All Forum Posts by: Simone G.

@Bob Ross

 The factors that contribute to an investment being worthwhile or not are not as complex as people think.

People complicate these factors in an attempt to delegate responsibility to non-emotional rationale and maintain loyalty to the "does it pencil?" strategy; this is as futile as a seatbelt on a bull.  

Simply, an investment is a good investment if it costs less than market value and appreciating it up to, or beyond market value, either forced via a reno, or over time organically, costs less than comparable ARV properties at the time of acquisition.

That's it. 

There will be bubbles. There will be recessions. There will be a deadly beer with a virus that shuts down humanity worldwide. Stuff happens. 

I know of investors who overpaid for a property because they got wind of their competition, and wanted to "win" - that is not a "the numbers have to pencil" strategy. That is ego. 

I know of other investors who would not write on an absolute gem of a deal because the property happened to be on a street with the same name as their ex girlfriend - also not a "the numbers have to pencil" strategy. Also ego.

So no matter what the market is doing; what type of property you're pursuing; and where you are located, whatever reasons people cite to pursue or not pursue a property are arbitrary - because candidly, we all lie to ourselves a little bit as to what motivates us to do this and not that, and if you think you don't, you're also lying. 

Golden rule: Can you buy for less than its comps, and assuming yes, can you appreciate it up to market value for less than what it would cost ARV on market?

That's it. 

If you are a human on this planet, you will be victim to bubbles and recessions and unplanned acts of god that influence the value of your asset. 

For fun, in 1999, the most brilliant investment minds, in positions of the most advanced and privileged access to market analytics, projection tools, education and resources, maintained that a little startup called Amazon is in a bubble because no way could one company "sell every book in the world today". 

They failed to anticipate that one day Amazon would not be selling books. They couldn't' even fathom today's e- commerce landscape. 

Real estate is no longer just about property and land. It is about a fluid and diverse asset that we may not be able to fully anticipate its optimal value and application five, ten years twenty years down the road. If you argue it is exclusively about property and land, you are building saddles in a Model T world. 

AirBnB was founded in 2008 and in December of 2020 IPOd with a $75 billion valuation. WeWork was founded in 2010, and its value plunged from $47 billion to around of $10 billion in weeks after SoftBank's acquisition. A lot of smart people with a lot of money with a lot of access to "bubble spotting tools" still messed that up. 

If you stick to the golden rule, accept that you're human, you'll be alright. Hope that helps. 

@Mitch Hankins scope Douglas Spence on here. 

@Sam Lofton $200/month 

@Joel Mooers

Bravo on this gem of a deal. 

In the spirit of getting you to the finish line and cleaving off more properties from this "awesome lady's" portfolio in the future, below are some unconventional negotiation and behavioral psychology suggestions on how to manage the 'elderly man' tenant, and maybe other comparable situations in the future?

Feel free to ignore, but hopefully these help:

