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EXECUTION Build a real estate company in a D area

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JohnD Realestate

JohnD Realestate

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Beautiful building! I love the black windows and ornate woodwork just beneath the roof.
Thanks! Gets better every day. Working on it.
 

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JohnD Realestate

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How long does it take you to rent these units? I recently purchased a small condo in a seedy part of Cleveland that I've been having trouble getting rented. People who are interested aren't qualified, and people who are qualified aren't interested. It's a narrow intersection of people who would be interested and qualify. It is listed on Section 8's website, but there hasn't been a ton of interest from there.
Usually 2-3 weeks but sometimes longer.


What are your goals with the property. Are you planing to buy more units in the same development? I’m not a big S8 guy. I have a 5 or so but I don’t plan on getting any new ones and when they move out I’ll look for market rate tenants.

Do you live nearby

I don’t pay too attention to how long it takes. I focus more on getting the best tenant for the long term. Ex. Right now I’m trying to convince some of my tenants to.break his lease in one of my buildings and move to my new property. It’ll cost me money to get him to move. I’ll rent it to him for less. But he’s like the Arnold Schwarzenegger of the neighborhood do I don’t mind losing a bit of cash flow.
 

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Usually 2-3 weeks but sometimes longer.


What are your goals with the property. Are you planing to buy more units in the same development? I’m not a big S8 guy. I have a 5 or so but I don’t plan on getting any new ones and when they move out I’ll look for market rate tenants.

Do you live nearby

I don’t pay too attention to how long it takes. I focus more on getting the best tenant for the long term. Ex. Right now I’m trying to convince some of my tenants to.break his lease in one of my buildings and move to my new property. It’ll cost me money to get him to move. I’ll rent it to him for less. But he’s like the Arnold Schwarzenegger of the neighborhood do I don’t mind losing a bit of cash flow.
We've been advertising it since early February, so it's been almost 3 months vacant. Just want to hold for cashflow. If the numbers work out like how we projected, we would buy more in the same development, since they're dirt cheap. If it's going to take 6 months or longer to rent, though, we'll move on to a different area.

We are not local. We're priced out of the market we're in (NorCal) so we turned to the midwest for investment opportunities. We're using a property management company who has a solid tenant screening process and requirements, which is why it's taking longer than I imagined it would.

I've heard a lot of different opinions on S8. Some people swear by it and others don't go near it. I'm open to experimenting. Thanks for your advice!
 
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JohnD Realestate

JohnD Realestate

Making Real Estate Great Again.
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We've been advertising it since early February, so it's been almost 3 months vacant. Just want to hold for cashflow. If the numbers work out like how we projected, we would buy more in the same development, since they're dirt cheap. If it's going to take 6 months or longer to rent, though, we'll move on to a different area.

We are not local. We're priced out of the market we're in (NorCal) so we turned to the midwest for investment opportunities. We're using a property management company who has a solid tenant screening process and requirements, which is why it's taking longer than I imagined it would.

I've heard a lot of different opinions on S8. Some people swear by it and others don't go near it. I'm open to experimenting. Thanks for your advice!
I would think 3 months is a bit extreme unless it’s a really harsh climate and those months were January February.

I house hacked my first three houses. At this point for me it would be a bit tougher but if you can make it work by living in your investments and then moving out and renting that’s a great way to go. Does you local California properties have a better chance of appreciating than the property you buy in Midwest?
 

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I would think 3 months is a bit extreme unless it’s a really harsh climate and those months were January February.

I house hacked my first three houses. At this point for me it would be a bit tougher but if you can make it work by living in your investments and then moving out and renting that’s a great way to go. Does you local California properties have a better chance of appreciating than the property you buy in Midwest?
It was listed for rent in February. My PM just updated me that last week they had 40 inquiries, 3 people showed up for a tour, and the one person who submitted an application was not qualified. They say there isn't a lot of interest in the area right now because of some recent criminal activity. Frustrating.

The properties in the midwest (Cleveland in particular) don't have a lot of appreciation historically, so I think it's safe to say the homes in California would definitely appreciate more. The median home value in my town is $575,000 according to Zillow, which is a 1% increase over last year. Given the rental rates, I think it's difficult to make an investment property work here. As an example, the home we currently live in we purchased for $670k, which was about market rate. The rental estimate is ~$3,400, which is about $200/mo more than our mortgage. The home value, 2 years later, is around $720k, which means we're pretty much at break-even now if you consider the costs to sell. Even vacant lots are going for $250k+ for a 5,000sqft lot.

Is it possible? I have to believe it must be, but I think my dollar will go a lot further in the midwest where my California down payment can buy me 3-4 properties for cash. I think I just messed up in my due diligence and didn't really understand how seedy the area is where we bought this condo. The down in general is ranked around a C/C+, but this small pocket neighborhood is more of a D.
 

