All Forum Posts by: Stephen Dispensa

This is an area that maybe frustrates me the most when working with investors, especially new investors.

Do you think someone is just going to HAND you a cash flowing asset? 

Even if you have a ton of money to invest, do you understand that the cap rate is essentially the same as your cash on cash return at that point? Do you realize how low cap rates are in general across the country?

I don't care if you have infinite money to invest or are just getting started, the ONLY way to really get assets to cash flow at a level where they become sustainable income is through VALUE ADD.

Yes, that means purchasing assets that are cash flowing little, nothing, or negative.

Yes, that means investing further cash to renovate the property.

Yes, that means investing time in finding the right tenants and property managers to raise your rent roll.

However, the upside is almost always HUGE and largely predictable if you're willing to put the effort in. The question of whether you're going to succeed or fail comes back to the VALUE ADD. What VALUE do you have to ADD? Answer that question and you might find money for investment much easier to come by, and the road to cash flow a lot shorter than it looks.

Dillon, 

I'm an agent here in Tampa and have sold many a home at an open house. Here are the key factors:

1. Competition - You want to get AS MANY buyers and looky loos in the property at the same time. You want buyers to feel like everyone is in competition for the property. They'll feel like any one of these people might buy the house and they need to make an offer fast to not miss out. 

2. Timing - You ideally want to launch your property as follows: On market Tuesday, Broker's Open/Caravan on Wednesday, Public Open House on Saturday. When your house hits the market on Tuesday, agents will generally call you that afternoon to ask questions. Tell them you're holding a brokers open on caravan on Wednesday, and tell them to come have some lunch. Bring any agents from your office that are available as well to fill in the broker's open. Let agent's show the house from Tuesday to Saturday, and then Saturday hit with the big Public Open. I recommend keeping the open house short, I personally like 11 am - 1 pm (although 10 am to 12 pm works fine too) I don't love later in the afternoon open houses because buyers have usually been out looking at houses all day and are a bit fatigued. Some may give up and not show. Remember the #1 thing is competition, you want them all there at the same time. Also be aware of sport schedules. On Saturdays in Tampa college football can be very big so get the schedules for teams that are big locally (Florida, Florida State, and USF to a lessor extent) and nationally (Alabama, Georgia, LSU, Notre Dame, etc.) and make sure your open house doesn't conflict with any marquee matchups or local games. I don't like Sundays for open houses. Too many people go to Church, and in the fall there's NFL to contend with. 

3. Sign In Sheet/Follow Up - It's important to have all open house visitors sign in both for security purposes, and for marketing. I like to have a branded video tour of all my listings. I tell every visitor to my open house that I need to collect their email, because I know they're looking at a lot of houses and they all blend into one. But I'm going to send you a video tour of the property, feel free to share it with family and friends. I also promise them that this is the ONLY email they will ever receive from me. (We all hate spam, and let's face it most Realtors/Loan Officer's mailing lists don't really have anything interesting to say)

4. Refreshments - Keep it simple, but do put out some beverages and light food. If it's a morning open house coffee and pastrys/bagels is always great, maybe some fresh fruit. Always have some bottled water. (I know agents that put their contact info on water bottles but let's be honest, these are getting thrown out.)

5. Neighbors - Others have said it but I always door knock the entire block and invite them. Usually try to do this the day before but can be done the morning of. Try to get as many people there at the same time. Use the refreshments as a bribe "Come down have a cup of coffee and check out the house."

6. Engage - Try to engage everyone who comes through, but try to not make it be about the house. Ask them what they're up to this morning, if they have kids with them talk about that, if they're new to the area find out where they're from/what brought them here. People love to talk about themselves, give them the opportunity to tell you what they want/need without directly asking. You'll often find buyers here. Also, while talking to the neighbors that came to take a look, you may find sellers as well. I had an open house a few years ago where a neighbor came by and I got three deals out of it. She let me list her house, her boyfriend's condo, and sell them the new house they bought together. And now her sister is going to buy a house with me too. Don't discount anyone you meet, open houses are a huge opportunity to expand your business.

Bottom line, open houses are great. Before the pandemic, my entire business model was based on flipping houses with investors, and then meeting the surrounding neighbors at the open house. The pandemic REALLY put a hurt on my real estate business because of the inability to hold true open houses for a while. (I switched majority of my business to multifamily value add after that but still take the time to do listings and open houses today when they come to me). Put the time into it and you'll do well.

I've been seeing some stuff go quickly here in Tampa the past few weeks. Couple of things I've noticed: 

- Some recently completed flips got pulled off the market and leased out instead, which drove inventory down a little.

- Seller's got more realistic about pricing across the board in January. 

- Market tends to heat up a bit down here starting in February, combined with lower inventory starts to bring back multiple offer situations. 

Getting multiple offers is easy enough. One of the first lessons I learned in Real Estate is "price it right and let them fight." 

