during the real estate boom it seems there were lots of profits to be made from flipping houses. I think several TV shows on the subject fueled the fire. I know from personal experience that property appreciated more than the monthly note in many markets, and if you could add value as a remodeler as well even after all the finance charges it was possible to make more money than contracting a job on someone elses property. of course you could blow that, but you could blow contracting as well.
my question is what about flipping in a down market?
it occurs to me (mostly after reading the thought provoking posts here) that one advantage of “buying” a remodel job in a buyers market is that there are more opportunities for bargains in the first place, and lower finance costs with possible creative type seller financing etc. in the second place.
am I nuts? can someone please explain the numbers to me? does it make sense to buy a house that may well go down in value 10% before you sell it, and then try to add value to said house by remodeling and hoping it sells?
I sense an opportunity here in a volatile market but I am just not sure how to make it work, I have a vision but I can’t see it clearly.
I would think that you would have to be in a market with no open space. an infill project would have a much better chance than an area with open land and new construction. this also ties in with the thread on the Harvard study with the big guys being more efficient in the open markets (lowering costs of homes and margins for small builders) creating better opportunities for the smaller guys in closed markets.
the one thing that does strike me as obvious is that if (big IF) you can predict a turn in the market, and buy at a bargain price with bargain (creative) financing and have project ready to sell after market turns back into sellers market there will be a healthy profit margin.
The 64 dollar question, when to buy, and when to have ready to sell?
What say you?
Replies
Investment purchases of real estate are like stocks, there are time to:
Sell
Hold
Buy
Buy and Sell
Buy and Hold
Typically, buy, fix, hold and rent in a down market. Things will eventually turn around.
Hopefully you never get to other alternative: Shoot Yourself
thanks for response, these two i get...
sell in sellers market
buy in buyers market
hint: thats why they call it sellers market, and buyers market. stating the obvious is good just to keep things straight.
the question was directed at what do the numbers say about buying, selling, and holding in buyers markets vs sellers markets with borrowed money? (finance costs and other variables?) please add to the list (requested of all readers, even if you don't think its good please post it may spark an idea or debate)
now again, if you can buy, fix, and hold until market turns what do the numbers say about profit margins? at what point (how long and for how much $) does it become more profitable to hold than to sell? what to do when is what i want to know, and i bet if we get the discussion going we will narrow it down!
the goal being avoiding your last choice, ie: shoot yourself, which by the way if i ever do that i swear i will shoot a few others first!
the question was directed at what do the numbers say about buying, selling, and holding in buyers markets vs sellers markets with borrowed money? (finance costs and other variables?) please add to the list (requested of all readers, even if you don't think its good please post it may spark an idea or debate)
now again, if you can buy, fix, and hold until market turns what do the numbers say about profit margins? at what point (how long and for how much $) does it become more profitable to hold than to sell? what to do when is what i want to know, and i bet if we get the discussion going we will narrow it down!
If you could answer these questions and convince investors / bankers / yourself that you have the answers and know what to do and when, you'd be a millionaire in no time.
Like all investments the real estate market carries risk, but nothing ventured nothing gained. I have 10 rental units, a 100 acrea property scheduled for development and am looking at 2 homes, a small store and some lots close to my home.
In all my real estate dealings I may have had immediate buyers remorse, and struggled to put the money together, but in the long run...no regrets. Of course, my foundational source of income is custom homebuilding, adn not the real estate ventures. Truthfully, I've had more regrets about not moving on a property than any purchases. I could name several.
As you recognize, the real risk are in dealing with loans for property, facing interest charges and the time it takes to turn the situation around. Each situation requires a different strategy, and many opportunities, especially buy, fix, hold and lease require healthy financials, with an an eye toward the long term. A down market is a great time to buy and hold. Donald Trump was on Letterman last night with the same advise.
thank you tx, there are several people in here that i always try to read what they post because i learn from it and you are one. on several positions you have my respect. i have rethought my position because of what you had to say. like i said several others in here as well.... i love this place.
"if i could answer the questions and convince the investors i'd be wealthy in no time" that is the reason i post it here! if i post it here and you guys shoot it full of holes i won't convince anybody. the funny thing is if i convince enough people to invest exactly what i predict will come true!
here's the deal, i think that if enough people buy enough houses in my area it will start a feeding frenzy.
the problem is the holding and renting part. because my area is so overspeculated there are many houses just sitting empty, and the ones that are rented are ridiculously cheap. it has been overbuilt like wildfire in the recent boom. i know personally a man that has invested in several homes and is trying to sell just one to be able to make the payments on the rest. he is overextended and trying to downsize. he will carry paper and guarantee to buy back for a set price higher than what he sells for in five years (i forget the details, and would need to get in in writing so terms are negotiable, but there it is). there are several others in the same boat, nothing is selling and if it continues not to sell the price will be even lower next year at this time. this is what i tell my friend, i'm in but not right now, let me wait and see....
segundo,
I am really glad to help.
What I have shared with you is true in your case, a feasibility study should be performed in all cases. All situations are different, even two homes in the same area can require very different strategies. Ask:
What is avaliable in my area?
What are my opportunites based on my current financials to include investors?
Can I logicaly present the oportunities and back-up plans to myself and others, being honest and truthful to the same?
Can I carry the load and do I have workable options if things do not go as projected?
Am I willing to work, work, work and spend / invest money in anticipation of a better tommorrow?
Real estate is most always good, usually a solid investment, and one of the very best if we can obtain and carry the load. It takes money to make money. When we find ourselves lacking in healthy and perhaps questionable financials it takes more creativity and realistic strategies to make things work.
Don't stop dreaming, but let your dreams be accompanied by wise and well studied decisons. Keep on asking questions...in an abundance of counselors there is wisdom.
Got to go....finishing my lesson for the adult Sunday school class I teach.
Edited 1/8/2007 3:34 pm ET by txlandlord
Excellent summation TX
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
flipping in a down real estate market
This is a subject of self study of an area. We keep saying here that location differs the answers. Before you move a checker , you would have to know what your area is doing.
I wrote about his a while back. You need to stay abreast of the local news to know what changes are taking place and there will be others awaiting the news as well.With that said ;
Once you know the selling days a house sits on the market on average in your developement area, you will also know the comps of the properties too. That will give you a solid insight to your projected project.
As far as selling in a down market , theres still buyers out there willing to buy . As fish , they didnt drop off the face of the earth. They are there but are a little reluctant to bite. It comes down to econmics within the household most of the time . How little of a down payment and how low are the monthly payments probably lead the show. Of course thats the surface water temperature .
In a semi active market , the lowest priced homes in category sell. Ill explain that ; Lets say someone wants to purchase a home and they contact an agent . They qualify for 100,000. If they get over that hurdle , they get to ride in the agents car and take his or her time . Lets just say they are shown 5 to 10 houses in that range in the area they want which Ill mention that you can never forget location, location, location. The buyer normally picks the one out of the 5 to 10 that leads the market and you have your winning sale. The rest are losers until the next set of buyer comearound. One thing to note is that house is also gone , so the field just got narrowed. Of course they could recieve 5 new listings but you dont have that data and new lists usually start high. You can only deal with what players are on the feild.
Next is the category of project you choose in terms of price range. You need to know just as much before you invest in that set of players. So which set of players do you want to compete against ? Starter homes mean goverment ####. and any time the goverment is involved they can take the word flip right out of the dictionary. 60 days is common and all you have is 500 earnest money which the buyer gets back if they are turned down for just about any reason. You normally dont get a down payment with that price of home . So you can invest 2 months in a buyer while the rest are locked out of the deal. With no money from the effort.
I prefer to use a cap rate although that it most commonly done with rentals . You take your purchase price and figgure estimated time you wll recieve payment in full. Of course the repair bill is affixed along with every other expense that is common . That builds a work sheet where after your deductions will give you a cap rate of return for dollars invested . Of course it will give you the rate of return which is what you are after the most to decide on which property has the best pay out . Most of the time a more expensive property wins out but with the most risk.
Now to what you are looking for as an answer; Properties sell in a down turned market but not in a crash. Semi active will sell if they are chosen correctly. I believe the most wanted price of property should be purchased . Not too long ago I was told they didnt have any 80,000 dollar properties at all on the MLS locally and they were a hot item.
So lets say we invest in one of those puppies.
That pup in order to flip must lead the market in price . We take past sales in the same area in the last 3 months and the last month is better . We also gain information on all the comparibles listed NOW. Thats the playing feild you are competing in. Once you use an appraisel tactic you will take away and add things like fences , accessory buildings , pools , how many car garages ? , carports, size of lots, etc. will give you a value feild for what you will have to compete .
So lets just say you have perfect match and their price is 79,999 and they are leading the feild with out you in . To flip, you come in at 75,999 and you sir are top dog or actually the low dog. Your home will sell first!
The problem is that you are losing 4,000. The only way you can do that is buy 4 grand cheaper , so you have to be the low dog buyer . That is a different nature of dog . You have to find that one house that everyone shoulda bought but you stole it . Thats really hard to do.
As Dad used to say anyone can sell anything [of value] if they sell it cheap enough. So the answer to selling is in the buying.
Tim
excellent response, thank you so much Tim.
what i said in original post is that when market is low there are more opportunities to buy a bargain, as dad said the answer to selling is in the buying. this is the opportunity i am seeing....
is it at bottom yet? i know i know a regional thing, i still say jan - feb 08 will be the time, it may change.
i am of the opinion that the hills and valleys of real estate fluxuation are steeper than ever, the faster information travels, the more people react. the more reactions, the greater the changes. the next swing up will be big in just the first 6 - 8 months.
my neighborhood was greatly overspeculated. in a general area where real estate went up 6%, my neighborhood went down 20%. when it corrects it will go up 30 - 40 % overnight.
again i say time to move is jan feb 08, come on down i'll help you build!
if you get 5 homes with owner carrying paper no down, value of home $200,000, payment $2,000 and you make that payment for 6 months, $60,000 invested.
if property values go up 40% in that 6 months, 5 - $200,000 homes starts at $1,000,000 and ends up at $1,400,000 for a leveraged profit of $400,000 with an investment of $60,000 in 6 months.
not a bad half a year, if i can just get the timing down. if not i gotta work on that list of who to shoot before i blow my brains out!
if you get 5 homes with owner carrying paper no down, value of home $200,000, payment $2,000 and you make that payment for 6 months, $60,000 invested.
Conceptually, this is a great deal. But pragmatically, it's a lot more difficult to pull off. 5 owners want to sell their $200,000 homes. But you need to find 5 owners who are willing to forego downpayments and carry paper. Problem is that most people sell homes for the purpose of raising money or to buy a new home, so you're not going to easily find your 5 people who are happy to sell for no down and carry paper.
if property values go up 40% in that 6 months, 5 - $200,000 homes starts at $1,000,000 and ends up at $1,400,000 for a leveraged profit of $400,000 with an investment of $60,000 in 6 months.
If pigs could fly. That's a great assumption, property values going up 40% in 6 months. If you know where that's happening, then we should all buy up every house on the market and rake in our 80% profit per year. And why aren't those 5 people selling their homes for no down and holding paper doing this?
Like the man said, it's a great job if you can get it. Personally, I think it's more likely I'm going to grow another 18" and get a job as center for the Knicks. Or star in a porno flick, according to how exactly my growth spurt happens.
SHGFor every complex problem, there is a solution that is clear, simple, and wrong.
-H.L. Mencken
that reminds me of the story of the guy who goes into the bar and see's a miniature man playing a piano on top of the bar! gets the story from bartender that here is alladin's lamp, but you only get one wish, and be very careful with pronunciation as genie is not native english speaker..... "you think i wished for a 12" pianist?"
but seriously folks...i have a theory that because of specific conditions in my very small micro-market/neighborhood, as stated in previous post, that this market will jump up 30% - 40% at the first sign of the market turning in said micro neighborhood.
this will not be sustainable, you can't rake it in at 80% per year, it is because of the volatility that the 30% - 40% is possible! and it is not a guaranteed sure thing, you may have to hold for a long time...
hold and rent, further down....
""is it at bottom yet? i know i know a regional thing, i still say jan - feb 08 will be the time, it may change.""
Two part answer ;
In a flip it doesnt matter is its bottomed yet . Flips sell in a couple of months which defeats the question as you will be buying another one in two more months and can reset another game plan then if necesary.
The months of December , January , and Febuary have always been the slowest months and there are atributing reasons . Its nasty weather out there and so much of home buying is spontaneous. We end up at an open house in a new addition and bring the wife . That starts her talking non stop and us guys are in real trouble .
Most kids are locked in school till May.
The start of the year is the hardest time finacially after Christmas and before tax time.
The real dark horse to pay attention to is that winter is the worst time to show curb appeal and the landscaping . Everything is dead with no leaves and for some its under a snow blanklet.
January is noted as the worst month in the three and fits your idea. If it needs exended remodeling you have your selection ready by the first of March for the Spring show of homes.
Tim
"my neighborhood was greatly overspeculated. in a general area where real estate went up 6%, my neighborhood went down 20%. when it corrects it will go up 30 - 40 % overnight. "
Search the number of listings in each price sector and you may find a weakness in their listings. Better yet ask any agent what he or she is short on and they are more than happy to tell you.
Pick a different area . The best one .
Tim
i am in the most volatile neighborhood in my area, again it was overspeculated. i think everyone knows it will explode someday, but how long will it take, how much will it cost to wait it out because there is no way to buy these houses with wages, it will have to come from people investing their equity or other wealth that didn't come from wages.
i still say that if, big IF, you TIME it right, you could stand to make 40% of a leveraged investment in 6 months or better! but if you have to hold, you better have deep pockets cause it might be a long while, still only a matter of time.
it is because of the volatility that the profit is possible, and i say a group of investors could spark a turnaround and possibly start a stampede, with the intent of getting out before it corrects. if it goes like i predict, and continues to decline untill next winter, and there is a buying spree feb 08 by a group of investors, word gets around and the general public starts jumping in, same group of investors sell in jul - aug when its at its peak, bottom falls out some people are caught, start the cycle again when conditions are right.
it has happened here before, i think history will repeat. it may not have been a coordinated concerted effort, but it happened just the same. i know, i'm one of the ones that got caught. i am just trying to time my moves so i don't get caught next time. if i can help it along by marketing my predictions and convincing others of said predictions it becomes a self fulfilling prophecy in which i make a fortune.
by the way, even though i "got caught" i don't feel to bad. i cashed out of high price real estate in california, paid all the bills, moved to an island in north carolina (walk to beach) and had a good down payment for the cheapest house on the island, what was localy known as "a free house" because i bought my teardown (but liveable)house for 235,000 when undeveloped cheapest lots on the island was 200,000 in sept of 2005. i could get a lot today for 100,000 if you believe the rumors, and there are several new construction piling homes advertised in the paper at 270,000 that would probably be owner financed with little down or sell for cash at less! ( i should have rented for a year or two but hindsight...)
again in north carolina in general property has gone up 6% in the last 16 months, while my neighborhood fell 20%. there are tons of new developments (massive, almost 100,000 units) being built just off the island, as well as quite a few individual specs on the island. the beach to the north of us is more expensive (wrightsville beach, wilmington) and the beach to the south of us is more expensive (myrtle beach) and with the exploding growth will cause traffic on underdeveloped roads and crowding getting on the island plus lack of parking once you finally get here will facilitate the only way to "really enjoy" the beach is to be able to walk there just like it is in southern california. its just a matter of when this micro neighborhood explodes in value, there are plenty of people waiting on the sidelines ready to pounce when it does i am sure.
i think i have it pretty well narrowed down in this instance as "timing is everything" since holding, at least right now is a huge negative cash flow. rents are as low as 500 - 600 for a nice house walking to beach. they are advertised in paper higher than that, but those are not rented.
"i think i have it pretty well narrowed down in this instance as "timing is everything" since holding, at least right now is a huge negative cash flow. rents are as low as 500 - 600 for a nice house walking to beach. they are advertised in paper higher than that, but those are not rented. "
I enjoyed that paragraph.
Yes you can find cheaper rents here too as well as people working cheaper than others . Knowing that Ive questioned my self why Im able to rent at top prices . But I do and I work hard at keeping somthing nice to rent . Its working while If I were the renter I would find a better value I think.
Tim
yes i have to say, i titled the thread correctly.
for the market i have described (volatile) flipping is key as the holding (low rents due to overspeculation) is too great a negative cash flow. as Tim Mooney points out there are better markets to hold in where rents are increased 20%, and smart investors are putting their money in Tim's market, not mine.
i'm gonna go jog on the beach now with my shirt off today i think, looks sunny out there. i will return shortly!
i still say that if, big IF, you TIME it right, you could stand to make 40% of a leveraged investment in 6 months or better!
Segundo, I'm beginning to see what the problem is here. You are confused about your goals in real estate investing. Let me explain.
You opened this discussion about flipping, but then continue to talk about speculation. They are two different animals and deserve two separate chapters in the book about investing in real estate.
When you talk about a 40% gain, you are talking about a 40% appreciation. You are speculating.
When an experienced real esate investor (flipper) talks about a 40% gain, he's not speculating. He's buying at 60% of TODAY'S market value and would theoretically make a 40% profit IMMEDIATELY. There's no waiting.....he's buying it at a price that he can immediately make money!
In these volatile times, some naysayers will tell you that this can't happen, but let me tell you, it happens every day.
You have been told fifteen times in this thread that the key to making your 40% is to buy right and you have missed the point 15 times!
If you buy right today, at 60% of fair market value, and the property appreciates another 40%, you will have a gain of: ______________. Do the math and please tell me what your gain will be. When you figure that out, you'll understand what it means to "buy it right"!
So, to keep this conversation on track, lets agree that flipping isn't speculation and speculation isn't flipping. Landlording is an entirely different subject altogether and it isn't speculating, nor is it flipping.
Hope you're not offended. I'm not trying to make you look bad...just trying to explain what I think I know about real estate investing.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
i think i am not "missing" the point, rather disagreeing with what you say is the point for my specific application. over and over (15 ?) i have said that the volatility (ups and downs) because of very specific micro location causes swings in price in every house in the area, timing is the key, not any one deal on any one house or property.
i do apologize however in my haste to respond and the excitement of brainstorming (after i make my killing in real estate i start my campaign for world domination!) i posted my thoughts as they came to me.
i get what your saying, its just that your wrong
"i get what your saying, its just that your wrong"
segundo, you sure have an odd way of engaging those who are sharing their valuable insights.
"i have said that the volatility (ups and downs) because of very specific micro location causes swings in price in every house in the area, timing is the key, not any one deal on any one house or property."
Would you agree that the timing of the one deal on the one house that you now own is important? Your house, in its micro-location, which is its market?
segundo, no one times each deal perfectly. In other words you'll never wring the most out of each end of each deal. The better your research and luck, the closer you'll get.
Be content to get some decent numbers on each one, repeat carefully, and you'll come out ahead over time.
segundo, no one times each deal perfectly. In other words you'll never wring the most out of each end of each deal. The better your research and luck, the closer you'll get.
I agree. Trying to "time" the market perfectly, as a basis for involvment in real estate as a business, sounds like financial suicide to me.
Timing it perfectly, by accident results in a grand slam. Going for hits sometimes results in a homer.
I'd rather get a base hit every time I'm at bat. At the end of the game, I'll find that some of those base hits turned into homers and some of those homers were grand slams. The base hits keep me at the plate though.
I think Segundo is caught up in the excitement of the possibilities of the "killing in real estate". Been there, done that. It's part of the process of learning the business.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
I like that baseball analogy. My brother and I are beginning to think about another real estate deal (bought a vacation/rental house in 2005 and rehabbed it, check it out: http://www.cyberrentals.com/USA/Maine/Western-Maine-Lakes-and-Mountains/vacation-CHALET-Bryant-Pond/Christopher-Lake/p131507.htm)
Anyway, he is excited and wants to go for a grand slam--I like his energy, but a base hit every time up sounds good to me.
That resort property looks great. I like resort properties, if there is a competent property manager that can service it, and if it cashflows.
How's it working so far. I'm not happy with mine. I should qualify that....I'm kinda happy....I'm living in it right now :). Heres my view.
What type of grand slam is your brother thinking about?
