Deshone's Million Dollar Wholesale Business Journal

You have come a long way! Keep it up! I am inspired by your upbeat attitude and continuous ACTION! Keep it up! I'm still looking for (another) re agent and an attorney. When push comes to shove and it comes time to put in offers, even though we've gone over everything and it seems like a go, they back off and have been afraid of ruining their reputations. Phooey! And finding an honest and trustworthy lawyer has been so difficult! You are doing a great job!

Hi Tammy, it's exciting to finally have my journal go to page 2. I guess it's encouraging to see the continuous effort. Thank you so much for the uplifting words. I believe you will find the right RE agent and attorney. The agent that I'm working with has been great up until this point and his motto is "like, not love" we put an offer in, if its not accepted, nothing personal. Prayerfully, he'll continue in that attitude when it comes time to make the offers. I have not found an attorney yet but i know that when the time is right they will be there.
Stay encouraged and know that with the Lord, you can't fail. He'll bring the right people into your life. God bless!!!

Deshone

you may never hear from them again and there is nothing you can do about it if they take the deal from under you

Sounds like you are off to an Amazing start! Keep it up! I am excited to get this going myself! Cant wait to see where you go from here!

Jenilo, you are on the right path, and among the right group of people to achieve. If we all continue to make a little progress everyday, we'll reach everything we want in life. Do one thing at a time, and stay focused on the end result because if you try to do everything at once, sometimes you can get overwhelmed. Keep asking questions. Thanks for the encouraging words. God bless!!!

Deshone

So, in addition to meeting my mortgage broker a few days ago, I've made a new connection which I think will have wonderful results. The next step is to start taking a look into some properties and making some offers.

So I knew I would need to have an idea of what repairs will be necessary to calculate the potential profit. So, I needed a contractor and as I pull up yesterday to my house my next door neighbor pulls up and we get to talking. I completely forgot that he told me this is what he's been doing for over 20 years. He said he can do everything even though he doesn't but it would be a breeze for him to give an estimate on what it would take to get a house up to code and beyond. He also said after a few walk throughs and him showing me some things I'll know how to identify what's what.

I tell everyone who I am considering for my power team that I am looking for long term business relationships. I want to do business with people for a lifetime, or at least while they're still active. So, we exchanged contacts and I have a valuable person that I absolutely needed. As you take the action, the right people show up.

Now I have an appointment with my mortgage broker, who's going to tell me what I need to do to get pre-approved for my personal mortgage. I'm excited about that. My target is to find a great deal on a multi family (either a 3 family or a two family with a basement we could legally rent out), rent out both units and live mortgage free. In the meantime, we'll be wholesaling property monthly. If you would have asked me a month ago if this was my plan, I would have said probably not, but thanks to the support of my wife and the Lord's direction, we have a new goal!!! God bless everyone on this journey!!!

Deshone

Hey everyone, after reading so many DGers journals I knew I had to get back with mine to hold myself accountable and share this journey. A lot has happened since my last post and I'm moving steadily towards that first deal. Before I share where I am at, I wanted to ask a question to everyone that I asked to Laura to get as much wisdom as possible.

I have a meeting Sunday with a real estate agent/investor that I know who is going to tell me about some investment properties that he has in some popular sections in Newark where everyone is trying to get in. The only thing I'm cautious about is that I think he's going to try and charge me Fair Market Value for these properties since him and his partners have already done the rehab work. I told him I want a killer deal. He told me because of the rental market in this area the property will cashflow at least $1000 and I verified it to make sure, but Laura is it wise to be in a property for Fair Market Value even if it does have a positive cashflow like this.

I will be using an FHA loan and he said he can get it done with no money down. What do you guys think about this and what should I be aware of going in? Some of these properties are in a great section of Newark near all of the new stuff that they are building. But I want to be wise. Thanks in advance everyone.

Things are great, big meeting tomorrow to take a look at some cashflow properties in Newark that the Realtor says will clear me, get ready, $1050 per month. Its a 2Family with a Bonus 1BR(basement, of course I will make sure its legal) and its completely renovated. The rents would be
1St Floor: $1350
2nd Floor: $1350
Bonus 1Br: $750
The mortgage with TAX and Insurance would be about $2400 assuming a 5.5% rate over 30 years.
Tomorrow I will have more details on this property and any others like it. I'm excited.

I just entered my essay for the Edge Scholarship. I wasn't going to at first, but then I said, what the heck, I'm working, I've been hitting it hard, and when I looked at the action I've taken, I said to myself, its worth a shot. Either way, I have to work this business.