• When you first sit down with him, ask him about the genesis of something personal to him - ask him where he got his shoes, a shirt, a hat, his dog, whatever. 
• Do not talk about yourself.
• This gets him talking about something comfortable and familiar because it's part of him and is a non-threatening topic. Him potentially having to move, uproot, pack, find a place to live, etc. is threatening and unfamiliar - you both know why you're there, you'll get to that topic eventually.
• Do not talk about yourself.
• Once you gently meander through the 'genesis' convo, bleed in to asking him what he values; that's the question, and pose it genuinely, "I would love to better understand what you value...and what's the best example of someone exemplifying that value to you?" 
• Do not talk about yourself. 
• Again, he's going to confidently be able to answer you and by doing so, you'll also get an idea as to the most valuable currency here to employ in getting him to leave - is it money, time, comfort, extra help packing, helping him find the next place, finding his dog a yard, whatever.
• Do not talk about yourself. 
• Now you (hopefully) have him comfortable and you don't want it to be an interview, so the questions need balance, but talking about yourself is not the next play (spoiler alert!). So many investors make the mistake of hemorrhaging on about their 30,000 feet view of the property, their goals, why they need the tenant to leave. This is a mistake. Never position yourself as needing something from them. Instead, position yourself as a winning lottery ticket they simply need to cash. 
• Next, ask him what makes his dog the happiest. He will list all the things that make his dog happy. By doing this, you're acknowledging the importance of incorporating (probably?) the happiness of the most important thing to him.
• Again, don't talk about yourself.
• You're seeing a pattern here. You don't need to qualify yourself. No one cares about you, sorry, but he doesn't, and any tenant in this situation doesn't either. Talking about your dreams for the property, your kids, where you went to school, is not the agenda. 
• Now that you know what he values, what his dog likes, and his preferred currency, you do something like this: "Look, Frank, I am pretty bad at a lot of things in life, but maybe this is something I could be somewhat good at, you tell me...you mentioned you value consistency and familiarity, are getting older, could use a little help packing and finding a new place, and ideally, more space for your dog - if I could set you up somewhere where it would be unlikely you'd have to move again, your dog could run, I could send my guys to help you pack and give you enough cushion to not have to worry about unpacking or the first three months rent at your new place, would that be of interest?"

You script it accordingly. But the take away is make it about them. Listen. Ask. Listen. Ask. Give them a winning lottery ticket they simply need to cash. 

Hope that helps. 

@Jayna Stevens Suggest you stop trying to fit in to a saturated category and instead create a new one. 

No one is going to jockey to reinvent the wheel. Writing with the same terms on the same properties everyone is elbowing for is reinventing the wheel. 

Instead, create a win/win structure of writing where your offers dominate a category of their own, and thus the jockeying occurs with the sellers who want to court your offer as word will get out with the realtors that your terms and speed are unparalleled. 

What does that look like? 

• Off market
• All cash
• No contingencies
• Inspections for reference - not rebates 
• Quick close
• Respectable earnest money
• No appraisals

How do you find these properties? 

• Call thirty realtors
• Call twenty probate attorneys
• Call ten brokers
• Join five zoom RE meetups 

How do I ensure this will work?

• Don't ask for something in these pitches, offer something. Be of value, and genuinely mean it. 

• Offer the realtor to double end the deal
• Offer the probate attorneys referrals 
• Offer the brokers your next listing
• Offer the contacts in the Zoom meeting honest, random feedback  
  • For instance a very successful broker/investor/realtor in my area does not have his phone number hyperlinked in his email signature. Small detail, but think of how much money he leaves on the table because we're all on our cell phones and we want to call with a 'tap'. I pointed this out to him and he is so grateful and appreciative, no one has ever mentioned this to him, that we're now pursuing a deal together. It's not for that reason, it's because I distinguished myself as someone who comes in on their knees in an effort to enrich the person before I ask for something from them. People notice. 

Hope that helps. 

Waiting is for whiners. 

If there is a deal, write on it. 

You'll know it is a deal because no matter where you are, and what the market is, the deal will distinguish itself as being better than its comps. 

It's literally that simple. 

Don't complicate it. 

@Angela Daigle buying a timeshare is like buying a crazy ex. 

@Elias Parisca, @Andrew Postell is absolutely informed and correct as it relates to building costs currently. 

The best way to determine the costs of an OOS flip is to first do a BRRRR close to home and manage the nightmare within a an hour's drive. ;)

If you can't do that, ally with someone close by who is flipping, and offer to be of value in exchange for insight and access to the process. Do not present as competition, present as a life line in some way. Unsure what resource you can barter, but get creative - this could be a warm intro to a low interest private lender, build them a website, whatever your special sauce is, leverage it.  

That way, once you've been the project manager on your own 'within reach' flip, you'll be able to have a realistic scope of your OOS one. Labor costs vary from state to state, but if a painter tells you it will take ten days and $xx to paint an interior of a 3/2 home, you now know that is BS. 

