All Forum Posts by: Garrick Solberg

So, I passed up on a property today that was sent to me by one of the many wholesalers I get listings from. The home has been totally renovated and apparently is in great shape (haven't seen it myself, but for the sake of discussion let's say it is). It comps out to about 155k, and the asking price is 122k. The only thing according to the wholesaler that needs to be updated is the kitchen, so they threw out an estimated rehab cost of 3k. I have no clue whether or not 3k will get you a decent kitchen or not, but I have been looking for a low rehab cost home to flip for some time. It appears that the wholesaler set up this deal to be a simplified MAO of 80% ARV. Simplified meaning only acquisition price and rehab costs considered. From what I have read, the true calculation to stick to is MAO = 70% ARV - rehab, closing costs, holding costs, etc. Because of this, I passed on the deal. Was this a good decision or should I jump on a property that requires minimal rehab and can still net me some cash?

I apologize if my post made this thread turn into a criticism of this site and its vets. That was not my intention at all. This site is an excellent source of information on real estate investing and one that I put a lot of trust in.

I think MarkY might be responding to allcash's post about the newbie investors at the REI meetings that always fail. Note: allcash has given some top notch info on this board, so I very much respect his opinion. That said, I don't want to be that newbie "paint the mortgage" guy (lol) that fails in six months or less. Rather than focus on that guy, I would like to hear about how newbies got past their newbness and were able to garner the respect and trust of the more experienced investors. The easy answer is to do a lot of deals, but gathering your first deal is sort of like applying to college without ever having gone to high school.

So, to review, and I am asking this in a very positive light, what can I do as a newbie to get the respect and trust of veteran investors?

Alright, let's turn this topic around to a more positive note. Since newbies are hated so much, what can we do to avoid the common mistakes that make experienced investors cringe?

This thread appears to be fragmented. This is the third time I have seen a thread like this. Anyone else having these issues?

Enjoy Minneapolis, it's a great town. I just visited there a couple of weekends ago, really made me miss all of the good times I had there.

That sounds pretty interesting. How will the fractional ownership be managed?

I see, so instead of paying down equity and refinancing, just hold onto any liquid gains and use them towards more asset purchases, or invest in CD's. Sounds good to me, thank you for the advice.

To change gears, I have been contacting FSBO's on Craig'slist to test out the waters. I think it's an extremely small any of these would actually result in a deal, but it's good practice of communicating with sellers. Here is an example of a discussion that ended up in a possibly dead, or at least dormant lead, feel free and encouraged to critique:

Listing:

[b]4 plex Riverside
nice quad for sale
Contact [email protected]
555-555-5555
contact me for more information[/b]

Me (email):
"I would like to find out more. Pictures and financials would be great, thanks."

Him:
[i]This quad apartment is at xxxx Generic St.
It’s on a great corner and has many updates
Asking price is $350,000
Average rents are $600.00 to 650.00. Not sure what market is as I have not researched lately.
Please go and look & let me know if interested[/i]

Me:
"What is your reason for selling? Are the units currently occupied? If so, are they under leases or month to month?
I have done a quick zillow.com check, and it gives an estimate of 297k for the home. Zillow is using other residential homes as comps though, so it's not exactly accurate. Zillow listed the building as 8 bedrooms, 4 baths at 3700 sq ft. Am I right to assume that each apartment is a 2 bd/1 ba?"

Him:
[i]I have owned the property for 10 years and renovated much of it (new roof, new a/c, plmg, elect panel, removed all old paint & repainted etc.) now I am moving on to other things.
I have a management company. I think it is fully occupied but not completely sure. It generally rent fairly quickly because of the location. Sign is quickly seen.
Not sure of terms of leases at this time. But it stays full generally.
Zillow also says from 253000. to 393000. so you just need to look and determine value you are willing to pay.[/i]

Me:
"Thanks again for the info. It sounds like you are intending on selling this to a retail buyer, and are pretty casual about how long it will sit on the market. When I purchase rental properties, for it to be able to cash flow, the gross monthly rents have to amount to about 2% of the price to acquire it. Assuming each unit brings in $650/month, the total price I could even consider, assuming no repairs necessary, would be $130k. This is obviously far below than what you are expecting, but I want you to be aware of where I am at in case your situation changes. If not, I wish you good luck with your sale. If you happen to know of any other landlords looking to get out of their properties, please pass them by my way."

Him:
[i]I understand where you are at but if you can buy that type of property for 130000. I would get as many as possible. That’s 35/ft sq.

Thanks for your interest[/i]

And that's where I have left it since yesterday. I checked the tax records and he did indeed buy the property in 1997, for a grand sum of 69k. I have no idea if he needed to rehab it at that time, but he seems like a pretty hands off investor, at least from what I gathered.

I'm starting to speak with various FSBO seller on Craig's list. I haven't found any properties that would bring in positive cash flow yet, but it's fun to fish anyway. Generally I have explained to them the price that I would be willing to purchase it at and still be able to cashflow. Everyone has turned me down so far, which is fine. My question is, what do you find is the best response to a rejected offer? Should I tell them that the offer (not on paper, just in discussion) is still standing, or pressure them by saying it has a deadline? Should I just be casual and say "keep my info if you change your mind"? Most of these people think I'm insane when I use the 2% rule, hehe, so they may not ever want to call me.

Well, I think the vacation rentals can be profitable if you're willing to advertise and manage it yourself. Obviously the location is key as well. When I went to school in Maine during the winter, I rented out a beach house on the cheap ($650/month, directly on the beach, but cooooold). I inquired out of curiosity what the summer rate was, which ended up being $2000/week for the studio apt below the house, and $3500/week for the upper part. The landlord put up an ad on the lawn in the early spring, and told me to "take down the damned sign" because he was overcome with calls from the ad, and he had already rented the entire summer out. The house was probably worth a million at the time, but he bought it for about $400k a few years earlier.

Actually I was hoping to get my mortgage balances down from proceeds of wholesaling while also acquiring renting properties and possibly from rehab flips as well. I don't know if it's unrealistic to have multiple paths towards profit, but it seems like diversification would be a smart move.

That is interesting to find out that overpaying the mortgage isnt a smart financial move, though. Does that mean I should never consider a 15 year mortgage?