All Forum Posts by: Wes Blackwell

@Patrick Boutin -- Here's my 2 cents:

First and foremost, it sounds like you are doing at least half of the work, and since it's your money you're taking ALL the risk. This is not a 50/50 partnership.

Second, the thing to understand about friends who are agents is that just because they are your friend DOES NOT mean that they are good at their job as an agent. 

I don't know your friend and their skills as an agent... they could be the best Realtor on the planet for all I know. But you should know that any regular joe shmoe can get their real estate license by taking an online course for $99 and they only have to get a 70% on the state exam to pass.

Further, half of all licensed real estate agents conduct ZERO transactions each year. And 50% of the other half conduct 4 transactions or less. So hopefully your friend is not what we professional Realtors refer to as a "part-timer."

It's evident you know this to be true since you said "making many offers that could take time and maybe frustrate another agent.." and "other agents many not want to do all of that at first" 

0_o wut? What kind of lame agent gets frustrated submitting offers?!?!  But still... you know that some amateur agents do, and that's why they're still amateurs, and that's just sad.

Because you're doing more than half the work involved, don't bring the Realtor in on the deal. Hire him. Split it 97/3. He'll get commission when you buy and commission when you sell.

And if you're hiring a Realtor, you want someone with a proven, professional track record and business model for getting you a fast sale at the highest price.

Here's some questions to ask your friend (or yourself if that's too uncomfortable):

• How long have you been a real estate agent? Is this your only job?
• How many homes did you sell last year?
• How many of them sold in 30 days or less? What was the average DOM?
• How many sold for asking price or above?
• What was the average % of listing price the properties sold for?
• What do you do to market the home besides MLS, Facebook, Zillow etc., "email blasts," Google Adwords, print media or open houses? (if they don't have an answer, they suck)
• What's the most important to consider in calculating ARV? How do you calculate it?
• What other kind of knowledge or expertise can you bring to this deal besides your skills and services as a Realtor? (like investing experience)

Market knowledge (calculating what to pay for a property and what to sell it for) and Selling the home are the two skills a Realtor brings to your transaction. If they screw either one of those up, you could have some serious problems.

Miscalculate the ARV too high and have to sell it for $20k less? Big problem. Do a crappy job of marketing it and sell it for an additional $20k less? Bigger problem.

Your friend simply isn't bringing enough value to the table to justify being paid more than his 3% share. And the worst part about hiring friends is that they're a whole lot harder to fire if they do a bad job. Plus, it puts your entire 17 year friendship at risk. Money changes people. Big time.

If you feel confident that he's the right agent for the job, hire him as your agent. If not, find someone who is. But no matter what don't cut him in on the deal. As soon as you get a few deals under your belt you'll quickly see how little he's bringing to the table.

Best of luck!

• How do I get started wholesaling?
• How do I get more wholesaling leads?
• Where can I find a lawyer to review my wholesaling contracts?
• How do I get started in real estate investing? What strategy is best for me?
• I just sold my home and netted X amount, now what?
• California is too expensive, how do I invest out of state?
• The Bay Area is too expensive, where should I invest in real estate?

Hi @Jesse Kailahi! Great question!

The tough part of this equation is that you still have to provide housing for yourself after selling. Therefore, one thing I would add to this conversation is to consider looking at 2-4 unit multifamily properties here in the Sacramento/Roseville Metro Area. This is an area I work in daily with multiple investors who have the exact same goals, so I can tell you there is plenty of opportunity.

The financing is just the same as SFR, and you can live in one of the units and rent out the rest. Either your obligation to the mortgage payment will be significantly reduced, or you might even come out ahead a couple thousand per year.

That allows you to enjoy extra savings and live there essentially mortgage/rent free. Stack away those savings to use as a down payment on your next property, and you can move out and rent your unit one day and experience a massive surge in cash flow.

Plus, since it will be your primary residence you will be capital gains exempt when you sell if you live in the property for at least 2 years! #winning!

This investing strategy is known as "House Hacking" and I know many other investors currently experiencing success with it. Here's a few Bigger Pockets articles on the subject to help get you started if this strategy sounds like a good fit for you:

• https://www.biggerpockets.com/renewsblog/2013/11/02/hack-housing-get-paid-live-free/
• https://www.biggerpockets.com/renewsblog/2014/11/20/a-new-way-to-look-at-the-concept-of-house-hacking/

Best of luck!

Hi @Hector Valles! Great question!

The tough part of this equation is that you still have to provide housing for yourself after selling. There are plenty of investing opportunities in Sacramento / Central Valley as well as out of state, but your returns may be offset by the fact you are still having to pay for a new mortgage or rent.

Therefore, one thing I would add to this conversation is to consider looking at 2-4 unit multifamily properties in your area. The financing is just the same as SFR, and you can live in one of the units and rent out the rest. Either your obligation to the mortgage payment will be significantly reduced, or you might even come out ahead a couple thousand per year.