I have to call 12 possible buyers to qualify them(hopefully I can get 2-3 serious ones) These are people who's ads I've seen(WE BUY Houses!) I also have an email that I will be sending to landlords renting apts on Craigslist.

I've set up my WE Buy HOuses Cash 24 Hour line and this next wave of Bandit Signs will say 24 Hour Recorded message because in Dean's book he say people are 80% more likely to call a recording than if they think its an actual person. 80%, thats a lot. I'm also setting up the Stop Foreclosure 24 Hour line with the script he uses from Profit Right Now. I really am getting into this automation and whatever I can do to get people to come to me, I like. I had 2 calls come in today that I have to return tomorrow. So it will be a productive day.

Morning 10 am: Church
1pm: Call 5 Buyers
1:45: Meeting with Real Estate Investor to look at Cashflow Properties
3:30: Call Remaining Buyers
4-4:30: Call 2 leads from Bandit Signs.

P.S. I am big on doing things on a shoestring budget, so I am working on a couple of sites to see who has the best free website designs. I'll design 4 and then choose the best including the free one Dean gives us in Profit from RE Right Now. www.deangraziosi.com/freewebsite

I will let you guys know how we make out. God bless!!

So after 4 hours of looking at multi family properties I am officially excited about the deals. I looked at 4 properties, all 2 families with a bonus basement 1 bedroom fully renovated apt. Hardwood floors, new fixtures, beautiful everything, no work on my end at all. Out of the 4, I have narrowed it down to two. I will be buying with an FHA loan.

Property 1
Purchase Price: $299,000
Appraisal Price: $350,000
Down Payment: $10465
Mortgage Amount: $303,535
Approx closing costs: $15,000(soft number)
Monthly Payment 30 year fixed 5%: $1811
Monthly Property Taxes: $750
Monthly Insurance $100
Monthly water/electric $100
PMI $224.25

Total Monthly expenses: $2985.29
Apartment 1(3Br,2Ba) $1350 (Already rented)
Apartment 2(3BR,2Ba) $1400
Bonus Room $850 (Already rented)

Total Monthly Income: $3600

Total Positive Cashflow: $614
(This scenario is with him giving me $10,000 at closing and him adding my down payment and closing costs to the purchase price)
So I'm into the property with $0, I'm walking away from closing with $10,000, and I will have a positive cashflow of $614.

Next property, next post

Property 2

Purchase Price: $210,000
Appraisal Price:$250,000
Down Payment: $7350
Monthly Payment 30yr fixed 5%: $1317.09
Monthly Property Taxes: $275
Monthly Insurance: $100
Monthly water/electric: $75
PMI: $157.50

Total Monthly Expenses: $1924.59

Apartment 1: 2Br/1Ba $950
Apartment 2: 2Br/1Ba $950 (Already rented)
Bonus: $700 (Already rented)

Total Monthly Income: $2600
Total Positive Cashflow: $675.41 w/ $0 money at closing and walking away from the deal with $10,000.

The tenants pay their own utilities. I'm leaning towards number 2, but I would love to get some opinions. Thanks in advance everyone.

This has me puzzled, when I was talking to the investor who owns the properties, by the way, he's also a realtor, we were talking about the appraisal numbers and he said that the right mortgage broker and appraiser can make it appraise for these numbers. He said comps are pretty ineffective(and I may be misquoting him) because nobody really knows where the market values are, but I went on Total View, that first property sold in Jan 2008 for $465,000. This is a long term buy and hold strategy. I want to keep this property for at least 10-15 years and collect the cash, I have no intentions to get out any earlier than that. If this is the case, should I be concerned about the comps if the cashflow is great?

there is a lot that I could say about these deals from the real estate owner agent but the one word that comes to my mind is RUN.

If you don't know why, put me on your visiting list at Federal prison and I'll explain it when I come visit you.

Bill, that's hilarious, but what does that mean?

You keep up the good work Deshone! Im an absolute beginner in this too, (im a car wholesaler btw), and ive read your journal. You posted your two properties looking for advice and got some great advice in a rude manner. Thats no way to motivate, especially from a veteran. You just learned a good lesson. I love your enthusiasm.

http://www.deangraziosi.com/real-estate-forums/financing-and-credit/7102...

I think that explains it all.

