Thread by @joecassandra

T#9
HOW TO BUY YOUR FIRST RENTAL PROPERTY AND GET PAID $16k TO DO IT

So...

I actually hate real estate. It's boring. Everything about dealing with contractors, tenants, loan officers, underwriters, getting crap from people, price of lumber..

All sux

2/
However, real estate is also the fastest way to make money. And I've tried many different ventures. We bought 5 houses in 2020 and it added multiple 6-figures to our net worth.

3 of them we'll literally have an infinite return on them

Let me explain

3/
First, I'll back up. I don't think everyone needs to own 500 doors like some of the 'gurus' out there. A couple doors could hit the goals you need

I'd say everyone should at least own 1 rental and see the possibilities for wealth-building.

however, there's a key caveat.

4/
You must BUY A GOOD DEAL. Don't just buy any house and put a "For Rent" sign on the yard.

Those folks usually end up selling for losses

Here's how to get a house for infinite returns.

5/

#1. Get a list of absentee owners in area you like. "Absentee" means owner does NOT live in house. Usually means they're a landlord

Absentees are the biggest, most consistent list to buy deals from bc ppl reach a breaking point where they don't want to be a landlord anymore

6/
Get this list from paid services like Propstream. Your mail house may even provide. (mailhouse in a min) listsource.com is most common.

Put in
- Absentee
- Have at least 40% equity
- Single family
- Last sold date is 3 months past (else you get recent sold houses)

7/
#2. Get list, comb through it just to make sure all the info is in there (make sure address is complete, you may have to fill manually)

#3. Take this list to a mailhouse.

8/
Ok...there's ton of mailhouses out there. Find one works mostly w RE investors. We used ballpoint marketing. Our first deal was actually letters I printed myself.

I believe the handwritten outside envelope is a key to get opened. (ppl open mail over their trash can)

9/
You upload the list you got into their system. Then, they take it from there. I recommend a mailhouse that you can drop mail locally so it has a local stamp. Found response was better.

"How many letters to get 1 deal w/ infinite returns?"

I'd estimate around 2,500-3,000.

10/
Cost? Some mailhouses are $0.50 per...ballpoint can get over $1. So you're outlaying a few thousand.

#4. After mail is sent, just have your phone ready. Expect a 0.75%-1% response rate. 1% would be about 30 calls on 3k mailers

11/
80% will be people saying to leave them alone, F off, call you names...etc.

10% will be tire kickers

10% will be serious and be willing for you to come and look at their house

"Look at their house...whatever I get murdered?"

Well, hope you don't...

12/
I can't go into great detail about working with sellers/negotiating.

Let's just say the 20% of people that will talk to you, maybe 3 will hear your offer and never call again. 1 will seriously think, and 1 will accept.

13/
When you go meet a seller, you're doing a few key things:

- Building rapport
- Making sure they feel 'hard'
- No judging their situation (many will have junky homes)
-You're feeling out what is most important to them. Is it price, convenience, speed?
- Estimating REPAIRS

14/
From there, you make an offer.

To make an offer, you must know

- What the 'fixed up' value of the house will be (after repair value)
- Ballpark of repair costs. Be conservative.

For me, I don't do fancy calculations or spreadsheets.

My formula

15/
I take after repair value (say it's $200k)
x 75%
- Repairs
- 5k of wiggle room
-----------
offer

Now, you can imagine your offer is going to be low.

But again, you're only willing to buy GOOD deals.

Real estate is a pain in the @$$ already w/o buying bad deal

16/
Say the 200k house needs 25k in repairs

200k
x 75%
- $25k
- $5k wiggle
----
$120k offer price

Here a seller will say:
- Accept
- I'll think about it
- F off & not waste their time

Or they ghost you forever or a long while

Your biggest negotiating chip to keep them on hook

17/
Is your offer. That's all they want to know from you and then they're thinking 'get out.'

So your offer is precious and should only be released when ready

18/
If seller says "ill think about it" or "ghost"...follow up

"F off" ... follow up

Skip to "Accept."

From there, you need to finance the purchase.

19/
Sure, you can go to a bank, but that could take forever. Your best bet is a hard money lender (google non-QM lender) or better, a private lender.

A private lender is someone who has money sitting in low return places that may be interested in a higher return

20/
I've had family fund deals, I've had random flippers I met fund deals...

I've even had the seller finance a deal.

All of this means you could buy a house with $0.

Infinite returns are even possible

21/
Say you buy the house, fix it up, rent it out (all of that is too much to talk about here...some property managers will do all fixing up and renting for you)

The infinite returns comes at cash-out refinance time.

22/
Most banks req at least 6 months after you buy a house to cash out refinance.

Well, they'll usually lend 75-80% of the APPRAISED value of house

Back to our house.

You buy it for 120k...appraises for 200k (or better 215k as mine did surprisingly)

75% o 215k = $161k

23/
Your bank will loan you $161k.

But you bought house for $120k, put $25k into.

Suddenly, you're into it for $145k, but the bank is giving you $161k loan.

That's $16k you get in cash from pure equity.

Get what happened?

24/
You now own an asset that actually PAID YOU $16k to own.

You have $0 in the house now. You're receiving rent, depreciation write-offs, plus, you still have $54k in equity in the house still!

Increased net worth
54k
+16k
-3k for mailers
------
$67k and you get cashflow

25/
Yes, this is a real deal we did in 2020.

It's possible to get into real estate even with being a "full time investor."

1 house is FAR better than 0

Feel free to ask any questions

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