Showing posts with label blog. Show all posts
Showing posts with label blog. Show all posts

Thursday, October 13, 2016

Lipstick on a House: The Art of the Cosmetic Rehab


When looking at buy-fix-sell (flip) deals, we often hear the term “cosmetic” rehab when being pitched by a wholesaler, agent, or anyone else looking to wash their hands of a property. “Cosmetic this, cosmetic that..”.
"Hey Mr. Wholesaler, I hear you loud and clear, but what do you mean by this? Is this just a way for you to underestimate the amount of repairs needed? How can this 'cosmetic' repair job come out to $30,000!?"

What Cosmetics Really Are

Cosmetics are usually referring to the lower cost, miscellaneous upgrades that a house needs. Kitchen upgrades, bathroom upgrades, flooring, paint, lighting, doors, windows, landscaping and minor demolition can all be focal points on a cosmetic rehab.
What we have to first realize is that everyone has a different idea of what cosmetics should look like in a house. It's similar to dressing yourself. We all have different styles to get the job done. A high end flip house would require entirely different and more expensive material than a low end rental. And a low end rental would be entirely different than a mid level flip. Many people can come up with different numbers (in different areas), and that’s ok. It’s usually good to stay within $4-5k give or take of the original estimate.

Pricing Cosmetics:

A quick visit to your local Home Depot should give you all that you would need to get a rough estimate on cosmetic repairs. (Understand, however, that Home Depot is what some call “The Retail of the Retail”, so you may be able to get some materials cheaper if you decide to go with a more localized home improvement store). When you get there take a look at some of the prices for the standard items you will need. Most prices are region specific, so it is important that you visit a local home improvement store. Below are some prices I have for my area (Dallas/Ft.Worth) that would work well in a mid level flip with an after repair value of $150-250k:

Bathroom

Toilet-$100
Sink vanity- $250-500
Bath Tub- $200
Shower Surround (Tile)- $800

Kitchen

Granite countertop installation- $25-30/sq. ft
Drop in Stainless Steel Stove- $500/ea.
Stainless Steel Dishwasher/Microwave- $200-250
Cabinets (Replace)- $100-150/door
Cabinets (Refinish)- $500-1000 total

Flooring

Average total $2/sf
Carpet (fully installed with old carpet removal)- $1.09/sf
Vinyl Hardwood- $2.19/sf
Engineered Hardwood- $2.50/sf
Wood Floor- $4-6/sf
Resurfacing- $4/sf
12"x12" Porcelain Tile- $2-2.50/sf

Lighting & Paint

Ceiling Fans- $70/ea.
Paint- $1.30/sf
Fencing, Doors, and Windows:
Average fence- $2,500
Front Door- $200-300 (wood doors up to $900)
Interior Doors- $500
French Doors- $350-400
Windows- $250-300
Garage Door (with motor)- $500/car

HVAC

Condensor- $500+ ($1x sq. footage)
Handler- $500+ ($1x sq. footage)
Now, once you know and understand the rough cost of materials in your market, you can go look at a house and have a somewhat accurate understanding of how much cosmetic work this house needs.
Cosmetics are the cheap items, however. You need to make sure you are taking into account the other things, the big things, that can really make or break your project. Stay tuned for my later posts to get the inside scoop on the BIG THINGS.
For more information on investing in real estate and a free list of property, please contact me 

Thursday, February 18, 2016

Why the 70% Rule is Dead

After moving to Tampa, FL - the real estate guru capital of America - from San Antonio, I keep running into people quoting the 70% rule, I believe coined by Ron Legrand.  But after examination of more than 10,000 transactions our company has conducted nation wide I must say, I think this rule is out of date.

I'm sure this was extremely applicable back in the 80's and 90's before MLS was a thing in the real estate world.  I remember my dad's big binder full of all the active listings and the fax coming in every morning with the listing updates.  He'd spend an hour going through his binder, removing the old listing, and placing the new one in it's place.

You used to really be able to make a killing investing in real estate back then.  Information just wasn't accessible to anyone, even real estate brokers.  In a non disclosure state like Texas where the sales price of real estate is not recorded it must have been absolutely impossible for anyone to conduct any type of real estate business without the consistent help on an agent.  At least the local board of realtors kept records of what houses sold for in their market.

I remember the first iteration of MLS in San Antonio which ran of MS DOS.  With an AOL trial CD and no one picking up the phone in your house you could quickly research what was happening in your area.  Before mapquest (remember that one) you had to have one of the large Mapsco books that gridded the city over and flip between pages trying to find what street you were going to.]