I apoligize for the manner in which I answered your post. I just get so spun up on the number of sellers (who are realtors) that will tell you anything to get a property sold. NEW INVESTOR ALERT: How can you tell when a real estate agent is lying?? ANSWER: When their mouth is moving!! (Please, I know there are good real estate agents but you guys are really in the minority. Really!!) The best way to learn real estate is to look for jobs that you find yourself. There are plenty of them. Just do a little driving around your town. This is one (of just a few) areas that I disagree with Dean and his books. Real estate agents layer on an additional cost structure that really doesn't work with typical assignments, lease options and/or subject-tos. Sure, they need to get paid; but people should get paid for WORK, not just listing something in MLS. That concept worked before the internet, but it is skewed currently. If they really wanted to be viewed as a profession, there would convert to fee for service and charge for the work they do. Such as providing lists of houses over 100DOM for investors.

But the thing that gets me is that your Realtor was willing to have you do an illegal act so that he could sell his property. That's just plain wrong and he used his "credetials" to lull you into a false sense of security. Move on!

$10,000 back at closing? You had better check with an RE attorney and not one supplied by your seller! This is most often illegal and it will be your head.
Besides that you are basing your monthly cash flow on partially vacant properties! I would walk, if the deal was this good and ligit you would never have heard of it!

I asked this question before and I want you to answer this to yourself in an honest way. I know several "investors" that bought great cash flow properties but had no reserve and lost their properties because they were not in the position to actually buy and hold. They had vacancies and unsuspected repair costs and had no cash reserves.

DO YOU HAVE 6 MONTHS OF MORTGAGE PAYMENTS HELD IN RESERVE?

Keep looking, this is how you learn, so good job!

Michael Mangham
MD Home Acquisitions LLC

Michael, I will have the money by the time of closing, but he said I don't have to use it? If the seller is inflating the price, and it won't appraise for that, how does the bank get the loan. The only reason the last unit wasn't rented is because he keeps one unit vacant to show and he literally just finished the rehab 2 weeks ago and 2 of the 3 units are filled. There would be no problem renting these units as the area is great and he said he would rent them for me. If the money that I would pay at closing gets rolled into the loan and he adds 10K to the loan and gives it to me, and the property can appraise for that, I'm still missing it. I don't need to get the cashback, in fact without it my positive cashflow was about $200 higher, so it doesnt make me any difference. Thats another reason I didn't think anything of it, because its not something that I needed to do, but he said I could keep my cash, pull that 10K out and put it into another property.

You can write in the contract that seller is to pay X% (like 3% maybe)closing costs and that is legal. Because it is upfront and allowed by FHA. (I think the max is 6%?)Check that avenue for your best outcome.

I meant do you have 6 months of mortgage payments in your account? Of course you won't have to use it if everything goes perfectly. A safe and successful buy and hold deal needs to have cash reserve at all times, 6 months worth. Do you under stand this? By your numbers on deal 2 you need $12,000 in your account that you do not touch unless you have a vacancy or repair. Then you replace what you use from your cash flow until you are back up to $12,000.
Worst case you put away your "cash flow" every month until you reach the 6 month safety net. This is risky however! Plan for worst case.
The "I keep a unit vacant to show" is a very questionable practice! You should be showing the property before the tenant moves out if you know what you are doing. No vacancies that way. I still say pass on working with this guy, his comments about appraisal don't sound honest.

Michael Mangham
MD Home Acquisitions LLC

about the appraisal, i'm calling him to find out how he came up with the appraisal numbers. Trust me, this guy knows the business and he's not a shiester. He may know some ways to ethically cheat the system(paradox) but he was just offerring me an option. I was going to buy the house without the cash back at closing. That's not how he hooked me in at all. I was interested from the start in the deal, going forward with the FHA loan.

The scenario he originally looked like this:
Purchase Price $210,000
Appraisal Price$250,000
Down Payment: $ 7,350
Closing Cost: $ 15,000(appox)
Monthly P @ 30yr fixed 5%: $1247.31
Monthly Prop Tax: $275
Monthly Ins: $100
Monthly water/elec: $75
PMI: $157.50

Total Monthly Expenses: $1854.81

Monthly Income:
Apartment 1 (2BR,1Ba) $950
Apartment 2 (2BR,1Ba) $950 (already rented)
Bonus Apt 1Br,1Ba $700 (already rented)
Total Income: $2600

Total Positive Cashflow: 745.19

Thats with him rolling my closing costs and down payment into the mortgage, he said I would pay it at closing, then get it back that day. (Now keep in mind I will the closing cost money in my account)

Trust me Michael, there is no trouble renting this place, unfortunately I've been a tenant for all my life and I've seen places, this guy decks his places out so that he knows the tenants realize what they're getting. Him and his partner buy a ton of properties cash at 50 cent on the dollar and they triple the value. He can afford to not have one unit rented because he bought it cash and is in it for next to nothing. He is an investor who has his realtors license. Alright guys, please give me your feedback.

the opinions of a couple of guys that know real estate. You just keep wiggling it around until you get the answer you want. Okay, here goes, I'm sure it was an accident that the knowledgable realtor talked to you about a kickback, and I am sure that leaving one unit vacant helps sell the the units quicker to give you a stronger cash flow. More importantly, he sounds like a good person because he knows how to legally cheat the system. You have found a diamond in the rough and should jump on it before someone else gets it. I am sure he wouldn't even think of pawning off any undisclosed problems to you because you know he isn't a sheister. However, let me add a disclaimer that this comment is in no way meant as financial, legal or tax advice.

