All Forum Posts by: Steve K.

I would say the opposite: find great deals first (emphasis on "great", which means knowing the market and rehab costs to nail down an accurate ARV). What are you going to sell to your buyers list if you don't have a product? Too many wannabe wholesalers out there building a buyers list with nothing to offer in my opinion.

If you get good at finding great truly off market properties, your buyers list should create itself. You don't even need a list you just need one buyer per property lol. I'm not a wholesaler but it seems to me like wholesaling is simply a marketing business. You've got to invest in advertising to generate consistent deal flow because without great deals what are you bringing to the table and why would anyone want to be on your buyers list?

 I doubt a TBD close date would hold any water anyway, even if you didn't already have an out with your contingency plus the fact there was no consideration. The contract is supposed to have a reasonable timeframe. The close date needs to be agreed upon by both parties, so one party writing "TBD" in and expecting that to make the contract good indefinitely is completely unreasonable and demonstrates a clear lack of good faith, especially with them now clouding your title. Contracts aren't just open-ended like that.

It doesn't really matter considering you had a clean exit with your contingency, plus there was a lack of consideration to make the contract binding to begin with but I think the TBD part is totally bogus too and you've got absolutely nothing to worry about. 

They were probably just hoping you would not be sophisticated enough to call their bluff and are trying to scare/blackmail/extort you into paying their ransom fee (and randomized the number to make it sound more official). I've actually seen wholesalers recommend doing this type of thing to other wholesalers on this forum. They think they're being slick pulling this crap. 

 Good job not falling for it! 

@Carson Plant In all states existing leases survive the sale unless stated otherwise in the lease. You will have to wait for the current leases to expire to raise the rent legally unless you can convince the tenants to sign new leases with you.

@Mark Rogers I'm not a lawyer but common sense tells me this suit is likely to be dismissed because the premise that NAR/MLS can "force" sellers to pay a commission is false. Commissions are 100% negotiable. Typically sellers pay commission but nobody is forcing anybody nor is anybody forcing sellers to use the MLS they can FSBO if they so choose. MLS is just currently the most complete and up to date listing service for buyers and sellers to use if they like, it's not forced on anyone and neither are commission structures.

@Brad Hasseler what everyone above has stated is spot on, especially the underlying fact that it’s a low margin business. Before hiring a PM I looked into starting my own PM business and put together a quick business plan through which I determined I would need 60 units minimum in my market to make any money and 100 units plus was necessary to start making good money. That many units would require great systems and hard work, and it has to be really hard to avoid things falling through cracks with that kind of volume. For this reason a lot of PM’s are also running successful brokerages with the PM side of the business serving as a lead generator and providing consistent income for the brokerage as opposed to being the core business. The two compliment each other because the brokerage side brings in much of the profit while the PM side levels out some of the volatility of operating a brokerage and also generates leads by providing access to a client base of investors using the PM service who are likely to buy and sell through the brokerage.

@Carson Plant I’d be cautious about turnover. In my experience turnover/vacancy is the #1 profit killer, and finding new tenants is the #1 time suck. I didn’t care about chasing away long term renters as I took over new properties early in my career but looking at the numbers has since taught me to try to keep them and raise rent more gradually. Are the units all nearby each other? If so, and you have several vacancies at the same time, they will be harder to fill and that could get very expensive. I find it helps to speak with the tenants and gauge how well they will be able to absorb an increase. You’re talking about an 8% jump 600-650. Will you make improvements on the property to help justify that? Is the local market increasing 8%/year? Can they go down the block and find something similar for $550? These are things that help understand the psychological impact for tenants. I’ve lost tenants over $25 and that was a mistake on my part, as the next tenant paid a little more but left at the first lease renewal and the two turnovers cost me more than if I had just kept the original tenant at the lower rate. I would work with each tenant on an individual basis and try to keep them in place. I actually often just ask tenants what they think is fair and some of the time they actually throw out a higher number than I would have said anyway lol. Try that and see if any say $700. If they say they don’t want any increase (also common), explain that market rate is $650 (provide comps), offer to fix whatever issues they have, and if it’s still a deal breaker for them at $650 compromise at $625. I would just recommend going easy on drastic increases on all units simultaneously to avoid multiple vacancies, unless you’re prepared to lose money for a few years and spend a lot of time and money screening/ placing new tenants.

