Interview with RE Investor Terry Kerr

[Yankees338]

Here's a video I found about an RE investor in Tennessee (I believe) that specializes in turnkey properties for cashflow-seeking investors.

I posted it here because I like the way they emphasize several things we push here such as systemizing and working with a niche.

[ame=http://www.youtube.com/watch?v=CwQ7fspJMC8]YouTube - Flipping Houses Tip from Real Estate Investor Terry Kerr[/ame]

Also, sounds kinda like what JScott (the newlywed ) is trying to do. This guy flipped 43 houses last year, so maybe this provides some validation for you?

 

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[PurEnergy]

Yankees338, rep+.

My area has a lot of old mill houses scattered around. That could very well be a good niche in some areas.

What do you think is an acceptable minimum monthly cashflow? I like a minimum net $150 per month for SFH. That's $150 per month after having taken into consideration PITI, maintenance, and TURNOVER. This doesn't include future potential repairs like a new roof or HVAC. What I'm really wondering about is, what the numbers are that Terry is working with.

I would imagine you could sell (lending crisis) houses to landlords turnkey with a $100 per month positive cashflow with the above terms. No maintenance should be necessary other than turnover for a good while if the house has just been rehabbed. I do believe rents are on the rise which is a good thing. And the deals are out there.

From the business model that Terry is running you would think he's doing more work than everybody else out there for the money. But from that interview it seems like he's got things running pretty smoothly.

Off of the top of my head the problems I see are keeping a decent profit margin, getting deals and investors financed, systems to handle the necessary volume, and managing everything. The good thing is the deals are out there and probably will be for a while. My area will still cashflow! The cost of labor is still low.

How do you think the market will be for this niche over the next few years? Is the demand for rental property going to be there? I would venture to say, it's housing, yes, in most areas.

 

[Yankees338]

I've never done a rehab or flip -- and don't even own a piece of property -- so take what I have to say with a grain of salt.

Cashflow: I think this depends on a few factors -- such as whether or not you will manage the property, how much of your own money will be in a deal, and whether or not you feel the area will appreciate. If I can get into a property with close to $0 down (via owner financing) without putting much work or time into the property, if it cashflows even $50/month -- after PITI, maintenance, management, vacancy, and reserve money has been taken care of -- I'd definitely take it.

It's a little different in my area, though; SFHs are extremely expensive here (about $400k for an old 3/2). Most don't cashflow, even at 70% FMV. Therefore, if I found a deal at about 70% FMV where it cashflowed even a little bit positively, I'd have a tough time turning it down. I could either (a) rent it out for a while to pay down some of the mortgage (maybe 5 years or so) or, more likely, (c) sell it quickly at a discount of about 90% FMV.

Also, I think whenever it is a good time to buy (i.e., now), these kinds of strategies should work well. He does have to worry about selling the properties, but it's a completely different ballgame when selling to investors; they know the market, and the know it's a good time to buy. I think it works out well for all parties involved.

As long as the numbers work, I don't see why this wouldn't be a successful strategy for the next few years. As long as there's enough meat on the bone for both the flipper and the potential landlord, I think this is a viable niche.

 

[hatterasguy]

He is a professional.

He's smart, he leaves some money on the table and makes it up by having a secure string of buyers. Since stuff is cheap in his area he can do that.

Good business!

 

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