But that's over.  Margins are becoming tighter for real estate investors.  The reason is the ease of access to information.  Moving to Florida is like getting in a DeLorean and shooting thirty years into the future from small town San Anton.  The amount of information available here is staggering - and if you have a real estate license and pay for MLS access you can do some pretty incredible things.

The profits you can make in residential real estate aren't shrinking because the market is hot or cold.  The tools available are making consumers - sellers - more informed than ever before.  It's becoming more difficult to tell someone selling their home to you that you can only pay $50,000 when they know it's worth $120,000.  Of course their are deals out there but because of mass marketing tools such as Zillow, Hubzu, Auction.com, and now even county auction websites, more eyes are on the limited amount of deals out there.

Good ol' Texas... I miss you.  I used to read the actual MLS feed constantly throughout the day and when I saw a deal I'd usually be the first person at the house, the first person with an offer in, and the person who ultimately got the deal.  Tampa seems to have 100 times as many people doing the exact same things I do.  If you think that 70% deals are still out there, I beg to differ.

To the people who tell me, "I only buy houses 70% of value less repairs," I say, "And how many of those deals are you actually doing?"  I can't walk into the grocery store, pick up a sack of potatoes that's advertised for $8.99 and tell them, "I only pay $6 for sacks of potatoes."  The high school cashier is going to look at me like I'm out of my mind.  It just doesn't work like that.

This guy named Adam Smith wrote a book before Legrand called An Inquiry into the Nature and Causes of the Wealth of Nations a few years earlier, 1776 I believe.  What I was beginning to describe earlier was the basis of the efficient-market hypothesis, something most business majors dabble in during college.  To break it down, the more information consumers have in the market place the more efficient the market and thus, the more difficult it is for investors to achieve a sale price of less the actual value (ARV - repairs).

The other factors effecting the market rate for real estate investments are things such as number of competitors, average availability of capital to those parties, the availability of credit, etc.  "The 70% Rule" really has to change depending on what market you're buying in.  Truly buying at 70% of a houses actual value less the repairs will basically always yield you a profit.  Something seriously catastrophic would have to happen for you to lose on that deal.

But the reality is, people aren't paying that.  In super desirable areas such as South Tampa you're paying around 81% of a houses value less repair work.  In wildly undesirable areas such as  South St. Pete, you can't even really get an ARV as all purchases in the area are investor purchases looking to rent the house out to a Section 8 tenant and is focusing more on cap rates than resale values.

In a nation wide study examining our offices in the markets of Atlanta, Austin, Dallas, Denton, Ft. Worth, Houston, Las Angeles, Philadelphia, San Antonio, and Tampa we haven't found a place that's selling a true 70% deal.  Sure, you can inflate the ARV on it ten or twenty thousand dollars, that will get you there.  I love deals where I'm told that a 1,500 sqft house only needs $10,000 in work, something I've never been able to pull off even on my rentals.

In summary the 70% model of buying houses teaches you something in the end.  You need to be careful that you're building enough room into your offers for profits, holding costs, realtor commissions, and closing costs.  You do need to remain competitive however.  If you're constantly getting beat out in multiple offers the market may be bearing less margin for profit than you're trying to achieve.

https://www.biggerpockets.com/renewsblog/2014/02/14/70-rule-bible/
https://www.biggerpockets.com/renewsblog/2012/11/03/flip-houses-formula-math/
https://www.youtube.com/watch?v=JpfnAMRj-2Y

Monday, October 19, 2015

Investment Real Estate "Don't be afraid to make $30,000+"

DON'T BE AFRAID TO MAKE $30,000+!!!



If you're new to Investment Real Estate you may have heard the saying, 

"Real estate cannot be lost or stolen. Nor can it be carried away. Purchased with common sense, paid in full, and managed with reasonable care, it is about the safest investment in the WORLD." 
- Franklin Roosevelt


That statement couldn't be more true, with the rising and falling of the stock markets and with so much uncertainty in other markets it is a great time to invest in one of the safest, most rewarding markets there is. Let me help you invest in a market that has withstood the test of time.

If you are new to the market or an experienced investor, let us help you by streamlining the entire process for you to make your investment process simple and easy. When it comes to the repairs it is always good to know how much work you are going to put into a property before you purchase it.  And it is imperative to know what the property is going to sell for once the rehab is complete. 

Let us help you with that.   We take out the guess work when it comes to investment real estate and streamline the entire process. To help our investors receive unmatched returns on their investments 

For more information and to see ALL of the distressed properties that we sell, please call Jacob Spain (254)-205-9590



I don't get paid unless you decide to purchase from me!