Sellers will almost always want to list for more than what a property is worth. And this is always the biggest mistake you can make. When trying to get the highest price with the best terms for a property, you want competition among buyers. 

I always tell my sellers, imagine a hurricane is coming. You're well supplied, you've got a couple cases of water at home, you've got food and flashlights and candles. You're out at the store one last time before the storm hits, and you see a single case of water on the shelf, do you buy it? Of course you do. Because there is no greater motivator than a diminishing supply of something you need. 

If you host an open house and there's 50 people there, they're all concerned that the other buyers are going to outbid them. You've just made your listing the last case of water on the shelf before the storm hits. Let them fight over it and get yourself max dollar. 

So your options here really come down to what was agreed to in the initial lease. In Florida, the standard lease form created by the Florida Association of Realtors along with the Florida BAR (FARBAR Lease) contains a "Liquidated Damages" addendum. If you used a FARBAR Lease, or a custom lease that includes this addendum, it gives the tenant the option to pay liquidated damages up to the amount of 2 months rent (amount is set by the landlord) as a price for breaking the lease early. This is the "60 day notice" you are referring to which isn't actually Florida law or local law. 

Without electing to take this addendum, the tenant is actually responsible for the ENTIRE lease if he breaks it early. If his rent is 1200 per month, and he has 8 months left, he is liable for the entire $9,600 he owes you. You could absolutely take him to court and would likely win. Florida courts are far more friendly toward landlords than some states. 

However, as a property manager, my recommendation in this case would be as follows. If he has the liquidated damages option, tell him to pay February and you're keeping his security deposit, and let him out of the rest of the lease. It's literally what he agreed to.  If there is no liquidated damages option, tell him to pay for the dates in February that he's actually using and you're keeping his security deposit, and let him out of the lease. You're doing him a huge favor in this case and letting him off the hook for $8,400. You could go the route of court and garnishing wages to get the full 9,600, but honestly with a $1,200 a month apartment it's so easy to find a new tenant in Florida that why go through the hassle? 

Whatever you do, make sure you put it in writing. If you're able to come to a deal with the tenant make sure they sign it.

I'm based in Tampa and work with investors regularly as a broker/property manager/project manager. I still like small to medium multifamily in our market IF you're willing to make investments in the property. The opportunity here is mainly in value add. You need to be willing to invest in renovations and turning over tenants to get properties in this market to cash flow at a decent level. However, we've had great appreciation year over year even before the most recent boom in 2020. 

I would look into the "land use" on the county appraisers website as that will let you know if it's non-conforming use is legal or not.

You need to open a separate checking account. If you are in the state of Florida, this can be an interest-bearing or a non-interest bearing account, HOWEVER your tenants must be informed at lease signed the name and address of the bank where the security deposit is to be stored. You must also inform them whether it is an interest bearing or a non-interest bearing account. Lastly, you must inform them who is to receive the interest if it is in an interest bearing account.

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 Yes, couldn't agree more. The question is always is there a number that will work that this seller will accept where the buyer is going to be able to make a return. If the minimum deal I think the seller will take is not one in which the buyer can make a return, the analysis stops right there. 

The difficulty I have seen with inexperienced investors on more than one occasion, is they want to start with an offer SO low that it doesn't get taken seriously. This is a waste of everyone's time. Generally speaking we figure out the breakeven point and work backwards from there. Figure out a realistic number the seller will take, see where the returns line up at that number. Then begin offering at a starting point that we think will get us to our target number. 

I have it written on my wall, and I swear I'm gonna get it tattooed on me one day, "Deals aren't found, they're made."

When discussing an offer price with an investor, I generally suggest what an initial offer should be, and what is a realistic number that the deal will close at. There are a number of items I research to figure out these numbers. First, there's market conditions: comparables, rental rates, ARV, etc. Second, I want to look at any existing mortgages, how much does the seller owe on the property. Third, I want to try to find their motivation. Do they own 6 other properties and are in over their head? Are they going through a divorce? Sometimes the listing agent will give me some of this information, other times I'm searching property records, court filings, and social media accounts.

Point is, when I give an investor a realistic number they can purchase a property for, it's not a shot in the dark. It's a researched estimate based on a whole multitude of factors. If a buyer asked me to place a low ball offer below market price and the balance of a current mortgage, they're often wasting everyone's time. Now depending on the situation, I may still make the offer if it's something where we're on the borderline and a seller might feel the pressure and bring cash to closing just to get out of a property. But those situations are rare. 

I've been lucky to work with some great clients over the years, but I have fired clients many times as well. I often have to work on, analyze, and pitch 20+ deals for every one deal one that goes into contract. I don't know how educated your agent is, but if they're doing their homework you should heed their advice. If they're just writing offers and don't fully understand the investing process, find another agent.