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How to make a million dollars in Real Estate
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Dash Global Offline
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Post: #1
How to make a million dollars in Real Estate
Equity and Refinancing is glorious when used right. I am starting to get my head back in the real estate game and develop a more concrete plan for my goals.

This is a great article that illustrates how one can build wealth with equity and refinancing.

http://www.biggerpockets.com/renewsblog/...n-dollars/

I am going to want to do a combo strategy of buy and hold and rehab and sell.

(This post was last modified: 10-21-2015, 12:12 AM by Dash Global.)
10-20-2015, 11:44 PM
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RE: How to make a million dollars in Real Estate
Am in the middle of closing a large property deal right now
Actually we should turn this thread into a resources guide

I will start

This podcast is essential for property investors partocularly if your interest is in the UK market

http://naughtynomad.com/2015/05/21/how-t...tionships/

Even if it's not, there is a lot of useful free advice here
(This post was last modified: 10-21-2015, 12:15 AM by JJ Roberts.)
10-21-2015, 12:07 AM
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Post: #3
RE: How to make a million dollars in Real Estate
(10-20-2015, 11:44 PM)Dash Global Wrote: Equity and Refinancing is glorious when used right. I am starting to get my head back in the real estate game and develop a more concrete plan for my goals.

This is a great article that illustrates how one can build wealth with equity and refinancing.

http://www.biggerpockets.com/renewsblog/...n-dollars/

I am going to want to do a combo strategy of buy and hold and rehab and sell.

Just read it over and it has good ideas. I'll just add a few thoughts based on my experience SPECIFICALLY IN CALIFORNIA, HAWAII AND JAPAN.

The examples they give there are for very low valued properties. Again, since I've only worked in high cost areas, I don't know those markets but many property managers and banks won't even fuck with a property that small since it's not worth their time. So what that means is the property managers you do deal with won't be the most professional and/or they'll be great managers but suck at getting you paperwork (which is important if you want to be analyzing your cash flow on an ongoing basis). Also, the article doesn't go in depth about possible evictions which can COMPLETELY KILL YOUR CASH FLOW. If a tenant decides to stop paying rent one day, it's not like you can automatically kick em out. You gotta go thru a very lengthy process which can take up to two months (that's two months with NO CASH FLOW from that unit) and you'll have to pay about $500 to $1000 in legal fees.

OUch!

So while the scenarios they're describing might be feasible in another lower cost state, in high cost areas like California and Hawaii, forget it.

Also, it described buying a property for 20% less than what it's worth? Not sure who'd do that? If they're talking about a bank, perhaps a short sale. I don't fuck with those so can't give an educated answer but from a broker perspective, one of my old friends USED to specialize in them but told me they're a bitch to do. Could take MONTHS to close. Plus, there could be a lot of repairs needed so you'll need to sharpen your handyman skills and have the right ppl in place to give you good advice. Oh btw, those ppl aint' gonna do it for free. As an example, a foundation inspector in Cali charges $300 to check out the foundation. Not that much but if you're writing offers on a crapload of deals, that shit adds up.

Now a lot of ppl won't even order a foundation report. (in fact in other countries, they'd look at you like you're crazy) Here is a real life example of a deal I was involved in. My guy had a roofer, general home inspection, termite, and they all checked out. Well, the foundation guy came in and said that in 3-5 years, there might be $50k to $100k worth of foundation work. This was a property selling for about $500k and seller didn't budge. So yeah, foundation is pretty fucking important.

The 1031 exchange they talk about is legit.

The thing I don't like is how they assume an automatic appreciation. That's what fucked many ppl in the subprime crisis. They thought prices would go up forever.

Now is appreciation a worthwhile strategy? of course it is but i personally look at it as icing on the cake. I prefer cash flow.

You've mentioned bigger pockets on here a lot so I trust they give good knowledge. I hope they go into detail about the kind of shit to analyze in your cash flow. Things like vacancy factors, replacement reserves, utilities (if it's metered or not), etc.

IF YOU DON'T KNOW ACCOUNTING (WHICH I NEVER KNEW FOR A LONG ASS TIME AND SUFFERED LEARNING THAT SHIT), DON'T FUCK WITH REAL ESTATE UNTIL YOU DO!

I REPEAT, LEARN ACCOUNTING, GET THAT SHIT DOWN ASAP.