Sunday, June 7, 2015

Real Estate Appreciation

     I've been told since college that real estate has the unique quality above all other assets of holding value.  It's tough to lose money owning land and it's tough to lose equity in a long term hold strategy.  I was told that certain areas of my home town, San Antonio, appreciate at a rate of 10% a year.  I'd like to address this misguided belief in increasing values.
     If you believe that your home will go up in value 10% every year for the foreseeable future, what you're effectively saying is that the house you bought for $100,000 today will be worth $1,750,000 by the time you pay off your 30 year note.  I remember the house my parents bought, and the one their parents bought.  Maybe Texas is a little different than the coastal markets but I can't see that be an accurate expectation.
     A 10% increase in value of real property is what most economists would constitute as an adjustment.  It's not appreciation, it's just that the guy who appraised the area the first time got it wrong and the demand was a lot higher than expected.  It doesn't mean that demand will rise at a constant rate, or that supply will continue to be in a shortage.  If that's the case you're looking at real estate in the eyes of the last bubble that happened thinking of all the great things that followed.
     Realistically, the value of real estate can only increase under a certain set of circumstances.  Demand increases - what does that mean?  Do you live inside of downtown Dallas in a single family home?  Are there 50 story buildings going up on both sides of you?  If so, your property value probably went up.  Is there no available vacant lots around you and people are swarming to this part of the city by the horde and are you located close to downtown?  If not, it's probably just an adjustment.
    Banking your investment on appreciation is a mistake.  A Good benchmark for any investor should be the rate of inflation.  If you're property is appreciating faster than the rate of inflation, you're in a bubble or there's a market adjustment happening.
    Word to the wise - Sell when you see these trends.  Buy when you see them in reverse.  Here's a fun fact about finance:  The value of gold to bread hasn't gone up significantly since the beginning of recorded history until innovations such as the industrial revolution.  When the price of gold goes up, it's not really gold getting more valuable so much as the dollar getting less valuable.  Be weary of hefty appreciation models.

Thursday, February 26, 2015

Preparing Your Credit for a Future of Investing in Real Estate


This will be a 7 part blog post that highlights important aspects that residential real estate investors need to know to plan for growth.  Please subscribe to stay updated on each portion as they are released.   Click the link(s) below to find out more about each topic.

History of investing
Taxes and Tax Deductions
Management
Cash reserves

Fannie Mae Guidelines and portfolio loans

Why Is Having Good Credit Important?

Being on the wrong end of a credit score can interrupt your investment future and ultimately stop you from seeing your full potential as an investor.  Neglecting indiscretions of the past can disrupt your ability to receive loans and potentially take years to amend.  Waiving a bad credit rating can suggest that you are a risk to investors/lenders.  This risk can not only affect your ability to secure the type of funding you require but make borrowing funds considerably more expensive. 

Developing and Keeping Good Credit

When applying for credit a lender is going to look at a number of things, including your DTI.  They will take a strong look at your 3 digit credit score.  This score is determined by;

  •  Past defaults and accounts currently in collections
  •  Average age of your existing credit accounts.  
  •  Percentage of on time payments
  •  Number of accounts on your credit history
  •  Revolving credit utilization.
  •  Number of recent credit inquiries. 


Here are some tips on each one of these items that will help you make dramatic changes in your credit score. 

Past defaults and accounts currently in collections

If you have an account in collections, know that it will stay on your account history for 7 YEARS AFTER THE LAST ACTION IS TAKEN.   That wording is very important.  If you call up the creditor and pay the $125 old cell phone bill that you may or may not have racked up in college, it will show on your report for 7 years that you HAD an account in collections.  The proper way to take care of an account that is in collections to endure that it doesn't negatively affect your score is to call the creditor and let them know that you don’t recall the cell phone bill and request that they guarantee to you IN WRITING that if you pay this debt that may or may not be yours, they will remove all record of it completely from your credit report.  Only then, should you pay the debt. 

Average age of your existing accounts

This one is easy!   If you have a parent, spouse, or an aunt that is really good with credit you’re home free.  Ask a trusted individual to add you to one of their credit cards that they have had for 10+ years with no balance and perfect payment history.  That’s it!  That’s all you have to do.  Let them know that you don’t want to use the card, you just need to be added to the account, not as a signee but to the actual account.  This will mean giving up your social security number to the credit card company.  Let your trusted family member know that you don’t need to have a copy of the card, you can make your mailing address theirs or take whatever precautions that you need to in order to help them feel warm and fuzzy.  This will increase your average age of credit over all of your accounts and make your score shoot up. 
This will also help you with the following category. 