Dianne Cohen

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How long does it take you to rent these units? I recently purchased a small condo in a seedy part of Cleveland that I've been having trouble getting rented. People who are interested aren't qualified, and people who are qualified aren't interested. It's a narrow intersection of people who would be interested and qualify. It is listed on Section 8's website, but there hasn't been a ton of interest from there.

I don't know your area, but I do rentals in South Florida. Advertise on Zumper. It is free. Make sure to use the words "section 8 welcome". Do it every day or more and change it up a little bit every time. If you need help with it, let me know. I do this without the section 8 part and still, get a ton of section 8 leads every month. Feel free to contact me if you need help with this. Good Luck.
 

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I don't know your area, but I do rentals in South Florida. Advertise on Zumper. It is free. Make sure to use the words "section 8 welcome". Do it every day or more and change it up a little bit every time. If you need help with it, let me know. I do this without the section 8 part and still, get a ton of section 8 leads every month. Feel free to contact me if you need help with this. Good Luck.
i just checked and my property management company has posted it to Zumper. Sadface.
 
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JohnD Realestate

JohnD Realestate

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Here it is. I’m not getting compensated for speaking and as far as I know they are not pitching anything....but there is no free lunch so I would expect at the very least some sort of ...give and take like asking for emails etc.

I’ve been to a few of these some good some horrible. I know these guys they are successful and def doing this for real. Vinny has a big portfolio Dwayne is also legit. 30 or 40 units from nothing like me.

Heads up:
If I don’t like the vibe at these things I tell them I’m out of cards and give them johnny1234@hotmail.etc 555-1212.



I’m thinking to start moving toward a residual income coaching type model. Dwayne does this already. Maybe I can teach better than do. Making headway with my portfolio. I like the coaching stuff. At any one time I’ve got 1/2 dozen newbies that I’m coaching and it’s starting to get cumbersome....at least doing it for free is. So I was going to start reading up on how the guys here did it...instead of my usual MO of just starting from scratch, learning as I go and beating my head against a wall.



View attachment 24223
This event was canceled probably better off I’m a little buried right now I’ll probably need that to a three hours that I would’ve wasted at this thing
 

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How many units do you currently own? I may have missed it earlier, but are you raising funds or just debt financing?
 
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JohnD Realestate

JohnD Realestate

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31 right now. I usually purchase with my cash or a hard money loan and then renovate and refi Brrrrr if your a bigger pockets reader. Been investing now for 13 years.

I have taken on partners last few years. A banker, a contractor and an a long time biz partner.
 

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@JohnD Realestate I just wanted to say that I really love your thread. Your action taking is inspirational! One of my favorite progress threads.
 

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JohnD Realestate

JohnD Realestate

Making Real Estate Great Again.
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@JohnD Realestate I just wanted to say that I really love your thread. Your action taking is inspirational! One of my favorite progress threads.
Thanks for the support.

So much of the credit belongs to my wife. We both work full time. She runs two companies that up till now have for the most part supported us.

My full time job the pay is decent but I’ve borrowed so much from my pension that the paychecks are laughable for our lifestyle.

Soon. We’ll be there soon. Right now it’s very tough. We’re at the end of 2 projects which is great but money is so tight and bills are stacked to the ceiling. All my Credit cards are maxed. Just trying to get to the next refi.
 

MakeItHappen

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Sounds like you two make for an awesome Team!
All the best for you.
May your effort be rewarded handsomely.
Keep us posted.
 

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Do you have a specific goal you're working towards and a timeline to achieve it, or are you just accumulating units as quickly as you can handle them?
 
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JohnD Realestate

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Originally my goal was to get to 40 units.
I got to 45 and it was a mess. 25 of those were Single room occupancy the revenues were high 400-550 a room. The maintenance was really high.

So I sold a few of them and also converted all of the units from SRO to apts.

We’re getting close to profitable and also manageable from a construction POV because we’ll only have two projects. Right now we have 5. We had 8 at one point. I’m thinking to make this GC I’ve been using a small partner. He’s interested and I think he be a great addition. Not sure.


Crazier is Right now I’m looking at buying 19 more units that are a complete rehab. It’s from another investor I’m friendly with. His partner and him had a falling out and he’s got a big biz down south so no time for Newburgh....but I need a GC. So we’re wroong out details. 6 partners. My present partner and I plus Electrician, plumber, GC, money guy.....we all have money but if he’s involved we borrow hard money at 10% with .66 points)
.... on this 1.5m dollar deal that’s 67k in savings a year. Worth it. Plus he deals with the refi and does that cheap too.
 
