Another week has passed, I have done a lot of research in terms of best business formation strategies, best financing strategies etc. All in all seems like the week just flew by with very little actual progress to show. I guess I am just not very patient, I want everything to happen now :).
Anyway, I did go to a couple of real estate investor club meetings since my last post, the first one was in regards to the ins and outs of dealing with short sales. After listening to the guy presenting the process I think it is pretty clear that I need to stay away from them. They seem to take way to long and be way to inundated with people whom I have absolutely no control over. The second meeting was in regards to the current and future economic and real estate climate in Texas/Dallas Fort-Worth. The presenter was a professor from the real estate department at Texas A&M university in College Station (Dr. Jim Gaines). This was one of the best speakers I have heard in a long time, he did a fantastic job of explaining the current market, what it would take to get back to "normal" levels and what the nearest two or three years will most likely look like.
Based on the presentation by Dr. Gaines, I am more convinced then ever that now is the best time in a long time to buy and hold real estate, both from a cash-flow perspective and the access to cheap financing (low interest rates). I have hopes that after this weekend I will have at least one private lender lined up so that I can start to more seriously look at properties and make offers.
Until next time, cheers.
Friday, January 21, 2011
Friday, January 14, 2011
First negotiation with a seller
As a way to generate some quick cash so that I can start doing rentals and flipping I have been advertising for a while on Craigslist and backpage with "I buy houses" type ads pointing towards a web-site I created (http://www.gdhomebuyers.com). I have gotten a few leads this way but most of them not so interesting until yesterday.
One homeowner sent in their details on a house in a very desirable neighborhood, they owned the house free and clear and wanted to sell. I tried to use my questions on the phone to gauge the motivation factor for selling and even if it didn't come out as a super-motivated seller, I thought it was worth taking a trip to the house.
I met with the owner and walked the house, it was in great shape structurally but needed a lot of updates, wall paper, built-in furniture, oak etc. I think the house had not been updated since it was built. We sat down and discussed what needed to be done, they realized that they had to make some updates to make it sell at a decent price. It became quite clear right of the bat that they didn't want to sell at investor pricing. I explained the reasoning why investors needed to buy at a certain level to ensure that there is a profit when we buy the house. The owner was very understanding and understood my explanations and agreed that we would not be able to reach a deal. Once we both realized this, we started doing some small talk and I explained to them what their options were, they could sell with owner financing, they could rent it out etc. They were very pleased with my explanations and they are exploring what to do.
For me it was a great relief that I didn't pass out while meeting with the owners, I was very nervous but as the meeting went on I started to realize that I actually do know what I need out of a house that I am wanting to buy. It was like everything that I had ever studied came together. Now I feel confident that I can talk to these owners and be much more relaxed then what I have been in the past.
What also made me feel really good was that I could actually provide the owners with some options they didn't realize that they had. They promised to keep me in mind in case they changed their mind and wanted to unload the property quickly instead of fixing it up them-selves or rent it out. They also promised to call if they ran in to other people that needed to sell. All in all it was a great day.
One homeowner sent in their details on a house in a very desirable neighborhood, they owned the house free and clear and wanted to sell. I tried to use my questions on the phone to gauge the motivation factor for selling and even if it didn't come out as a super-motivated seller, I thought it was worth taking a trip to the house.
I met with the owner and walked the house, it was in great shape structurally but needed a lot of updates, wall paper, built-in furniture, oak etc. I think the house had not been updated since it was built. We sat down and discussed what needed to be done, they realized that they had to make some updates to make it sell at a decent price. It became quite clear right of the bat that they didn't want to sell at investor pricing. I explained the reasoning why investors needed to buy at a certain level to ensure that there is a profit when we buy the house. The owner was very understanding and understood my explanations and agreed that we would not be able to reach a deal. Once we both realized this, we started doing some small talk and I explained to them what their options were, they could sell with owner financing, they could rent it out etc. They were very pleased with my explanations and they are exploring what to do.
For me it was a great relief that I didn't pass out while meeting with the owners, I was very nervous but as the meeting went on I started to realize that I actually do know what I need out of a house that I am wanting to buy. It was like everything that I had ever studied came together. Now I feel confident that I can talk to these owners and be much more relaxed then what I have been in the past.
What also made me feel really good was that I could actually provide the owners with some options they didn't realize that they had. They promised to keep me in mind in case they changed their mind and wanted to unload the property quickly instead of fixing it up them-selves or rent it out. They also promised to call if they ran in to other people that needed to sell. All in all it was a great day.
Tuesday, January 11, 2011
Trying to spread the word
Well, here we are less then a month on the world wide web, no comments but a few readers...
To get more readers I am trying to add my site to various blog indexes, it seems as most of them are pretty good at creating traffic so I am putting a lot of hope in this.
