All Forum Posts by: Yoann Dorat

@Dominique Nolen it usually goes both ways: 

The agent sends to the wholesaler the leads he doesn't want to deal with (mostly badly damaged properties where the agent knows he's not gonna be able to obtain conventional financing for his buyer). Most agents like the fancy listings while wholesalers shine on distressed assets. The wholesaler ends up kicking the agent a referral fee out of his assignment whenever he closes. 

On the other side, wholesalers spend a lot of money advertising to distressed homeowners (cold calling, texting, postcards ppc...) but only a small percentage of the leads coming in are going to fit the wholesale model (less than 10%), instead of throwing the residual 90% away the wholesaler can work out a referral agreement with an agent to recoup some of these lost marketing dollars. 

Sadly most realtors don't realize the value in this kind of partnership, hence why more and more wholesalers are getting licensed and keep everything in-house. 

I strongly believe that the close-minded agents who are not ready to provide several options (listing, cash offer, seller financing, subto) to a homeowner are ultimately going to be weed out of the market at some point. 

@Troy DeLong every investor situation is different so it's hard to answer without knowing your particular needs, I would definitely recommend you to consult an attorney and a CPA. 

The cost of creating an LLC being "cheap" is not something you should consider, you should create your LLC in whatever state you're planning to buy your properties, otherwise, you gonna have to file some foreign affidavit in every state you own property in.

Then, it looks like you're looking to hold 1 property per LLC, some people do that for liability purposes, I personally think it's unnecessary unless each property is worth several million, the added cost will burry your return. I personally pool up to 50 SFH per LLC and set up 1 LLC per Commercial property, I also set up 1 LLC in each state I'm doing business in to simplify my accounting.

If you really want to keep every property separated you might want to take a look at Delaware series LLC.

Depending on the size of your portfolio you can consider setting up a holding to regroup ownership of all the other LLCs. 

Look into the tax consequences (LLCs are pass-through entities so you might want to set up a c-corp etc...) 

But once again, there's way more to consider than just the cost of setting up the LLCs, it's a bookkeeping nightmare and you're going to be surprised when your CPA hand you his invoice. 

Hey @Rachan M. congrats on getting started, happy to see you're making moves! 

@James Wise and @Drew Sygit provided a lot of valuable information here, plenty of sound advice. I would just recommend that you start by vetting and building your team on the ground, especially a good property manager, even a Class A asset can turn into a nightmare if poorly managed. 

Many of the cities on your list are in the Southeast, which is perfect if you want to bet on appreciation but not that great if you want a steady cash flow, if your goal is to generate some passive income target the midwest, and stick to solid suburban B areas, don't make the same mistake as many other OOS investors did chasing high double-digit returns in C-D areas, these returns only exist on paper. 

Good luck!

@Ana Ngon Commercial properties are evaluated based on financials (or proforma) and not on market trends like residential is. Even though it's possible to wholesale commercial assets (we do a few of these every year), the sellers and buyers are usually more sophisticated. You will have a hard time convincing them if you don't know how to underwrite a deal (or even better own a few units yourself). My advice would be to start with residential and once you sharpen your skills you can graduate to commercial. 

Hi @Harold Rutila, I would avoid any lengthy rehab for a BRRRR, you gonna need to use Private or Hard money on your acquisition and rehab since the conventional lenders won't finance until it's stabilized. The longer it takes for you to refinance, the less profitable it becomes due to the carrying cost. I would stick to cosmetic rehab and try to be all in at 70% ARV with a 6 to 8-month turnover.

My sweet spot is at $250 net cash flow per unit on SFR but it's up to you.

Havent seen the property but $20k rehab on a duplex seems a little light. 

Detroit is my home market, feel free to reach out if you have any questions

Hi @Diana K. it's unfortunately a very common problem for out-of-state investors in Detroit. I strongly disagree with some of the comments above, even if you intend to do reach an agreement with your tenant, you have to show them you're willing to do whatever it takes, even if that means going to court. Here are my advices based on my experience in this area (done hundreds of flips since 2015 and use to own a Property management company with +300 doors). 

Buying a tenant occupied house is rarely successful, most of them stop paying as soon as you close they might have a prior agreement with the seller or just jumped on the occasion, when investing out of state always pick a vacant house and make sure the tenant is properly vetted by your manager. 

Start an eviction process as soon as the tenant default, best case scenario you work out a deal and drop the case, worst case you move forward with the eviction and you didn't lose precious time trying to make things work (guessing you're in a C-D areas of Detroit, tenants are well aware of the process and like to play the watch to stay in the house for free as long as possible), navigating the courts since covid is a lengthy process so the sooner you start the better. 

It might surprise you but people are lying ;) making repairs won't make them pay! Get them out and then do the repairs and get into compliance for the next tenant. Unless the current tenant brings a money order to cover all unpaid rent I wouldn't spend a dime on repairs. 

Try a cash for keys, handing them $500 to $1000 to move out is usually more cost-effective than going through an eviction (attorney fee, court fees, bailiff...). 

Lastly, being out of state you better find a team of Boots on the ground you can trust, and this is probably the most difficult part, you should talk to @Drew Sygit he might be able to help. 

@Yangbin Tong let's talk buddy, I'll be happy to help. 

@Joaquin Garuz Right, the problem is everybody's targeting value add projects in B-C areas. I agree you don't want to be stuck in a stagnated area, however, if you focus on 50 to 100 units in B-C areas you shouldn't be too much concerned about migration trends. And local dynamics are not as important of MFH as they would be on SFH, you can force your appreciation anywhere in the country as long as you're improving the income and/or reducing the expenses.

I strongly believe the cash-flowing markets up north are going to be way less impacted by a recession than the southeast because they are based on solid fundamentals, as long as you don't overleverage you should be able to weather any cycles. 

My 2cts on Major improvements... you want to stay as far as possible from these deals (been there done that) except if you're a GC and willing to be very hands-on. The best deals in my opinion are the ones around 70% occupancy that you can bring up to 85-90% by doing small cosmetic rehab but nothing major so you can focus on improving your financials without having to worry about debt service. 

As far as how I find my deals, I run a wholesale company out of Detroit and I have team members all over Michigan and Ohio, hence why I focus on these areas, we do direct marketing to sellers and get a fair amount of referrals from other wholesalers. 

I hope you'll find what you're looking for! 
Yoann

Thanks for the heads up @Drew Sygit

@Joseph Abbott sorry I've been off BP for a few weeks, if you want to discuss your options send me a DM. I can help you unload it or match you with a lender if the project makes sense. 

Hi Guys, I'll be in Cleveland on 09/01 & 09/02, and I'm looking to network with local investors & wholesalers, send me a DM if you want to meet!