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Thanks Blue. It's working out pretty well--it's been on the rental market for almost a year and it's almost breaking even. We bought it in "D" condition, got it to "B-" condition and rented it at a discount relative to the area, and now it's probably a "B+" or "A-" property and the rental rates are in line. We have some more changes planned that will eventually make it a solid "A" property, and will add a bedroom (within existing space) so we can charge more.
Thanks to a real estate agent who was looking out for us, we bought at a good price ($250K) because it showed very poorly. It took more work than we thought it would, but we could probably sell it now for $350K. A year ago we could have gotten $400K if it had been fixed up.
My brother wants to refinance and use the equity to buy more of the same. He already bought a mountaintop lot that looks over the lake, for a good price but now he's servicing that debt and can't afford to build something.
The resort area is over an hour away from me, and almost a full day away from my brother. I would prefer to use some of the equity in the cabin to buy a fixer-upper next year in the city where I live, when I believe the market will be at it's lowest. Since you've been posting about your school deal my mind has been racing on related ideas too. I need this year to fix up my own house anyway (my wife says so!) Last year I was gone every weekend working on the cabin; I don't really want to do that again unless it's another killer deal.
We do have a good property manager, a husband-and-wife team. My mother, who is our third partner, sometimes does or helps with the turnovers on Sundays.
You can see on the availability page that it's rented out about one week plus one weekend each month. Less in the "shoulder seasons" (it's close to two ski areas in addition to the lake, not that that does any good this year with the weather!) and more in the summer. If we can average one week plus one weekend a month all year we'll pay the overhead, not including improvements.
Sorry to the original poster for the hijack, but it's all related, right?
Of course it's alright to hijack...it's our Taunton given right!
I'm concerned about your numbers. You claim that you are breaking even, then you tell me Mom is doing some of the work and the improvements aren't covered.
For me, those are danger signals. IF there is some other offsetting positives, then perhaps it's okay, but because Ive already bought an alligator, I'm dead set against hooking myself up with another.
I've done the vacant lot thing too. Vacant land is a huge mistake, unless it's ripe for development, or there is a huge upside possibility (speculation) and the investor has lots of excess cashflow to bury in something. It doesn't sound like your brother is making smart financial decisions with respect to his real estate investment career.
Vacant is very hard to justify because it simply doesn't cashflow 99% of the time. Most vacant land is purchased for emotional reasons, nor financial reasons. I once heard a guy say that if he couldn't make 100% on vacant land, he didn't want anything to do with it. I've accepted that philosphy myself and usually don't bother looking at it, unless I'm looking at it for development possibilities.
Like I said...I like resort properties...but I haven't found any that come close to my criteria. I don't have mountains near me, so I'd have to make all my money in a very, very short summer. Based on that knowledge, I'd offer only about 50k for the property that I'm currently living in. I'm asking $539,000. IF a bigger fool comes around and buys this for resort property, I'll be surprised. We are courting a doctor that wants it for a residence, if he lands the doctor job at the local hospital.
I'd also be wary about tapping that equity. I'm not opposed at all to using all your assets, including the equity of that property, but I'd make darn sure that I was investing in a cash flow, not another speculative venture.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Funny, I was starting my reply to you when my brother called. We talked about this stuff for the last hour.
You're right, the numbers aren't great. We're sort of feeling our way through it. We're going to drop the rental price to try to get higher occupancy. Mom does some cleaning because she likes the drive out on a Sunday afternoon, it's exercise for her, and she hates paying the caretaker $25 and hour to do it. My brother and I think it's pound wise/penny foolish. We look at the cost of the improvements, around $25K for materials, as being tied up in the equity of the house like the down payment. My brother said I estimated the current value of the property low, it's more like $400-450K.
When my brother approached my mom and I about the vacant lot, she and I saw the same cashflow problem. My brother decided to buy it on his own. He thinks he could sell it this spring for 20% more than he paid for it last fall. If he's right he would make close to 100% profit on the money he put down plus the mortgage payments.
Too bad you don't have mountains nearby. Being on a lake and close to skiing is a great combination, more than doubling the length of the season. I know you want to move south, but have you considered looking for resort properties somewhere like Idaho where you can have it all?
If and when we take equity out of the cabin, probably in the form of a line of credit, it will definately be for something that produces immediate cash flow. Although, one of our other properties is a trailer lot we own free and clear. It has a run-down trailer on it, but it's in an up-and-coming area. Since the lot is nice and already improved, I'd like to build a house on it and sell the house. Would you consider that a speculative venture?
Although, one of our other properties is a trailer lot we own free and clear. It has a run-down trailer on it, but it's in an up-and-coming area. Since the lot is nice and already improved, I'd like to build a house on it and sell the house. Would you consider that a speculative venture?
Yes it's speculative unless you have a construction contract with an end buyer.
How's the market for new homes? Any demand? Is it possible to get someone to put their name on the construction financing? How much is the lot worth? Is there enough equity in it to use it as collateral for a spec home?
I don't know what the market is like there, but I'd have custom build signs on both lots (yours and your brothers).
What makes your brother so sure he'll get a 20% increase on a vacant lot? Does the gain include selling costs? More importantly, how much is the actual gain...sometimes a 100% ROI still isn't worth the risk and negative cash flow.
Personally, I wouldn't take on any negative cash flow on vacant land in these days and ages. The only exception would be if there was a grand slam waiting. That "grand slam" better be close (or over) to 7 figures. If it's not a "grand slam", I'm holding out for positive cash flow.
blue
"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
The trailer lot would probably sell for $25K to $30K as is. The new home market there has been pretty good, with places selling for $150K to $250K, but things have slowed down. I need to do more research. Would a $25K lot be collatoral for a $200K construction loan? I don't even know. There's probably not enough upside to justify the risk of carrying a spec. The problem is we have another lot nearby that could be subdivided into several house lots, and we'd like to dictate what gets built on the trailer lot because it would affect the perceived value of the undeveloped lots.
The custom-built home signage is a good idea. The problem is that I am not currently self-employed, although I have been in the past and have all the tools. Building a spec could work because I usually get 3-day weekends and could do much of the work myself. Building on contract, I'm afraid I couldn't give good enough service to the client. Although, I have always done high-end building where clients expect a lot of hand-holding and make a lot of changes. Maybe that's different with the lower-end houses we're talking about.
My brother isn't SURE he can get a 20% increase, but he spends a lot of time looking at RE ads, talking to realtors, generally chatting people up, so has a pretty good idea of local prices. His lot is much bigger and has much better views than nearby lots that have sold recently for just a little less.
I'm with you on not wanting (or being able to afford!) negative cash flow. What I personally have for assets are my building tools and skills, 3-day weekends, this forum. I'm working on the business knowledge, but for now I'm trying to leverage what assets I have.
Thanks for the input. I'm feeling a little beat up, but it's a good beat up ;-)
Here's a picture of my brother's view. Our cabin is at the far end of the lake. Those are mountains, not clouds, on the horizon.
Thanks for the input. I'm feeling a little beat up, but it's a good beat up ;-)
It's good to get challenged a bit. If your deal can stand up to scrutiny, its a deal. If not, it's a loser. I'm fairly certain you don't want to buy a loser.
As far as your lot. If it's worth 25k, I doubt that it would be enough collatoral to fund a 200k construction loan, but it might. It would all depend upon the lender's cash position. If they are looking to loan money, you're lot, combined with the created equity (the builder's equity) might suffice. It can't possibly hurt to ask. The thing that might hurt would be to get a loan, build the spec, then have to make the payments while it doesn't sell. Ask Mike about that.
We put up a spec this year, but our main criteria in structuring the financing was to not expose ourself to making payments. We offered more in terms of juice, but the tradeoff of risk was well worth it. If you're going to spec something, you absolutely have to know that you can afford it. If you lost your job tomorrow, would you still be able to make a spec payment? I can...because I don't have any...yet the spec is sitting there waiting for a buyer.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Stuff to think about. I think I'll do some more research based on your questions and start a new thread..."What should Mike's RE investment be...."
Thanks Blue--
wood... been cruising thru this thread when i saw your mention of a "trailer lot"
<<<Although, one of our other properties is a trailer lot we own free and clear. It has a run-down trailer on it, but it's in an up-and-coming area. Since the lot is nice and already improved, I'd like to build a house on it and sell the house.>>>
in a lot of areas , "trailer lots" get zoned out of existence.. right now you have the right to the trailer that is there already... do you have the right to buy a newer trailer and replace the old one ?
in our town , that right to replace was zoned out years ago..
before i'd build on that lot you have , i'd look into replacing the trailer.... unless "trailer lots " are nothing special where you are
Mike Smith Rhode Island : Design / Build / Repair / Restore
Hi Mike--
No shortage of trailer lots where this one is. It's a nice old farm town in central Maine, next to where I grew up. Since I was a kid there has been a lot of development, good and bad, lots of mobile homes. Zoning there requires two acres, build or park whatever you want.
The neighborhood where this lot is surrounded by fairly well-kept farmhouses, ranch houses, and a couple of trailers. That and some big pastures and cornfields. A nice, simple starter home would fit in nicely. A trailer would uglify the area. It matters to me. But, if we sold the lot, there's a very good chance the buyer would just park a trailer on it. Maybe the best thing to do is some landscaping so it's not as visible from the road.
What do you find special about trailers?
Mike Maines (from Maine)
i don't find anything "special" about trailers except their price
i can't think of anything as inexpensive in basic housing as a double-wide..
truth be told.... the average family ( 2.3 or whatever the number is ) doesn't need anything more than a double -wide... pretty luxurious when you come right down to it
ugly ? .. yup
temporary ?... usually
my only point was if i had the grandfather right to have a trailer on a lot in my town, i could probably get $300K for it in a New York minute
now axe me what my house is ? and if i'd want to have a trailer next door Mike Smith Rhode Island : Design / Build / Repair / Restore
Would you do it again on the same property?
Is it renting less than you thought it would ?
Tim
Would you do it again on the same property?
I think we would. We've learned a lot, and it's been a way to spend time together we hadn't done in years. Not too many arguments. In the end I think the money will be ok.
Is it renting less than you thought it would ?
It has been renting about as much as we thought it would, but this winter looks like it might hurt us with the lack of snow and 65° days. We are charging more than we thought we could though.
Yup , we did a cabin and it provided some of the best family time weve had but for the most part a lot of it .
No computers , phone ringing except cell phones . No where to go and no one drops by on the mountaijn except in deer season it seems . Those visits are always welcomed.
I bought a piece of property that has a killer view of the river valley in the mountains and cabins are what Im thinking about doing with it .
Tim
I was following your thread on that land--any new ideas on the cabins?
Well, its a good thread to tell it I guess.
That land developement was to be my next job when a tragic thing happend. I had planned for it to be listed first. So for the ones that didnt read it ;
I bought the land on the mountain for 8,000. Theres 5 acres there . A road runs through it and the lower portion is pretty steep.[below the road] Not too steep to build on but it would cost some bucks for parking . The upper part is prime with a gentle slope and it holds 60 percent of the land. The lower part is to be cleared for the upper view .
I envited my cute realator out to look at it and she hit it at 30 grand cleared with a driveway built to the upper portion. 1000 for that as I had it priced but I have to be there on site when its done and I havent been able to be because of the tragedy.
I should finish up with the tragedy in a couple of weeks and its taken all that time. Then Ill get started on it .
So the question was whether to sell it for a sure profit with little work . At least list it for 6 months and see.
DW wants to keep it as its a 1/4 mile from the cabin and has quite a wood lot on it . Thats the newest twist. She wants to put our camper on it and enjoy it ourselves.
The main idea of buying it in the first place was to put four small cabins on it . Mebbe 5 with a shower house/ community restroom to serve the cabins .
It would also be suited for RV spaces as we dont have such a thing up there.
We are mostly hunting and four wheeling activity up there . We have several different kinds of hunting seasons and draw folks miles away. They stay in motels and with realitives. Hiking and canoeing is also very popular and a new one that is gong great guns which is motorcycles touring . We have two scenic route hiways and this place is on one of them. We get over a thousand bikes a day on the weekends touring . We have 200 miles of nature trails for horses and walking plus it sits in the national forrest where atvs are permitted and they have access to all the forestry roads. We are called the natural state and thats what we are known to be right here .
I dont know anything about cabin rental so Im hesitant and I dont often gamble in my mind. Most things are sure bets. I already have rentals and I could use the cabin we already have as an office to the cabins or rent it too. Land is cheap in my mind up there and Im told there is a need for recreational property. But I dont know it for a pure truth as I havent expericenced myself.
Tim
WOW, so you think you could make $21K on the deal just by clearing the lot and building a road? It sounds like a beautiful area.
Before buying this place we were looking in northern Maine, which sounds like it attracts the same kind of people your area does. There are a lot of cabins up there to service hunters and snowmobilers. For what they get in rents, it has to be a lifestyle thing, they don't make much money on them that I can see. Something like $35/night per person, and somebody still has to be available full time. It's a rowdy crowd (I know, I've been one of them!) and I wouldn't trust a bunch of drunk hunters without some sort of supervision. I've seen other places trashed. Not to try to talk you out of it, we just decided it wasn't for us.
We ended up getting a full-on house. We call it the cabin because it's a log home. That way it's more likely to be families, less chance of damage.
Without being there I think I know what I would do (thinking about keeping the wife happy!)--could you clear and sell the upper lot, and keep the lower lot? Make it a private little retreat for you while letting someone else worry about the management headaches on the upper lot?
Edit to add: I'm sorry for whatever your tragedy was. You know Breaktime is a great place to talk about it if you feel like you need to.
Edited 1/8/2007 7:01 am ET by woodguy99
Edit to add: I'm sorry for whatever your tragedy was. You know Breaktime is a great place to talk about it if you feel like you need to.
Thanks , but it isnt all that bad for me . At least now anyway.
Robbi has taken care of an elderly lady for 10 yrs or so doing small things , dropping by every day . She went into the hospital having a stroke . After it was over the doctor said where is she going ? Shes not going home . She will have to have full care . There was no place for her to go except a nursing home and she doesnt draw anything close to enough money for that. She didnt want to go there anyway so I built her an apartment in our garage . That had to be done quickly. I moved on to her house and Im about done with that . I rented it last week.
So I ad two jobs to do that needed doing before the land is all.
Tim
Ah. You and your wife are nice folks.
i was responding to the statement that "i missed the point when i was told 15 times", i didn't miss it, that statement was wrong. i disagreed with it, and i pointed out why several times in response to the posts as they came.
in each of the 15 times it was pointed out to me i agreed with the fact that buying something below market value makes an instant profit.
the difference i was trying to point out was my hunch that a particular (small) area had declined, while the general (large) area that encompasses the particular area has appreciated mildly, or at least held its ground.
there is something going on here, a certain volatility caused by speculation in my opinion, that i am trying to figure out how to capitalize on.
the timing of the one house i know own is indeed important, i got in on the high side and rode it down much to my dissapointment buying the cheapest house in the neighborhood. all the homes went down in the small area, when rebounds i predict it will appreciate 30% - 40% in 6 - 8 months, every house and bare lot in the small area! if i can calculate to increase my odds of success i might roll the dice!
was responding to the statement that "i missed the point when i was told 15 times", i didn't miss it, that statement was wrong. i disagreed with it, and i pointed out why several times in response to the posts as they came.
I didn't think you responded too harshly Segundo. In fact, your post clearly made me understand, that you weren't missing the point. Up until you straightened me out, I thought you were...but I was wrong.
I understand your desire to "time the market" to get the biggest gain, but I also strongly think that it's a significantly flawed strategy, if someone wants to be a serious player in the real estate game. Let's face it: when someone decides that the bottom has bottomed out, bad news could hit the next day and send everything 15 points lower.
Best wishes, I truly hope you can figure your timing out perfectly.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
do apologize however in my haste to respond and the excitement of brainstorming (after i make my killing in real estate i start my campaign for world domination!) i posted my thoughts as they came to me.
i get what your saying, its just that your wrong
Please don't apologize. No apology is needed.
I'd like to know what I'm wrong about. Are you simply disagreeing with my definitions or strategies?
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Tim -- this is a great post, and a lot of good information. But about half way thru I had to stop reading, cause the blue ink was making me dizzy. Think you could go back to black?********************************************************
"It is what we learn after we think we know it all, that counts."
John Wooden 1910-
"Think you could go back to black?"
Ill choose another color . I went back and re read the post and you are right ,thats too bright .
Thanks ,
Tim
Tim, black is beautiful! Really, black works best. If you gotta be colorful, then maybe color the quoted parts and put your writings in black and the default font/size.
Tim, black is beautiful! Really, black works best. If you gotta be colorful, then maybe color the quoted parts and put your writings in black and the default font/size.
Please.SamT
Now if I could just remember that I am a businessman with a hammer and not a craftsman with a business....."anonymous". . .segundo <!----><!---->
Excellent forum advice Cloud.
Get with it Tim Mooney!!!
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
tim,
maybe the light pink in a smaller font size?.... hahahaha
A great subject, and interesting responses.
I don't have enough real estate experience to add much here but have an anecdote.
My first house was purchased in a buyer's market, so the price was right. So was the house's condition and the location. However interest rates were 17%, having just started a four year return from a 21% high to more reasonable levels. So I bit the bullet.
Having negotiated flexibility in the terms (very few were borrowing at that point, so you could negotiate), I paid extra against the principal whenever I could, which reduced the effects of the high interest mtge.
10 years later, I sold in another buyer's market.
Yes, not the best move, but I don't believe in putting my life on hold. Anyhow, though interest rates were low (10%) by then, similar houses in town would sit unsold for 4-5 mths. I think new home sales were doing well.
So I listed $4k low, and the listing contract was at a reduced commission rate, to help compensate for part of that potential loss. Showed 4-5 times and had a firm offer in 19 days. We batted it back and forth 2x over 3 days, selling for 2K less than asking. Did my own lawyering. Done. Let's move on.
Amazing what a good location, a well-maintained home, a competitive price, a bit of trim and paint, and minor landscaping will do. ;)
Grossed 2.3 times my initial investment, not taking into account the mtge interest and taxes paid, or the fact that I lived there rent free with minor repairs/maintenance (nothing major like appliances, foundations, roof, furnace, etc).
My point of view is that you have to look at the total picture, get many (seldom all) the parameters lined up in your favour, and have a strategy to minimize the neg impacts of the things that are out of your control.
Segundo, when you make your decision to buy, cover your azz by knowing how much rental income that property can be expected to yield. Renting (as you wait for a buyer's market if buying, or a seller's market if selling) can be a good way to buy you time in or out of the housing markets. Markets plural, because this market includes the mtge and rental markets, and the economy as a whole.
In my un-informed opinion, flipping in a down market is do-able, so long as you have a 'hold and rent' strategy should worse come to worse.
Don't worry about getting all the pieces in perfect position (they seldom if ever are), look at the total picture, then get on with your life.
thank you, that compliment is invaluable to me as i live to provide food for thought. i like to think of this forum as my own private think tank.
on your points let me respond,
i have a place to live, and i am considering investing in real estate in addition to my home, so the place to live for free is out,
the purpose of this thread is to uncover the parts of the picture i am not seeing to make sure i have the total picture (these are the notes for my business plan/ proposal to investors)
hold and rent, i'll get to that further down
You know Rez started this in a half way complaint , that the colors were screwing him up with my posts . He says Im the only one who types all the time in blue and quotes in black .
So, ok everyone and thanks .
Ill try , but Ill miss the blue . Bye Blue .
Now to test the different fonts , hahahaha.
Tim
the one thing that does strike me as obvious is that if (big IF) you can predict a turn in the market, and buy at a bargain price with bargain (creative) financing and have project ready to sell after market turns back into sellers market there will be a healthy profit margin.
The 64 dollar question, when to buy, and when to have ready to sell.
If you intend to make your money flipping, it's ALWAYS the right time to buy and to sell. Your idea of timing the market to perfection is correct, but unrealistic. It's not going to happen. It doesn't need to happen.
Shg is right too that your idea about a 40% appreciation in six months is possible. I'm not saying you can't have a 40% gain...those can be had every day in every market, but they don't occur becuase of the timing. They occur because of your buying!
It's all simple math, but some don't like to believe that. Tim mentions a 100k house. Do the math. If houses are selling for 100k, and you want to flip one, you have to buy at 60% (after expenses, including ALL expenses).