I am finalizing my business plan this week, I have a meeting with a local score representative tomorrow so keep your fingers crossed. It feels like this is version EDZGYWYZZD32EDZGYWYZZD32 of my business plan :)
This weekend I will also visit with a potential Private Money investor. I have great hope that this can turn out to be a potential win-win for both of us. This person has money not working for them and I am in need of some capital to start my business, obviously I will have to put up some collateral but I think in the long run it will be worth it. I am that confident in my market research and my business model.
Keep your fingers crossed.
To get more readers I am trying to add my site to various blog indexes, it seems as most of them are pretty good at creating traffic so I am putting a lot of hope in this.
I am finalizing my business plan this week, I have a meeting with a local score representative tomorrow so keep your fingers crossed. It feels like this is version EDZGYWYZZD32EDZGYWYZZD32 of my business plan :)
This weekend I will also visit with a potential Private Money investor. I have great hope that this can turn out to be a potential win-win for both of us. This person has money not working for them and I am in need of some capital to start my business, obviously I will have to put up some collateral but I think in the long run it will be worth it. I am that confident in my market research and my business model.
Keep your fingers crossed.
Saturday, January 8, 2011
Patience is a virtue they say
A few updates on my progress so far.
I did meet with the CPA I was referred to yesterday, seems very knowledgeable and will probably be a good fit for the start of my business. I have two more CPA's to "interview" before I make any decisions.
I have also been referred to a Law firm here in Dallas that specializes in Real Estate. This Law firm has both Attorneys and Title company in the same office and a lot of the established investors use them. I will setup a initial consultation meeting with them for next week.
With regards to the banks, I am moving a lot slower then I would like on this front. Part of the reason is that I am working full time so finding times when it is mutually beneficial seems like a big hassle. One other reason is that I am trying to complete my business plan before I meet with the banks. I need the business plan to be a home-run if I am going to have any success with getting a line of credit from the banks. I do have great personal credit and cash/money-market/Stocks/401K reserves so it should not be a problem.
One of the things I have done to get the business plan to be a home-run is scheduled a meeting with one of our local score offices, this is a great resource for people looking to start or improve a business. Retired executives and professionals offering advice for free to entrepreneurs and small business owners.
I did get a lead from my marketing website yesterday, looks like a good deal on the surface but now I can't get a hold of the homeowners. Hoping they will call me back today. They own the house free and clear and need cash, 3 bed 2 bath 2 car garage, they are asking 32 but I need to check and see if I can get it a little lower.
I did meet with the CPA I was referred to yesterday, seems very knowledgeable and will probably be a good fit for the start of my business. I have two more CPA's to "interview" before I make any decisions.
I have also been referred to a Law firm here in Dallas that specializes in Real Estate. This Law firm has both Attorneys and Title company in the same office and a lot of the established investors use them. I will setup a initial consultation meeting with them for next week.
With regards to the banks, I am moving a lot slower then I would like on this front. Part of the reason is that I am working full time so finding times when it is mutually beneficial seems like a big hassle. One other reason is that I am trying to complete my business plan before I meet with the banks. I need the business plan to be a home-run if I am going to have any success with getting a line of credit from the banks. I do have great personal credit and cash/money-market/Stocks/401K reserves so it should not be a problem.
One of the things I have done to get the business plan to be a home-run is scheduled a meeting with one of our local score offices, this is a great resource for people looking to start or improve a business. Retired executives and professionals offering advice for free to entrepreneurs and small business owners.
I did get a lead from my marketing website yesterday, looks like a good deal on the surface but now I can't get a hold of the homeowners. Hoping they will call me back today. They own the house free and clear and need cash, 3 bed 2 bath 2 car garage, they are asking 32 but I need to check and see if I can get it a little lower.
Wednesday, January 5, 2011
I might have found my CPA
Today I spoke to a CPA that I was referred to from one of the members in a Real Estate Investment club I have joined. He seems like a perfect fit after talking on the phone. He has experience working with Real Estate investors, he also is well versed in which business structure and which tax strategies I should use for my new venture.
We have a face to face meeting scheduled for this Friday, we are going to go through my business plan and my overall goals, both long-term and short-term. He said he can recommend several good real estate agents and real estate attorneys so I have big hopes that we will be a good match. You can never have too many good people on your key team.
I will post an update after our meeting to let you know how it went.
We have a face to face meeting scheduled for this Friday, we are going to go through my business plan and my overall goals, both long-term and short-term. He said he can recommend several good real estate agents and real estate attorneys so I have big hopes that we will be a good match. You can never have too many good people on your key team.
I will post an update after our meeting to let you know how it went.