I can only speak to our construction business in Southern California, but here is a smattering of what we've experienced from the impact of COVID in the past 6-8 months as a general contractor:

1. Lumber costs have tripled/quadrupled - thus framing bids look like typos. Basically the mills shut down at the start of quarantine, workforce got laid off, then they started up again, but it was difficult to hire back the labor to run the mills. Cue dropping interest rates, cheap money, more building demand and it was the perfect storm for a supply and demand conflict. 

2. Labor costs have increased a third, in some cases doubled, and avail is 2-4 months out, contingent upon the sub. Some subs work weekends now - they're basically being poached by longer term, higher paying industrial/commercial builders who have 6-9 month contracts whereas in the past most subs needed to find their own work from job to job with GCs. This is because with reduced commuting and continued shut down and vacancies, all those freeway projects, city buildings and schools are finally getting the carte blanche to renovate, remodel, improve and build. That takes a lot of labor to satisfy and if you're a union electrician, plumber or painter, which gig are you going to choose? 

3. Materials across the board (no pun) are backordered. See above. We are still waiting on a door for a client that was ordered in September of 2020; windows are backordered; the list goes on.

4. OSHA wants you to build masked, six feet apart on a construction site. So there's that. 

5. Permitting approval for footprint changes (and every contractor "knows someone with the city") is six-nine months out. 

Those whom I know manage OOS flips do cosmetic only and turn their realtor in to a project manager with the promise of the listing of the ARV flip. They FaceTime the property, do video walk throughs, manage the draws for the contractor, etc.. An established realtor (5+ years in the business) also has the relationships with the subs if no contractor is needed and it's all a la carte tasks like a painter/electrician/flooring/tile play.

All this aside, decide on a region, call 5-10 realtors in that area, vet them, and turn them in to allies. I know some use (future) property managers as project managers, but I trust realtors over PMs because realtors have a more regulated industry with checks and balances - you can always go to the board or their broker if an issue arises. 

Hope that helps. PM me if you want more honest contractor insight, I know California is heavily regulated, but a lot of our wholesalers and materials are from midwest and East Coast. 

@Ken Naim good to know. Yeah, I am a fan of flipping as each unit becomes vacant, versus trying to vacate an entire complex. 

@Cherisse B.: someone smarter than me on Florida can probably do a better job than my back of the napkin broad strokes below, but maybe this will help you. 

In Florida:

(1) If the tenants are month to month, and you want them out, you can serve them a Three Day Notice to Pay Rent or Quit (via U.S. Mail or in person) fifteen days prior to the end of the month, and they need to be out in 15 days.

(2) Florida is one of the few states that honors UNWRITTEN leases for weeks, months, quarters or a year tho - so be real careful here, if tenants say the owner/landlord said they could stay "for a couple weeks", the court recognizes this as a binding contract and this makes it muy messy. In complete contradiction however, if there is no written lease in place, you can evict a tenant with no written lease at any time. 

(3) If there are existing one year leases in place, you can't raise rent until that lease ends. 

As a landlord, if you want to terminate a lease and notify tenant it won't be renewed, you need to give notice via US Mail or in person with this amount of notice:

• Annual lease – 3 months prior to the end of the lease term
• Quarterly lease – 45 days prior to the end of the quarter
• Month-to-month lease – 15 days before the end of the month
• Week-to-week lease – 7 days notice

You don't need to do cash for keys as much as people think you need to - in Florida, there are no current rent control laws, so as a landlord you can raise rent as much as you want (make sure to check your county laws   if /when you proceed, but I know I'm right as of this posting) once lease terminates. 

If there are squatters in the place; people who used to have a lease, don't anymore, never left, aren't paying rent, and have been there uninterrupted for more than seven years, they can claim legal ownership to the property, and while there are specific circumstances associated with this, it's an entirely new issue.  

I would get an attorney/property manager/Florida real estate expert/someone more experienced than me/ to chime in cause they can probably do a better job than I am here.