You can't be afraid of buying right. Right now I'm in negotiations with a guy that was asking 160k for a commercial property. After some negotiation, he last offered the property to me at 95k with a large down payment on a two year contract. I've decided to ice the negotiations for a couple of months in order to get the price a bit lower and a better owner financing. I'm not looking to flip it but it doesn't matter, the idea is that you buy the property at a price that will be profitable. I have to get it at a price that it cashflows if I rent it out, or I have to be able to sell it for profit if I flip it.
It's all about buying it at wholesale.
blue
"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
all about buying at wholesale! couldn't agree more, just want to state the obvious that in my particular area timing is everything.
i am talking about volatility here, its going up and down in one small neighborhood right next to the atlantic ocean in an area where generally prices are appreciating at 6%, the highest rise in the nation, and yet because of overspeculation, my little hood has fallen 20% in the last 16 months.
i expect it to continue to fall untill jan - feb 08 at least. the problem is that while the next correction may jump up, it may just as quickly fall back down. timing timing timing, jump in low, jump out high, repeat. volatile markets are where the money (and risk) is!
hold and rent, further down...
theres nothing scarier than standing there buying while everbody else is running,but it's the best way to get ahead in real estate.i went through the early 80's doing some crazy things,but when the sun finally came back in the 90's the only regret was i should've been crazier. i have 3 things i try to always remember about bussiness that i've been told by some great mentors. 1. don't follow the crowd,you will just get your toes stepped on. #2 you will make 90% of your profit on 10% of your inventory. [that one took a long time to sink in,but looking back over of 30 yrs real estate,it holds pretty true]. # 3 you make your money on the buy not the sell. if you ever buy something to cheap let me know. larry
hand me the chainsaw, i need to trim the casing just a hair.
thanks larry, i am letting you know now, and i will say i told you so a coupla years from now! some people say " i hate to say i told you so , but..." i never say that. i say " i love to say i told you so, and i will say it over and over again every chance i get!" but thats me, i am an honest guy.
what i am letting you know is not that i bought too cheap, but i have seen my neighborhood decline 20% in 16 months. i bought way to high, but i know with every fiber of my being that it will go back up, and that someday it will explode up. its just a matter of when.
seems like the timing theme keeps recurring here. i definitely don't want to follow the crowd, what i would dearly love to be able to do is predict which way and WHEN the crowd moves so i can lead the way. i also think it may be possible to create a stampede!
You specified flip which singled it out of the investing choices.
What Tex suppied has real merit. It just doesnt qualify as flipping.
When interrest rates are high, properties sell slower so there are some really good buys considerng some are forced to sell ASP because they cant hold them for one reason or another but there are many reasons. Life goes on.
If you buy a property in hard times for a cheap price and rent it , thus hold it , you will pay a higher interrest rate . So profits are very low if at all until the rates drop or a demand hits your area like a new plant opening for instance . Remeber when I said to stay abreast of the local news?
So while you hold the property and are just getting by somthing breaks like the last happening of interrest rates dropping to 5 percent from 9. That sent a national wide rush to home ownership. Everyone was refincancing and buying . Many were trading up which opened up a brand new ball game in older sales. The prices peaked and some saw double apraisels as compared to the times they bought in high interrest times . For those that did , saw very high gains .
I was able to buy and hold 5 homes at 9 percent and was quoted by one bank , 10 percent and another 9.5. I held on breaking even but never reached for my back wallet. It was very hard to do and I would have failed if the properties werent in so good a condition that saw me through the hard times.
When the interrest rates started dropping was a hard time as well because of indecision when to refinance. Do I take 7 percent when it was offered or hold on at 9 percent ? Well, I held on till it reached 5.375 and cashed my hand on those 5 properties . I had bought some others too on the decline at different rates. When it hit a flat 5 percent , I brought 7 more to the refinace table . I locked in for long term and that alone put me in the drivers seat with 12 in the 5 percentle range. Two more are already locked at 7.375.
That bolstered an income but wasnt an end to it .
When interrest went up and homes sales slowed this last year , it put a bind on a lot of first time homebuyers who could not qualify with the higher selling prices of last year being set as an all time high while including a higher interrest rate , they just could not show promise to make payments . With fuel prices still at an all time high the buyers could not buy. There are 54 million uninsured people right now and minimum wage has not been raised but by a few states this year.Credit card debt is at an astounding figgure and is also at an al time high. The average balance on a credit card is like 9 grand and change . The CR card companies have already started tricks of engagement of higher interrest taking advantage . Add the war and out sourcing . Its a very hard time to buy for many, so those unfortunate are being forced to rent .
As with every other business its a game of supply and demand . Demand is at its highest for rental proerty right now so the price is going up. In the past 5 months Ive taken a 20 percent increase on my properties . I just rented a house this week that leased for 20 percent higher than it could have a year ago. It actually rented easiar this week than a year ago for 20 percent less becuse I was fighting the buying surge resulting from 5 percent interrest . During that low interrest time it was very tough to rent anything and I didnt even think about raising rent prices. Also during that mad rush for buying the properties were recieving the same rent they did in harder times .
Now its the buyers market and the land lords it seems . I got news this morning they may lower the interrest rate to bolster the economy . Here we go again. It seems this business changes plays as often as a play off team in the playoffs.
Tim
LOL
would have been funnier if it had actually posted in green--:)
guess I won't be mastering the "ALL" button either!!!!!!!
Stephen
good thread, here's 2 cents from a newsletter I get:
Flippers still profit in real estate slowdown
But selling too soon after renovation has tax, profit consequences
Are you a real estate "flipper" or a "keeper"? Most home buyers are keepers, owning their houses and condos for five or more years. However, even as residential sales prices currently "stagnate" or "plateau" in most cities, according to the latest statistics from the National Association of Realtors and other sources, flippers continue to profit.
WHAT IS A REAL ESTATE FLIPPER? There is no official definition, but a real estate flipper is a buyer who acquires a property and holds title less than 12 months. Other names for property flippers are "quick turn specialists" and "speculators."
"Buy low, sell high" is the motto of flippers.
There's nothing wrong, illegal, immoral or fattening about that. However, buying low and selling high isn't always easy.
Real estate flippers usually must add value to earn profits. Not only do flippers buy 25 percent or more below the market value of equivalent property in good condition, but they increase the purchased property's desirability by improving it to increase the value more than the costs incurred.
The most profitable real estate example of adding more value than the improvement costs is fresh paint. Everybody has witnessed a shabby run-down house suddenly brought to life by exterior painting.
Although your results will vary, spending $1,000 on exterior paint of a house often produces $10,000 increased market value, sometimes more. Interior paint can produce similar profitable results.
SPECIAL TAX BREAK FOR OWNER-OCCUPANT FLIPPERS. If you enjoy tax-free income, consider becoming an owner-occupant flipper. That means you buy a house or condo, move in to make it your full-time principal residence for at least 24 months, and then profitably resell it after making valuable improvements that add more market value than they cost.
Thanks to Internal Revenue Code 121, your principal-residence sale profit is then tax-free up to $250,000 (up to $500,000 when both spouses meet the occupancy test and file a joint tax return in the year of sale).
WHO SHOULD BECOME A REAL ESTATE FLIPPER? Flipper properties are especially attractive to beginner real estate investors getting started. Having earned substantial profits from fast-flip properties, I am aware the profits don't always materialize as quickly as expected.
For this reason, especially for the first few properties, a "get rich slow" attitude is best. Later, after experience is gained, flipping properties becomes easier, perhaps even developing into a full-time profitable business.
Flippers are especially ideal for investors with a flare for spotting sound, well-located real estate in need of upgrading. When you see a run-down house and cry out "yuck," you are a potential property flipper.
SECRETS OF PROFITABLE PROPERTY FLIPPERS. Although any type of property can be flipped, most flippers specialize in houses because they offer the best potential and the largest market of prospective buyers. The secrets of profitable property flips include:
1. Find a motivated seller who wants to sell due to an urgent reason and is willing to sell below market value in return for a quick sale. Strong seller motivations include out-of-town job transfers, unemployment, divorce, financial problems, illness, death in the family, and moving to a better house.
2. Look for fix-up properties needing inexpensive cosmetic work. "El dumpo" houses often just need fresh paint, new light fixtures, cleaning and minor repairs, new carpets and flooring, and fresh landscaping.
Examples of unprofitable but necessary fix-up work to avoid include structural changes, new roof and foundation repairs, which are very expensive but add little or no market value.
3. Search sources of "fast flip" properties, including real estate agents, newspaper classified ads, foreclosure sales, probate sales, bankruptcies, expired MLS (multiple listing service) listings, vacant rental houses, absentee out-of-town owner lists, and properties with unpaid property taxes.
4. Drive around desirable neighborhoods looking for vacant, run-down or abandoned houses. Jot down the address, take a digital photo to remember the house, and then check the owner's mailing address at the tax collector's office to discover an owner who might be anxious to sell.
If you discover a house that has been owned for many years, often with a small or no mortgage and a large equity, that owner might be extremely eager to sell at a bargain price.
"Being a cowboy aint all ridin and shootin" - Tim Mooney
DISADVANTAGES OF FLIPPERS. But flipper properties, even when they produce large profits, are not without possible disadvantages such as:
1. Profits from the sale of investment properties held less than 12 months are taxed at ordinary income tax rates. However, when a flipper holds title more than 12 months, then the sales profits are taxed at the long-term capital gains tax rate, currently 15 percent or less, plus applicable state tax.
Of course, if you own and occupy the property as your principal residence more than 24 months within the last 60 months before selling, then your profit up to $250,000 (up to $500,000 for a qualified married couple) is completely tax-free. Home sellers who repeatedly sell their homes every 24 months are known as "serial home sellers."
2. Some flippers don't enjoy the work of fixing up property to add market value. Serious flippers quickly learn do-it-yourself work wastes time and money. The smartest flippers hire professional contractors. However, obtaining cost estimates and supervising workers can be time consuming.
The goal of every property flipper is to add at least $2 of market value for each $1 spent on cosmetic improvements. Wise management can often orchestrate improvements on a typical house to completion within 30 and 60 days.
3. Fast flippers who sell quickly after completing their added-value improvements forfeit long-term market-value appreciation, which has averaged about 5 percent annually, according to the National Association of Realtors. In recent years, this annual appreciation was even greater.
CONCLUSION: Flipping properties for resale profits is a great way to start investing in real estate. But flippers should be aware of the pros and cons of this profit opportunity, including the income tax aspects of long- and short-term profits. A valuable resource is an excellent new book, "Flipping Properties for Dummies," by Ralph Roberts, available in stock or by special order at local bookstores, public libraries, and http://www.Amazon.com."Being a cowboy aint all ridin and shootin" - Tim Mooney
excellent points, thank you for responding.
i am not sure if i agree with all of the statements however, some sound a little "generic" ?
avoiding foundation or structural repairs that don't add any value?, in a buyers market i would imagine it would be difficult to sell a house that wouldn't pass the most basic of structural inspections, so you should be able to buy that home for quite a bit less than market value, and if you did the repairs it seems that you would then have a house that brought back up to market value as well as adding the paint! ( i cant imagine a house needing structural or foundation repairs and not needing paint the number 1 money maker according to post from newsletter.)
and the part about flippers not enjoying the work, smart ones hire pros, hello!!! i are a perfeshunal cunstrukshun werker! don't get me wrong, if i have a contract that is paying me $300 a day to be onsite i may be money ahead to hire someone else to labor at my flip, but it is what i do, and i specialize in foundations and structures! or at least those are my strengths well that and being a plumber and electrician and cabinet builder and well you get the idea, in fact painting is the thing i would probably sub out, that and drywall mudding. i'll hang all day but i need to find a mudder! i am not a concrete finisher either, although you will be hard pressed to find a better form setter.
the point is i want that job, i kill two birds with one stone that way, i labor and manage all at once, plus if the numbers work out and i can carry it for 6 months and the property goes up i reap a little appreciation out of the deal. in fact the ones that nobody else will touch are perfect for me, bargain bargain bargain!
i would like to know what the newsletter is that you are referring to in the post, they make some very good points besides the ones i dissect.
Hope this hasn't been covered already but sometimes when there's "slim pickens" the investor has to look at things they typically shy away from:
Homes with Mold
Fire Damage
Basement walls caving in
Foundation Damage
Asbestos
You know what I mean? The houses the "amateurs" don't want.
good luck!^^^^^^
S N A F U (Situation Normal: All Fouled Up)
yes thats the point, when the market is already low, and normal houses are having a hard time selling you would think excellent bargains on those having major needs.
You probably know this already but in case it's not obvious to others... I love doing the work and not much I won't do, but if I can hire somebody to do the work faster as well as release me to do other stuff, it's often cheaper elapsed-time-wise and loan-interest-wise to farm it out. Each aspect has it's own calculation while knowing what you're spending daily on your loan costs & time-to-market Vs how much your saving by doing it yourself.
yes i agree, thank you. you have to write it down and compare calculations, let the numbers decide.
some sound a little "generic" ?<<<<<
you're right. It's free.
http://www.bobbruss.com/
Some of his stuff may be helpful.
"Being a cowboy aint all ridin and shootin" - Tim Mooney
hey there was some good stuff in there too, thanks for the name. i'm sorry i should have written up the good points not just the bad.
i have heard that free advice is worth every penney!
"Flipping Properties for Dummies," by Ralph Roberts,
Ralph Roberts is an interesting character from my neck of the woods (Warren, MI). I've got one of his books and I'll be ordering this book.
I was at a seminar about entities and asset protection when I met Ralph Roberts. At that time, he was already legendary in the real estate business and I was surprised to see him in a seminar that I'd think was old stuff for him. I asked him what he expected to learn in here and he excitedly told me that he had picked up one idea for partnering with the many small time investors that came to him for hard money for their own rehab projects. Ralph not only buys and fixes properties but he also lends money to guys like me that might get involved fixing them. One problem that he routinely was facing was that the houses sometimes took longer than he'd like to get fixed up and he was going to use some entity structure to maintain possession of the houses he lent on, and if the borrower failed to get it done in a reasonable time ( he would allow six months), then he would simply take it over via an excercise of an option and finish it himself!
Smart man.
Interestingly, the reason I first bought Ralph's book was because I spent considerable time reading a different one by him about marketing. He was a marketing fool and still is.
One of his marketing ploys: when the host of the seminar announced that they would break for lunch, he mentioned that the hotel had hot lunches available for $8.00. Ralph immediately stood up and bought the entire room a lunch! As we all came back from lunch and individually thanked him, he handed us a copy of his current book, which was "How to sell you own home faster" or something like that.
I like to tell this story because it shows how different someone in tune with marketing is, compared to us ordinary guys. Raplh is indeed a master promoter and a very successful real estate investor. He buys and sells anything....slums to farms. I found him to be a very personable and interesting guy.
Sadly, he recnetly lost a 16 year old daughter last summer (or maybe the summer before) to a JetSki incident (drowning) on Lake St Clair. I remember him talking about learning how to have two separate houses eligible for a homestead tax credit at the seminar we were at. One of the homes was on the water which obviously turned out to be tragic for him.
blue
"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
I thought about reading that book, too. So many of these RE books are just sold to make money off guy's who think they can read a book and make a killing. THat one may actually be worth it.
Please let us know what you think about it.
"Being a cowboy aint all ridin and shootin" - Tim Mooney
I will do a book report.
I noticed you mentioned Bob Bruss. I've read some stuff from him too. I like Bob's stuff too. All of it makes some sense, depending on your R E goals.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
I'm looking forward to that book report.
You pick up on a lot of angles that go over my head but that I appreciate after you expose them.
"Being a cowboy aint all ridin and shootin" - Tim Mooney
You pick up on a lot of angles that go over my head but that I appreciate after you expose them.
Thanks IC. Thats a truly inspiring comment!
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
You've already gotten some good input, and I'll add my 2bits.
There are good and bad buys in all markets at all times.
The best success comes from the hardest shopping. If you buy more than one out of several houses you offer on, you are offering too much. If you run into a realtor who doesn't seem responsive to your low-ball approach, get a different broker. You might try working with someone relatively new to the real estate biz who is a bit hungrier than the established brokers.
Another way of looking at it is that you make your money when you buy, not when you sell.
Do your homework. Look at dozens of houses. If you don't have a real close idea of what a house is worth TO YOU as soon as you look at it, you haven't done enough shopping. Think of it this way: What if, by shopping really hard and walking away from lots of deals that weren't terrific, you could eventually pay yourself $200 or more, per house that you looked at, from the excellent buy that you eventually got?
Good luck!
"Doubt is not a pleasant condition, but certainty is absurd."
~ Voltaire
the best success comes from the hardest shopping, thank you, good stuff.
i don't think it matters what house you buy on the beach here, teardown, needs only paint, needs nothing. if it has declined and a buy in can be timed to coincide with the correction back up in value, a short hold, 6 - 8 months (is that a flip or speculation?) to sell after said correction may net a 30% - 40% gain. of course these are just numbers i am guessing about, its hard for me to explain the feeling i get of what the market will do in concrete terms. it will be very interesting to see if what i think comes to pass just as i describe. this has happened to me before, i have forseen the future but it was still scary to plunk down the money. one lot i bought in california (2004 - 2005) for 35,000 sold ten months later for 95,000 was definitely the result of hard shopping and homework. is that a flip or spec?
i definitely think Tim Mooney's market is a smarter investment, as long as it rents you can hold with little negative cash flow and reap the rewards of equity over time.
i guess i was just asking if anyone else could explain investing in a volatile market that might make a big change with no safety net of decent rent if you have to hold. it doesn't sound to good to me when i put it like that.
I think you are talking about relatively pure speculation, not that it's bad or anything. I understand, since my hunches are part of the decision making process, too.Our market is so different that most of the US that I wouldn't know a thing about a beach house. We just don't have them here at 6,200 feet. ;)My bud closed on his latest project this week: Trashed house with a bit of style, two masonry fireplaces, a small garage, 1500 sqr ft on an 8,000 foot lot, needs new plumbing, wiring, all surfaces, but the frame is straight and the price is $20,000. He'll probably wind up selling it for $120k.Small potatoes, as my dad would say, is what our market consists of.
"Doubt is not a pleasant condition, but certainty is absurd."
~ Voltaire
I liked rich dad poor dad books and his pbs show, But he sells an idea but try and look for details, Its pretty much buyRE cheap through different methods sell higher, Its as though hes explaning how to frame but never telling you about trimmers and headers, I looked on his forum and i remember hes talking about getting out of RE into gold or the next big thing, next on flliping here your gonna pay full price on RE, your not gonna beat realtors to a deal or get a property for 60 percent, And your not gonna get foreclosers or courthouse deals, Maybe other places in the country but not here, Only way i came out was buying and holding , Yes i did get one house cheap but i knew the guy and it needed a foundation, roofing, windows,everything, How many guys are like me that can do all the trades, I know a lot of you are but it would never pencil out hireing all those trades
But he sells an idea but try and look for details
You are right Bobbys, he doesn't give details. He does explain concepts and it's up to each one of us to understand the concept, then apply to whatever method we choose to advance our economic standing.
I think it's unrealistic to expect to find the answers in one book, or author. If it were that simple, everyone would be zillionaires. Kyosaki is one author of about thirty that I would recommend.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
i guess i was just asking if anyone else could explain investing in a volatile market that might make a big change with no safety net of decent rent if you have to hold. it doesn't sound to good to me when i put it like that.
That is an intelligent assessment that deals with the risks of the different types of investing! Congrats on that reality.
Here in MI, I've been dealing with that same assessment and have passed on "deals" simply because assuming the risk was too great. There are strategies and tactics that manage this type of risk. Using partners is the easiest way.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
In all my life I have never flipped or owned a rental. I have on the other hand turned raw land and made several handsome profits.
No matter the deal. One thing will always remain constant. The money is made on the buy, not the sell. If they buy conditions are right, your getting a check at the other end. Good or bad market. It's all in the buy.
Even in the worst market, there is money to be made. The problem I see right now is that too many of the desperate sellers were not long ago desperate buyers and overpaid for what they have. Therefore, they can't be "Motivated" sellers. Not yet anyway.
But, several people I know bought anyway with the intention of flipping. One guy did it just because he couldn't convince his wife that the market was turning and she was watching six shows a day about it. He finally gave in. Couldn't hold out another day. Probably gonna cost him $30K.
