All Forum Posts by: Jason V.

Great - Thanks @Lelith Walker!

 It's been a while since I really, strongly disagreed with something you've posted Greg, but I have to chime in on this one :-) Unless you meant to write: "...not have an expectation to generate value from day one..." I think you're way off base. 

A lot of value-add investing involves not having a positive cashflow from day one, month one, or sometimes even year one. I'd certainly call doing large scale development or new construction 'investing' and the wait for 'income' from these activities might be substantial. The BRRRR strategy that's ever so popular here on BP doesn't generate income from day one either. And I'm sure if you look past your frustration at the current market, you can see quite a few instances (high-income earners in states with income tax, etc.) where it makes sense to invest in real estate with 'income' as a secondary or tertiary goal - the long term benefits (delaying income) and short term tax benefits could easily outweigh the short-term yield sacrifices.

There are as many different reasons and ways to invest as there are investors. (And yes, sometimes the reason is 'because I was stupid' and the way was 'poorly') but that's not necessarily the case here. 

So while I'm not at all a fan of the movie, I'm beginning to believe more and more that "The Wolf of Wall Street" was actually a documentary, and not all that sensationalized. 

Vanguard Index Funds for the Win!

Good Morning BP!

I know this is a topic I've heard brought up a couple of times on the podcast (or elsewhere) but I wanted to see if anyone is actually doing it successfully: having someone drive to a property to take pictures and videos for you. 

I tried Task Rabbit, but they don't have service available in the area I'm interested in. If I were to use something like Craigslist, how would I make it secure for both parties? Can you use Paypal for something similar? Is there a different or better service than Task Rabbit? 

If you're doing this currently, any suggestions? What's a typical amount to pay?

Thanks All!

As others have noted, your maintenance budget might be a touch low, but it all depends. 

What's your 10k in rehab going to get you? Is it all just deferred maintenance?

Yes, with a FHA loan, the CoC return is often going to be pretty solid - you just have to be comfortable with either holding it a little longer (because you'll have no equity when you sell) or confident you can add some value.

If you're buying it in your name (since youbare, because it's FHA) then no, you won't be cutting a check from yourself to yourself every month for rent. I suppose you could, and maybe a CPA will tell me I'm an idiot, but from a tax/business perspective it doesn't make any sense. The house will be on your personal tax return either way. (And I think you get some added tax benefits for keeping it in your name whIle you live there as well.)

Looks decent, especially in the current market - pull the trigger if it's where you want to live.

@Joshua Martin Your numbers look spot on to me, especially for a 'first pass' analysis. My guess would be the owner paid expenses are probably higher than they're telling you (shocker, I know) and you'll find that out in due diligence or after you close when the tenants call you to let you know the garbage bill is due (or something similar.)

On one bedroom units, with rents right at the market average, you might find your vacancy will run higher than 8.3% - but I don't know the market. 

Your maintenance might be a touch high, but not a ton. You might safely be able to use 8-10% versus 15%, but if it's an older building, with older wiring or plumbing, or just a beat up property, you're probably right at 15%. You'd much rather be high than low on this. 

I'd also be worried about the owner paid utilities: they seem way too high to be lights and heat for common areas, and way, way too low to be the utilities for the entire property - definitely would warrant a deeper look, if there was any chance of this being a deal. 

This should be getting the 'pass' signal from investors all day long, but you're right: there are plenty of folks out there buying these "deals" right now. Hang onto your money and pick these up at a discount after the correction. 

Oh geez, we've got 2 Leyboviches commenting in the forums....we're all going to be hearing "Don't buy Pigs!" in stereo now!

@Shaquan Whitaker Welcome to BP! Looks like you've got a lot of motivation, and that's a great thing! 

One thing that might not be so great: your seller did not, in any way, shape, or form, "put you in a tight spot." She simply dictated the terms in which she was willing to sell to you - i.e. that she expected you to be the party closing on the property if you were the one making the offer to buy the property. I applaud you for not wanting to be dishonest or mislead your potential seller, because that is exactly what most "wholesalers" would do, and (in many investors minds) seems to make up the majority of the business. 

When you have a couple of minutes, take a look through the FAQ thread here on BP that discusses if wholesaling is actually legal, and the steps people can take to avoid legal trouble while doing this type of business:

Is Wholesaling Legal?

Below is a copy and paste of the most relevant post from the thread, in my mind. (Hat tip to @Darrin Carey)

IS WHOLESALING LEGAL?

I'm not going to get too far down into the weeds here. As you know, with any post there are a lot of "What ifs", ways for people to misinterpret, and look for a way to weasel around what is said.

First, people must stop equating "Assigning the Contract" as everything wholesaling. Assigning is a useful tool, but only one of several ways to wholesale a property. I understand people's attraction, as it's always promoted as a way to “invest” with little or no money, and make a nice chunk of change doing it.

The following applies specifically to unlicensed people in Ohio. Most, if not all states are probably very similar.

WHOLESALING BY CONTRACT ASSIGNMENT

The first two are absolutely absolute (redundancy intended). Direct from the Ohio Revised Code and the Division of Real Estate attorneys. There is NO wiggle room.

