Who was selling a chunk of his properties here in Ohio to cash out and invest in Florida. He owns around 100 units, and is looking to sell most if not all of them. I was connected with him by the mortgage broker who financed my first two deals with cash out at closing. The thing that blew my mind was this guy bought something like 80 units (singles and doubles) as a brand new beginner. I’ve never heard of somebody doing that, but it got me to thinking that if I could pull something like that off, I could do the full time investing gig sooner than my goal of 5 years. Is that realistic these days? If I have great credit and little cash, does anybody think there is a way to buy 30-50 units from a single investor at one time? I think he might give some help in financing the DP’s and CC’s.
Just found this guy’s story interesting (he started about 20 years ago), and thought I would share and ask the question.
Always create your own plan and follow it. Do not copy someone else’s success because it worked for them 20 years ago. Also if these properties are so good, why does he want to sell them all? Because an investor never sells everything unless he thinks something is going to go down.
I should point out - he didn’t suggest that I buy all or even a large portion of his properties. He told me his story, but I had told him that I was looking for one or two single family properties in the beginning of the conversation. Also, I don’t think he wants to sell all of his Ohio properties, but he does want to sell enough to raise cash to invest in Florida. Our market here in Ohio isn’t great in terms of appreciation, but I don’t think it’s “going down”. Most neighborhoods are either holding steady or gaining 4-5% per year.
His thing is, he’s 50, and he wants to go to the next level just like we all do. He and his wife are also looking to retire to Florida eventually.
Many investors here in Ohio and I’m sure elsewhere are trying to get into the hottest markets now b/c they are afraid they are going to miss the big oppty’s. I think in some cases they already have, but I say if you want to try it, go for it.
Anyway, thanks for the response. I also am usually suspicious when a guy is trying to sell me all of his stuff.
Hi,
sounds like this could be a great opportunity for you. Work te #'s and see what your cash flow will be. If the guy is willing to carry that would be even better.
I’m in California so I have no idea what your market is like. good luck
Hey,
Diane is right. Opportunities never fall out of the sky but come to the one who is looking for them. For good motivation and a good story read Diane’s blog.
Peace,
Richard
You’re going about this completely backwards! The point of investing is to make money, not own a bunch of properties. Making money requires a serious plan and some serious education on your area of focus. It is very important to learn to walk before you try to run. Don’t get greedy and try to do 30-50 units all at once. Start with a very low number of SFHs and learn the game. If you don’t currently own any rentals, you’ll probably be shocked by the landlording business. Being a landlord is an entire business all by itself! Learn to do it right and you’ll be successful. Have a soft heart or believe the multitude of lies and sob stories told by tenants and you’ll quickly become a very motivated seller.
Even if you could buy all of these properties, you haven’t asked the critical question - ARE THEY A GREAT DEAL? Buying properties at near retail will almost certainly result in your failure as an investor - especially here in Ohio. As you correctly stated, there is no appreciation in many parts of Ohio and some areas are declining slightly. Therefore, you MUST make your money when you buy and you MUST have a significant positive cash flow. I insist that the positive cash flow be at least 1/3 of the mortgage payment and I must have at least 30% equity at closing. Meeting these parameters is your insurance that your business will be successful.
Other important considerations when buying rental properties are the maintenance status of the property and the status of the tenants. Unless you have a very large cash reserve, buying multiple run down properties can ensure that you soon be broke. Also, it is absolutely mandatory that you examine all the leases and know who is in each property; what their rent is; how long their lease runs, and determine their criminal background. Often, someone selling multiple units will fill their apartments with just about anyone to get the occupancy rate up for the sale. Be careful.
Finally, I’m a little concerned about this investor selling his property in Ohio to invest in Florida. That seems crazy to me. With a little work here in Ohio (or Indiana, or Michigan, or 90% of the rest of the USA), an investor can buy properties at 50% (or less) of market value. In these cases, you’ve made a 100% return on your investment (in equity) when the deal closes. Why would anyone in their right mind turn that down hoping for appreciation in Florida? (remember hope rhymes with dope)
So, start with a small number of SFHs that you buy at a hugh discount. Perfect your system and learn to make some money before you bet the farm on a hugh deal.