Tuesday, January 4, 2011
Wholesalers
If you are anything like me, completely unable to sell anything, you need other people on your team that can provide you with the deals that you need for your investing. In Real Estate these people are often times referred to as Wholesalers.
Their job/role in the investment business is to find a motivated seller and negotiate a large discount from fair market value (this is where I completely suck). Once the property is put under contract, the wholesaler quickly sell to another investor, either a landlord who will keep the property as a rental unit or a flipper who will renovate and sell retail to a homeowner.
Being a wholesaler is a great way to get started investing in Real Estate, it is a lot of work but you can make a great profit without risking a whole lot of your own money or credit. The problem for me (and I am sure other investors as well) is that since it is easy to get started in wholesaling, a lot of people do it and not all of them are qualified to be a good wholesaler.
As an example, my criteria for buying a property to flip is pretty simple, I want the property to be 65% of market value minus repairs, so if the house is worth 100K and needs 25K in repairs to sell quickly, I need to buy the house for no more then 40K (65% of 100K is 65K-25K in repairs=40K), that is a huge discount from the fair market value and not many wholesalers understand this.
What is most common is that the wholesalers are greatly underestimating the cost of repairs. I get daily several deals where someone is trying to sell me a house like the one above for 80K, great deal right, you can buy it with 20% equity right of the bat...
Well, what about closing costs, inspection, utilities, appraisal and a minimum of 10K for paint, flooring and other touch-ups? Best case on a deal like the one above I would break even, worst case I am loosing 15-20K.
Now this post is not to rack down on all the wholesalers out there, they are needed and most of them do a really good job in finding deals, take this post more as education if you are new to wholesaling, talk to a flipper and ask if you can tag along when they estimate the repairs, this way you can learn for free what investors are looking for.
Once a flipper finds a good wholesaler, they usually hold on to them and both sides can become very successful.
Their job/role in the investment business is to find a motivated seller and negotiate a large discount from fair market value (this is where I completely suck). Once the property is put under contract, the wholesaler quickly sell to another investor, either a landlord who will keep the property as a rental unit or a flipper who will renovate and sell retail to a homeowner.
Being a wholesaler is a great way to get started investing in Real Estate, it is a lot of work but you can make a great profit without risking a whole lot of your own money or credit. The problem for me (and I am sure other investors as well) is that since it is easy to get started in wholesaling, a lot of people do it and not all of them are qualified to be a good wholesaler.
As an example, my criteria for buying a property to flip is pretty simple, I want the property to be 65% of market value minus repairs, so if the house is worth 100K and needs 25K in repairs to sell quickly, I need to buy the house for no more then 40K (65% of 100K is 65K-25K in repairs=40K), that is a huge discount from the fair market value and not many wholesalers understand this.
What is most common is that the wholesalers are greatly underestimating the cost of repairs. I get daily several deals where someone is trying to sell me a house like the one above for 80K, great deal right, you can buy it with 20% equity right of the bat...
Well, what about closing costs, inspection, utilities, appraisal and a minimum of 10K for paint, flooring and other touch-ups? Best case on a deal like the one above I would break even, worst case I am loosing 15-20K.
Now this post is not to rack down on all the wholesalers out there, they are needed and most of them do a really good job in finding deals, take this post more as education if you are new to wholesaling, talk to a flipper and ask if you can tag along when they estimate the repairs, this way you can learn for free what investors are looking for.
Once a flipper finds a good wholesaler, they usually hold on to them and both sides can become very successful.
Monday, January 3, 2011
Some progress
Well today I made some progress when it comes to building my team, I got referred to a CPA from one of the REI clubs I attend. We spoke for almost one hour on the phone discussing what I was trying to accomplish. As he is running a very large operation geared more towards established investors it won't be a fit for me as I am just starting out. He is however going to refer me to some of his colleagues that runs a smaller operation. hopefully this will pan out so that I can get a CPA that can assist with all the questions I have.
I also contacted several banks and Credit Unions in my area today (must have talked to at least 15 different institutions) and despite today's credit climate a lot of them seem willing to work with me, I now have 4 appointments for the rest of the week to present to them my business plan and my balance sheet etc. I hope I can find a bank/Credit Union that I can get a long-term relationship with.
I will try to put up some pictures of my first rental in the next couple of days so you can see the differences between the before and after status. I am quite proud of the work I did with that house on my own.
I also contacted several banks and Credit Unions in my area today (must have talked to at least 15 different institutions) and despite today's credit climate a lot of them seem willing to work with me, I now have 4 appointments for the rest of the week to present to them my business plan and my balance sheet etc. I hope I can find a bank/Credit Union that I can get a long-term relationship with.
I will try to put up some pictures of my first rental in the next couple of days so you can see the differences between the before and after status. I am quite proud of the work I did with that house on my own.
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