All Forum Posts by: Robert Haney

I have a spreadsheet which is quick and easy to use to calculate a bunch of numbers.

- % return of cash flow (cash flow/out of pocket invested)

- The first year % return on investment ROI ((cash flow + principle pay down)/out of pocket invested)

- Realized Capital Gain (ARV less Total of all costs less selling costs)

I've seen lots of buy-and-hold investors looking at "Capital Gains" without considering any selling costs. This does not make sense to me. Selling costs will usually take a significant bite out of capital gains since selling costs are a percentage of ARV which is a big number.

I buy and improve properties for cash. If I leave them that way I want to make 10% ROI. If I refinance the property I want 25%+ return on cash flow. This can easily be much higher in the 30% to 60% range. How you ask? I believe in buying rental properties with the same criteria as my flips. In other words, unlike so many buy-and-hold investors, I do not believe in paying more for rental properties than I pay for flip properties. Call me crazy. (I just sold a flip listed on the MLS to an investor for $141,000 for his buy-and-hold rental. We made $36,000 net on the flip. Just think what the returns would have been if we had rented it compared to his.)

Yes:

$250 refundable deposit per pet

$150 pet fee nonrefundable per pet

$25/month pet rent per pet

Pet Addendum is attached to the lease detailing the pets, costs above, etc.  

You will learn MUCH more about what things really cost if you act as the general contractor instead of hiring one. When you learn what they are really paying per square foot for LABOR for tile instalation, backsplash installation, granite installation, painting, carpet installation, etc. you will be shocked at how low it is. Finding material costs to add to the labor is easy for anyone. After you know what things really cost you can negotiate to pay cost plus a MANAGEMENT FEE. This can save you thousands. A professional flipper likely pays about half what a new investor will pay for the exact same work. 

I don't mean to be negative, but since about 98% of agents are retail oriented it is extremely difficult to find an agent to bring you flip houses. An agent to find rental properties is more practical and yet still very difficult. 

You'll be much more successful monetarily finding properties yourself. You do the searching and comps yourself and prepare your offer. Then find a Realator who will simply email your offer (read: "do no work") for 1/2% to 1% and rebate the remaining commission to you. 

You can also use Wholesalers but they are just a little better than RE agents for finding deals and generally much more dishonest (some must be honest but I haven't found one. Read: BEWARE)

I started 21 months ago. I own 7 rentals in Richmond and 1 in Sugar Land. I've done 7 flips in the area. I wasted a lot of time with RE agents who generally had poor deals for this investor.  (There is a strong tendency for agents to keep good deals for themselves and family, I hear. )

Helping others is a good thing and I enjoy doing it. 

However ...

I break down my RE investing into 3 major phases requiring significantly different knowledge & talent. 

1 Buying

2 Rehabing

3 Selling (as a flip or rental)

Teaching #2 & #3 is not a significant issue for making the student my competitor. However #1 can be significant when buying at auctions. Another competitor at auction can easily cost me $5,000 to $10,000 or more. Competition for buying houses on the MLS or Wholesale is not significant and therefore not a problem unless the focus is the exact same (small) market area.

I place buying as the most important area of my investing. 

Financing is not on my list because I save all this effort, hassle and large cost by paying cash. Cash increases profits and decreases aggravation. No asking permission or jumping through hoops. If I do finance a rental it is after finishing 1, 2, & 3. This can easily give me cash on cash returns of 35 to 50%. 

I don't follow you thinking that a "fix and flip" neighborhood is not a good "buy and hold" neighborhood.  

Obviously, to successfully flip a property it has to have a reasonable capital gain after rehab. This feature often makes a great yield/return (COC) when the property is held as a rental instead of flipping. In fact, the returns can be significantly better than the typical "buy and hold" investor returns since the typical "buy and hold" investor usually has little, if any, capital gain.

This reduces his rental ROI, increases his out of pocket investment, and results in a capital loss if he sells before (hopefully) appreciation takes place.

Your costs seem high. Maybe you should wholesale the house. How much do you want to assign it over?

Ed in Sugar Land 

Thanks, Brett.

In the Houston area, which I assume is like most major areas, there are companies that just handle short sells.  They are usually much more qualified than the typical agent since that's all they do everyday.  Typical fee to the buyer is $3k to $4k.

In the past I have found forums on various topics to be very helpful.  I learned to build guitars largely from reading guitar building forums and books.  So I thought I would give BiggerPockets a go for improving my real estate investing.

I want to improve my prospecting for houses.  Basically, I want to take the place of a wholesaler by finding houses as he/she does, but not sell wholesale.  I would like to make the purchase and then rehab and rent, or rehab and sell.

So far, my house purchases have been for cash at the county auction.

Where is the best place to go on this forum to learn to prospect for houses as a wholesaler would??

Thanks for the help in advance!

Robert