All Forum Posts by: Lou Castillo

the best advice that I can give is for you to talk to a local attoreny about the best entity for the four of you to use. Basically, you'll want to either do a C corp, and S corp or an LLC. If you use an LLC, discuss the advantages/disadvantages of being taxed like an S Corp.

I agree with what everyone was saying about get trained in the business before you get started. Then decide on what type of rentals are you looking for? Are you looking for blue collar cheaper homes; Section 8 rentals; median price bread and butter homes; resort properties, etc.

Learn abut your profit centers. For the most part, rental properties are about long term wealth building more so than about significant cash flow today. Are you all on board with that?

Learn to buy properties at a discount, but that are still in good shape. My favorite is to buy a house subject to the existing financing so that I don't have to get new financing, and I keep the mortgages off my credit report while still helping the distressed seller.

Just be sure you understand the end before you get started.

I never tell the seller that I am planning to wholesale the property. I simply go under contract which gives me control over the property. Imbedded in my Purchase and Sales Agreeement is a phrase that states "This Agreement can be assigned" This is what allows me to wholesale the property without having to purchase it myself.

The main ingredient in a successful wholesale is starting with a motivated seller.

I am thinking of starting a real estate investors association in Charleston, SC. Is anyone from the area? What do you think?

I tried all of the techniques that the books tell you - work with realtors; call the FSBOs; chase vacant houses; run a classifed ad. None of these techniques work with any kind of regularity. The best way to find motivated sellers is to market to find them. Who are they? They are people facing foreclosure; people who have run down houses; people getting a divorce; frustrated landlords; out of state property owners; etc. Develop a marketing campaign and stick to it. The sellers will be calling you!

I have found that escape clauses tend to make the offer weaker. Remember, a great deal comes from a motivated seller, and a motivated seller doesn't want to hear that you'll buy unless... To alleviate your fear, use a Purchase and Sales Agreement that states that your earnest money is full liquidated damages if you the buyer do not perform. That way the only thing you have at risk is your earnest money, which you should keep at a bare minimum anyway. I don't even offer earnest money with most of my contracts.

The biggest mistake I made, and I think that most investors make is getting in over their head. The trick is to balance your portfolio and do the right deals for the place you're at in your investing. For instance, to buy up a bunch of rental properties when you're strapped for cash is dangerous. Whne cash flow is critical, the best strategy is to wholesale properties. Once you have a steady stream of cash, then look to diversify and create long term equity.