Percentage of on time payments

If your aunt or spouse had had that particular card for 10+ years and have perfect payment history on it, and let’s say that you have one or two 30 day late payments on your report, this could potentially push you into a different bracket of “percentage of on time payments” and raise your score. Whatever you do, avoid paying anything late.  Most credit agencies don't report a late payment until it is 30 or more days late.  However, don't hide from creditors.  If you know that you are going to be late on a payment, call them early as possible and let them know.  They might be able to work with you.   

Number of accounts on your credit history

A common misconception is that it's a bad thing to have a lot of cards so people tend to close cards that they don't use.  Before you close an account, find out how long you've had it.  If it's a card that you don't use because it charges 18% interest, pay it down to almost nothing and hold on to it so it will raise your average.  If you've owned the card for over 8 years, it's probably raising your average age so closing it would only hurt your score.   The more accounts you have had the better…but you have to balance that with the average age of your accounts.   Not much you can do about this one but luckily, this category doesn't weigh as heavy on your score as other categories.  This is a perfect reason why you shouldn't apply for every credit card that shows up in your mailbox.  This is also the reason that you should stay away from department store credit cards.  More chances than none, the extra 10% you save on the day you purchase that new $120 outfit will be outweighed on the extra percentage point that you are going to have to pay every month on your $120,000 investment property mortgage. 

Revolving credit utilization

Another easy one…figure out what your credit limit is on every credit card you own.   Keep the balance on that card between 1% and 25% of the total limit at all times.   Do balance transfers or whatever you have to do to make this happen.  This is the piece of the puzzle that I've found that most people are missing.  This can make a HUGE difference in your score.  Sometimes 50 points or more.  You never want to have it over 50% and it’s not helping you to have it at 0%.  You want to show creditors that you know how to use credit responsibly.  If you don't have enough money to pay your cards off or enough available credit to do a balance transfer and keep the balance of each card under 25%, then as a last resort, you can ask for an increase on your limit.  Most banks will do a hard inquiry on your report when doing this so only use this as a last resort.  

Number of recent credit inquiries 

You've probably heard the saying “Banks only want to people who don’t need the money.”  This is a very true statement.  If you apply for every credit card that comes in the mail, and apply for a car loan and mortgage and decide to finance that new bed with 0% interest for the "special one day only President’s Day sale", banks are going to look at that as a red flag.   For this category you have to know the difference between a soft and a hard inquiry on your credit report.  A soft inquiry happens when you check your own credit on apps or websites such as Credit Karma, myFICO or LexingtonLaw firm.  Those types of inquiries DO NOT NEGATIVELY affect your credit score.  However, anytime that you are applying for any type of loan, including credit cards, you are doing what’s called a hard inquiry.  A hard inquiry will negatively affect your credit, especially if you apply and do not get the loan/credit card because you get denied or just decide not to.  A hard inquiry will stay on your credit report for 2 years from the day that your credit is pulled by the potential creditor.  There is a way to get these taken off of your report.  Lexington Law Firm has pre-written letters that you can send out to creditors and credit boroughs that demand that they take those inquiries off of your report unless the creditor can prove it was you who made that inquiry.  Most creditors would rather take it off than spend time and resources with an investigation.

If you read nothing else, read this…

Bottom line, know your limit.  Just because you get approved for a certain amount, doesn’t mean that you have to use it all.  There are other factors to consider before applying and accepting a loan that can have a huge impact on your investing future.  Make sure EACH of your credit cards are at least 75% paid off at all times.  And utilize apps and websites like myFICO, Credit Karma and LexingtonLaw Firm and Mint.  They are more of a reference and a monitoring tool than a magical fix all elixir, but if you are proactive with any repair that needs to be done, these websites are great tools that I have used myself and highly recommend. 
Hopefully all of this information helped you understand what you need to do to get your credit score a little higher than it already is. If you have any questions, please leave them in the comments section below or email me at JD.Castillo@NewWestern.com or you can always call me at 214-650-5493.  If you need Investment property or a loan on your next investment deal, we have some of the lowest rates in the nation and I would love to work with you. 