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JohnD Realestate

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8EDB834F-4466-4D6F-8B71-7D0E937F504D.jpeg 327B8086-EAE5-40A3-A9BB-38C522D03F06.png D3CBAB47-9CF5-4A96-9260-D12A5B4F2D13.jpeg AEAAC348-DE6B-4895-A494-4FAE3F5EC990.jpeg 199300EB-CE7B-4445-B1F9-9CFC7E764108.jpeg 7A23FF3D-66C5-4536-A1B6-A71F3FCF5854.jpeg



Passed on the 19 units. Too fragile financially. All credit cards still maxed. Got the last of my two Refis on the big hard money loan going now. Got about 900k worth of property and the current mortgage is 330k. But 120k of debt in cc, personal loans, loans from family, loans from pension etc.

Going to pay down all the credit cards pay everyone back and get a mortgage for about 60%. That should make life a lot easier.

This ones done. Purchase 70k...120k Reno about 15k over budget. Some of that is my partner likes to finish each apt to his own tastes. But I like his taste too and they will rent a bit higher to better tenants...but man he likes to spend money.

The arv was 250k last year but I think pretty soon that I’ll see comps for 300k....my neighbor sold his beat up house for 207 about the same size not as a good a block.

Main Sewer on another house we’re doing got fixed so we started back up on that one. New GC Partner ended up coming in. Good to have some help. He didn’t touch these but I can’t wait to get his hands on the rest.
 
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JohnD Realestate

JohnD Realestate

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Finishing another two family this week. Tenants are moving in next week. About 120k invested. Rents 3k a month. Should be a money maker. Having a disagreement with a partner On it. That’s interesting.

Got six vacant apts left. 2 of them are a few weeks from being finished. The other 4 are in gut rehab stage.

Made a decision. Long time coming.

Selling about half the portfolio. Mostly the commercial. Going to keep one mixed use property and all the residential. Think I’ll stick with 14 units. Should be pretty manageable after what I’ve done.


Got an offer for 920k on a building I bought for 560 two years ago. Put about 60 into it. 10 units. 14k a month in rents. When I bought it it was half vacant drug house. Didn’t do too
Much to the building but just clearing out the bad tenants changed the neighborhood.

I’ll Pay the tax man and stick a bit in the bank and chill out For a while.

Got another similar property on the market. Paid 503k for that one. Same deal drugs/hookers/junkies. It’s not a hipster paradise yet but it’s a changed neighborhood.



I managed to turn around the commercial properties to the point that they will sell at a hefty profit. Percentage wise I killed it in less than 2 years.

Def proved my theory of picking gentrifying market and speeding up the process.

Thinking of writing an ebook on it. Mostly simple stuff but it’s hard learned.
 
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JohnD Realestate

JohnD Realestate

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25737 25738



First photo is the big drug bust. Second one is now. The two stores in front of the hot dog stand weren’t open in the pic but they’re operating now. This block is much cleaner today. Still has a few junkies hanging out but much cleaner.
 

Dianne Cohen

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Great job and Congrats!

I am a Realtor in South Florida and you would be amazed at how many people here call themselves "investors". They want big profits with no risk. You took the risk and were rewarded for it. These "investors" could learn a lot from you.
 
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JohnD Realestate

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Great job and Congrats!

I am a Realtor in South Florida and you would be amazed at how many people here call themselves "investors". They want big profits with no risk. You took the risk and were rewarded for it. These "investors" could learn a lot from you.
Thanks!

Got another property finished today. Rented out too. That’s the one that I mentioned in the last post.

I have one property left with no CO and another that I’m changing from 14 unit SRO to 4 apts. things are good.
 
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JohnD Realestate

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Little to little, little to late. I have to sell more properties then I planned. Good and bad. Get to spend more time with my kids now. I’m still working full time.

if I had gotten this far a few months ago I’d probably stick it out a few more or more then a few years. But it got a little to close to insolvency. Few lawsuits too.

Ill keep posting back as I progress. Try to detail out some of the mistakes I made. Still going to keep some.

Can’t say it was a complete failure. I’m selling one property for good gain. And I did manage to clean up the neighborhood a bit.
 

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Michael Burgess

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Thanks for continuing to update this thread - especially with the photos!

Do you mind sharing any details about the lawsuits, what happened, and what the results were like?

As I move forward in my own small scale real estate investing, keeping cash on hand vs. using the money to put back into improving properties / buying more is a tricky balance. I probably tend to be too aggressive with using cash reserves, so it's a good reminder to be liquid and secure.
 
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JohnD Realestate

JohnD Realestate

Making Real Estate Great Again.
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Update on what’s going.

I got sued by a minor partner he had 10%. He was supposed to come in and help me get projects finished. He put up a bit of money but nothing like what I put down. He was supposed to be on site for every project till completion. His strenuous party schedule interfered too much so i offered to buy him out for about 40% gain. After 8 months.

He declined and He put liens on most of my properties.

Most of those properties were under hard money loans. Half finished and at 12% interest things got ugly quick.

Thankfully I was able to navigate
 

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