@Barak Hamdani

Some great advice coming from @Bill S. and @Matt M. here. I like the Denver market long term and you definitely have a budget that can get you in although with $400k to invest I would think your max purchase price should be closer to $1.4M based on my experience. Keep in mind you will likely want to have some left over for cap-ex/deferred maintenance/ rehab type expenses but that will depend on a lot of factors so as Matt M. said, your first call should be to some lenders. 

With $400k your options will range from an 8-24 unit "value-ad" in a "transitioning" area (higher cap rate, higher risk, more active management, more broken bottles and needles in the parking lot, gang bangers, etc.), to a 3-5 unit in a nicer area (lower cap rate, better tenants, less risk). I would lean towards the latter personally and if you don't mind being a little more hands-on you could probably find the best return from something like a fixer-upper in Baker, Barnum West, maybe even Wash Park West or similar area. I like the close-in neighborhoods that were run down during the 80's-90's into the early 2000's but are now becoming nice. I know other investors that really like the north side of Aurora and East Colfax/West Colfax (Lakewood) zones. In general it seems like the grungy pockets surrounded by fancy developments have the most upside potential, and there are many such areas in Denver. 

Much easier to base your strategy around the property once you find it rather than setting unrealistic criteria that nets 0 search results or wasting your time on hypotheticals in my experience. There aren't that many properties to choose from so just learn the neighborhoods, get familiar with developments (such as the $20M being invested in East Colfax, infill projects breaking ground in neighborhoods surrounding RiNo, Sloan Lake, Golden Triangle etc.), and look at a bunch of properties until you find one that meets more of your criteria than the others. 

5 years is a bit of a gamble; if your timeframe was closer to 10 I'd feel more comfortable but that's going to be the case no matter where you choose to invest IMO.   

This is one of the most classic CL scams, right up there with the cloned listing, the illegal sublet, and the fake database. She'll email you soon saying something along the lines of she has to move to Tacoma instead of Texas now because her Aunt Alice is sick and she has to take care of her. But you can cash the check and keep $200 for your troubles, just please wire the rest of the money right away as she's having a financial emergency and trying to get to Tacoma to see her very sick Aunt Alice immediately!

Craigslist is pretty worthless these days, it's outdated technology and should only be used for local, face to face, cash transactions (preferably in a police station parking lot).  

I’m also surprised this hasn’t gotten attention from press. This is probably in part to avoid lawsuits for libel and also in part because the story would be more digestible to an audience with a happy ending. Usually the scam shows are made after the trial when the perps are locked up. American audiences in particular like to have closure/denouement/justice. 

But something along the lines of John Carreyrou’s Vanity Fair article exposing Elizabeth Holme's Theranos fraud would be appropriate here. He followed her for two years before pulling the trigger and that single article is essentially what took her down (combined with the fact that she was running a scam and it was easy to verify what the author wrote about her of course). She was worth 4.5 Billion before the article, 0 not long after it came out, and now I think she owes over $25 million to spurned investors and is still facing criminal charges/potential jail time... pretty crazy.

It might be risky for a reporter at this point, legally speaking, and a publisher might not want to touch it until charges are brought. But it sure would be a public service to get the word out to a wider audience about the ongoing fraud. 

Perhaps a good start would be for all of us to report his channel on YouTube. All you have to do is go to the channel (try not to puke while you're there) and at the bottom right click on the three dots, a dropdown opens and click "report", then click Spam/misleading, then click Scam/fraud, and leave a nice comment. I've done it and nothing happened of course (I think his channel is one of the top rated channels on YouTube so maybe he's untouchable), but if enough people report it YouTube might take action in order to avoid being complicit in an unfolding scam. Eventually they will take it down just like BP took his podcast episode down a long time ago. Once that YT channel gets taken down the new money will stop and the house of cards will fall because a Ponzi scheme doesn't work without more and more new money. A downturn in the economy would have the same effect as new investors will dry up, which is basically what sank the Madoff ship. 

Jay your idea for a website is a great one. MorrisInvestScam.com would do it lol. But a google search even right now turns up so much dirt, it's amazing people still wire money by the tens of thousands without doing a simple search. Celebrity is a powerful selling tool, all you have to do is get on TV and people will believe anything you have to say it seems! Clayton could probably walk down 5th Ave and shoot somebody in the face and people would still buy houses from him. I mean he's on TV so how could he be a scammer? Crazy times we're living in. 

@Sean Heard I don’t see why you would agree to that unless they are willing to pay double the rent, in addition to the extra utilities. Even then it might not be worth it, your place is likely to get trashed.