Thursday, February 5, 2015

San Antonio: Forgotten Land of Real Estate



     It never ceases to amaze me how often San Antonio is over looked by real estate investors on a national and state level.  Institutional funds and TV shows tend to focus on markets such as Phoenix, Las Vegas, Las Angeles, Dallas, and Houston but what about good ol' San Anton? Let's take a look at some surprising real estate factoids:


  • According to some sources the greater San Antonio area has more than two million residents
  • San Antonio is the seventh largest city in the country
  • There were only 52 recorded sales of houses over one million dollars
  • Texas has 4 of the bottom 10 lowest credit scores per city
  • San Antonio currently has seven homevestors franchises.  Dallas/Ft. Worth has over fifty
  • For "flippers" San Antonio consistently shows 6-10% more equity in properties than similar properties in Dallas and Houston
  • San Antonio 
  • According to dozens of articles San Antonio consistently ranks as one of the fastest growing markets.
  • San Antonio also continuously shows some of the highest rental rates per purchase price of property (Cap rates)
  • Texas is widely viewed as the easiest state in America to foreclose on a home (average time of 45 days)
  • The city is also widely viewed as one of the most stable markets nation wide
  • The average sale price for all houses in San Antonio in 2014 was $209,534 whereas the median was closer to $165,000.  
  • Average rental rates for Greater San Antonio were around $1,195 (Zillow)
  • The actual sale price of all houses was 82% of the original listed price in 2014
  • Average DOM for the entire city was 84 with the median around 70.
  • San Antonio also ranks as one of the third most financially irresponsible cities
I'm always curious why the city doesn't get more attention and seems to fly under the radar of the big national markets.  I always here that "San Antonio has always been 20 years behind Dallas and Houston in regards to real estate development." Given that we know how those markets have turned out I encourage every investor to take another look at the home of the Alamo.


Wednesday, October 15, 2014

Testimonial 10/15/14






“It’s been great working with Dustin O’Neill. I’ve bought 2 properties so far and they've been great deals. Really good service and follow up. He always remembers when a property becomes available in the part of town I like. We’ll continue doing business. I would recommend anybody to do business with Dustin at New Western, really professional and straightforward.”

Wednesday, September 17, 2014

Shavano Park Mansion Flip

Shavano Park Mansion Flip

What a find!  A 16,000 sqft Mansion on 6.17 Acres in Shavano Park.  With an upstairs that still needs to be finished out this house would be the ideal flip for an investor looking to hit it big.  The completed downstairs has an over sized master bed and bath, three car garage, and three bedrooms down stairs.  The unfinished upstairs has an exceptionally large game room, movie theater, and room to build out an additional seven bedrooms and five bathrooms.  Call Ryan Harthan for pricing, access, and more information at 210-710-1617








http://s1228.photobucket.com/user/njkzero/library/Shavano


njkzero's Shavano album on Photobucket



Thursday, August 14, 2014

Testimonial 8/14/14




“We definitely have enjoyed working with Carlos Garcia at New Western Acquisitions.  He has provided us with good listings and we have had many referrals for workers to repair the property.  These have proved to be reliable and with good rates.  The property we purchased sold within two months with a sizeable profit.  We would for certain buy from him again.  We have been very happy with this service.”

Sales Associate:  Carlos Garcia

Thursday, July 31, 2014

HARD MONEY with 0 POINTS and 11.99% !

To Apply, fill out application at this link and send to 

JD.Castillo@NewWestern.com

JD Castillo
214-650-5493


The Art of Successful Business

Concepts that Apply to Every Business

Buy Low - Sell High

That's it.  No seriously, that's it.  It doesn't matter whether you run a grocery store and have to buy produce, an auto shop, if you buy gold or other metals, stocks, boats, TV's... It's all the same.  I chose real estate. It was the logical choice for me because it's the thing I knew the most about growing up.  I also gravitate towards real estate because everything in business is based upon mark ups. And as real estate is one of the highest priced "products" available, the mark ups and therefore pay offs, would be the greatest.  I like to work smarter, not harder.  Fewer transactions for higher commissions.

And that's really all I have to say about making a boat load of money in whatever business you choose to apply this elementary concept.  But there are a few other pointers that will make the bigger picture easier to attain.

Negotiating 

It is my hypothesis that when two equally skilled negotiators enter into a transaction with an equal desire or necessity to buy or sell, the final agreed upon sales price will be equal to a third of the difference between the asking price and the original offer, plus the amount of the original offer.  For instance: A house is listed for $100,000. A buyer offers $50,000 and there are no other offers. The seller must sell, and the buyer must purchase.  The agreed upon price should be around $67,000.  An agreed upon price in either direction would show a fault in one party's side to negotiate.  This may be the result of a simple lack of skill in making a deal work, a more pressing desire to sell than to buy, multiple buyers pursuing the same product, or any number of other reasons.

The Buyer has the Power

The emasculated way of saying this in pop culture is that, "the customer is always right".  This doesn't explain the reason though.  The buyer has the power in business transactions because he has the sole capability of completing the transaction by providing payment.  Multiple sellers are often in a given market offering substitute products. A buyer might compromise some qualitative aspects if he feels the negotiation is not going well.  Buyers do (generally) not have to advertise.  They have no overhead, no employees, and no carrying costs whereas sellers generally incur all of these expenses.  It takes time to find a buyer, not a seller, and time is money.