• Assigning a contract is perfectly legal. However, what people are doing to get from contract to assignment is frequently not. Driving to the Beach is legal. Driving 90 miles an hour to get there is not. Assigning a contract simply takes a few sentences to accomplish. Of course, a specific contract can prohibit assignment, but the law clearly allows it.
• You cannot advertise a property for sale unless you legally own it. Having it under contract is NOT the same as owning it. And for the weasels, "Equitable Interest" does NOT give you ownership and allow you to advertise the property for sale. You must have legal ownership. There are still questions on precisely where the line for "advertising" is drawn. The Division would not take a solid position on where the line was if you were just advertising “The Contract” for the property.

The next one should be absolute, but there may be a loophole somewhere.

• Do not put a property under contract unless you are ready, willing, and able to close on it personally. (For me, this is an absolute.) There are all kinds of issues with entering any contract when you have no intent or ability to perform on the contract. And you're screwing the seller if you don't perform. Don't do it. This is one of the key points for the State to determine if you are acting as an agent.

1. If you assign multiple deals, but never close on one personally, you’re going to have a hard time saying you’re not acting as an agent.
2. If you’re putting properties under contract, but have no intent or ability to close, you’re violating contract law, and trying to act as an agent. (Imagine the seller suing you for contract fraud and specific performance.)
3. If you leave behind a trail of purchase agreements you didn’t close on if you couldn’t assign it, then you’re probably acting as an agent.

Now for the licensees:

Being a licensee allows you to advertise a property you don’t own when you have the owner's written permission. You can have it under contract and be acting for yourself, and not as an agent. However, consider this. I can easily imagine a seller filing a complaint/lawsuit on how they were taken advantage of by the unscrupulous licensed, skilled professional real estate agent. You know the one who put their home under contract, then assigned the contract for a lot more than a commission. The agent clearly took advantage of the unsophisticated seller, and stole their home for less than it was worth for their own personal gain. Guess who wins that?

Being a licensee MAY hinder you. At the very least, it requires extensive disclosures, and the broker’s approval.

Wholesaling and all real estate activities MUST comply with the three rules above.

In case you're wondering, I primarily focus on rentals and flips. I do wholesale some properties, which may include assigning the contract.

For additional information, here is a link to the video with Attorney Jeff Watson interviewing the attorneys for the Ohio Division of Real Estate on the specifics of wholesaling legally. https://www.youtube.com/watch?v=9fi54S8nwUA

ASSIGNING THE CONTRACT

So you’ve followed the rules, and successfully assigned the contract. Now, time for the closing and get paid. It’ll be a great day right? What could go wrong? Remember these two points:

• When you assign a contract, you are giving ALL your rights to the contract to the buyer. You are removing your name on the purchase agreement replacing it with your buyers. You're out of the picture on the purchase agreement.
• Your assignment agreement is ONLY with the buyer. In exchange for replacing your name on the contract, you agreed to receive a fee.

The buyer and seller both have the right to change the purchase agreement. So, the buyer and seller could legally cancel the existing contract and create a new one. (Remember, you're no longer the buyer) You could be sitting at the closing table, and you wouldn’t be able to legally stop it. The title co also wouldn’t be able to stop those changes, as the buyer and the seller have the right to change their agreement. A newly written agreement could take the assignment out of play from the title co perspective. The title co is simply a facilitator for the written agreement in the transaction, even when the buyer and seller make a last-minute change.

Ok, so most buyers and sellers wouldn’t do that. But some would and do. You could try to sue the buyer for not paying you, but how do you think that would go, and what would it cost?

IN CLOSING

How do you prevent all the questions and problems above? Simple.

1. Find a great deal
2. Buy the property (use a lender or partner as needed)
3. Sell a good deal

Clean, neat, simple. And no argument about whether it’s legal.

Be careful of zoning issues, unless they're 4 seprate tax parcels. Be careful of any septic system. Are utilities sub-metered?

Keep in mind the structures themselves are worth a couple of thousand dollars each, maximum. All of the value in a MHP is having the land zoned properly. 

You might have a hard time getting it financed too - the National MHP lenders aren't going to be interested in a deal that size in my experience, and local banks are hit or miss on these. They'll take issue with assigning any value to the homes themselves. 

Economic vacancy/losses will be much higher than you might expect, depending on the area and condition of the homes.

Good luck!

Three words for you: Massive Underground Bunker.

Sure, if you don't die of malnutrition from eating nothing but cans of baked beans you'll eventually go insane and murder everyone else in the bunker (and start eating them) but at least you'll be alive!

But seriously, Kiyosaki has been pushing people to buy precious metals for a while now, but that's one "investment" I could never quite understand, personally. If you're playing the currency arbitrage game, that's fine, but you're gambling. If you're "preparing for disaster" by buying gold.....what's the point? You're assuming anyone will care about gold after this anticipated Global disaster, meaning there is still some sort of economy, and that people still want gold for some reason. In my mind, I'd think food, bullets, and booze would be the currency of choice in a world post-economic catastrophe.  

If we're in a situation where things have gone sideways, but people still want gold, it'll mean they probably still want other "things" (like a place to live) too. Which would mean every physical "investment" would make just as much sense to buy as gold if you're trying to hedge against runaway inflation - so why not buy something that's a good investment both right now, and in just about any future situation you can think of....like real estate.

Buying gold as "protection" seems kind of like buying a crash helmet that only works between 100 and 105 mph, and does nothing for you if you're going any faster or slower. But I'm not expert, either. 

And if, after the end, there's still an internet, I can guarantee you there will be at least 3 guys shouting about how they were right, and hocking their books. 

Good luck in the Zombie Wasteland!