That allows you to enjoy extra savings and live there essentially mortgage/rent free. Stack away those savings to use as a down payment on your next property, and you can move out and rent your unit one day and experience a massive surge in cash flow.

Plus, since it will be your primary residence you will be capital gains exempt when you sell if you live in the property for at least 2 years! #winning!

This investing strategy is known as "House Hacking" and I know many other investors currently experiencing success with it. Here's a few Bigger Pockets articles on the subject to help get you started if this strategy sounds like a good fit for you:

• https://www.biggerpockets.com/renewsblog/2013/11/02/hack-housing-get-paid-live-free/
• https://www.biggerpockets.com/renewsblog/2014/11/20/a-new-way-to-look-at-the-concept-of-house-hacking/

Best of luck!

Hi @Jason Howell! Welcome to Bigger Pockets! You're in the right place! :-)

Here's a Simple 3-Step Plan you can follow if you're looking to invest out of state:

1. Online Research: The first step is to start wide and research the various markets that match your investing goals. Read about them on Wikipedia, City-Data, Local Newspaper, Local Business Journals, etc. To take it a step further you can research zip code demographics, local crime data, schools and education, and job growth. Then you can hop into the local forums here and ask some local investors their opinions about the market and investing opportunities. Browse around on Realtor.com and get familiar with the price points and available properties, and virtually 'drive' the neighborhoods with Google street view. This will be the most time intensive step as you will have to do this for multiple markets before deciding on your top 3-5 before moving onto step 2.
2. Contact Local Professionals: The second step is to talk with local experts, namely real estate agents. Your best bet is posting in the local forums here and asking for recommendations, as that agent is more likely to understand your real estate investing goals and can better serve your needs. Don't hesitate to start working with several of them either. Being so far apart it'll be more difficult to establish a connection, and ultimately one of them will set themselves head and shoulders above the rest. But frankly, if you do Step 1 correctly you'll likely know more about the market than they will. Just a matter of fact. But the local agent will be able to give you context about the data you've read. They're out in the market talking with clients and the public, and can give you the word on the street about the various neighborhoods, developments, local news, etc.
3. Visit the Market: Step 1 and 2 should help you narrow the selection down to 1-2 markets, and now it's time to take the final step and visit the market in-person. Try to plan a week vacation so you really have time to examine the city, as you'll have a lot to do while you're in town. You need to meet up with your agent or turn-key provider and look at as many properties as possible. Meet with local property managers and interview them. Knock on the doors and talk to the neighbors about the area. Visit the local hot-spots and talk to every single person you meet and you can just tell them you're thinking of moving to the area and asking them what the town is like. People LOVE to give their opinion and pretend the expert, so you're learn a ton about the city, neighborhood, and local culture. And if all seems well, buy something! :-)

But, you might actually be surprised to learn that investing opportunities are a closer than you think. I've written fairly extensively about the Sacramento and Central Valley Markets and what kinds of multifamily investments are available there. 

It's great for Bay Area investors since it's only a couple hour's drive and much closer to home than something that's several states away. New investors particularly like the idea of being able to "drive and look" at their property :-) Here's some posts to help you explore that direction if you're interested:

• https://www.biggerpockets.com/forums/55/topics/396376-looking-to-get-unstuck-in-the-sf-bay-area
• https://www.biggerpockets.com/forums/621/topics/396725-millennial-migration-to-sacramento-2017---here-comes-the-rush

Best of luck!

Hi @Gary A.! Great question!

Unfortunately I can't recommend a good flat-fee broker to you, but I can offer some food for thought on discount brokerage business models in general.

First let's take a look at the potential savings: 

If the home is an Anytown, Northern CA let's just say it's worth $400k. If you're in the Bay Area it's obviously worth more, but let's just use $400k as an example.

You will still need to offer 2.5-3% commission to the buyers agent, otherwise nobody will show your listing to their clients. Is that the best service? No. But is it reality and human nature? Yes.

But the good news is you will save the 2.5-3% commission that would have been paid to the listing agent, minus their flat fee of course, which let's say is $3,000.

3% of $400k is $12,000. Subtract the flat fee of $3,000 and it seems as though you've saved $9,000! Sweet deal!

Now let's look at the potential problems:

That $9,000 savings assumes that your home sells for the same price as it would've with a professional, experienced, successful Realtor with an extremely good business model for selling your home quickly for the highest possible price.

If that stellar agent puts a 10x personal effort into selling your home and could've gotten you $400k, but the flat fee broker who's sitting at home twiddling his thumbs and waiting for a buyer to call them only gets you $390k, there goes your $9,000 savings. 