But time is on my side. I've been watching a few pieces of property bought a while ago by people who are now over extended. Sooner or later they'll be for sale. And,18 months from now? I'll be cashing one of those checks. And I ain't gonna paint or clean a thing.
Robert thats pretty well part of what Ive said here .
We open up the champange when we close on a property, not sell it .
We know exactly where we are at when we close a deal. We always figgure the modest of a gain and that has to be enough to triggure us . If we get the high side then all the better and look at it as a gift.
Mostly the numbers have to work before we make an offer and being that we buy mostly possible rentals we also know what they will pay back if they are chosen to be in our group of rentals which is a double play.
So not only does the modest flip numbers have to work but the property also has to pass the rent return test. If a property does both , we are all in and quickly.
Ive been at a lot of auctions and could not get it done because I went there with a number . If that number doesnt do it , I walk away to the next one . Theres always another one and sometimes there is better deals that follow. Theres always another ugly property that wont sell.
I watch properties too .
Tim
excellent robert, excellent.
that is just what i am looking at, i am watching a few pieces that will be for sale at the bottom of the market, even if it goes down for another 2 years here, and then after a rebound will be an instant large appreciation.
i think the key to this is timing, if it does come to pass like we have described. i want to buy in before it starts to go back up, but not to far before as the cash flows here are terrible.
Not sure if this has been covered but financing investment properties is a big part of your game plan.
Some (not me) are in a position to pay cash.
Others get bank financing but you've really got your work cut out for you if you're new or in a position that your only option is 20%-25% down bank financing.
This can be a killer as it's a big chunk of money out of pocket.
A third option is what I wanted to tell you about.
sometimes we've made an offer and the Seller won't come down on price. (this is plan A)
We step back and look at it and either walk away or we go to plan B.
Plan B is agree to pay the sellers price ONLY if the seller will finance it with no money down.
Some will do this and some won't.
It can really make a difference if you can get in with little or no money out of pocket.
good luck!^^^^^^
S N A F U (Situation Normal: All Fouled Up)
Damn, you guys are good negotiators!
LoL^^^^^^
S N A F U (Situation Normal: All Fouled Up)
Others get bank financing but you've really got your work cut out for you if you're new or in a position that your only option is 20%-25% down bank financing.
No one...and I mean NO ONE, is in a position that their only option is 20-25% bank financing. Of course you already know that because later in your post, you discuss owner financing.
Your tactics: Plan A and Plan B are not fundamentally flawed, but your presentation is. I would suspect your success rate would be 10% of how Peter Conti does it in his four step instant offer. If you haven't grabbed one of his books, and you are out making Plan A offers and Plan B offers, you owe it to yourself to give him a quick read. If you don't do anything, just go read that chapter in the bookstore.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Thanks Blue, I'll check out the book - I've been buying books at a used book store and I'll check it out. Thanks for the Tip!
This was a conversation I had recently. I talked to another realtor and she is flipping houses. I said "where are you getting financing?".
She gives me a name and phone number and says "Tell Joe I referred you".
I say okay and call Joe and our conversation goes like this:
Hi Joe I'm interested in 100 percent financing for real estate investment properties, can you help me?
Joes says, "sure, what's your story"
I say, I'm self employed and my credit score is 760. I have no debts. No car payments, no credit card debt, no student loans, nothing.
Joes says "Lets do business".
I say, well I have one glitch.
Joe says" Oh, what's that".
And I say "I'm interested in a stated income loan".
Joes says I can do that but even with your good credit, our policy is that we can only go 80 LTV (meaning I must put 20% down)
I say thanks Joe but I'm going elsewhere. Do you know as a realtor I get emails everyday from banks with zero down financing for investment properties?
Joe says "Yes I know that but I can't do it here. They won't let me".
The End
Anyway, thanks again for the info Blue on the book and I'll see if I can scrounge up a copy.
^^^^^^
S N A F U (Situation Normal: All Fouled Up)
not trying to be an ####, but if i was Joe, and you called me and told me you get emails everyday from others offering you these deals... i would have asked you why you are calling me..
I understand about the need for the 20% of stated income Mr Fixit, but my point is that if you have a real deal, that 20% can be raised from alternate sources, perhaps a guardian angel?!
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
And I say "I'm interested in a stated income loan".
Joes says I can do that but even with your good credit, our policy is that we can only go 80 LTV (meaning I must put 20% down)
Stay with me till we get done with this please . Ill see if I can help.
What is a stated income loan?
I can guess from the seccond comment that you are asking for a 100 percent loan. Is that what stated income is ?
Tim
Are you self employed? or do not have documentation of earned wages to state a wage and qualify for a mortgage based on that stated income?.
Or, If you just don’t want to jump through all the hoops and provide all the documentation required for most loans, then check out our No Income / Asset verification programs.
The advantages to a stated income loan are that the borrower does not need to verify income and approval is generally faster than with traditional loans offered by most mortgage institutions.
So what is your situation?
Tim
The disadvantages to this type of loan is that interest rates are often higher and the down payment required for the loan is also typically higher than with traditional loans because this type of loan is less secure for lenders than traditional ones.
To get help calculating your stated income amount contact one of Custom Construction Financing representatives and let us help you get the loan application process started. Also see Sub Prime Loan information for those who may qualify.
Tim,
I don't have a house I'm wanting to buy right now but in the past when I think I've found something that will work, I immediately start shopping for the financing.
I get things about home loans in the mail or see something on TV or I get an email or I hear about a program from someone else. Things change everyday.
Lending is very competitive. They want business and they want to make loans.
Stated income loans simply involve listing your income on the loan application with the understanding the bank is not going to verify the amount or ask for documentation.
In return for this, you pay a half a percentage or even one percent higher interest rate.
I'm also in a situation where I have been very aggressive at "expensing" as much as I possible each year on my tax return.
This hurts me when I apply for a home loan and they ask for a copy of my tax return.
It's my understanding stated income loans are very common for people who are self employed.
Am I on the right track?
I'm always looking at ways of financing fixer uppers with no money down and with the understanding that I will buy the house and then get rid of it and pay off the loan as soon as possible within a few months or up to 6-7 months later maximum.
I'm not buying the homes to be rentals. I won't be keeping them long-term.
Do you have any suggestions for me?
Thanks!
^^^^^^
S N A F U (Situation Normal: All Fouled Up)
I forgot to answer your question. Yes, I am self-employed.^^^^^^
S N A F U (Situation Normal: All Fouled Up)
Im gonna type this for everyones benifit . I believe carps should do this and I now see part of the problem. In fact I believe its a big part of the resistence to it . Im afraid Ive learned more from your post than Im going to learn you <G>
I see the problem in multiple here on this board.
Im not educated enough on this issue since I dont have that problem exactly. My income is expensed with the rentals .
I told someone today and two days ago that I couldnt have done what Ive done with out my wife and she would say the same thing about me .
She shows the income of support while my gain of assets isnt listed as income . Its pretty simple really . I wont show the income unless I sell it and at that time I will be taxed for it . Until then its not income . Thats one of the best reasons for doing it but this isnt what you want help with is it? The fact is though that rentals are a tax shelter unitl its sold . My case and not yours?
Restructure your earnings where they are shown. I dont see how a carp can buy and sell property full time with out being self employed so a spouse can change things.
On the other hand , I agree with Blue , what he offered is a good deal. If you lack the financial backing to swing the 20 percent or a lack to offer assets of it , then I question what you are thinking . Im sure the guy couldnt do it any different because of law . You are right , they want to loan money but under these circumstances Im sure they can not.
DW and I together bring to the table a means of support plus assets to secure the loans . Theres another two things they keep talking about is our credit history with the bank and professional ability in my field .
They want a track record of accomplishments that in their system.
They have seen me in action by seeing loans get paid off when I flip and I have a lot of loans that get paid on time . I dont know off hand how many loans we even have at the moment but its a bunch.
They ask for a report every year on our income and assets. Known as a financial statement . While I dont think its necesary they do . I think its legal requirements expected of them to get from us. I know them well enough and Im sure they are comfortable with me enough that they dont want that report personally.
Maybe because we are showing income on the financals , or maybe not ;
They will loan up to 80 percent loan to value . That means if I want to buy a 100 thousand dollar house by appraisel for 80 grand they will loan me the 80 grand . Or you could say on a loan like that , they will loan me 100 percent of the loan as long as its 80 percent loan to value or less.
That suits me fine because I would never buy a house and pay over 80 percent LTV . Its not happening .
I hope somthing there helps because I think this guy needs what hes asked for and now its your job to work with the details one way or another.
I think Ill make another post now for another subject.
Tim
Blue will disagree with me on this one but we do it and easily get past it .
"Buying from a homeowner with nothing down".
I have been approached about a property I own that sits empty. I cant count the times Ive had calls about the property. Even a well to do man called and asked about it . I dont want to sell it but they persist. Over and over .
Ive been caught there on several occasions because I have a warehouse on the property that I use and thats the reason I dont want to sell . It also has a house thats vaccant on it and thats what they are after.
I decided I would sell the house alone if I could keep the other property thats with it including the warehouse. I started listening to offers both in person and on the phone . Ill also note here that I want cash up front and closing in two weeks . I want that because I know all about goverment loans and this excludes them being able to buy it if they are trying to buy it that way.
None of the offers Ive listened to had any money much less cash to purchase it . I would say they bought a book, went to a seminar , or they have been watching too much TV on the subject. Anyway, Ive been asked many times to sell the house to them and carry the paper with O down.
The house is worth 80 grand says my realtor . Id take much less than that because the value I have in the property is the warehouse. By not renting the house, I control the whole place but I would sell the house cash for 50 grand with restrictions of holding the drive open for my use too. No takers yet.
Everyone I talked to would give 70 grand for the house alone if I carry it and let them have it for O down.
The honest truth is I look at that and they have offered me absolutley nothing.
My daughter called me one day and asked about leaving an offer continguent on selling her house she lives in. I laughed and said well you dont have anything to offer . She thought she did and was a little upset at my response . So I explained it ;
First you dont have any business offering anything on any house unless you have money to bargain with in form of a loan or otherwise that you can deliver into their hands. Otherwise you have no bargaining power so you would be paying too much. You cant move till you sell your house anyway so why waste both of your time ? However you can do what you asked about but its worth what my coffee today is tomorrow that I drank today. Nothing.
Second you must realize what they will think about your offer . Anytime you present a deal you must think about how you benifit them requardless of your feelings you must look at it from their point of view. She said you are right , I havent helped them one bit but I want it .
Tim
Interesting.
I learn a lot reading about your experiences with your rentals.
Thanks for the info.^^^^^^
S N A F U (Situation Normal: All Fouled Up)
Tim, you are right....we are going to disagree on this.
I view your daughter offer as a meaningul offer and I would accept her offer on a property that I own, provided that the other terms of the offer were acceptable.
I would also give you 50k for your property, and be willing to accept the offer from the fellows offering 70k. I don't know what they'd offer to secure the deal, but I'd be looking at something of theirs that I could go claim if they defaulted. A good Schwin bike might be enough....it all depends upon the terms you and I agree to when we settle the deal for our 50k home.
Oh by the way, I'll probably need a little extra time to do my due diligence on your piece. I'm not opposed to giving you 50k cash in two weeks but I'm kinda slow and I'll need considerably more time to study the situation, mostly because I have to research the laws regarding that complicated split and easement request.
You seem to be a reasonable guy, you're not opposed to me studying the laws of your county so we both know what were getting into, are you?
What I'm saying is that there are a lot of different types of buyers and sellers with different types of time frames and needs. Yours might be different than mine, just like your daughters ideas are different than yours. She made a good and valid offer but you're not the type of buyer that would accept that. She made the offer to the wrong seller!
Everyone I talked to would give 70 grand for the house alone if I carry it and let them have it for O down.
The honest truth is I look at that and they have offered me absolutley nothing.
This is where I vehemently disagree. If you are carrying it, then they owe you interest and payments. They are offering you an income stream. I'd call that something more than nothing.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
vehemently disagree.
Where did that come from ? LOL.
Blue its still absolutely nothing . Heres why;
I cant rent the house for 600 per month and I can be landlord telling them what I want them to do and not do. If they resist , they are down the road , hidie hogh.
I can run it next week in the paper and get a grand in rent and deposit and sell nothing .
I would already be getting what they are offering but I would have full control and security of my asset. If they bought it for "nothing " , they could run a trash dump and paint the house pink.
Yes I realize it takes time but when we sign an offer together it will be two weeks for a cash closing. I think we been here before and I knew ,,... LOL.
Tim
If they bought it for "nothing " , they could run a trash dump and paint the house pink.
If that is your concern, you could ban that in your contract language. I'd suggest qualifying your buyers a bit better and if they seem a little shaky, add a couple of large ones on the selling price. Also, ratchet up the interest rates a bit. If they pass a credit check and perhaps are just a nice young family looking for a place to raise their brood, then sell it at normal rates.
Remember, you can't take it all with you. Also remember, when you're the landlord, you have to do something. When you sell it, it's theirs. You do own the income stream from the note though...so make it a good one.
If the note performs for a year or so, you can sell it for cash if cash is what you need/want. Some people refuse all cash because of the tax consequences. I suspect you are in the same boat.
I don't know...all I know is that zero down usually doesn't mean that the buyers dont' pay the seller anything at closing...it means that the buyers find OP money (banks, etc) to pay for the property at closing.
Why might someone like you sell on contract? Becaue you might be thinking of buying something on contract and using your property in a 1031 exchange. I don't know...all I'm saying is that an offer is an offer and only an old curmudgeon like you will reject it simply because it's not an all cash offer.
blue, who's brown now "...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
83749.99 in reply to 83749.97
Tim, you are right....we are going to disagree on this.
I view your daughter offer as a meaningul offer and I would accept her offer on a property that I own, provided that the other terms of the offer were acceptable.
I cant wait . What are your other terms that you would take your house off the market and wait on her with out any money or assets? Cause she aint given none up . lol.
Tim
What are your other terms that you would take your house off the market and wait on her
I wouldn't take the house off the market and I wouldn't wait on her. I'd have a clause that allowed me to force her to a two week cash closing or let her walk off and let me sell to the latest offer. I think they call that right of first refusal or something like that.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
What are your other terms that you would take your house off the market and wait on her
I wouldn't take the house off the market and I wouldn't wait on her. I'd have a clause that allowed me to force her to a two week cash closing or let her walk off and let me sell to the latest offer. I think they call that right of first refusal or something like that.
That to me is nothing . Blue please remember a saying that I use all the time ;
In God I trust , all others pay cash .
I believe in that. I havent been swindled one time when going with it .
I dont take , "I dont have any money " for an answer that is worth a sorry cup of Folgers coffee . Its not good enough for me . Only cash makes me react in a positive way. Theres no checks in the mail with me and Ill not be honoring any empty offers. I would just as soon my competition deals with those people .
You have to demand what you want in life before you can expect it .
Tim
That to me is nothing . Blue please remember a saying that I use all the time ;
In God I trust , all others pay cash .
Tim, I thought you were talking about an offer that you got from your DAUGHTER that wanted to have a contingency clause in it.
I can understand why you'd want to have the mentality that you'll only accept cash and will only entertain a cash offer. Everyone has their preferences....but that's not the reality of the marketplace. Yes, a good percentage of people are just like you and there is nothing wrong with your position. You won't go wrong but you will be eliminating a substantial portion of the marketplace and some of that marketplace are solid buyers.
The last time I sold my house, the guy kept wanting to include a very vague escape clause. When I first read his offer, I kinda laughed and exclaimed that the offer was basically non-binding and he'd have to re-write it. When he came back with the re-write, it was again a non-binding contract with the same escape clause. I gave it about ten seconds thought and accepted it because it was only going to "tie it up" for a short period and I felt that I really wasn't going to lose any potential sales anyways if the guy backed out ten minutes before closing.
We closed and he owns the house. I got my cash.
A contingency deal is just like that....it's contingent. Every buyer should have some form of contingency or escape clause written into their offer, if only to do their due diligence period. I would be willing to make an offer to a guy like you, that will only take a cash offer, without escape clauses....but my offers will reflect a marketplace reality....there ain't many buyers that will make offers like that. Thus, my offer will be extremely aggressive.
I would suggest giving your daughter some slack. With a signed agreement, loaded with contingencies, it might give her some incentive to come up with the required capital. Perhaps you might be some inspiration to her in a way that you've never thought of. If she closes the deal, you win and so does she. If the deal doesn't close, you're in no different position than you are now...the house is still for sale. If a diferent buyer comes around and buys the house, it wipes out the contingency deal anyways.
I just don't see why you'd want to be so stubborn if you're dealing with blood relatives.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
I am going to read through these again. You and Blue have a lot of background and it's good information to have.
I don't know how frequent "Owner Finance" occurs nowadays.
Probably a real estate statistic I could find if I started digging around.
Anyway, I was thinking about some of the things I've been around and I thought of a couple of situations.
My mother is not a real estate investor. She was married three times and there were situations where there were houses to sell as part of divorce settlements.
Anyway, she sold one house & a small diner to an employee at the diner.
The employee could not get financing and mom financed it to her at 10% interest.
This was around 1990 and Mom received every penny she was owed.
Mom had another situation with owner finance.
She sold a house, seller finance, to a doctor.
He turned it into a medical practice.
I don't remember why, but the doctor wanted her to finance this deal and mom did and got every penny.
I think the Doctor was young and just getting started.
Mom had one other situation.
She had a house in a resort area (in New Mexico).
She is not wealthy but she did have a second house near a small lake.
Nothing fancy. It sat for a year and she couldn't sell it.
The price was around $100 K.
After a year she finally found a buyer.
He was a wealthy guy who owned a large car dealership and he wanted her to finance it for a year or two and she did and he then got bank financing and she got out.
These owner finance deals probably happen all the time.
^^^^^^
S N A F U (Situation Normal: All Fouled Up)
i have to admit that i too am studying this like a book, clearly there are two different points of view here, and there are probably additional different points of view that are valid and profitable.
from my perspective it looks like the difference is that blue is willing to be a little more adventurous than tim. nothing wrong with either stance. this explanation may be oversimplified, there is more to it than just one being slightly more conservative than the other, i think they are perhaps in different stages of life with different goals.
i would also like to join that club that you speak of mrfixitusa, i have also agressively expensed and have little to show on tax returns.
with no money of my own to invest on a property how can i find a "guardian angel" to finance a project.
what can i expect to make in a situation like that percentage wise? it seems to me i have heard mentioned in this forum (not this thread) that the money man will want 50%. is that a reasonable expectation?
let me state the obvious, my job is to find a property in need of rehab at a good price (the money is made on the buy) and outline repairs/improvements to be made, cost and time (present a "business plan" on the prospective property) to the investor.
investor will provide money for property and repairs to be made, i self perform some work and sub-contract some and the split is? here is what i don't get. why would any investor do this? why not just hire someone to find them, (house hunter) and hire a contractor to perfom the work. why split anything with anyone?
is there something i am missing here? i can see where there might be some jobs in a project like this but not any profits if you are not providing the money.
Have you any equity in your own house? Probably a dumb question since you've already stated that your area took a dive right after you bought, but is there any? I use a HELOC (home equity line of credit) to get a project rolling.
50% to the money man is what I would expect to pay for using his money. Not that I like it but that's what the people I've talked to wanted. Didn't use them becasue of it.
50% to the money man is what I would expect to pay for using his money. Not that I like it but that's what the people I've talked to wanted. Didn't use them becasue of it.
That's what sent me looking for a bank. I've had a few guys tell me I can have all the money I want. But they get 50% of the profit. Some don't want to do anything but write and then collect checks. But other ones have "Ideas" about how a project should go.
Turns out small banks are better than big ones and either is better than a silent partner who has no idea about what's going on but wants to help with day to day decisions.
ok now let me get this straight, i find a house that needs work and undervalued, present a proposal to the money man outling cost to buy, cost to fix, time it will take, expected selling price when complete, and you know someone who will do all of this for 50%? that is if i pass muster as a builder and reliable sort, good credit record no felonies etc etc?
now at the same time, right up front, i hire myself as the general contractor to self perform all structural (concrete, wood, steel) as well as plumbing, electrical, heating & air, finish carpentry, setting (maybe building) cabinets, and maybe hanging drywall & roofing depending on circumstances. sub-contract and supervise pretty much everything else.
i will need bi-weekly draws to pay both myself and subs, and if there is a profit after job is over i get 50%? does anyone else in here see how this is way better than just contracting to do the job for the set amount in the estimate plus extra's as they arise with 0% profits when you are done and no additional risk? well you may have a profit built into the bid but it won't be 50% or you won't be getting the job!
where do i sign up? please introduce me to the man who made you this offer as some character you met online and let me try to prove myself. you will have my eternal gratitude. P.S. i will travel anywhere to perform this work, serious.
i know just how to deal with the not so silent partner, no problemo!