The cashback was not a deal closer for me, that was simply him throwing an option out there. It's not like he told me before our meeting, "hey I can get you into a house and get you cashback at closing". That never was mentioned until way later. Just so you know, he told me "It is illegal". I took it more along the same lines of having the bank think I'm actually going to be living in the property when I'm not. I know that's frowned upon by the banks.

I understand you guys know RE, but I need to understand why the scenario in my last message, without me getting the cashback is not a great way to go. I don't need the cashback and I told him that. I'm going to assign properties this year for cash, so that's not important. What is important is picking up a property that will cashflow that I can go into legally. He bought, rehabbed and is selling these properties. Can I go in and buy it have him rolling the closing costs into the loan? Is this illegal and why? I understand the cash back being frowned upon, but I here sellers paying closing costs all the time?

And what does it matter that one unit isn't rented if he said he would rent it for me. The property that he just finished the rehab 2 weeks ago was newly rented, the people let us in to walk through and they were still unpacking, in other words as
soon as he finished the rehab, it was rented. Please help me get these questions answered.

You never answered my question. Do you have 6 months of mortgage payments in the bank right now before you do the deal? This is the safety net that a wise and successful investor will have when he purchases. Otherwise he knows he could become next years foreclosure.
Like Bill said, we tried to help you, now you must make your own decision. One thing you must ask yourself is this. Why haven't these properties been sold already? Good luck and I hope we were all wrong about this deal and all it does is cash flow, stay occupied and never have a repair problem.

Michael Mangham
MD Home Acquisitions LLC

I have almost 5 months of reserve Mike. Now please answer my question, im not going to take the cash back at closing, you see the numbers(message 56). How is that a bad deal in you guys opinion? Forget about the getting money back at closing, thats done.

This question is for everyone: In buying your cashflow rentals, have any of you ever told or made the bank think that you were going to be living there and you weren't?

When you buy a property with the intention to rent it out, who do you tell the bank is going to live there? I'm totally confused now. There a people on here that have dozens of rental properties, I know the bank doesn't think you're living in all of them. I thought the bank won't give you the loan unless they think its your primary residence. What the heck?

Just plan-e, as I said I know it is common practice(especially in Newark, NJ) to buy a property and have the bank think its your primary residence, while you rent it out, although it is technically illegal. The thing to understand is he was just giving me options on his terms. Previously I was going to bring the down payment to closing, sign and at the same time, he(the seller) was going to give me the down payment back in certified funds. But I have new updates on how I will structure the deal to make sure I am doing things right.

1. I will look at getting my own financing rather than working with the mortgage broker that the seller works with.
2. I will put the money down at closing, the 3% according to FHA guidelines

So, the new deal will look like this
Purchase Price: $210,000
Appraisal: $250,000
Down Payment: $7350
Closing Costs: $15000(approx)
Mortgage Payment 30yr fixed @ 5% $1168
Monthly Prop Taxes $275
Monthly Prop Ins: $100
Monthly Water: $75
PMI: $157.50

Total Expenses: $1,775.50

Monthly Income
Apartment 1: $950
Apartment 2: $950 (Already Rented)
Bonus Apt: $700 (Already Rented)

Total Monthly Income $2600
Less Expenses: -$1775.50

Total Positive Cashflow: $824.50

Now, how does the deal look? If I get yelled at for this one, I really going to bang my head against a wall, Lol

Deshone,
I have been following your blog. You are doing all the right things and your progress is an inspiration to the rest of us!
You are living the dream, my friend, and good things will happen. Just know that there will be setbacks but you need to view these as "teachable moments" that will give you the knowledge and wisdom to keep moving forward.
Keep on, keepin on!
Homevestor

Thanks Merlyn, I appreciate the compliment, I am definitely learning a lot as I go on, things that I would never have learned if I wasnt at least giving my dream a shot. I have just begun but its a blessing to see that my journey and all the mistakes I've made so far are learning tools for someone else. We all have to start from somewhere and I'm actually enjoying the journey. We will Win!!