They say $200 per unit in one simple sentence. Well, one vacancy, one major repair, a higher than expected interest rate can easily kill that $200 per unit.

What I did like (although they didn't really go into detail about it) is when they mentioned "force the appreciation on the apartment" That is what's good about apartments and commercial real estate vs residential real estate. YOU HAVE MORE CONTROL over the value vs residential since the underlying income is what appraisers use vs the comparable sales method. The latter being more of a sheep strategy since if everybody is pushing prices up, your property goes up (think china) whereas sophisticated investors generally go for commercial properties because you can control your expenses, you can raise the income, and divide that all by your personal CAP RATE, and presto, there's your value.

But what they also don't mention in the article is that many good commercial properties are off market. In fact, just the other week, a client gave two different values for his property. On one, he gave his opinion based on getting a loan ($4 million) but if he were to sell it, he'd want $5 million.

Why?

Because where else will he put his money? And this is very common with older commercial owners.

So in theory, you might actually pay a premium for a good property, not a bargain as the article suggests.

There's one dude, Dave Lindahl, who wrote a few books on commercial real estate investing and apartment investing who I think has a great system. He uses basic marketing strategies to go after the owners directly.

It's like pickup, it's a numbers game.

Anyways, hope this post didn't come off as negative but rather, just sharing real life scenarios from the battlefield as it's those tiny details that can make or break success. You can totally do the strategy they suggested, just make sure you know ALL THE DETAILS, not just the macro strategy they talk about.
(10-21-2015, 12:07 AM)JJ Roberts Wrote: Am in the middle of closing a large property deal right now
Actually we should turn this thread into a resources guide

I will start

This podcast is essential for property investors partocularly if your interest is in the UK market

http://naughtynomad.com/2015/05/21/how-t...tionships/

Even if it's not, there is a lot of useful free advice here

The hard part about investing in the UK for non-residents is you guys have a huge capital gains tax for non-residents if I'm not mistaken. That's a big deal killer for a lot of ppl. What is good with the UK is you guys have leasehold so for someone who wants a huge tax write-off and their country allows depreciation for UK properties, that's good since you can get 100% depreciation. Hawaii also has leasehold properties.

The problem with that though is while the depreciation benefits are nice, the cash flow isn't that great (from the properties i've seen)

I'm speculating here but I think London might suffer from the same problem that other primary markets like Manhattan and San francisco have. There's so much demand for those cities that the cap rates have been compressed so low that you gotta put in a lot of money just to get a tiny return so the whole play is appreciation. As mentioned above, appreciation is OUT OF YOUR CONTROL unless you happen to be able to control interest rates, job growth/migration, bank lending requirements whereas with cash flow positive properties, you can at least control the income and expenses.
Kaizen (Continuous Improvement) My personal journey of improving myself as a man and finding happiness

https://kaizenmanofsteel.wordpress.com
(This post was last modified: 10-22-2015, 03:37 PM by fucksong.)
10-22-2015, 03:33 PM
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TideRide Offline
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Post: #4
RE: How to make a million dollars in Real Estate
FSong
In your market which real estate professionals are making the most on average (appraisers, brokers, inspectors, loan officers, etc.)?

Do you know of a decent tutorial to learn income capitalization?

10-22-2015, 06:27 PM
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Post: #5
RE: How to make a million dollars in Real Estate
Tide, please stop being so Sesame Street and start being more Nike...
10-22-2015, 07:16 PM
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Post: #6
RE: How to make a million dollars in Real Estate
What you guys think of Grant Cardon?
10-22-2015, 10:07 PM
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Dash Global Offline
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RE: How to make a million dollars in Real Estate
Fuksong,

Yea, def not places like Cali, Haw, etc. Unless you have a ton of capital, the average joe is gonna be investing in places with houses in the 30-100k range.

With such cheap houses you will be doing cash deals. Most likely with a hard money lender if you don't have all the funds yourself.

As for buying property for 20% below value (actually need to look for ones needing some work for an even higher ARV %). You would look for motivated sellers and REO / short sales / auctioned houses. These places have usually been neglected and need work done to them.

The idea is you want to create appreciation when you buy the house under value. In addition to regular appreciation.

But yea, there are a million nuances that go into real estate investing.