You'll never find one that simple.
you'll be expected to run the whole job and NOT draw a check. then, when the job is done and sold you get 50% of the profit as your SALARY and your PROFIT. Keep in mind, you did ALL the work and got 50% of the reward.
Here where I am there is an older realtor who has been around for awhile and you can go to him and he will line you up with an investor.
If you meet an investor, you will tell him you're wanting to borrow money from a private party in order to flip houses and your question will simply be as follows:
"I would like to borrow money to flip houses, would you be interested in loaning me money, and what kind of interest rate are you looking for?"
Do not expect him to say 6 or 7 %
I ran an ad in the paper saying I wanted to find private party financing and didn't get anywhere.
However, I've seen other people do it and they may have got a bite.
What about asking around and seeing who's loaning money and then go from there?
Are you going to need a realtor to be part of this operation?
If so, get hooked up with them and see if they can steer you toward private party financing.
Good luck!
^^^^^^
S N A F U (Situation Normal: All Fouled Up)
thank you robert, yes i knew it could not be that simple however i feel the the way you outline the deal between investor and contractor is way too one-sided in favor of the investor, in fact in a slow market (if it does not sell quickly) carying costs may eat up all the profit! of course you can always hold and rent, the key to making all of this successful is to buy at a very very low price, (the lesson of this thread repeatedly beat in!) thank you.
the way i outline the deal is way too one-sided for the contractor, no contractor would ever work any other way if those deals were available, there must be some middle ground.
i am extremely frustrated in that i can't seem to be able to get a foothold, the financing costs keep me from showing a profit other than wages, good wages if market is good and timed accordingly, bad wages (according to projections) if the market is bad, and bankrupt if the market is bad and timed bad accordingly.
Anyone I know who has made a livimg doing this, had one big hit that left them flush enough with cash to work out of pocket................OR.....................has one of those 50% partners with enough cash to be working four or five at a time.
am extremely frustrated in that i can't seem to be able to get a foothold, the financing costs keep me from showing a profit other than wages, good wages if market is good and timed accordingly, bad wages (according to projections) if the market is bad, and bankrupt if the market is bad and timed bad accordingly
One of the rules of real estate dealing is fixed in stone: If the financing costs are too much and the deal isn't a deal, then you never really had a deal to begin with.
Paying for a deal on a credit card at 18% sometimes makes sense. The key is to buy the property right and get it available at a price that will sell...fast. That will take an extremely low offer in a down market. So...what's the problem? The problem is that you are afraid to make lots of extremely low offers! I don't blame you...I wouldn't want to get the door slammed in my face over and over and over and over...but that is what it will take.
Or, you can devise another tactic...one that brings your buyers to you. That is where most sucessful flippers start. They entice the motivated sellers to contact them, then make offers that they know they can execute and make a bit of cash.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
You'll never find one that simple.
you'll be expected to run the whole job and NOT draw a check. then, when the job is done and sold you get 50% of the profit as your SALARY and your PROFIT. Keep in mind, you did ALL the work and got 50% of the reward.
Not true at all Robert!
It's unreasonable for a money lender to think that someone should work all week and not earn enough to eat and pay their bills. If I'm a lender and someone is trying to get me to finance a project, and they don't include a way for them to survive, I'm going to assume that they'll starve to death. That is a sure sign of failure.
It is true that you'll never find one that simple if you don't offer it. Remember the wise words : Ask and Ye shall receive.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Not true at all Robert!
I don't know Blue. Maybe it's a regional thing. Around here anyone with a trade background is just a mule to make money off of.
My father travels in some pretty well heeled circles because of my mother's position. We've found plenty of lenders, but 50% of the gross take has been the standard.
Then too, there is no shortage of fools willing to do that. So why would someone offer or accept 2 or 3% over bank rates.
Catch 22. It would be cheaper and easier for me to deal with a bank. Probelm is, the credit line I can pull puts me in a pretty slim margin price bracket.
I would need to put up about four or five signed for personally but as a business and then I would be good.
Around here anyone with a trade background is just a mule to make money off of.
The difference is that you are shopping your trade background and in my thinking, I'm holding the paper to a profitable, viable project and I'm shopping and income stream, or some hard cash from a flip.
I'm not at all saying that taking a job and only earning 50% of the profits is bad...sometimes 50% of the pie is better than 100% of nothing, but every deal should be shopped on it's own merits.
At the minimum, every tradesman should be paying himself contractors wages, as they are incurred and the profits left at the end of the deal are split in some form. I think only tradesmen would pitch a deal that didn't pay them for their time...after all, trademen are accustomed to thinking that their services lack value. I think that idea is taught in Carpentry 101.
Just because some succumb to this thinking, doesn't mean it's done like that all the time. It isn't.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
If your business plan results in 0% profit, I don't think anyone will sign up. That doestn' make sense. IF that's the case, you failed to buy it right.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
50% to the money man is what I would expect to pay for using his money. Not that I like it but that's what the people I've talked to wanted. Didn't use them becasue of it.
Thats just too simple of a supposition. And it's dead wrong.
My son in law visited an old guy in Punta Gorda that was thinking of selling his 125 properties. He said he got started back using private money. To raise his cash, he ran a private ad in the newspaper and made contact with a guy that was willing to loan money on good properties for about 2% over the going mortgage rates. He's used the same guy for financing for decades.
Everyone that has money has different objectives, goals and fears. Some feel that owning real estate is safer than the bank or stocks. Some save in the bank and bankrates and if they can invest at 8"% they'd be very happy. It all depends on the financiers situation. No one should assume anything.
blue "...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Step one is to establish your baseline. In other words get a figure for what bank financing would cost you and you will use this to compare with other sources of money.
Get a Good Faith Estimate (GFE) from your bank where you have your checking account.
Or just go to one of the big mortgage co's like wells fargo, bank of america, etc.
When you talk to the banker she will need these numbers to punch into the computer and print out the GFE to FAX to you:
Your credit score
Purchase price
Amount financed
Monthly premium homeowner's insurance on the investment home
Investment home property taxes per month
Good the GFE and calculate the amount bank financing is going to cost you. Don't forget to include your monthly payment (what you will pay per month until you sell the house and get rid of it) and
calculate the total amount "out of pocket" for financing^^^^^^
S N A F U (Situation Normal: All Fouled Up)
from my perspective it looks like the difference is that blue is willing to be a little more adventurous than tim. nothing wrong with either stance. this explanation may be oversimplified, there is more to it than just one being slightly more conservative than the other, i think they are perhaps in different stages of life with different goals.
When I got started I used to go to the bank hoping they would accept my proposals . After a few trips with the information from answers it was clear that they had rules of engagement for their loans .
Through that I learned that they were conservative . Thinking out every thing they told me it all made sense on a road paved with saftey. Carefuly reading their contracts I saw that if somthing bad happened they had alternatives that are mapped out clearly.
IMO, a good loan officier cant be burned . There is an extreme of one who is too conservative which gains no new business and a hot dog that gets his bank in trouble . Still I get along with the middle of the road type pretty well. There still comes times when I need to be trusted but thats a sticky situation for them with out holdings. While its not poker , its still loaning money and thats always has its risks.
I patterned my style to them since I had no close mentor at the time . After all they were the people with the money. They were in the business full time of handling money. Rather than take a negative approach to what I disagreed with , I studied their adavantages.
Basically it comes down to a few things for me ;
Any time you borrow money you are risking somthing you dont own and that should be scary. If we were all that good we would have our own money. Since we dont it shows the lack of a successful track reccord or we wouldnt be talking about this subject.
I often think about the Texas Holdem tv shows playing poker where one by one they are eliminated. Thats very scary to me in business . It always has been for Ive always had a fear of starving . Ive always had a fear of going broke being elimintated. So after a sit down of my approach which has been questioned here Ill share some of my thoughts on it .
When I started I didnt have any money. Thats right . When I made up my mind this is what I wanted to do I could not finance it . I began with a plan of putting money back and starting with small purchases. I made a business plan and stuck to it like an awful diet.
One play I used in my head many times is this ; I dont have any money so therefore I cant afford to lose any. There can not be one single loss because I simply cant afford it . I have to win every time out or defeat is a sure bet.
I listened to my banker which wasnt really MY banker at the time . I took to his conservative rules as my own. If its not good enough for him then it must be a risky idea for me . If somthing smells bad usually it is bad. If there isnt an option to most all problems then it isnt a good plan.
Risk is to be avoided . It dosnt get any simpler than that.
Tim
Risk is to be avoided . It dosnt get any simpler than that
Aversion to risk limits many. Instead of avoiding risk, others embrace it and see it as opportunity. Instead of avoiding it, they manage it.
It's not a simple subject.
Your banker has different obligations. Private money is not bankers and there are lots of people out there rolling the dice for the sheer pleasure of rolling the dice! They win some and lose some.
I just missed out on a very substantial deal. I can't explain the details because I was one person removed from the equation but essentially I can tell you that if I'd have been that person, I would have negotiated to sign a contract as hard as I could, then tried just as hard to find the financing.
The guys that landed it were riding in the same car as my contact. They found the $4 million dollars to make the deal go through the next day. By the time I was talking about making arrangement to get back there to start the negotiations, the guy called my contact and indicated that they were already in the process and had the investors committed.
It works because the deal made sense. There is a substantial amount of return at the end. Would I have had to give up 50%...maybe...maybe more. Would it be worth it to me? Yes. I probably could have given up 70% and been happy....very, very happy.
Risk....it all depends upon the deal. To you and I, risking a few thousand dollars seems like a big deal. To some, risking a few million is the same as us risking a few thousand. It all depends on the wad right?
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
from my perspective it looks like the difference is that blue is willing to be a little more adventurous than tim.
Correct. There are lots of people like me and lots of people like Tim. Neither group is right or wrong. Each group has to understand thier risks and manage them to balance the risk vs reward.
with no money of my own to invest on a property how can i find a "guardian angel" to finance a project
The answer to that is actually much easier than you think: find a true "deal".
Think about that a bit because that is truly the catalyst for every business transaction, isn't it? An investor house deal is nothing more than a business deal. If you make the right buy, then the "guardian angel" will easily see the profit and will be willing to finance it. If you're guardian angels are also broke, you simply have to take this deal to a "hard money" lender. They are everywhere. Don't believe me...do a google search....it turned up more than a million hits!
If you've truly found a "deal" hard money is better than nothing.
what can i expect to make in a situation like that percentage wise? it seems to me i have heard mentioned in this forum (not this thread) that the money man will want 50%. is that a reasonable expectation
I don't think 50% is any "standard" rule of thumb. Every deal is different. Most hard lenders are going to hit you up for some serious interest and some substantial upfront points. Consider it a cost of doing business...after all if you don't take their deal and you have no cash and you have no guardian angel....what is your option besides leaving the deal on the table and walking away? Remember....if it was truly a deal, you, and the hard money lender will make money...right? Why would you walk away?
Where do you find these hard money lenders? Everywhere. I'm a hard money lender. Many of my associates would be, depending on the deal.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
investor will provide money for property and repairs to be made, i self perform some work and sub-contract some and the split is? here is what i don't get. why would any investor do this? why not just hire someone to find them, (house hunter) and hire a contractor to perfom the work. why split anything with anyone?
is there something i am missing here? i can see where there might be some jobs in a project like this but not any profits if you are not providing the money.
Yes, you are missing something. You don't understand where the money is truly coming from. You aren't acknowldeging where the assets are. You're only looking at the deal from one point of view.
To get to the crux of the issue, I'm going to challenge you to list everyone of your assets in a "deal" that you've found. It's a theoretical deal. Here's the challenge.
Youve located a property that is worth 200k if it was fixed up. It needs 40k of materials and labor. The owner owes 100k and is willing to walk away from the mess if he could get his note cleared...he's behind a few payments and it will go to the bank if he doesn't do something. He only wants "cash"...to pay off the loan. You agree to pay and put 1$ down on a signed purchase agreement. You have ten days to arrange a loan to pay off his loan, or you lose your earnest deposit of $1.
What are your risks? List them separately.
What are your assets?
After seeing your answers, and getting them all on the table, we'll have the answers.
blue
"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Youve located a property that is worth 200k if it was fixed up. It needs 40k of materials and labor. The owner owes 100k and is willing to walk away from the mess if he could get his note cleared...he's behind a few payments and it will go to the bank if he doesn't do something. He only wants "cash"...to pay off the loan. You agree to pay and put 1$ down on a signed purchase agreement. You have ten days to arrange a loan to pay off his loan, or you lose your earnest deposit of $1
ok i'm playing!
first risk or investment is the dollar, and the time to find the deal, and the time in attempting to put the deal together. not much risk
my assets are an excellent credit rating and the ability to move quickly to perform the work. if the home doesn't sell quickly i will make minimum payments on $30,000 charged on my credit card, so the interest for that amount. even if its 20% thats only $6,000 thats a possible risk if it goes longer i would have to re-finance, credit cards are not a long term solution. ( i also have to time this to coincide between other commitments, i have to work but not a steady job)
so i am presenting to you my guardian angel a deal where if you put up $100,000, i will put up $40,000 (although the $40,000 is costing me more than $40,000 because i am borrowing it) and together we will own a property worth $200,000. hopefully it sells quick because i cant afford to wait very long unless we can rent for a positive cash flow. i could possibly do even cash flow indefinitely as long as i could continue to get more credit to keep this ball rolling.
i could see how it could get very complicated very quickly. let me say this answer is a rough first draft, it needs much polishing but i wanted to post for feedback to see if i am on right track.
Thought of a couple more stories.
About ten years ago my brother and I bought a real crap can.
It was a Small house and the renter got evicted as part of the sale and he left more trash and garbage than you've ever seen.
We put a for sale sign on it and didn't even clean it.
Sold it in a couple of weeks for $8,000 more than we paid for it.
We bought it for $8 and sold it for $16.
It was not on the market. We just found out the owner's name and called her and made an offer and she took it.
Again, I did no repairs to the house and made some easy money.
Wish I could do that again.
Next story (not quite so pleasant)
We bought another house and I did a lot of work to it and we put it on the market.
It sat there on the market vacant month after month after month.
We weren't getting any offers.
I think the real estate sign in the front yard started getting rusty.
Anyway, We finally found a Buyer and it was a young woman in her twenties.
Her Dad was buying the house for her.
we breathed a sigh of relief.
The end was near.
They asked if she could move in prior to closing.
This was a timing issue with her lease expiring on her apartment or some other kind of hardship.
We reluctantly said "ok"
After she'd been there a few weeks she found some problems with the house.
We fixed a couple of things and said no to several others.
They tried to put the squeeze on us and asked for a price reduction and we said no and they cancelled closing.
We were in trouble.
On a Monday we told them they had til Friday to sign an amended contract stating they would close in seven days or be evicted.
The amended contract said there would be no repairs of any kind and the house was being sold "as is where is".
This got their attention and the deal went through.
They paid the original agreed upon price.
If they had refused to sign the amended contract and close the deal we would have evicted her on the spot
We would have evicted her in the dead of winter with snow on the ground.
Thankfully we didn't have to go that route.
It sure changed their tune when they figured out they were behind the eight ball.^^^^^^
S N A F U (Situation Normal: All Fouled Up)
We would have evicted her in the dead of winter with snow on the ground.
Thankfully we didn't have to go that route.
It sure changed their tune when they figured out they were behind the eight ball.
Hahaha. If they were professional rent dodgers here in Michigan, you might have ended up eating four months (or more) of free rent while you tried to move them out. If you made a wrong move, you would owe them for stomping on their tenant rights, possibly paying double!
I'm glad it worked out.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
i wanted to post for feedback to see if i am on right track.
Yes, you are on the right track.
The deal appears to be a solid deal. The numbers are close to wholesale: not perfect, not spectacular, but workable.
How important is the actual physical piece of paper that the contract is written on? Is that an asset? Is it worth more than the .02 cents that it cost you?
Are your skills and experience an asset?
Is the time you have available an asset to this deal?
How would you categorize the terms of the deal? Are they an asset or are they more of a detriment?
How would your investor feel if you had negotiated an owner finance deal? Would your financier be happier to see that the seller was willing to let you take over the loan and not cash them out? How much stronger (or weaker) would the deal be?
Lotsa questions and the answers are the reasons why some financiers are willing to put up hard cash. For instance, if you were a family man, worked a 6 day full time job, was active in the Church all day Sunday, coached two soccer teams and took the girls to dance, was an active Troop leader and was sitting on three municipal councils....would you think your time available for a project like this would be an asset or a detriment, in the eyes of the investor?
Im trying to make you see that the numbers are one part of the equation. The terms are another. Your skills are important too, as well as your time. Now, think about a guy who already is married to his corporate job, juggles a full time family life and makes twice as much money as he needs. He inherits some more and suddenly wonders how he's going to invest it all. He doesn't have time and suddenly you are there pitching him a good deal. He's got the money and nothing else. You have the time and skill and not the money.
Are you starting to see a potential meeting of the minds here?
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
excellent questions, you are indeed a smart man, thank you. you mention in another thread that you have some framing coming up and may be able to put something together with someone who posted in here. i would like to apply (just to help, i don't have a crew although i can work with just about anybody. i learned to california frame in california, i served my apprenticeship in local 1062 beginning in 1978) for that job in exchange for more of the lessons like i am getting in here, except maybe a little more up close and personal. i am committed from feb thru mid april, ready to travel and work after that.
Segundo, I belive I would be able to contract for your services. Are you traveling alone, with or without tools and how many hours would you like to contrat out for this coming summer?
My email works, but I can also be reached by phone at 586 292 974 for the time being.
blue
aka jim"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Segundo, in our little exercise about the 200k house...what do you think that I think is the most valuable asset out of the things we listed? You might be surprised at the answer.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Segundo, in our little exercise about the 200k house...what do you think that I think is the most valuable asset out of the things we listed? You might be surprised at the answer.
i have given this a lot of thought, the thing that i would expect to be the most valuable asset is my time. i would expect given your statements (you are clearly experienced in this) for you not to have any trouble providing financing for a project, so it would surprise me the most that the meager amount i might provide for a short time would be the most valuable asset to you. Unless by me being invested with my own money it means less direct supervision and worry on your part, again providing less time involvement from you.
many complicated scenarios to consider, i have to confess i love thinking about it. you have some excellent questions.
This was stolen from another discussion that seems to fit the threshold here.
training future tradespeople View Image
83968.23 in reply to 83968.1
midmoteacher,
I would take a decidedly contrarian approach.
I would consider myself basically a working tradesman---that's the basic skill set. what makes the $$$$ is applying those basic skills to business---- thinking critically.
1) I firmly believe that right now---today ---is AS good-even BETTER a time to enter the trades than EVER before
2) the reason is already outlined above--- the current educational system--along with at least 2 generations of parents has worked to DISCOURAGE young, reasonably bright people from working with their hands----- this creates HUGE opportunities for a reasonably bright hard working person
3)currently the educational system is run by folks who did pretty well in school. They equate success with achieving educational milestones, diplomas---and a job-------and they encourage parents and students to think the same way------but that is a very limmited way of thinking
4)---- if you looked at the most financially successful people posting on this format-------------- I suspect most of them haven't actually collected a paycheck in 20 years or more------- business is the oportunity
5) in my trade-- I can hire younger faster men than me-------- with basic tradeskill competence----------- for $12-$15/hour.So--if I had to take a job--a paycheck---that's about all I could hope to make-$12-$15---------------- from that perspective---trades are not a good "employment" situation
but with basic business applications--- I can leverage those basic tradeskills into a billing rate 8 or 10 times that with attention--and 5 times that everyday all day if I choose
THAT's the opportunity
6)--instead of schools trying to herd trouble makers and dummies into the trades----they SHOULD be selling it as a business studies opportunity.