Thanks Mike. I appreciate the advice, and I agree. I think I am doing a good job on these first two (actually set them up as lease/options to the tenants so that they sign on with maintenance being in their area of responsibility). However, there are and will be inevitable expenses, I’m sure.
Anyway, I like the idea of buying with 30% equity and large PCF, but can you also do it while financing 100% of the deals? I have found a lot of either/or scenarios, where I am getting around $100-$150 PCF on a PITI payment of $450, but I actually got money back on both houses at closing that I can use for my next deals.
The key word for me is patience, I do need to avoid buying mediocre deals just to grow my portfolio. Thanks again.
You can do it if you finance 100% of a deal you got at 70% of FMV.
I believe someone warned against buying at FMV. Here in Cleveland, I ran into a newbie investor who had met a mortgage broker who got him some properties at 95-100% LTV. Now, value is a strange thing. He was trying to unload these so I did some comps and it turns out he significantly overpaid. He was actually asking less than he paid (and financed) in some cases.
I’m pretty sure it was a cash at close type of deal. All his cash is gone.
Junk properties with horrible tenants. Buildings were in horrible condition. He had negligible cash flow and high maintenance and I believe he was starting to freak.
It’s a really rough way to learn a lesson. Hopefully this isn’t the case here.
I will say that I am very careful about values. I certainly don’t just rely on what the seller is telling me, or even what I can find out on my own. The two deals I bought are, being completely honest, only about 80% of FMV for the purchase prices I paid (49k and 49.9k). The upside is, I didn’t have to put a single penny down, and got cash back. On the 49k property, I didn’t spend one dollar or minute rehabbing and had it Lease Optioned to a lady with decent credit and 5 years of verifiable stable work history before I closed on the loan. The other property had so much interest from prospective tenants, I eventually took down my yard signs to slow down the calls. I got $625 rents, and the tenants signed leases taking responsibility for all maintenance. Not saying that I made some wonderfully incredible deals by any means, but I think I’ll be in good shape holding these for rentals until the tenants decide to exercise the L/O, or if they don’t that’s fine too.
If I could go back and do my first two deals again (bought from one seller), I would negotiate a slightly better price on both properties. Other than that, I consulted with 2 of my friends here in Columbus who have experience in the business and they both said the deals were good.
All in all, I’m very excited to finally be started, and can’t wait to find another good deal or two. My goal is to find 1-3 more by the end of the year that are good deals. I sat around and thought about doing this for 10 years, and like people always say, you just have to go do it. I’m sure I have and will make mistakes, but I think as long as you have decent monthly cash flow and you buy right, you won’t be in bad shape.
And the most important thing, at least in my case, was to find a couple of people who know what they are doing and were willing to advise me through my first couple of purchases.
Yes you can do both - get a good cash flow and pick up some good equity. I see people getting these deals all the time at the BUY-SELL-TRADE at the Columbus REIA. They are buying cheap and wholesaling, so there’s no reason that you can’t buy cheap and rent them out. Also, I wouln’t get too excited about the guy that has 100 units for sale (unless he is selling them dirt cheap) - there is a continual stream of frustrated landlords that are selling cheap. Typically, they are newbies that didn’t do their homework and didn’t have even the slightest idea of what being a landlord was like. I have taken these properties over subject-2 with a lot of equity; taken them over with bank financing with cash back at closing AND a good cash flow AND 30% equity; and taken them over with cash at a HUGH discount. You can do this too! The key is to be patient and wait for a great deal!
I think that you’re off to a great start. I’ll look forward to meeting you at a REIA meeting.
likewise. I was out of town and missed this month’s meeting, but I intend to schedule around October. i’ve been to meetings in the past, but it will be nice to be there in the position to actually do something.
Approx 80% LTV, some properties as low as 70% and some around 85%. I am expecting a detailed list with his value estimates tomorrow as well as current or expected rents. obviously, i won’t take his word on the values.
I did go inspect a few of the ones I’m most interested in today, and for the most part they are in great shape and “rent ready” if not rented currently.