess. You also did not have any income from the land. Is that correct? Not even close to the 1% rule yet you appear to have made a very good return. With that sort of logic some people buy SFRs and expect to make up with appreciation what they are not getting in cash flow returns.

Should you compete with such investors? That is your call. If you are in a high priced market it is hard not to complete unless you do something different than what they are doing (rehab, commercial, very large down payments).

For many reasons I invest out of my area. That lets me pick locations where I can get the cash flow I want or where I believe there will be good appreciation. My style is not to be directly hands on for all of my investment properties. They happen to span 11 time zones so there is no way I could be directly hands on in all cases.

1% is something to look for. It is not a rule and it is not required. It is just a way to quickly decide if a property might be worth looking at. There are other factors that can be more important to investors.

John Corey

All the other comments so far offer good advice.

One thing you have to account for is your local market if you are trying to invest locally. There are markets where you just will not find a single family rental that will cash flow. At least not unless you have 40% to 50% to put down. The problem is the rents are just too low compared to what the owner occupants are willing to pay for a home.

Other markets there are homes that rent for way more than 1% of the purchase price. Normally in poorer areas, areas with unemployment problems given changes in the employment trends, etc. One city, Buffalo NY has see its population fall for 20 years. Think about it. That means that each year they need a few less homes then the year before. Hence the house prices there barely keep up with inflation.

So, finding a renting that will cash flow can involve all the things people have said plus knowing if your market has any. If you happen to be in high priced area consider investing at a distance (its own set of problem), changing your focus to commercial or other property types or invest but not as a buy and hold investor.

To finish I know one investor who is more of a rehab investor. For ever 5 or so properties he will keep one as a rental after selling off the other 4. There are tax implications and it means you have to find multiple deals. It is his way of dealing with the idea that he has to leave equity in a rental so the numbers work out as he needs them.

John Corey