In fact, you've lost an additional $1,000. And plus or minus $10k on the list price happens ALL the time. It's not like have to take a huge $25k discount on the list price to lose all your savings.

But let's say that the flat fee broker does get you a $400k offer... now the problem comes during negotiations in the inspection period. As a Realtor, my job is to protect your equity and ensure that you win in negotiations. The flat fee broker gets paid the same no matter what your house sells for, so what's it matter to them if you lose another $10,000?

What if the buyer secretly has a friend who's an inspector or contractor, and they have them come in and point out all sorts of unnecessary repairs and make inflated  estimates? That way the buyer gets you to pay for a bunch of updates and repairs you didn't have to, and his buddy the contractor makes some extra profit. I've seen it happen.

What's the average home seller to do? They usually get taken advantage of, and I see this happen in FSBO situations all the time. And a flat fee broker is usually just the same as selling FSBO. All you have to do is lose $5k on the purchase price and $5k in negotiations and your $9,000 savings evaporates into thin air.

Here's another scenario... we all know that the flat fee broker gets paid the same no matter what your home sells for and no matter when it sells. So he'll agree to the seller overpricing it by 10-20% because he doesn't care, and then your property sits on the market because it's overpriced. 

That's several more months of holding costs... mortgage payments, utilities, interest, property taxes... so there goes your $9,000 savings!

PLUS, now your property is "stale" and buyers and their agents will perceive your property differently simply because of the days on market. High DOM is like ACID to the price of your home, and that brings either low offers or no offers. So there goes another $9,000 on top of that!

In Conclusion:

My question to sellers is "How can an agent who specializes in less get you more for your property? There's no incentive, no motivation for them to get you a high price or a fast sale. The guy isn't out actively selling your home every day, he's sitting on his office playing on Facebook and eating a ham sandwich. 

And frankly that's no difference from the average traditional real estate agent either, so I don't blame you for seeking out a flat-fee broker. Is those were the only two options, I'd go with that option too.

Now, I don't believe in charging the standard 5 or 6% either, but I structure my commission completely differently than most other agents because I've put some serious thought into what benefits the seller the most (increasing chances of higher price and faster sale) and what's ultimately fair for the service I provide. With some things in life, you truly get what you pay for, and real estate is one of them.

Just some food for thought. Best of luck!

Hi @Randy Sinda! Great question!

I think any wholesaler or rehabber who does lots of transactions really ought to consider getting their real estate license for scenarios such as these. I know of several rehabbers in Sacramento who also have their RE license, and if they can't make a deal work with the numbers or the seller won't go low enough on the purchase price, they list the property instead and still make some money from their commission on the sale. 

(The best part about that is I know that if they're listing a fixer-upper it's not a deal because they would've bought it themselves!)

Although, for your current situation you won't have the time to get your license by the time this deal closes...

But, another option that may be possible is if the seller agrees to directly pay you outside of escrow for essentially a finder's fee. They would pay some commission to the buyer's agent and this would all take place as normal, and then after the transaction is closed (or possibly before) they could write you a check for a finder's fee. 

Although, the likelihood of this and enforcing it if not honored is a whole 'nother animal. And the money could not come from the real estate agent because they would likely be violating the Real Estate Settlement Procedures Act (RESPA). Here's some more info about it.

Best of luck!

O'rly? --> Salesman Billy May's Tribute Video

'Nuff said.

But seriously, beards are just fine in business. The most important thing is that the beard is groomed. If your beard is so bushy a small animal could hide in it, then yes it's a problem.

http://livebearded.com/beardbusiness/

A few scientific studies have been done on beards in the workplace, and a study in 1990 even showed a preference for them. And now that beards are trendy, they're even more acceptable than they were three decades ago.

But like I said, if you're trying to pull off a handlebar mustache or look like you're a mountain man from the 1800's, it's far too distracting and potentially off-putting to some clients.

Beards are actually much more important in politics. Why? Think about our foreign enemies for a bit... Osama Bin Laden, Fidel Castro, Ho Chi Minh... all had facial hair. And that's why the last time we had a bearded president was 1913. And that's because politicians have to rely on the uneducated masses to vote for them, and people vote for all sorts of stupid uneducated reasons.

But when it comes to business, beards are just fine. Here's a list of CEO's and famous capitalists who have rocked some facial hair:

• Google’s co-founder Sergey Brin
• Goldman Sachs’s chief executive, Lloyd C. Blankfein
• Marc Benioff, the billionaire founder and chief executive of Salesforce
• Oracle CEO Larry Ellison
• Business Mogul Sir Richard Branson
• Steve Wozniak, Founder of Apple
• Steve Jobs, needs no introduction
• Richard Parson, former CEO of Time Warner
• Andrew Carnegie, famous Industrialist and Capitalist

I'll rock a beard any day if it puts me in the likes with those fellows :-D

Hi @Jai Koolwal! Great question!

