All Forum Posts by: Stephen Stokes

Ran across this today and thought this might be extremely useful for others to use if you are discussing directly with sellers so they can have a better grasp on what they will receive net on a direct to buyer sale. 

https://ctot.com/texas-premium...

@Joseph Kline call around to some title offices and ask if they are willing. If they are not, ask for recommendations for attorney title fee offices and check with those. Usually, small lawyer practices that do title work are willing to do them. Whoever you go with, make sure that it is not their first rodeo as you really need to CYA on these types of transactions.

@Valerie K. I think about a cap rate this way; if you were to put your money into a risk asset like real estate, what is your expected cash flow return requirement? It is all individual preference what you want to set YOUR threshold at. So at the end of the day you need to make a personal judgement call on what you are willing to exchange for in order to part with your capital and put it at risk. Those with a lot of capital or those investing with other peoples capital are able to accept and feel comforted much lower returns. Those with smaller amounts of their own capital who have to work extremely hard just to build that capital should be demanding higher returns. Again, you are parting ways with YOUR capital, and the exchange you make needs to be commensurate of the risk/return profile you are comfortable with.

I personally shoot for 5% cash flow returns on my investments. Any appreciation or other benefits are just cream on the cake for me. My rationale is that I can achieve around 4% through macro market ETF’s in the stock market which require no hands on work so 1% additional cash flow is commensurate for the amount of work I put into my buy and hold real estate investments. Again, that is just my preference and each individual is different.

Now, being able to achieve your threshold is dependent on the macro market cycle position, current interest rates, the micro market, the target asset quality, the neighborhood quality, and how you source your deals.

If you seek to buy in Austin, want to have a 10+ cap rate, sourcing deals that are listed publicly, you better be willing to buy properties with lots of deferred maintenance, high vacancy rates and in “war zones”. This may still be a difficult feat to achieve as the risk premium that is added to the risk free rate (treasuries) needs to be significantly large since the risk free rate is basically zero. This risk premium also varies with market cycles as demand for risk goes way down when there is blood in the streets and way up when the fed is printing money like crazy.

@Jay Hinrichs the rewards are not a fee from the borrower directly but rather the discounted property we acquire as a result of helping the borrower avoid foreclosure. Anyone pushing the model you referenced is a complete scam and is not helping anyone.

@Greg H. Short sale, payoff, subject to, reinstatement, loan modification, are all options for helping borrowers who face foreclosure. Curious to know what state would enact laws against investors helping borrowers avoid foreclosure using any of these strategies. Seems like that would be counterproductive to the best interests of the borrower. Anything that can be done to save from a foreclosure is better than the alternative which leaves the borrower unable to get a loan for 10 years.

@Greg H. Helping people avoid foreclosure is illegal in what state?

@Daniel Hixson the wonderful thing about pre-foreclosures is you are truly helping someone in a major way. That is where we as investors are adding tons of value to the community and thus are justified in reaping large rewards for our efforts. Part of the reason why most people don’t pursue is borrowers tend to be difficult to work with and banks are also tricky. The amount of effort is sizable as well.

@Kole Moore legally speaking you must use the VA loan for the city in which you live. If you are flexible where you live and want positive cash flow you can find them in any city but the more boring slower growth cities are going to be easier to find deals and the high growth cities will have more competition.

Regardless of location, iIf you want to be able to cash flow, you will need to learn to market for distressed sellers/homes. I recommend checking out Bill Bronchick's course on finding motivated sellers. https://www.legalwiz.com/store...

@Prash ManoharI have been receiving anecdotal evidence to support as well from leasing agents and other landlords. Still no macro data to support swift increases across the board. 

@Anna Marie Holland wow I guess they have increased their fee by $10k since just last year! Even if you did have the money hope you wouldn’t waste it like that. I once met a gentleman who has spent over six figures on Than Merrill’s program over course of a couple years. My initial thought was woah that’s a lot of cash but hey if he is making six figures off deals now that would be a good investment. When I asked him how man deals he had done he said zero. At that point I was just sad for the guy as he had clearly been taken for a ride by a guru. People like me are more than willing to lend free advice to others because we know how difficult this business can be to get started and taking the leap of faith is good as long as you are not shooting from the hip. Find others that are not looking to profit from you by selling you something, maybe they will even partner with you on your first deal. Find ways to add value to their business as well and you will be shocked how many people want to work with you.