Reducing Competition for the Buy

I am in no way advocating the creation of a monopoly.  But from a mathematical and economical standpoint, the lower the competition is, the better chance you have to increase your profits.  If I'm the only person bidding on a house, the price will not get driven up!  True auctions hold the ideal way for sellers to maximize their proceeds from a sale and allow for pure capitalism to "do it's thing". If you're trying to get a better price, look at the products others aren't.  Another easy way to reduce competition is to be the first to offer.  It doesn't always work, but it works a surprising amount of the time.  Highly motivated sellers will often jump at the first offer they see, without taking into consideration that higher offers may soon be forthcoming.

Reduce Competitors

I am in no way advocating the creation of a monopoly.  Using free market capitalism can actually set you up to reduce competition.  By initially lowering your mark up, fee, commission, or charge for your product, you can slowly start to drive your competitors out of business by offering your products at lower prices. Once you have established your business or your competitors have left the market place, you can then raise your rates and take advantage of an increased market share.

Reputation - More Important that Profit

The most important concept in preserving a good reputation is to do what you say you're going to do, and to not do what you say you won't do.  I've had dozens of clients and partners get mad at me for an entire array of reasons, but the only time I've gotten myself into trouble was when I broke this fundamental rule.  You can always retort to an accusation if you stuck to your word and were honest about your intentions.
Ever speaking ill of anyone can only hurt you.  Do I love my direct competitors? Of course not.  Would I ever say anything detrimental about them to anyone?  No.  Speaking ill of anyone in your profession will only make you look buffoonish and will make that person reluctant to do business with you.  Additionally, there is an exceedingly high probability that the person will tell not only the party you spoke negatively about, but will inform others of your unprofessional behavior.

Cut out the Middle Man

This is principle number one of every drug movie you've ever seen.  Every link in the chain between the supplier and you is a tax, a mark up.  It's the way they make their money.  Getting to the source is always going to provide you with the cheapest price of a given product without the interference of middle men. Real estate agents are often regarded as consumer advocates by the public, ensuring that actual buyers are not able to directly negotiate with actual sellers in an effort to prevent exploitation of the seller.  This is a good thing for society, but in certain instances well educated buyers and well educated sellers do conduct business between themselves directly and independently - which is not advisable.  Often times attorneys come into play on larger dollar amounts. They advise on unconventional transactions that require rigorous attention to the law to protect both parties involved, not only from exploitation but legal and tax ramifications as well.

Networking and Increasing Buyers

Every networking opportunity is a chance to build your network.  And every person in that network is potentially an opportunity to do business down the line.  Listening to Dale Carnegie's How to Win Friends and Influence People will teach you that people are inherently more interested in talking about themselves than listening to how accomplished and awesome you are.  Allow him to tell you about himself, take notes, keep those notes, and when an opportunity comes up down the line that your acquaintance can provide assistance with, reach out to him.
People in your network do not want to be constantly solicited business.  It is beneficial to make it known to your peers what it is that you do and how you can be an asset to them. But constant solicitation of business is annoying to everyone and will only cause people to leave your network.  This is especially true in the new era of social media, where anyone has the capability of becoming a pest to their friends and peers by constantly trying to either buy or sell something.

Keep Your Buyers and Sellers Separated

Would you like to know the fastest way to go out of business?  Introduce who you buy your products from to your biggest repeat buyers.  Your clients, as loyal as they may be, will ten out of ten times cut you out of the picture if they can figure out your acquisition source.  Don't let your clients know what you paid for your goods, don't tell them where they came from, and don't tell them how you found them.  You won't be on top long if you begin to breed and cultivate your own competition.  Limiting access to information is key to long term success.  

Never Offer List

It doesn't matter what price the seller is asking for, I'm not offering that much.  It doesn't matter if it's the best deal in the world, I'm going to ask for a lower price.  Have you ever seen the show Pawn Stars?  How many times has Rick Harrison said right out of the gate, "Done.  $300? Here's the cash." Never.  He always asks them if they'll accept at least a little bit less.  If you don't ask for a discount, you won't get a discount.  This is a good rule of thumb but not necessarily a commandment.  If there is competition, you will likely have to be as competitive as possible.  But in the absence of other buyers you should always offer less than the asking price.

Don't Reinvent the Wheel

There are very rarely revolutionary ideas or concepts that change the way business is done in your field.  I've seen many people spend extraordinary amounts of time thinking of ways to reinvent the foundations of how investing in real estate is done, all of which have been short lived.  You should instead dedicate your time to tweaking existing models to improve them, by making them more efficient.  

