Build a real estate company in a D area

[JohnD Realestate]

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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[Merging Left]

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.

 

[Merging Left]

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]

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.



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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

 

[Merging Left]

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

 

[JohnD Realestate]

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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[MakeItHappen]

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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[JohnD Realestate]

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.

 

[JohnD Realestate]

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.

 

[Michael Burgess]

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.

 

[ChrisV]

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Is that a Humvee in Brooklyn? Lol. What did they catch Scarface?

 

[Bigguns50]

Outstanding thread @JohnD Realestate . Thank you for your time. I was in the Hard Money biz for 4 years. All you wrote about, I've pretty much seen here.

I'm in a Detroit suburb and your buildings are basically the same as ones here in the bad areas of the D. There's a LOT of big money pouring into the City an it's been an impressive turnaround.

Still...outside the downtown, there's money to be made.

My Wife and I are heading out to AZ soon and I'm convinced I can successfully flip homes there.

 

[Bigguns50]

From my experience in the hard money biz, the BIG money is in the lending. Seems you'd be perfect for this.

 

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[JohnD Realestate]

@Bigguns50 I’ve been thinking about it. I like the action of doing deals.

I don’t have much money tho. Coild
I ask how you got into it?

 

[MHP368]

Still toying with some ideas on what to do next.

flipping mobile home parks?

the real estate world in general sort of ignores it because its not seen as "sexy" but, thats sort of your bread and butter. Due dilligence is a bitch though (even a small deal could have you busy 6 to 12 months waiting for inspections and things)

 

[Kevin.o]

What is your plan with these units/stores ? If you got a good deal on them you can try wholesaling them to investors who buy them and fix them ? I do this here in Arizona and it works pretty well

Hey man I see your a wholesaler, I'm 15 in Massachusetts eager to run and scale a wholesaling operation soon. Any tips for me to get started and become succesful in wholesaling?

 

[Kevin.o]

Have you thought about learning to walk before you try to run a marathon? RE is a whole world into itself.

What do you mean can you give any suggestions?

 

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[Kevin.o]

At 15, you cannot contract. You are barred due to your age. You might want to start with learning about buying, selling, escrowing, fixing, appraising, locating, and making contracts... and that's just to start. Just jumping in is a dangerous leap! You may need an apprentice situation with someone who is doing it. Actually, you need a whole string of different experiences before you try it on your own.

PS. How do I know that? 37 years of experience in the RE business.

I dont want to overstep my place as a newbie but I'm sure someone often the 18 can legally sign a contract for me. But besides that thank you for the advice and I'll continue to learn and educate myself on the topic. Also how would I find an apprentice ship with someone who is already doing it?

 

[WJK]

I dont want to overstep my place as a newbie but I'm sure someone often the 18 can legally sign a contract for me. But besides that thank you for the advice and I'll continue to learn and educate myself on the topic. Also how would I find an apprentice ship with someone who is already doing it?

I thought about you today. We had to go to Anchorage, 4 hours from our home. I had 8 hours on the road to think about many things. I told my husband about our conversation.

I love your goal. I'm not sure if you know what you are trying to do and what is going to take to get there. In my opinion, you are planning on making a kill without knowing what you are hunting, when to hunt, how to hunt, or what to do with it when you find your goal.

If I was in your shoes, I'd work toward getting your salesman license. If your interest is in residential RE, I'd be going to all the open houses you can find on the weekends. That gives you a chance to tour the interiors of the houses and talk to the salesmen sitting on the homes. I would be driving neighborhoods and defining their trends and natures. I would concentrate on listing agents rather than selling agents. (Most agents either concentrate on listing properties for sale or are dealing with buyers.) Then I would ask to be an assistant to one of those agents. When you are licensed, you can become a bird dog. That is a person who goes out and lines up listings and deals for the experienced person. It's a team effort. The bird dog gets a finder's fee and sometimes a portion of the commission. In exchange, he learns to locate the sellers and their properties. Then learns to make the deals and run the escrows.

Answer some of your own questions through hands-on work:
Why do people sell their property?
How do they set the selling price?
Why would a person sell their property for a lower cash deal when they could have fixed it up and sold it for market value?
How do you determine the current and future market value of a particular property?

In my opinion, there is no substitute for learning from an experienced person. Every profession and trade has shortcuts and work secrets. The only way to learn those is by being inside of that world and personally involved. Book learning only goes so far. You must try it for yourself to really understand.

 

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[Kevin.o]

I thought about you today. We had to go to Anchorage, 4 hours from our home. I had 8 hours on the road to think about many things. I told my husband about our conversation.

I love your goal. I'm not sure if you know what you are trying to do and what is going to take to get there. In my opinion, you are planning on making a kill without knowing what you are hunting, when to hunt, how to hunt, or what to do with it when you find your goal.

If I was in your shoes, I'd work toward getting your salesman license. If your interest is in residential RE, I'd be going to all the open houses you can find on the weekends. That gives you a chance to tour the interiors of the houses and talk to the salesmen sitting on the homes. I would be driving neighborhoods and defining their trends and natures. I would concentrate on listing agents rather than selling agents. (Most agents either concentrate on listing properties for sale or are dealing with buyers.) Then I would ask to be an assistant to one of those agents. When you are licensed, you can become a bird dog. That is a person who goes out and lines up listings and deals for the experienced person. It's a team effort. The bird dog gets a finder's fee and sometimes a portion of the commission. In exchange, he learns to locate the sellers and their properties. Then learns to make the deals and run the escrows.

Answer some of your own questions through hands-on work:
Why do people sell their property?
How do they set the selling price?
Why would a person sell their property for a lower cash deal when they could have fixed it up and sold it for market value?
How do you determine the current and future market value of a particular property?

In my opinion, there is no substitute for learning from an experienced person. Every profession and trade has shortcuts and work secrets. The only way to learn those is by being inside of that world and personally involved. Book learning only goes so far. You must try it for yourself to really understand.

Thank you I appreciate the advice will definitely try and learn from more hands on experiences.

 

[WJK]

Thank you I appreciate the advice will definitely try and learn from more hands on experiences.

Dreaming big is a good thing. I had to start a new to-do and goal list over the last couple of years. Over time, things get done and crossed off of those lists. I can't think of much that I want to buy since I'm personally a minimalist. But, in business it is different. I've always wanted to buy whole portfolios of trust deeds and/or loans. That's generally an impossible dream for an individual. Portfolios are built up one deal at a time. And the mark of a good investor is to be fully invested with some "strutting money" set aside to do more deals. I worked for several banks that did those deals and I did the appraisal reviews for them on their piles of files. I have a list of all the heavy hitters for privately held trust deeds in my target area I'm thinking about putting that goal on my list again. It's a long shot, but it might be fun!