Here's my simple 3 step process for investing out of state:

1. Online Research: The first step is to start wide and research the various markets that match your investing goals. Read about them on Wikipedia, City-Data, Local Newspaper, Local Business Journals, etc. To take it a step further you can research zip code demographics, local crime data, schools and education, and job growth. Then you can hop into the local forums here and ask some local investors their opinions about the market and investing opportunities. Browse around on Realtor.com and get familiar with the price points and available properties, and virtually 'drive' the neighborhoods with Google street view. This will be the most time intensive step as you will have to do this for multiple markets before deciding on your top 3-5 before moving onto step 2.
2. Contact Local Professionals: The second step is to talk with local experts, namely real estate agents. Your best bet is posting in the local forums here and asking for recommendations, as that agent is more likely to understand your real estate investing goals and can better serve your needs. Don't hesitate to start working with several of them either. Being so far apart it'll be more difficult to establish a connection, and ultimately one of them will set themselves head and shoulders above the rest. But frankly, if you do Step 1 correctly you'll likely know more about the market than they will. Just a matter of fact. But the local agent will be able to give you context about the data you've read. They're out in the market talking with clients and the public, and can give you the word on the street about the various neighborhoods, developments, local news, etc.
3. Visit the Market: Step 1 and 2 should help you narrow the selection down to 1-2 markets, and now it's time to take the final step and visit the market in-person. Try to plan a week vacation so you really have time to examine the city, as you'll have a lot to do while you're in town. You need to meet up with your agent or turn-key provider and look at as many properties as possible. Meet with local property managers and interview them. Knock on the doors and talk to the neighbors about the area. Visit the local hot-spots and talk to every single person you meet and you can just tell them you're thinking of moving to the area and asking them what the town is like. People LOVE to give their opinion and pretend the expert, so you're learn a ton about the city, neighborhood, and local culture. And if all seems well, buy something! :-)

Hope that helps and best of luck! Keep us updated of your progress!

@Gene Mattos -- Yes, you're exactly correct. People live where they can afford to live. And if the rents in Oak Park go up several hundred dollars that will automatically push the thugs and riff-raff out. But unfortunately, this will cause a hardship for many lower-class families that are just trying to get a break, and we'll probably see a rise of homelessness:

From http://projects.scpr.org/broke/ ~

"Despite federal and state money earmarked specifically to support children’s wellbeing, government programs are inadequate to meet the region’s rising housing costs and falling incomes, leaving the poorest families on the street.

California’s version of cash welfare, CalWORKs, gives a parent with two children a maximum of $714 a month. That’s meant to be flexible income impoverished and down-on-their-luck families can use to pay the rent and utilities or to buy their kids shoes.

But it’s not enough.

According to the California Budget & Policy Center, the average low-cost apartment in California costs $870 a month – about $150 more than the CalWORKs check.

“The maximum amount of assistance won’t even cover low-cost rent in California,” said Alissa Anderson, a senior analyst with the group."

Landlords are already trying to charge people $1,400 for a 1 bedroom apartment in Midtown. The massive influx of millennials will drive that number even higher. They want to be close to all the bars, clubs, and hot single 20-somethings they can flirt with. Those that can't afford it will start looking at other areas as an alternative. And North Oak Park has already gone under a ton of gentrification, and hipsters have jumped on the bandwagon and so now it's considered a cool spot to be. 

Sure, they'll avoid Del Paso Heights at first, but eventually areas like that, Meadowview, Parkway / South Sac will be the only areas they can afford. Current tenants won't be able to afford the rent increases, and the demographics will shift. Only 4,400 new housing units and 512 new apartments were built last year, a far cry from the 18,000+ units at the peak before the housing crash. The only thing possibly alleviating the demand is Boomers cashing out on their equity and moving to the midwest where they can buy a house cash and retire to live like a king.

The new Mayor Darrel Steinberg is doing all he can to change the rest of the state's perception of Sacramento. "Nationally, we're either unknown or misunderstood. People in the Bay Area still think it's 1978 in Sacramento. Sacramento has long been a proud government town... but that's no longer enough. The real test is whether a young person who graduates from school either inside or outside Sacramento chooses Sacramento as their home." And with cool videos like you just saw earlier and the comments that were made in reaction, I think they're succeeding.

So before you know it, people from Oakland, Richmond, Fremont, San Jose, San Francisco and everywhere else in the Bay Area will start viewing Sacramento as the new hip spot that's way cheaper but still has several professional sports teams, a major college, an international airport, and the sparkling new Golden 1 Center to host all the music concerts their heart's desire. Remember that Millennials are the main consumers of the "Experience Economy" and Sacramento's cheaper housing frees up more dough to do stuff like go to Coachella later this year and party like crazy.