Failure More Valuable Than Success

I can go online right now and find fifty seminars on how to become a millionaire by buying real estate.  That's great, but if I could find a book titled 1,001 Ways to Lose Money in Real Estate, I'd read that first.  I'm not advocating to learn from fire by sticking your hand in.  This is the perfect example of when to reach out to your network and find out what other people did that didn't work. "Hey, Ryan, you remember that time I lost thirty grand on that deal in Alamo Heights? Yeah, I'm never doing that again."  This is an easy and pain free way to learn at someone else's expense.

Monday, July 28, 2014

Testimonial 7/28/14

New Western Testimonial 






“I have worked consistently with JD Flores over the past couple of years.  JD has always been professional and honorable in all of his business dealings.  The two key qualities that jump to mind when I think of JD are his unwavering persistence and his positive attitude.  No matter how many times things don’t result in a successful sale, JD continues to have a great attitude and continues to contact me each time he believes there might be an opportunity for me.

JD is a rare individual.  He has a unique ability to face a challenge and is truly unflappable.  Rarely have I met someone that keeps such a cool head in a very competitive sales environment.  Also, honesty and integrity have always been apparent in all of his business dealings.  I sincerely appreciate the opportunity to work with JD on a regular basis.  He is a true professional and will continue to bring tremendous value to all of those he works with.”


Sales Associate: JD Flores

Monday, April 7, 2014

Where to Flip in 2014-2015

Emerging San Antonio Real Estate Markets

Whenever a client of mine asks what a house could potentially be worth I tend to respond in a similar way, "whatever a buyer will pay for it...".  Isn't that a simple and true answer?  We real estate agents use comparable sales to make the best educated guess we can about the value of a house but there's certain areas that don't lend themselves well to comping out.  Some areas are just starting to see investors enter into the neighborhood and rehab houses.  Those brave cowboys of real estate usually don't have a very good idea of what a buyer will pay for their finished product but after they do sell begin to establish an MLS track record.  A wise man once told me, "The early bird gets the worm, but the second mouse gets the cheese."

Three years ago if you were willing to buy in Alta Vista or Tobin Hill you were taking a chance.  These days you can't find a property that makes sense in these neighborhoods because regular sellers are comparing their homes to fresh rehabs.  Where you use to be able to buy for $30-40/ft and sell for $100-130/ft you're now facing a tougher market on the buy side.  Unfortunately for you the cat is out of the bag for these neighborhoods.  But I don't bring only bad news, I'm here to inform you of where the next two Boom Flip Neighborhoods are going to be in San Antonio.

Dignowity Hill



As soon as you say "East Central San Antonio" investors run.  Where I bought a 3,000 sqft for $9,000.00 one day and couldn't give it away the city of San Antonio has begun creating some incentives to improve this centrally located area.  Let's be completely real though, the closer you are to Dignowity Park the higher the property value.  12 months ago I wouldn't have touched the area because there was no indication that investors were being successful in selling their completed projects.

But recently there has been a change in the winds.  Where investors are buying as low as the $40/ft price range it seems as though they are selling as high as $130/ft!  While comps are still few and far between this is huge news for investors looking to earn higher than the average return.  While the typical equity spread in San Antonio is somewhere between 25-30%, equity capture here can be as high as 50%.  This is because so few investors are aware of the city incentives to redevelop this area and because of their own personal reluctance to buy on this side of town.  Folks... Not buying on a certain area town because you have a personal issue with it makes you a real estate hobbyist not an investor.  

Government Hill



When I think about this area it kind of blows my mind that it's actually taken up until this point for this area to get hot.  Literally caddy-corner to the downtown central business district you can't really ask for a more central location.  Did I mention it backs up to Fort Sam Houston, one of the largest and most historic army bases in Texas?  The rents here are through the roof and it even has it's own business district off Grayson and New Braunfels.  Now it is important to pay attention to what has been designated as "historic" over here as it does have a profound effect on value.  

Values?  Somewhere between $155-170/ft!  For being regarded as one of the city's roughest areas it's certainly weeding out the riff raff via price point.  With a solid figure being somewhere around $135/ft and purchase prices in the mid 40's/ft it doesn't take a genius to add the figures up to equal higher profit margins.  

I'm not saying you should be the first person to try and flip a house in these areas, I'm saying you're already behind the rest of us.  If you're not looking here you're doing more work for less profit.  Get with a professional and get richer quicker.

Tuesday, March 18, 2014

7 Essentials you MUST Master to Acquire a Rental Portfolio


This will be a 7 part blog post that highlights important aspects that residential real estate investors need to know to plan for growth.  Please subscribe to stay updated on each portion as they are released.   Click the link(s) below to find out more about each topic.

