All Forum Posts by: Richard Davis

Extremely helpful, all.

I have read that buying without an agent can be an effective negotiating tactic for the buyer. "You wanted $100k, but I'm giving you $98k. If your agent agrees to take 4% commission, you'll both be better off than if you sold at $100k through a buyer's agent." My seller's agent offers her client a deal like this whenever an agent-less potential buyer approaches her.

@Kerry Noble Jr Not on the deal that I am considering now, but in the future, hopefully yes.

@Dana Whicker Thank you for this very clear and to-the-point advice.

@Marcus Auerbach @Michael Platte I agree that a great agent would save me trouble and get me a better deal. However, part of my motivation is that I want to learn from the experience of acting as my own agent (something I neglected to mention above).

I'd like to buy a house with cash without using a buyer's agent, in order to save on fees. While I understand the steps in broad strokes (make an offer, request contingencies, give them earnest money, and so on), I've had trouble finding any kind of guide that explains each step in detail. Does anyone know a book or website that provides such information?

Example: I know I need to make an offer. But how exactly do I do that? Just send an email saying "I'm offering $35k cash to buy the property at this address (...) from the current owner with such-and-such contingencies"? Or is there a form I fill out? Does it need to be notarized?

Basic questions, but hard to find an answer online.

@Karl Denton Thank you for the tip! I should run a search specifically for potential STR/MTR's near hospitals. Also, I do like arbitrage, but I'm thinking there's more wealth-flow (increase of equity + cash) in BRRRR converted into an STR? From what I understand, a good BRRRR should get you ALL of your investment back out at the time of refinance, and then after that you get ongoing appreciation and your mortgage payments will be less than paying someone else rent. Could be wrong on that: BRRRR does involve those initial renovation months when you have NO cashflow because the property is not yet ready to be rented, whereas arbitrage gives you almost immediate cashflow.

@Eddie L. Thank you! The $65k is before my contribution to Uncle Sam.

@Justin Beasley It's not nearly as good as it looks, unfortunately. Three different contractors (or teams of contractors) did sorry, slow work, and I eventually had to replace them. The end result was that my reno cost was two or three times as high as it could have been. So while I'm walking out with $65k cash (literally: thank God!), my net is much less -- maybe $25k. That said, I did live there myself for a year while house-hacking the rest of the property and then convert it into a 100% rental for about four months. So in addition to my net proceeds, I also got the benefits of a place to live myself + rental payments from my tenants. Also it was just an overall neat experience. There's a good feeling to looking at the inside of a condo, which is now beautiful, and realizing that it is that way because you did that.

In Atlanta, but willing to invest anywhere. Tomorrow I close on my first successful flip. I have a fun and practical question:

I'll be coming out with $65k cash. I don't need it to live. I want to reinvest it into real estate with whatever strategy will allow me to multiply the wealth the most and fastest.

I've considered: Sign a lease-contract on somebody's fixer-upper property, renovate it with my money to generate forced appreciation, then when the renovations are complete both (a) buy it and (b) cash-out refinance it at the same closing table, and afterwards run it as a short term rental for the long run.

I am open to any and all ideas. Doesn't have to be a BRRRR, doesn't have to be short-term, doesn't even have to be residential. Hit me with your best shot. I am open to partnering if that's part of the strategy. For the record, my long term goal is to generate enough cashflow to support the poor with a huge empire, but there are many steps of wealth-multiplication between now and that endpoint.

@Rick Albert The insurance company Proper specializes in insurance for this situation. The tenant (me) can buy a policy which covers the landlord's building, enough to rebuild it from the ground up. Even in the event of intentional damage from the subletters (something typical renter's insurance does not cover).

Unfortunately such a policy is very expensive -- something like 8x the cost of typical homeowner's insurance. On a quote for a 4-bedroom house in Decatur, GA, the number was $4200 for a one-year policy.

I believe there is also a way for the landlord to buy insurance that has the same effect, but I'm not sure of the details.

As for if the law changes, there are several ways to handle that:

(a) Build in a lease-break clause. E.g., tenant (me) may give 60 days notice and pay a one-month's lease-breaking fee to terminate the lease.

(b) Give the tenant the right to vet and place a long-term tenant (background, credit check, income verification, rental history), with the landlord's approval, in order to take over the lease.

(c) Allow the tenant to end the lease in the event that it becomes illegal for him to short-term sublet (with or without some stated penalty).