7) in the posts above--blue mentions construction isn't a good business opportunity------it's all relative in my opinion. If you are looking for a business opportunity comparable to the next Geico, Microsoft,Google, GM or whatever-----sure it's not good--and it never has been------but viewed another way--it's OUTSTANDING--it always has been---and it get's better every year
8)-- you should sell this----as training for and entry into owning your own business.
DO NOT sell it as job training--it's never been a good job
but I think it's a good business
9)----- high school graduate----- get's entry level job$10/hour---over the next 4 years he learns basic competence in his trade, aquires good, basic tools up to table saw,scm saw and a basic truck---AND if he lives at home with mom and dad and assumes a basic college student lifestyle he can save $5-10,000/year.
At the end of 4 years--- he has the basics of his trade down, has the basic tools, has made contacts, has probably been doing lucrative side jobs for several years, owes ZERO and has cash in hand $25,000--$50,000.
what are his option???????? he has so many, I don't know if I could list them all
ASK Tim Mooney here what he could do with those skills, $50,000 and 22 years old---plus he is already employed.
compare that to our young friends peers----who still have another year to go to graduate with a polisci degree, and already owe $30,000-----and are looking forward to a job at $7/hour a Borders or Starbucks---and wondering if they will EVER get a real job.
Our young tradesman????? he is now poised to make some serious money. In my market he could turn that $50,000 into stakes in more than 5 rental houses almost immediately---while maintaning his present employment--------- before he was 30-he could be prettywell retired from working for other people
He has MANY other options as well-like I said--too many to list.
Previously--Pony mentioned a tradesman charging $600 to change out a door----- that's a whole'nother opportunity-------------cash flow,cashflow,cashflow-------------
really sorry--i am just getting going-gotta run to a family gig---
more later,
Stephen
This is the answer for the reason Id like to help here. He said it better than its been said anywhere else including from me . Blue Answers in another post that says the money is not there for new trades people which is right on. Stephen gives an answer that its a prelude to a business approach as you will learn if you read his post above.
He also goes on to say that the trades can be the entry level to a business and with out the second step its not very good as he lists what he can hire people better and faster than himself which is also true about me . I cant compete on a job any more with the 22 year old fast guns that can survive with out breakfast and get by on junk food smoking cigarettes. That type will always be hired for a bottom line to make someone else money. There will be job pushers that will make more but the people that do the work often owe for a Car Mart vehicle and many dont have a drivers license or credit card. Now many dont speak English.
This is one opportunity to make a business from your skills . There are many. This is just one.
Tim
That was a valuable afternoon I spent .
Like I said , its hard to self learn it . It can be done as its what I did but if I had known better I would have saved a lot of valuable time .
Another experience ;
Ive had people working for me lately that know what they were doing . I listened to criticism contnually.
To spark this thread I dont mind sharing it .
They [2] work for the public and have to satisfy them and that is molded into their mind . Litterally.
They were working for me and I work for renters . They missed that concept.
I let a wobbling fan light stay for another year , but cleaned it .
I installed three fan lights from a buy out warehouse for 20 bucks a piece. They looked a lot better than they were let me tell you .
I repaired the drywall , walls and ceilings . I matched popcorn texture when one thought it would be a good time to elininate it .
I brought in Walmart paint and shot the ceilings white . That provided the top 6 inches cut in for a roller as I rolled the walls to match. Bathroom and kitchen was done with the same in an egg shell ceilings and walls . It was quick and it was cheap.
The house had hardwood floors that needed refinishing at 27 bucks per foot . I laid commerical carpet glue down over them and DW had a fit . NO pad , so carpet @4.99 plus 3.00 labor that included glue . Total price of job 7.99 per sq yd. It will last 10 years by experience which is 4 more than regualr carpet and pad . If it gets flooded I wont be hurt as it would ruin any pad. Pet stains can be cleaned and the smell wont be there unlike pad unerneath carpet. Thats a smell that keep on giving .
After taking all of the abuse and criiticism , I rented the house at my all time reccord high for a 3 bd 1 bath. In fact its the same amount Im getting for a 3 bd 2 bath. Guess Ill have to go up on those now . I just got done raising them. Oh well.
The money hit the bank in cash Friday with a one year lease. DW shut up and we are rollin. Ive had a 20 percent increase across the board in the last six months because of the higher interrest . Im still not at one percent .
Its a different business than contracting . I look at some of it as boogering . You stop when its good enough to rent not to sell or satisfy a homeowner.
On pricing ;
to all,
Its never gonna go up till the people read it in the paper . I remember when I had to have 500 dollars here for a 3bd2 ba. 350 for a 2b1ba. I had to have it when the top rents were 450 and 300. I believe I set the market . In a year all of them read 500, 350. I went to 550 , 450. you guessed it they followed.
Im at 600, 500 and I have some 3b1ba I didnt mention. This last one brought 600 , so it looks like Im looking at 650 for an extra bath.
When I started out advertizing 600 not many called but as they started becomming availale I ran them right back raising to 600. Now , its common to find them in the paper for 600. People need a guienie pig some times . They need that first house in an addition or the first 5 so they can follow. Too often an addtion will just sit if it doesnt have a builder working in it .
I have two 4bd 2 ba that have been renting for 650 but Im thinking they should go to 750 with the amount of calls they recieve.
When a house doesnt draw calls from a paper add then its time for me to get off your butt and make it happen.
Arrow signs at the crossing streets with a sign in the front yard.
Dial a trade on the radio
All of the agents offices that will take free listings for rentals.
All free adds like the state paper which do classified free.
Cheap adds in the trader mag.
Phone work to people that hire people .
Doesnt hurt to pass the word at church if they ask what you are up to.
Always the building supply yard .
Cards in motels and hotels .
Im looking at a lighted sign in from of my office.
How much will the realator charge for you to use his sign per day?
Chamber of Commerce knows a lot of people transferring in to town.
Buy unlimited minutes plan for a cell phone and you can work while you track all of that . Only give that cell phone number for all adds and calls to be returned. They dont need a number someone else will answer and say duh. You need to be in control all the time . If you like a calls sound , you need to respond to it like a wreker driver and be there in minutes. Others you may choose to cull where someone else may give you every single number to return the calls. My top turned down call is a HUD renter . They dont pay my scale and the house is gone before they think about sending their inspector . My estimate for them to get their stuff together is a week or more . This puppy will be gone in hours to a few days .
Another favotite reply ;
Ill get back to you saturady . We need time to talk it over.
It wont be here sat , so let me save you some time . I expect this house to be gone by dark. This is wed,, were you kiddin? If you want this nice home which there arent many out there to be had in this town, I suggest you take off work and come over here with cash. I carry a lease in the truck. Thats how we do business. We have a quality product and the need is great . I appreciate your call.
Thats pretty strong , but it weeds them out . The serious ones will make it . If your lucky they will be thinking this is the last house in town this nice. You only have seconds off a phone call to make an impression.
Tim
Thanks for all your info.
I like your idea about carpet with the attached pad and had never heard of that. I'm going to let a few friends know about that.
What would you think about painting every one of your rentals the same color on the interior.
Paint every room the same color. The walls, ceiling, trim, doors, etc all the same color.
The whenever you repaint you can avoid brush work. Just roller only.
Walmart white or Walmart antique white or Walmart off-white
You would roll up to about two inches from the ceiling and just get close to the trim.
The new would blend in with the old.^^^^^^
S N A F U (Situation Normal: All Fouled Up)
One of us made a mistake . I used glue down comercial carpet with out pad . Pad is 4.00 per yard installed last I checked > I eliminated it .
Commercial grade carpet wears a lot better than residential.
With out it , you can have a flood and vac it dry. You cant clean the urine out of pad when its under carpet so its a smell that keeps on giving . Commerical carpet with out pad can be cleaned is its got urine in it .
Paint it all depends . If they smoke Im dead meat . Ive sprayed the whole place down with one color which is actually what I did on this one . But I had a reason.
I had fixed a lot of drywall in this house and either had to first coat in primer or use flat . Then I could have come back over it with eggshell. I did not have the option of using only eggshell over new mud and drywall patches. I spread a lot of mud on this house. It had a bad job to begin with and they had several patches going not completed. The house had water damage and I replaced a floor and a whole wall in the living room. I moved some lights , and covered up some space heater vent holes in the ceilings. One water damge place in the ceiling that was 3x3. That was a lot of repair . So my decison to to rent it this time was to spray it out in flat . The next paint job it gets will be eggshell on all the walls , because its a proven saver of another year most times. When ever it gets eggshell on all the walls , I can use a sponge mop and bucket dipped in Mr Clean solution. Then I wont paint for some time even if its a smoker. I can hire labor for 7.00 per hour to do that but Ive been hiring a lady thats good for 10 bucks and shes worth every penny 'with out me being there " . She cleans carpets too with my machine and strips floors with my stripping machine. Im going all vct floor tiles in bathrooms and kitchens .
Tim
my mistake, and yes I agree on the commercial carpet.
^^^^^^
S N A F U (Situation Normal: All Fouled Up)
Because im a nice guy i get screwed all the time, yet its my fault, When i talk to a renter i tell them its all my brothers bizness, So then i can say ill get back to you, That way its very easy for me to give all the rules no execptions, You wanna smoke?? no way my brothers very firm about that, You dont have all themoney, No way my brother wants it all or no dice, My brother sez no pets at all dont ask, my brother needs every form filled out, Actully i would never rent to my brother and he has no part in my biz, Im not the kind of guy who can be real firm so i use this, It works for me
Tim,
Stephen's post is a "Robin Hood". He put the arrow dead center, and split that arrow with the next shot.
Bowz
I think he did .
You take a skill you already have and have a sit down converation with your self and ask how can I do better?
Heck theres one I didnt mention. '
We traded five houses to get the one we are in today. A carp can own his own home with out paying for it . It used to be three but now its more like 5.
Live in each house 2 years and never any capitol gains .
I already mentioned when I movewd into this one and was working on it the guy next door wanted to know who I was working for ?
He didnt think I belonged here . With out a bit of trading and a lot of work , he would have been right .
Thats a good start to own your own home .
Tim
Fun with Math
First you could pick up a mortgage payment book. Mine cost 9.00 at the book store. You can do the same thing online but its hard to do that in church. <G>
Run the numbers on a property near you . Look at the property prices and the rents . This is a new deal to do every time you pick up a paper .
Look at the commercial properties along with single family homes in different areas. Now switch over to for rents in that same area.
Does it match up? If it doesnt its either a flip area or its a rental area for you to be . Pretty simple really . If you cant buy cheap enough to rent it then it needs flipped. If you find that the rent prices will make the mortgage payment , then you are in prime rental areas.
People like MS and Piffin live on islands where ground sells at premium. Evidently so does construction, hello? Those are places to sell labor and rehab like AndyC. [long island NY]
Dallas TX has built on to its town in circles and now they have taken in the the surrounding towns . Whats happened here? The outside towns are now considered suburbs of Dallas and the building is going on in the sub towns . Just get on a hiway and you will see it . Sherman /Dennison is 60 miles from Dallas North and its a boom town. That laid an awsome school district that attracts people as any good school system will.
Little Rock Ar, segregated its schools about 1965. The crime rate was too high for a lot of residents with kids. Conway , Ar which is 20 miles away has become another boom town.
Fayetteville , Ar. is home of the Razorbacks and the biggest university in the state . They now through the Waltom estate have an outstanding fine arts community. Tyson foods , Walmart , has made it trucking capitol of the state and holds the biggest trucking company in the world. JB HUNT. There are several major trucking companies beside them. FT Smith has become a sister city to them. A year ago or so Walmart said that any vendor had to have an office in the area with someone in it that could make decisions. Close enough to make meetings at the corporate office in Fayettevile Ar. That has made commercial office space go through the roof and it has been history to Arkansas biggest boom in construction. The pace has been so fast they havent completed the intrastate to Kansas City.
All of that has been in the news periodically. There are lots of facts in that to consider to find a niche market . Listen to what the news tells you and price their property.
Tim
Tim,
You take a skill you already have and have a sit down converation with your self and ask how can I do better?
Or you sit and ask yourself, what skill do I not have? Why aren't things working? Rather than peeing and moaning about someone else's actions.
Sales for instance. I don't pretend to be a sales proffesional like Frenchy. But to sit down and read Zig Ziglar and a few others gets you a few steps above the crowd. In the trade as Stephen describes it, that is something you need.
Those same techniques and ideas led to our biggest real estate score. A year after we bought the shop and land, the neighbor called us and said he was going to sell his house, barn, and 19+ acres. At the time we were living in the fixer upper yet, and planned to build a new house by the shop. We weren't setting the world on fire income wise, but we had a buttload of equity due to having bought the fixer upper when I was 22.
One of Zig's statements is "You can get anything you want, if you help enough other people get what they want." So we sat ourselves down and asked "What do they want?"
They had mentioned how they made an offer on another house, pending the sale of this property. that was our leverage point. Our offer was low, but not insultingly low. They countered, we didn't counter but pointed out that our offer was not contingent on the sale of our property, and perhaps they would want to re-think they're counter offer. They did, and came back at a price we could accept. $168K. The house and buildings sat on one of 4 lots. (here we go with the hidden lots again)
We busted our tails to finish the fixer upper and get it sold
2 years later I took 14 months off to build our new house. We sectioned off the old buildings and 1.5 acres and sold it for $160K. that's right. $8K for approximately 18 wooded acres.
Never would have happened had I not been in the trade. We wouldn't have had the equity in the fixer upper, and we would not have had the basic sales skills to see the deal through. Never could have built our house for the price we did if I hadn't been in the trade. And had the connections from it.
My brother is a CPA. A few years ago he bought his first house. Last year he sold it and just about squealed with delight at making some money on it. 43 years old and scored his first real estate gain. I guess it is better than never, but just think what he could have done starting in his 20's.
Bowz
I was gonna mention that and thought I might offend someone passing through here.
Thats a very good story including your brother.
That football team would have had no chance of winning if it had quit .
In my early days I sat and did nothing having a good time wasting the money I made . Dad said that goes with age and is natural. I wish like you mentioned I would not have been natural cause like Steve mentioned I coulda had this wrapped up a while back. A good while back! If I had started at 20 considering my decisions were sound , I could be rich. Woulda coulda shoulda. If a frog could fly he wouldnt bumo his butt . If he could fly that is ,...
Its still not too late for anyone that can do. Buying a property at 70 percent in a rental area or less can produce a good check every month as a supplement considering it at 30 year note. I bought one very cheap and I pick up 300 per month on it alone . Times 10 is 3000 per month and is more than DW and I will draw SS. Taking care of 10 rentals is a semi retirement job. That house is on 20 years I think. I coulda made a little more money.
But holding that 10 is much more than that with property increases. In another 10 years that same figgure may esculate to 500 a piece . Who knows ?
But to remember nothing will increase if we dont do somthing .
Im gonna quit when I get to 20. That was my goal from the start . I dont know why about any of it . Im running out of gas but I did finished one last week and I did one right before that . Im gonna let someone else do it after that . Thats enough for me.
Maintaining them is a piece of cake where as buying and fixing them is pretty tough at my age.
Somebody said by the time I got to where I could get up and go , the went left me .
Tim
OK, another story alert!
This is how not to do it!
2 years ago I got a call from the plumber I use. They had a young couple that was going to buy a house and wanted the bathroom remodeled before they moved in. OK let's look at it.
"No can't do that they haven't closed on it yet"
So they close and the next morning plumber and I show up. It's got a new garage, and from there it goes downhill. It is a shack that was gobbered onto at least 3 times, different roof pitches, etc. But it had nice new vinyl siding and a new thick splatter coat on the sheetrock inside. Floor levels at all different heights.
Plumber already has the fixtures removed, when he explains that they want to expand the bathroom, and laundry and eliminate one bedroom. Doesn't seem the brightest idea but who am I to judge?
As the plumber walks past, I see the floor moving up and down. I ask "can we get into the crawl space?" "ah..... no. We need to cut an access hole anyway so go for it"
I cut a hole and man does it stink down there. I poke my head down in and see standing water and mushrooms growing off the floor joists. "think we better call the owners" Husband and wife are about 25. Husband looks at it, asks what it will cost to re-do. I give a range. Plumber and I both suggest husband gets his money back on the house. he says let me call the wife. husband comes back,"We really love the house so let's keep going."
To shorten my long story I'll just say the day I was done I got them a bill and collected. The plumber ended up getting drawn out for months because the couple had run out of funds.
The thing is the day we started the husband was confidently explaining how they had paid $80K and planned on selling at $115K in a 2 years. And I'm thinkin' the whole time "you are converting a 3 bedroom to a 2 bedroom, and it is a hunk of crap at that." Too much HGTV for you man!
Later I checked to see what they had paid, and it was $89K. By the time they added my bill and the plumbers I think they would need about 10 years just to break even.
Anyway, I had to throw that out there so anybody reading this thread doesn't think they can just start throwing money at properties. I assume most here would know that.
Regarding your early years: Hey, I drank and partied away down payments on probably 3 or 4 properties. LOL ..........sniff....sniff.......sobbbbbbb.
Bowz
I love Zig and Carnegie both.
so it would surprise me the most that the meager amount i might provide for a short time would be the most valuable asset to you.
Ironically, the most valuable asset is something very, very meager. I teased you with it when I mentioned that the paper you write the contract on costs a bout 2 cents.
It's the contract! That piece of paper represents what? (I'm thinking out loud here: 200k fmv, 100k note, 40k fixup) That looks like a very nice deal to instantly flip to someone that has cash, or it looks like a nice deal to rehab. Either way, your 2 cent piece of paper represents 60,000 of cold hard cash. If you have to move it fast, it might only be worth 20k but if you can hold out, it will fetch that 60k.
Like the good book (Think and Grow Rich) says, ideas are things and things have value. Your idea to take over that guys loan and do the fixup is an idea. You took action on your idea (got the guy to sign the paper) and now you hold something of value.
In the real world, I might instantly hand you 10,000 for that! I once saw a guy holding a piece of paper up at a real estate meeting, explaining that he had the property under contract, how much equity it had in it and wanted to know if someone in the meeting might want some of the action in exchange for handling the financing. Immediately ten people (mayber more) stood up and headed for him.
There is as much money available as you want for a "real" deal. Real deals are those in the 60 to 70% range of fmv. If you're holding a piece of paper and it represents 80% of the fmv, it isn't that exciting, given the risk.
I'm glad you got back to answer this question. I'm heading out of town and I might have time tomorrow, maybe a little later tonite but I also might be away for a week or two or three. I was afraid I'd miss out on giving you the answer to the original question: "Why would anyone do a fifty/fifty split with me, if they have all the money?" The answer is: BECAUSE YOU HOLD THE CONTRACT! THEY HAVE NOTHING, WITHOUT YOU!
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
How important is the physical piece of paper that the contract is written on?
very, or not depending, to me that pice of paper should and would only come to be used if someone did not do what they had agreed to do, or in some way not lived up to the bargain. it needs to be done, but hopefully it wont be used.
skills and experince definitely an asset, but not nearly so much if they have to be babysat. you could easily hire many people to do what i do, but do you have to supervise them? can they solve problems and answer questions? will they take the bull by the horns? i think thats the main asset, not taking time and energy from guardian angel, and providing a certain warm fuzzy. this relationship will take a certain amount of time to cultivate, but it seems to me money is a key motivator. when my stake is clearly defined by my performance (and i am invested) i don't need to be babysat.
time (especailly in the context you ask the question) is probably the biggest asset particularly when it is coupled with the aforementioned warm fuzzy. it is as you state, if you are busy with job and life you want to minimize time spent babysitting investment yet still be confident you are doing the best you can.
terms of the deal, an asset to me in that they provide motivation and deadlines, despite the fact that i am a hustler, even i can find another gear when the concrete is splashing up and falling in my nail bags (been there, done that, got the T-shirt) on the other hand, i am risking to finance a hypothetical project like we spoke of, and i would hate to put myself in a position where i had to go to a job i really didn't want when i know there is a better opportunity but i don't have the time to find it or wait for it.
an owner finance deal should make my investor happy, less risk (cash out of pocket), probably better cash flow, which means more time which can only add to the profit in any real estate dealing. i do understand that real estate is a means to leverage an investment, and that my 40% stake in a $200,000 property makes my out of pocket investment grow much faster than if it was at the bank or in a stock.
clearly the huge range of choices and variations that can be advantageous to all parties involved present opportunity, yet the complication that goes with all the choices causes me to wonder if i have made the right choice. when i truly understand something i am able to explain it in terms others can understand, it has been my experience that in teaching others i understand it better myself. while i think i have a grip on this subject we discuss as yet i can not explain it. much to learn, and many reps to be skilled. thank you for the questions that cause the learning, knowledge is the most precious possesion i have!