History of investing
Taxes and Tax Deductions
Management
Cash reserves
Fannie Mae Guidelines and portfolio loans



Debt to Income
As independent contractors, real estate investors walk the difficult line between claiming income that they make and taking tax write offs that may limit their ability to get loans due to their Debt-to-Income ratio (DTI) not being low enough.  I work with a lot of investors whose biggest obstacle is their DTI ratio; I felt it necessary to help clear up questions investors might have. 

A Short History
When proposed, the Dodd Frank Act required lenders to have a standard for their loans that they originate.  This is called a “Qualified Residential Mortgage” or QRM. This definition was so constricting (back-end DTI maximum of 36%) that there was a lot of protest from real estate agents and lenders alike to broaden this definition.(cited sec.gov)  The push prompted the Dodd frank to be amended to say that a QRM will be defined as a QM, or Qualified Mortgage.  The Consumer Financial Protection Bureau is the bureau that defines a QM and that definition is subject to change.  Currently it is defined as one where there is a maximum DTI of 43% by the borrower.  FHA guidelines also requiring borrowers to have a maximum debt to income ratio of 43%. So that is the number that you want to shoot for. 

How is Debt defined in DTI?
There are two types of DTI.  Front End and Back End.  When applying for a mortgage, creditors look at Back End DTI so that is what we will cover. 
If you were to pull your credit right now, add up every minimum reoccurring payment that would show up on your credit report.  If you have a credit card debt of $20,000 but your minimum payment is $35…then you would add $35 to the total amount.  If you own your home, remember to add all property taxes, insurance, and home owner association dues.  If you’re renting, make sure to add in your rent for your place of residence. (Yes they will ask to see your lease)
***If your spouse or parent pays your rent or mortgage, AND you can provide a 12 month documented history of it, then you can negate that payment. If you can only provide 11 months of documentation of them paying that debt for you…then that cost will be calculated in your ratio.

When configuring your Debt in DTI, you should also take into consideration the minimum payment for any potential new loans you will soon incur. i.e. the mortgage you are applying for.
***Note that if you have claimed to be a real estate investor for 2 years on your tax returns, you can also consider 75% of the potential income that you will receive for your rental property you plan to purchase.

How is Income defined in Debt to income?
This is your adjusted GROSS MONTHLY Income.  You can add back in depreciation on real estate owned.  Unless you own a ton of houses, I would recommend that you pretend that you can’t add in depreciation and keep that as a buffer when deciphering income. You never know if/when they will change the requirements. 
***If you are an independent contractor and get paid on a 1099, add up two years of claimed income on your tax returns, line 31 of your 1040, and divide by 24 months.   If you are a W2 employee you would calculate two years of line 21 of your 1040 then divide that number by 24.

I have created a simple spreadsheet that can help you calculate it your debt-to-income.  If you would like a free copy of it, or are interested in purchasing investment real estate and you are looking for Hard Money starting at 7.99% and 3pts or a new 100% FREE source of property, please click here and someone will contact you. Or call me at 214-650-5493

  

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I only get paid if and when you buy a house from me.


Tuesday, October 15, 2013

Career in Investment Real Estate



Do you love waking up for work in the morning?

You will....



Don’t be suckered into mediocrity, getting paid a fraction of what you’re truly worth.  Don't be one of those people that sits in a cube every day, packs your lunch and walks at the bell. You've been given a false sense of what you are capable of. If you think it's time to make a change your life, keep reading.  

I'm looking for people who are tired of the rat race, clocking hours to make a living and not getting anywhere. Come work for yourself and I guarantee you will make well over 6 figures your 2nd year, probably even in your first.  If you don’t then you will know pretty quickly that this career isn't for you. 

We sell investment real estate.  As a sales associate, you will be given all the training needed to become successful.  I can train everything except work ethic.  You will be required to work your ass off if you want to succeed.  

Requirements;
Reliable transportation
Laptop and/or iPad or equivalent
Applicants will need to obtain a real estate license after/during training if accepted. 
Bachelor's degree preferred but not required. 

Reasons to Work with New Western Acquisitions;
1099 "employee” Be your own Boss.
Get Paid What You're Worth...Not What Your Boss Says Your Worth!
The New Western office Culture; Company-wide trips to Vegas, Miami, Tahoe, New Orleans,     Cancun etc...
We are a growing company and we only promote from within. From Humble beginnings in Dallas in 2008, we have grown to 7 office nationwide stretching coast to coast.  

Create your own luck and send your resume to JD Castillo at 

JD.Castillo@NewWestern.com





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