Financing options
Finding properties
Estimating repairs
Making offers
Estimating ARV and cash flow / profit
Building a REI team (re agent, lawyer, contractors, pm's, etc)
Finding the right contractors
Holding costs
Closing costs
Exit Strategies
Finding and managing tenets
etc
etc
(This post was last modified: 10-22-2015, 10:53 PM by Dash Global.)
10-22-2015, 10:52 PM
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JJ Roberts Offline
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RE: How to make a million dollars in Real Estate
(10-21-2015, 12:07 AM)JJ Roberts Wrote: This podcast is essential for property investors partocularly if your interest is in the UK market

http://naughtynomad.com/2015/05/21/how-t...tionships/

Even if it's not, there is a lot of useful free advice here

Sorry posted the wrong link due to a copy and paste error.

The link I wanted to post to the property podcast is this one

https://itunes.apple.com/gb/podcast/the-...27071?mt=2
10-24-2015, 03:27 AM
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fucksong Offline
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RE: How to make a million dollars in Real Estate
(10-22-2015, 06:27 PM)TideRide Wrote: FSong
In your market which real estate professionals are making the most on average (appraisers, brokers, inspectors, loan officers, etc.)?

Do you know of a decent tutorial to learn income capitalization?

On average?? I would say loan officers as they work for a bank earning a salary BUT you don't get into real estate if you want to just be average. While not every broker will be earning a lot, the top ones earn half a million if not more. You have to be on top of your shit. Appraisers who do houses earn little, but the commercial ones earn more but again, there's a limit, same with inspectors whereas brokers have the most freedom as you can go after the biggest buildings possible BUT you can also starve if you don't close a deal. Survival of the fittest
(10-22-2015, 10:52 PM)Dash Global Wrote: Fuksong,

Yea, def not places like Cali, Haw, etc. Unless you have a ton of capital, the average joe is gonna be investing in places with houses in the 30-100k range.

With such cheap houses you will be doing cash deals. Most likely with a hard money lender if you don't have all the funds yourself.

As for buying property for 20% below value (actually need to look for ones needing some work for an even higher ARV %). You would look for motivated sellers and REO / short sales / auctioned houses. These places have usually been neglected and need work done to them.

The idea is you want to create appreciation when you buy the house under value. In addition to regular appreciation.

But yea, there are a million nuances that go into real estate investing.

Financing options
Finding properties
Estimating repairs
Making offers
Estimating ARV and cash flow / profit
Building a REI team (re agent, lawyer, contractors, pm's, etc)
Finding the right contractors
Holding costs
Closing costs
Exit Strategies
Finding and managing tenets
etc
etc

Yeah, you know what's up. I highly recommend you check out Dave Lindahl. Only dude I ever heard of who has a system for going after distressed sellers which is basically your business model. So at the end of the day (and this applies to me and damn near every business person), you're a marketing firm. You gotta know the demographic you're looking for and find them using old school systems (cold calls, warm calls, networking) or technology. Because I can tell you right now most ppl who are NOT in a distressed situation have no motivation to sell below market. Luckily for you though, there are a bunch of them who are
(10-24-2015, 03:27 AM)JJ Roberts Wrote:
(10-21-2015, 12:07 AM)JJ Roberts Wrote: This podcast is essential for property investors partocularly if your interest is in the UK market

http://naughtynomad.com/2015/05/21/how-t...tionships/

Even if it's not, there is a lot of useful free advice here

Sorry posted the wrong link due to a copy and paste error.

The link I wanted to post to the property podcast is this one

https://itunes.apple.com/gb/podcast/the-...27071?mt=2

You Brits should look into the QROPS program, similar to the US 401k I believe. Basically it's a pension program where you can control where the funds are invested. So if you want to raise capital to invest in a bigger deal, you can try to find people with QROPS earning small returns and pitch them bigger deals that you can partner up with them on. But now, you're not an investor but more now raising equity which is a whole other job unto itself. Which brings me back to a point i've brought up in other threads, what do you want to be spending your precious life energy and time doing on a regular basis.
Kaizen (Continuous Improvement) My personal journey of improving myself as a man and finding happiness

https://kaizenmanofsteel.wordpress.com
(This post was last modified: 11-07-2015, 05:56 PM by fucksong.)
11-07-2015, 05:49 PM
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Post: #10
RE: How to make a million dollars in Real Estate
Prior to making real estate investment decisions, whether buying a rental property, it is essential to have a professional legal support. I'm seriously considering purchasing investment property in Toronto, so a good friend of mine referred me to a good real estate lawyer.
12-13-2018, 06:20 AM
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