Of course selling on paper works.
With a healthy down payment and great credit withn a solid work history its a wonderful process.
Say I want to sell a 100,000 dollar place and I recieve 30 grand down payment on the years I want to be paid back. Legaly in this state I can legaly charge 1 percent more at the time that the bank on a construction loan. The price on a house can be greater if an owner does carry the note , so it looks like this ;
110,000 selling price on a 10 percent note .
Im paying 7.5 percent locked in. . Bought the house for 65,000 . 30 grand down payment and Im making money above the switched payments every month.
If they miss one payment to the second payment I take it back over on the due date of the second rent due.
That is solid financing carrying paper .for the seller.
Tim
With a healthy down payment and great credit withn a solid work history its a wonderful process.
All of those ideas are negotiable. What constitutes a healthy down payment? Would you take my offer of my lake lots as collateral and ignore my credit and work history?
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
One more thing since you mentioned your Mom selling on paper .
As I said before , you have to look at the goals and advantages of the other person. If they want the same thing then like everyone knows you have a match.
This is a question as much as anything because I narrow it quickly but mebbe Im an ole fart. <G>
"A " type person owns a 200 thousand dollar house clear or some decent equity. [100 grand]
Some body walks in and offers nothing down or nearly so on a long term or a short paper.
Why would that person let their investment away with out some real money?
Where would they llive with out their money?
There are a limited few that would want an income into retirement but would that be risky in your mind?
What was your Mothers take on it ?
Tim
Tim
I don't remember the details but the resort house had sat there for over a year and Mom was what you would call a "motivated" seller. The house was vacant.
I think she slept okay knowing the doctor and the wealthy auto dealer would make their payments.
I think she took a risk with the woman cook or waitress who worked at the diner who bought the diner and the house across the alley.
Mom may have gotten a down payment with some or all of these.
As far as your question, why would a seller owner finance with no money down.
I have a brother who owns a lot of property in Denver and he has people calling him all the time wanting him to owner finance a house to them.
He just hangs up the phone.
The books and tapes say it's possible, however.
They say to find someone who's burned out and simply wants out.
Today is January 11th.
According to the books and tapes there are people out there who "are throwing in the towel" and they're not going to make their Feb 1 payment.
These are the people to find.
Maybe there's a divorce.
Maybe someone has lost their job.
There's a term "accidental landlord".
Someone buys a house and six months later gets transferred out of state.
He'll lose money if he sells it so soon.
So he either rents it or maybe "sells" it owner finance.
Don't you have signs on every street corner in your town saying "we buy houses"
dont' you have 5-10 ads every week in the sunday paper saying "we buy houses"
Some of those are people who are trying to get someone to sell the house to them owner finance.
^^^^^^
S N A F U (Situation Normal: All Fouled Up)
This is a different subject.
Do you have a lot of HUD foreclosure houses for sale where you're at?
The federal government owns these and in some areas they're not selling very well.
So they're dropping the prices on them and some people are getting some good deals.^^^^^^
S N A F U (Situation Normal: All Fouled Up)
Yes we have those houses . HUD
They list a price on the web site
and after two weeks drop it
and after two more weeks drop it , and etc.
Someone is going to buy it sometime.
The first two weeks is owner occupant only
then its opened for all bidders. and then the count down.
Realators watch the list every day for new ones too. They are what I call free listings cause it takes one to sell it .
I boughtone a year ago . Same deal. wait , it was a 1 1/2 now. It had hidden value that I found in four lots , not one . No one knew that becuse they never sent a legal to anyone . Fannie Mae. Small town with no action of selling but I rented it becuse there is a new plant in town. Hello people ? I read the papers and knew the news.
The hard luck buys I dont find out right except in a repo sale or a bank cals me as IM in the business . By then the bank owns it so thats not what you were saying .
You would have to knock on a lot of doors . JUst figgure the odds with the people that are searching for them via the actual sales that happen. Yes its possible but if you have tried it , you can also calculate your time . Repos are a very time consuming business to start with dealing with auctions which give you all the info. Anyway try it and I think you will notice youn consumption of time .
Yes we have those adds . There are a tremendous amount of people watching tv and buying books and attending seminars . Its big business right now .
Next time you watch flip this house , think about how much knowledge those people actually have and before you quit thinking , how would you react if you were one of those contractors that got treated that way? I think its like Championship wrestleing , fake fake fake .
Tim
Edited 1/12/2007 1:37 pm by Mooney
I boughtone a year ago . Same deal. wait , it was a 1 1/2 now. It had hidden value that I found in four lots , not one . No one knew that becuse they never sent a legal to anyone . Fannie Mae. Small town with no action of selling but I rented it becuse there is a new plant in town. Hello people ? I read the papers and knew the news.
See Tim...there's people out there, like you, finding gems everyday.
Lets say Segundo was actively seeking deals. Would your "deal" be a deal? I think so. If he didn't have a dime to his name, he could call a guardian angel, or a hard money lender and make something happen on this. He might make an offer like this to the hard money lender: Buy the property, I'll do the work, just buy the materials. As payment, I'll take the extra lots, you keep everything else.
Now, Sequndo has some lots free and clear. He can sell them on land contract for nothing down. Each month, the buyers send him a check.
That is creative financing plain and simple. The key was to find the deal. It takes time and effort to find a deal. I walked around for two month in a small town before the school deal came up. The key for me was I was in the game when the opportunity arose. It has nothing to do with me having, or not having money. The real money comes from the future value of this property...just like the extra lots in your deal. If there is truly some value in those future lots, or my school, it is bankable and leverageable. It can be sold for cash...before I, or you, close on the property!
Or it can be sold "owner financed" at a higher price and nice interest rate....
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
I think there is a lot of what's called "creative financing" nowadays.
Tim, not only will people sell houses for no money down but they'll even go one step further.
I haven't read all the posts and maybe this has already been covered and Blue has probably even done this but I talked to a guy a year ago who bought a house no money down and the seller financed it.
This Buyer-Investor-Contractor took things even one step further in that he negotiated the purchase with the agreement that he didn't have to make any payments to the seller for six months.
The six month period was the timeframe he would remodel the house himself and then sell it and get rid of it.
Sounds incredible.. Who knows maybe this happens all the time.
Now that I'm thinking about this if I remember correctly this guy was working on the house everyday and at the same time trying to find someone to "buy him out" so that he could walk away with a profit.
He was offering the house to me so that I could finish the work and sell it and try to make a profit myself.
I didn't buy it and don't know how things turned out.^^^^^^
S N A F U (Situation Normal: All Fouled Up)
Everyone has to do their own thing .
I was at coffee this morning with some old timers . I was thinking about this thread .
I said what do yall think of owner finance?
It was odd but they all had some type of experience and one just had recieved an offer . He ws offered a good price on his commercial property with no money down. He rejected it easily. Old body painter across town turned the same guy down last week. Good price , but no money down.
I tried to figgure what he was going to do with either property at the price he offered but I understood he was gonna walk in scott free if they accepted it .
They say there is a fool born every minute and I dont doubt it . People are scammed every single day so that goes to show how many have intelligence . One time , two times I did not count my rent money given to me in cash. Twice I was scammed. Never again and a very cheap lesson at that . .
One morning I was sitting in a closing with 6 people . Everyone was tossing the documents around on the table and trying to get off to lunch. My own wife sailed right through all the documents signing every one of them and Ill mention staring at me embarrashed. I kept reading and re reading the property lengths. Finally after 15 or so minutes after everyone was done , I said would someone please explain this to me ? Im not getting it . The lady at the closing told me what the paper said . But I said it isnt to be what this paper says . Im only selling half of this , not all, and I cant find it anywhere . This is the legal of my entire property! Both realtors had assured me it was right . No it isnt ! Im out of here ! They brought the owner of the closing company in to review it . Finally he looks up and says;
It looks like its right but it isnt which is a minor play on words that everyone but Tim missed . It was worded wrong and Tim caught it as not being right on. Its not right and Ill change it .
That made everyone look good and I thought it was a BS answer but it left everyone feeling the best they could in the circumstances except me . They damn near gave away half my property! Dont trust anyone to take care of your money for you . Not a closing agent nor a lawyer. I could have been scammed by my own closing agent !
My wife got up and said I gotta run . Tim , thanks for being on your toes . It was a great save and I totally feel stupid . Shes a chief operations officer at a factory.
Still folks make stupid decisions every day and they might as well be making one to you .There are plenty out there making bad decisions. Good luck.
Tim
Tim, great story.
The moral of that story is to not go to a closing without first reviewing the closing documents. I agree with that concept myself. I've lost a lot of money letting other "professionals" read my closing documents for me.
They say there is a fool born every minute and I dont doubt it . People are scammed every single day so that goes to show how many have intelligence
Now that statements a much different story. You've related that story to the topic of owner financing and now are intimating that it is a scam. You seem to be trying to tie in the fact that someone shorted you in cash and make it sound like the three ideas are related.
It's three separate issues.
1) Owner financing
2) Miscounted Cash
3) Scams
There are scams in owner financing and there are scams that involve short cash transactions. There are also owner financing that isn't scamming and short cash transactions that are simple mistakes, no scam intended.
Okay great....you think all owner financing is a scam. That's okay....you're entitled to buy and sell any way you want. You're comfortable using the banks loans and I'm comfortable doing it another way. I'm not scamming anyone though. Are you okay with that?
Incidently, a lot of people buy homes now with 80/20 loans. Thats 80% first mortgage, with a 20% equity loan. They go to closing and bring no money. They are getting the houses without anything down?!!!!!
Scams?
blue
"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Incidently, a lot of people buy homes now with 80/20 loans. Thats 80% first mortgage, with a 20% equity loan. They go to closing and bring no money. They are getting the houses without anything down?!!!!!
With a 700 plus score they are with exellent financials and very good income statement . Other paid for assets also help too.
I said that very thing earliar in the thread. Credit is just as strong as money in some places. Depends on who you are and where youre at.
I havent put any money down on a loan in 15 yrs. Every single loan Ive had in that time frame has been 100 percent funded.
Thats my world . I dont even get my cell phone out and warn my bank anymore when Im at an auction. As long as Im within the numbers . I buy at 70 percent LTV or less. I wont pay any more . I miss a lot of sales where I dont get it done but as the old sayin goes , Ive still got the same address in the phone book after all these years. Im still in business . Banks call me to give a bid on a house they want rid of and the funny thing about it is they are gonna loan me the money. They should sell them retail. They dont need me but they still call.
Thats not what this thread is about but you called me out . Post after post I kept my trap shut . The newbies dont need to hear this kind a thing and get discouraged. They dont need to think that they cant succeed until they fail, so they need that chance . But you are dressing the turkey.
Its a pretty bad business if you depend on someone to drop their guard. Scam or not , if the buyer doesnt have collateral sufficient enough its a bad deal to the buyer and the seller . It doesnt matter how you got the collateral. If the buyer has it then everyone has a hold on things. Lord knows Ive ate many suppers on peoples bad decisions , but Ive never knocked on their door . Its always been the result of an action .
I know numbers fairly well to know its a bad deal to sell on paper with out sufficient collateral and a good credit report. Yes , you can out smart lots of people that dont know that fact , but it still remains a fact .
Now here comes the buyer with no money down and hes gonna steal somthing with a low ball price asking they carry the mail? That has scam written all over it . Might not be but if you live that way what is it ?
I disagree with you Blue and thats fine with me .
Now heres some more facts ;
The no money down buyer that wants the owner to carry paper has the least power . He has to look and look for a seller that will meet his needs with the loan so how can he work on price ? He cant compete with the leveraged buyer. Hes not even in the running .
The real truth is , the no money buyer asking for his mail hauled will pay more and put up with more crap. Why? He doesnt have any choice in the matter if he wants to be an almighty American home owner and watch home improvement tv.Its the American dream! There are all kinds of them kinda like carps and painters professed to be. Everyone can do home improvement h^ll Lowes teaches it . How hard could it be? Everyone is doing it if they can own a house . If they can just own a house .
We are getting old my friend and you need to change with the times . Its a new age out there where they think they are all remodelers . A newly married couple can do anything on the weekends to a home and flip it . The stupid jerks are doing it on tv . If they can do it with out knowing jack I know we can! Lets quit our day jobs and flip some houses man. Sounds far out doesnt it ? Cool.
We happen to be over run with that type right now and they are trying to scam. After all, the guys on tv treat people like sh^t.
They are runnning this profession in the ground right now even if its popular.
No I dont like the idea of borrowing big amounts of money with out the ability to pay for it . Its a bad business gamble and the percentages suck. I would call it a business destined to fail. This isnt any different than contracting for big bucks with out reserve in the bank. Any business plan worth its salt would say you need to be vested in reserve. So heres an example of those odds;
We are watchin Texas Holdem on TV . Its down to the final two. One has a million . seven in chips and the other has forty thousand . That happens to be the odds.
Tim
Edited 1/13/2007 12:23 am by Mooney
But you are dressing the turkey.
I'm not dressing any turkey. We ate him at Thanksgiving.
You obviously dismiss every zero down offer as worthless and I don't. I'll entertain any offer with an open mind. I'm willing to see, hear and listen to someone with an idea. Ideas are things. Things are sometimes assets. Sometimes, their assets combined with my propertys equal mucho success. I'm just not willing to dismiss this concept because I'm a good ole country boy. I'd rather look at each deal and offer for what it is...a chance for me to say yes, or no.
You've already said no. That's your choice.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Tim,
I have enjoyed reading this debate. I have a few questions maybe you and/or Blue and the others can answer;
1. do you pay self-employment tax on your rental income, and on the profit from flipped properties? or do you have enough yearly depriciation to offset any tax burden? It seems to me that if you buy low enough, you would not have enough depriciation to offset the income.
2. What are the general figures you use to establish the value of a property? For example when I worked for the rental place my boss used to only buy if the monthly rental was 1% of the property value or more: say if the rent was $450 the property had to be $45,000 or less. Do you have any other formulas?
3. When you say you never pay more than 70% loan to value, how do you justify to the bank that you really are only paying 70%? do you have it independently appraised? Or do they simply trust your numbers?
4. Blue, do you advocate no money down even if you have it available? When DW and I have bought, I think we have paid less overall by having some cash available and cutting a better deal. I would also confess to leaning towards Tim's more conservative side though.
thanks,
Bowz
1. do you pay self-employment tax on your rental income, and on the profit from flipped properties? or do you have enough yearly depriciation to offset any tax burden? It seems to me that if you buy low enough, you would not have enough depriciation to offset the income.
2. What are the general figures you use to establish the value of a property? For example when I worked for the rental place my boss used to only buy if the monthly rental was 1% of the property value or more: say if the rent was $450 the property had to be $45,000 or less. Do you have any other formulas?
3. When you say you never pay more than 70% loan to value, how do you justify to the bank that you really are only paying 70%? do you have it independently appraised? Or do they simply trust your numbers?
4. Blue, do you advocate no money down even if you have it available? When DW and I have bought, I think we have paid less overall by having some cash available and cutting a better deal. I would also confess to leaning towards Tim's more conservative side though.Bowz, good discussion primers.
answers, as I know them, even though they are aimed at Tim:
1) The characterization of income, especially real esate income, is a rather complex subject in it self. Flips would generally be considered dealer property and have a different set of taxation regulations governing them than would passive income deals such as landlording.
There are limits that depreciation writeoffs can be charged against dealer property income. Its not a simple question.
Interestingly, the taxation method might be one very critical reason why an all cash, owner financed offer is SUPERIOR to cash!!!! Sometimes the tax implications dictate one form or financing or another.
2) Your 1% rule of thumb is just that. It's a pretty good back of the envelope test. I use that everyday in my thinking and dealing.
3)The 70% threshold is the number that many investors might chose. No type of valuation is perfect and many methods will result in differnt values. Each iinvestor has to know the market well enough to make a decision. It's got a lot to do with having your boots in the dirt, in markets like Tim and I operate. The big guys might do it different. They can afford to make a mistake.
Interestingly, I'm thinking Tim gets his loans approved from the banks portfolio, meaning they will accept 70% of the value, whereas most homeowners will apply for a mortgage and the banks would be looking at 70% of the sale price. It happens all the time that someone buys a great deal, say 50% of the actual value, and the bank will not fund it because they don't have 10 or 20% cash deposit.
This idea that some cash must be layed on the table is the basis of many broke (cash short) people not knowing that they can buy real estate. They are using the wrong type of financing when they finally find a deal. Inverstors know that it's entirely possible to take cash OFF the table at closings!
4) I think we have paid less overall by having some cash available and cutting a better deal
Every cash offer, whether in part or whole should take into consideration how precious cash really is. In the negotiation process, it's important to ask a lot of questions before offers are made and make offers that appeal to the sellers. If cash is king, then an offer of all cash would be made, with the appropriate discounts. Cash can come in the form of third party mortgages or pennies...it doesn't matter...it's all cash. An alternative offer containing owner financing should/could accompany your cash offer. If you're doing it right, the offers should tease the sellers into accepting either one, but not be so good that they choose either. You want them to make a counter and see which they prefer.
Personally, I like to informally make these offers and counters, not on paper. I'm a handshake kinda guy....reach an agreement and then shake, then hand it to the agents to write it.
Occasionally, it makes more sense to make an offer of all owner finance first. I made an owner finance offer to a guy wanting 160k for a commercial building. I made an all owner finance offer of 280k! We've now negotiated the deal down to under 100k cash but I'm not going for his bait. I'll not pay a penny over 70k and am now in the walk away mode.
I think the point I'm trying to make is that even if you don't want to make zero down, 100% owner finance offers, it makes sense to explore and understand them. Use them to make your cash offers sound better. The last one I did, I used a letter of intent, layed out all the positives and negatives of the property, explained what I'd do to improve it and why it will make sense for both of us. It was a win, win deal but he didn't take it. Okay...no big deal. He lost out, I'm still out there looking....and always will be. I like using letters of intent.
blue
"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
1. do you pay self-employment tax on your rental income, and on the profit from flipped properties? or do you have enough yearly depriciation to offset any tax burden? It seems to me that if you buy low enough, you would not have enough depriciation to offset the income.
Yes . Depending on how long property is kept. On a short term flip its counted as income just like we make on a job. However if its kept longer its listed as capitol gains tax which is variable , but less on small profits which a rent house would produce. Often from a speculative view its best to keep a property for a couple of years in some cases . Those cases may be over interrest like I explained earliar in the thread . Buying from properties in high interrest times and holding till lower interrest can amount to greater gains while still taking advantge of the capitol gains tax. There are many other reasons too. Mainly the reason my properties are in the rental price range speculation and a saftey net. Higher priced properties dont fit my plan and saftey net.
The taxes that are paid are still in a sheltered mode. The house is set up on a depreciation tax schedule while actually in my area properties are gaining @ 6 percent per year history. While its true that after the costs of maintence of a loan may show a profit the things above off set it which is much better than getting paid from a contract job like we so often do. Ill mention that after the net gain of all those things you have to count to money the propery actually made in your possesion too by actually holding it a period of time . Theres a lot of numbers to figgure on each purchase which can be so different to the next one which is another subject.
2. What are the general figures you use to establish the value of a property? For example when I worked for the rental place my boss used to only buy if the monthly rental was 1% of the property value or more: say if the rent was $450 the property had to be $45,000 or less. Do you have any other formulas?
One percent to value is a national average . That is a proven number that works over and over . Anyway the average says that if a house brings in 450 per month that it is fact worth 45,000. Apprasiors use that number to value commercial rental property. On houses the value of sale is most times greater than that method in this area while a duplex may use the 1 percent method.
Dan T and I are on the same system basically although he has sold most of his property. We ask the property to rent for enough to pay all debt service plus taxes and insurance . We also expect 200 dollars on top of each property above all costs. Sometimes that figgure is used for needed things such as carpet and roofs but still show a profit for each property. Then see above for the gains and remember they are making payments on your property paying each month on principle lowering it over time on a 15 year note. I bought two properties so cheap I put one on a 10 year note and another on a 5 yr note.