My experience is very limited, but I've run into all three of these options (or some combination) in Atlanta. One landlord volunteered an additional clause saying that if occupancy was too low (<30% for three consecutive months), then I could end the lease with no penalty. However, he wanted 10% profit-share on top of the usual rent in order to cover his risks.

About the law changing: I suspect that in most cities where this happens, there are several months of notice, at least, between the passing of the new restriction on STR and the day that it comes into effect. So the tenant and the landlord both have warning, which helps keep things viable.

@John Underwood I'm not sure about the switch to a commercial policy, but you may be right. I've found it difficult to get details on the landlord's side of the insurance situation.

I will probably be PGing my first few arbitrage contracts. I believe it's typical for arbitragers to start that way and then switch to No PG after they have a proven track record and substantial cashflow.

I'm getting into rental arbitrage, and I'd like to have an addendum I can offer to landlords to be added to their existing lease. The idea is to cross out the "No subletting" clause from the lease and replace it with "See addendum." The addendum should at least specify that I'm allowed to do short-term sublets through AirBnb, etc. Perhaps there are also other clauses it would be helpful to include for my arbitrage business.

Does anyone have an addendum for this purpose that they'd be willing to share? Or even a set of points that should definitely be covered somehow in an addendum? I'm a newbie and would certainly be grateful.

I’m trying to get a handle on whether a wave of successful evictions is going to hit Atlanta in the first half of 2022 and, if so, what this will do to the real estate in the area (rentals or sales).

Here’s why I think a completed-eviction wave might hit: The eviction moratorium has ended (on August 26th, when the Supreme Court struck down the last extension on the moratorium … right?) and the processing time for evictions in most of the counties in the Atlanta metro area (Cobb Clayton Fulton DeKalb and Rockdale) range from about 100 to about 290 days. That gives a range of early December 2021 to mid-June 2022 for the completion of evictions that were submitted shortly after the moratorium ended. So maybe there’ll be a wave of evictions in those counties staggered across that period.

Gwinnett County, btw, takes only about 58 days to process evictions, so I’d be interested to know if there’s already been a wave of completed evictions there starting in late October.

These figures (58, 100, 290 days) are coming from my realtor, and I’m trying to get them verified.

But I’ve also heard that a lot of renters who were behind on rent during 2021 managed to get state financial assistance rather than getting evicted. So I’m not sure a significant wave of evictions will actually materialize. I hope it does not, since evictions = suffering for everyone, but as a real estate investor, my strategy depends heavily on knowing if it will.

So.. does anyone know if the expected wave of evictions has already been happening or will happen in 2022 (either nationally or in and around Atlanta)? And how this has or will affect rental and sales prices for real estate?

Usually there’s a substantial boost in sales price for units in June (compared to the previous December). I’m considering holding a certain property to sell till June to take advantage of this higher summer price, but I’m wondering if a wave of evictions in the first half of 2022 is likely to add inventory to the market, thus substantially increasing supply and so mitigating or reversing the usual May-July price jump.

Any data, experience, insight, or corrections of mistaken assumptions/data on my part is appreciated! Thank you!

@Paul Sandhu Just as an example, I might spend 10 hours researching a property and negotiating with the owner and an STR manager. The property might cost $24k/year to rent with $60k annual revenues. The manager takes 25% (that's $15k), there's 8% residency tax (so $4.8k), $2k in annual repairs, and another $5k in utilities, yard service, and so on. If it cost me $12k to outfit the property with 10% interest, then that's another $1.2k of debt service. I think these are realistic numbers: neither a fantastic property nor a terrible one (and notice I've set the manager's fee at the top of the usual range). All that gives me $8k profits, so about $800/hr for my actual work. I'm not there yet -- I've never actually done this -- but I think these are realistic numbers.

@Paul Sandhu There's a finite amount of time and energy I have available to research real estate, find deals, negotiate, and secure financing. The thing about arbitrage with a manager is that although I'll make less money on a single property with a hired manager than I would if I managed the property myself, I'll also save 99% of the work I'd otherwise have to do. I'd rather get paid $1,000 for 1 hour of work than $50,000 for 100 hours. I can take those 99 extra hours and invest them in more research, etc.

@John Underwood I'm actually pursuing buying and owning as well. But there seem to be some great arbitrage deals out there - properties not available for purchase but re-rentable at a much higher rate than I'd have to pay to get them under long-term lease. So I'd like to pursue both routes.