As Dan mentioned one time , you can choose what ever you want it to do for you. If you are in a high interrest time you may choose a 30 year note to skid by if thats what you want . The ones I buy today and keep, I look at 30 year notes becuse of my age and condition. I didnt touch any of my properties until I got sick. After 15 yrs of service it was time for them to pay me for semi retirement .
You can choose a harvest method where you sell the oldest ones not the recent. An older one goes under the capitol gains tax which saves money. That method is often used to pay a tragedy of expenses or additonal income . So far Ive never had to do it but the rental income paid my part of open heart surgery of 48,000 insurance would not pay.
3. When you say you never pay more than 70% loan to value, how do you justify to the bank that you really are only paying 70%? do you have it independently appraised? Or do they simply trust your numbers?
Several reasons. I have somewhere over a million dollars worth of properties financed. Some are close to being paid for while others are strung out within a 15 year period. I have a few paid for which they dont have but if I defaulted they would come into play off my assets. Nothing is safe at this point .
They make loans every day and can figgure sq footage. Lets say that what I want to buy they are loaning 80 percent of 80 dollars per foot on which is the average purchase price in their system. I come in and want 50 dollars per foot and an appraisal. If it were to come in above 80 percent I would have to pay the difference.
They deal with me constantly so through track record they trust my figgures and time after time Ive come in true. Their relationship means a lot to me and I would not intentionally mis represent it . My income is also important to me so it takes 70 percent buying to make money off rental property.
This is a little bit of bragging but Im sure proud of what happened this last summer . I brought in a goverment house add where there was an auction. The kicker on this one was it was being sold on a cash sale the day of sale . Once the proceeds were sent in the goverment would issue a court deed the next time the judge was scheduled. From my predictions that could take two weeks until the bank had their main collateral. That went before the president of the bank and he approved it . I went to sale with an open check to buy it . The owner of the property redeemed it from relatives so it didnt actually sell . But I was the only buyer there . Normally at those types of sales a special warranty deed is issued on the spot.
Tim
Edited 1/13/2007 2:46 pm by Mooney
FYI, that color and font works for me.SamT
So much of the success of a company is not determined by degrees but temperature. gb93433 83537.46
FYI, that color and font works for me.
Good , LOL.
Tim
This is a bit of a spin off but since your questions were nearly all about rental purchases.
Its a time over time system that sees success. I thought for a few minutes on which example to use but still it offers some additional points .
14 Years ago I bought a house that was in bad shape and termites had eaten the front portion. No body wanted it so the I walked into the bank and found it .
They had recieved an appraisel of 56 grand 2 yrs earliar and then it defaulted. When they viewed their prize they knew they werre going to lose money and the year it sat on the market confirmed it . No offers the whole year.
I offered 12,000 as is and bought it . I came back and made an additional loan on it and came up with 18,000 owed money against it with the money and labor I spent . It was appraised again for 59,900. It didnt bring that one percent , but it did rent for 500. It paid for itself bringing in 500 and now rents for 600.
While the 1 percent wasnt relative the cost ended up being the ace in the whole along with being a young carp in his prime to rebuild it .
There can be different things to bring to the table that can benifit you over time .
A banker once told me that rental property was worth doing if it broke even while paying for it . He did own some so it wasnt idle talk but I never studied his system. I do remember him saying even at that its one of the best investments out there . Im sure he as counting inflation, renters paying priciple , and tax deduction.
Once you get a few of those I mentioned you get leverage you never paid for to get . So to speak.
Tim
Tim,
Thanks to you and Blue for your responces. I have printed them off and will be pondering them.
I bought my first house, (a duplex) with the owner carrying the note. I had saved quite a bit, but wasn't making much. I recall getting the cold shoulder at a bank when I talked to them to pre-qualify. When I found this duplex, it needed some work, but was livable, and the owner would finance about 75% of it.
So I bought it in fall, And I still lived at home with my parents, on the deal that I would move out in spring. In spring it was rented out, and it broke even or better if I had good tenants. I had been looking at single families also. One I found had been on the market for awhile, and had some structural concerns.(that I figured I could fix). The price had been $40K, (assessed at $38.5K) but had been dropped to $34.5K.
I borrowed $18K from a relative and coupled it with $7500 I had saved and made a cash offer of $25,500. The realtor said the people had already turned down a $29,000 offer, but he presented it anyway and they took it. (no financing contingent)
That was my fixer upper. 11 years later it appraised at $70,000. we borrowed against that appraisal when we found the shop and 9 acres. So we were able to make a cash offer on the shop and land. the owners hadn't been to the property in 2 years and sold it a little above the assessed value, even though the assessment was 7 years old. We paid $34,000 for it and were offered $50,000 for it a year later.
I'm tossing these examples out to illustrate some of the points made here. One is that owner financing isn't always bad. In fact, when I sold the duplex I ended up carrying a $3K second mortgage for the buyers, though I can't remember the exact reason why.
The other point is that had I tried to screw around getting owner financing We would have probably lost the other properties. Had we lost the shop property, we wouldn't have had the opportunity to buy the land and house next to it.
Thanks again,
Bowz
Well.
Most all of my buys have been goverment repos .
Most have been at the court house steps outside where I would not have been able to buy cash with out a bank backing me .
Elininating much competition from every day bidders , I was able to secure some very good deals at 70 percent or below.
Tim
Edited 1/13/2007 6:47 pm by Mooney
Something that I would like to do is as follows:
Buy a fixer upper for $50,000.
Buy the home with my own cash, or seller finance, or pay with a credit card, or borrow money from family or friends, or whatever it takes.
Go through it and spend $5,000 for materials and 2-3 months of my labor and wala the home is worth $100,000
The appraised value is $100,000.
I would then go to the bank and get a mortgage on the home.
My loan would be 80 percent of the appraised value.
I would borrow $80,000.
I would pay my expenses, pocket the remainder, and go find the next one.
I would keep the homes and use them as rentals.
I have not found a bank that will do this.
Has anyone been able to do this?^^^^^^
S N A F U (Situation Normal: All Fouled Up)
i'm in the same market as you,yes there is banks that will do this,but where is that 100k house for 50k only needing 5k spent on it ,not even in ne wichita. i've bought 4 properties here in town in 06 ,pretty happy with them all,all in west wichita except a duplex in college hill,i probably own them at 75% of market value ,i am a investor not a flipper,all will be rentals.so going out and buying decent house and fixing it up and owning at 55% to value sounds great,if you find more than you can handle let me know,i'm in larry hand me the chainsaw, i need to trim the casing just a hair.
I live on the West side in a three bedroom, one bath, one car garage, 1250 sq feet brick house in a nice neighborhood.
It was a fixer upper when I bought it in the Summer of 2003.
I had forgotten this, but the house was listed for sale with a COMMERCIAL realtor.
So it wasn't even in the MLS system.
He had been advertising it in a small ad in the sunday paper and that's how I found it.
I moved here because I wanted my son to go to NW High School.
I painted it inside and out.
Removed all carpet and sanded and finished the oak floors.
Painted the original Birch varnished cabinets and replaced the sink and countertop in the kitchen and have ended up with a decent place.
Even if the market slows down, the houses still sell in this part of town because of the neighborhoods and the schools.
These houses will always be in demand.
^^^^^^
S N A F U (Situation Normal: All Fouled Up)
I have owned rental properties for over 24 years. Some good times and many bad.
I owned two rental properties before I bought my first house to live in. At my peek I had 7 rentals and my own residence to manage and maintained. My wife was pregnant with our 4th child and had to quit her job. I sold 4 of the properties just to keep up with the bills and be more at home. The three that I have now are just about paid off. They bring in a little income each month.
What I am trying to get to is if you go into the rental business thinking that you will receive monthly income off any of todays properties you will be sadly mistaken. I can not find a single piece of property that will fit in the 1 percent to value equation. Maybe its the area but it cannot be found. Total gut jobs still cost more than you can rent them.
The real estate market is in a correction period just like the stock market a couple of years ago. Landlords will see increases in the next few years that will help to off set the ratio. Right now I have a single family 4 bedroom 1 1/2 bath house in a great condition in a great hood renting for $950 a month. I probably could get an additional $150 but the tenants are fantastic. The street value for this house (I have check with my realtor) is an easy $250,000. City assessment over 200K. This house needs to rent for $2500 a month. This will not happen in this market.
I feel the big 20 percent gains per year (or better) are over. I am not trying to discourage any one from investing in real estate, but do not think you will make the big returns shown on TV on flips or rentals
Thanks and this site is a great asset to anyone!
I hate to say the obvious , but in your case you woulda been set with all the rentals you had .
If I take the value of my houses now , they dont rent for 1 percent either !
You could say its time to cash in now.
You could also say the market has to even up and it probably will.
So lets take your investment on the big house .
we will say you could get to the table with 200,000 , less 5 percent commision =190,000. Now you need 1900 per month in rents.
If someone buys that house for 200,000 it will cost them 1800 [7 percent @15 yrs]per month before insurance and taxes. You are paying the insurance and taxes on yours and only getting 950.
I would sell as its too big a gap. Invest that in another town if you can catch some action in the paper . Stock market is better than that . Check with Piffin. What its time to do for you if it were me is take that money and flip houses.
Tim
You do know it cant stay that way ?
Right now your 950 house would be a rage of people calling if it were advertized.
I bought my first 4 bedroom and didnt know what I had . There is no 4 beds for rent ever it seems.
I advertized it for the price of a three .
In a town of 8,000 with 3000 thousand of those being mexicans , I logged 56 calls on it . Talk about hot . 4 bedroom houses will rent high!
Im hoping you are mistaken about how much that house will rent for but anyway I wanted to tell you somthing last night and didnt so here it is ;
Story alert
I worked for other people all my life in their homes pleasing them.
When I bought my first rent house I made it as nice as I could . We answered adds and went and looked at the competitions houses. When we got back we knew we had fixed ours to sell and not rent . It was too nice ,,,... or was it ?
We were making a lot of money at the time with our jobs and did not have to have money from this rental immediately. It was her idea to price it very high in the paper and at that time I could get on lists with agents .
So we got 20 percent more than any one in town had heard of getting . [which doesnt add up to what you need] 20 percent is a lot of money however and it drew lots of attention because we are noted to have" the nicest rent houses in town but they are pricey" . Our niche is people that sold their homes and are loking for another one . They have money in ther pocket from their sale and they will pay a high price for a nice place. I have a lot of turn over others dont have so I tacked somthing on top for that . And also on short term , somtimes I have bouncer fees. <G> So its a higher cost business .
I dont know what the limit is on a house . Every single time Ive raised the rents someone has paid it . Ive said and my wife has said we will never get that much rent . We have never failed to get what we needed. Never not one time . They bitch about the price somtimes and hang up the phone in your ear but some one told us one time that those are the self eliminators. They think they have to call and voice their opinion never having any intention of renting your house. They want to see it though and ask if we take HUD. <G>
You might be surprized what that house might bring and I hope you are mistaken.
Tim
My last post reminds me of somthing I would like to share .
I do have some mentors and one flips houses and hes much older than I am. I could have dated his daughter . His life advice is on flipping is ;
Get your price if its justified . Always get your price . Dont pay any attention to people wanting to turn in lessor offers. If people want and need your house , they will pay for it . You are holding the prize and they are playing a game that doesnt cost any money to play. You paid the price , so get your price.
Tim
Tim,
Get your price if its justified . Always get your price . Dont pay any attention to people wanting to turn in lessor offers. If people want and need your house , they will pay for it . You are holding the prize and they are playing a game that doesnt cost any money to play. You paid the price , so get your price.
The same statement can be made for contracting/remodeling/building/carpentry, yet how many of us do it?
Bowz
To be honest I never did until the rentals and I figgured I screwed up and made them too nice . I had to try and they answered.
Yes I suppose its much the same .
I doubt I could rent a rats nest for top dollar though.
There is a market for nice rentals or houses for sale , I know that .
Now everyone I recieved an email asking the answer to this so I thought Id just pass it on to everyone ;
http://www.usahud.com
Pick your location and enjoy.
Tim
I never made it work in contracting while others on here are doing it .
And thats the main reason I left contracting .
Its also the same why I chose flipping and rentals . At the time I did it I was a sub mostly while I didnt starve out at all , DW said its time to change what you are doing with this income statement. My income really sucked compared to what others were making and it was her that said enough is enough. I left contracting and never looked back litterally except commerical bidding I kept. That turned me into a commercial contracting sub/ investor/ landlord.
I never did well with residential contracting.
Tim
You are so right with what you say! I think a lot of times I am to lazy or to busy with my work and family. There is no doubt I could rent all my properties for more $. I get a good tenant and just let it ride. I have people that have rented from me for over 12 years and I raise the rent very little. The plus side is I know that check will be there at the first of the month.
I need to start re thinking my strategy because I am not getting any younger.
Thanks for talking to me!~!!
Tim,
I never made it work in contracting while others on here are doing it .
And thats the main reason I left contracting
A couple years ago you and DanT were talking rentals, and i butted in and asked if you though any contractor/carpenter could be a landlord. You said you didn't really know.
Seems to me that many of the same reasons contractors fail are the same reasons they would struggle as landlords.
contractors need to size up projects accurately-landlords need to size up rentals accurately
contractors need to evaluate clients-landlords need to evaluate tenants
contractors need to do bookeeping-landlords need to do bookeeping
contractors need good plumbers and electricians-landlords need good plumbers and electricians
contractors need to sell their projects-landlords need to convince renters to rent, or buyers to buy the flips.
both would need negotiating skills
both need people skills
So what say you? having been on both sides, is the landlording skill set easier to handle?
Bowz
Ill get to that post that was in my way in a minute. <G>
You as tradesman have an opportunity to excersize your talents . Espeically remods.
You can deposit your labor into homes that will give you returns on that labor many times instead of once and being taxed to death on it .
Bowzs question was a one of many that loses the insight to a quality of life you may not be able to enjoy otherwise.
If theres anything that I ever do on this forum that is good I hope this is it . Nothing would please me more than to see yall benifit from somthing you are good at anyway and are already tooled to do. Its not like Im asking you to jump out of an airplane when you have never flown. You have dusted saw dust off and smelled paint the whole time so whats the big deal? We all will be doing that next week and most will be doing it for someone else . {or somthing similar]
Back to ya Bowz;
Where ya gonna find someone else to put money in the bank for you in your name when you didnt do one thing for it ? <G> Why question how much or little depreciation really ?
I wasnt on ya buddy , it was just a good place to make a point. Or two <G>
Tim
A couple years ago you and DanT were talking rentals, and i butted in and asked if you though any contractor/carpenter could be a landlord. You said you didn't really know.
Seems to me that many of the same reasons contractors fail are the same reasons they would struggle as landlords.
Now that !!!! , was a good question!! <G>
You would need to ask others here what being a good contractor contains . I wasnt one for several reasons.
You called me out and so you will get me . <G>
I got to the point I didnt want to deal with people and not get paid for it . So much of a contractors time is eat up with customers wanting to talk off the clock. I could care less what she chose for colors , I just wanted to work. The work I always loved and still do if I feel good. ETC! Most of my time I was a sub and I was all business . I didnt talk about the ball games or camoflouge or anything else but work. There was a thread a while back where I said I wanted to be paid to scrap out a house or anything else that was out side the scope of my work. I was a bull about getting the job started and complete with out interruptions . They could count on me to get the job done and turn it back over to them on time but I didnt get paid for small talk so there wasnt any. I billed for anything out of the scope of my job.
Several contractors chose not to deal with someone like that and hire someone they liked a lot. Someone that would give freebies and buy lunch. While I stayed busy by people that had deadlines , I wasnt covered up with work enough that I could raise prices above everyone else . I wasnt much better with my help. I was hard to work for and harder to please . As one worker told a newbie one morning when he was asked what he thought about me ? He said well; "you will never wonder whats on his mind ". That pretty well summed it up as far as IM concerned . I coached my help all the time to be the best they could be . Not only for my benifit but for theirs. If they were going to spend their life doing the work, they needed to be able to make money at it and if they ever wanted a raise. Several of my hands went into business for themselves. Several are still working out there in their name. They made it while some didnt make it past me .
I was good at pushing a job so I did some super work commercially. Thats where I got my start as sub commercially because it paid much better considering volume . I was in my element where only the amount of work turned out mattered and getting paid damn well for my efforts. No more cleaning floors for nothing or anything else . In fact they helped me make it doing side work for me such as hauling my tools and using their lift for me .
I was never a good business man then . I felt the work again was the most important . Thats where Robbi walked in as a business manager of a company. She was a pro at it and very good at her job. I owe her as much as Ive done or more for us because at that point we were married. She was also my business educator and coach. She turned me away from some jobs that had too much risk and did not have the money we were looking for in profits. She was right and the train moved on. I gained a respect for women from her that was greater than I had .
She advised we needed a tax shelter with the good money we were making . We needed a place to put it so it would not only be safe but would grow . She looked hard at the stock market but because of my talents "her" choice was clear that it should be in rentals . That caused us to start flipping too when we bought to large of a property for a rental. From money from our jobs and the flipping we bought rentals left and right . We financed all the repairs but never a down payment . I sent my crew to fix up a house and paid for it out of the construction account .
I had 10 rentals when I fell to a heart attack and I got a job for a year as a building inspector . I healed up enough and went after it again .
We have 14 rental houses right now and some other properties we hold .
The work got us there with some good guiding . We worked 7 days per week for a long time and never took a dime . Her and I spend time together many weekends working on a rental. Now while Im working on the job she does the business on them. I go bid on properties and she helps collect information on them.
I do what Im good at doing and so does she which made a partnership. I did not have her while I was contracting residental. We taught each other but mainly she has been my coach.
Now to the talents of a land lord test. :
be continued
Tim
A good landlord has many needs thats different than a contractor or most .
There are very few subs . The only ones I use is HVAC and carpet . I do the rest or I hire people by the hour under me .
Being a framer or a finish carp has little to do with it , but at times it can.
Not much of it is new work . Its more repairing anything ,,,. anything . Ive got to pull a dish washer in the morning because its stopped up.
The tool layout is over whelming and I bought a warehouse to store things I use.
Saving money is the object , not making it. A dollar saved is a dollar earned . That could be a book. You fight expenses like the plag but you have to be in front of a renter on their payday. Still its more defensive than offense. You learn to buy things that will last , not what a customer would pick out . Decisions of that nature can make or break if the profits are low . You dont throw a light fixture away , you fix it . You save three to make one and so on. Its a little like a junk man.
Anyway so much different than contracting where you ask about everything you install. You make all the decisions .
I do electrical, plumbing , carpenter work, drywall , painting , but the kicker is I do mostly repair. I rout sewer drains and unplug commodes along with anything else you can think of ,...
After several years you get efficient at doing it just like no other trade its like except some people who are handymen. Even they dont go to the extreme a landlord does.
Your income is set if the property is rented so all you can work on is expenses sometimes . Much like living off a retirement income where you cant change the imput .
Buying properties is still another talent thats different . Real estate law is first or at least some of it . Lots of study from reading . Lots of hours looking at properties and their values. That has some similarities to being a contractor.
Tim
Tim,
I very much appreciate your extended responses.
much to think about.
Bowz
Thank you for writing all that, we have 5 and i never thought about all that, just did it, own tools for everything, I go under and clean drains, anything i need to do, Although i am a carpenter i had to learnplumbing and electrical, I always keep a few plastic boxes full of those tools ready to go, If i dont know something i find out, Even im amazed at all the things i can do
I think this talk about all the different tools explains why I don't want to landlord.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Even im amazed at all the things i can do
That just keeps growing too. I made a lot of mistakes and still do.
Somthing else I wanted to share since we have a house full of landlords in this thread.
I know what I know and dont think about it .
I stopped by and visited another landlord that has a full time man working for him.
I was supposed to talk the the owner but he left to pick up his kids at school.
So I was left talking to this handyman type . Im sorry to say I almost too quickly judged him negatively from his demeanor. He opens up and starts teaching a class to me on what they do to save time and money. [where the hal was my notebok?] This guy was good ! So for an example ; They only use one type of faucet and when they buy a place they switch it . They carry a tool box of replacement parts that can rebuild any thing they have at 10 pm on the spot.
So I traded him and said well, I keep water heaters in stock that I buy from an outlet that has dents and missing parts. I bought 5 boxes of missing parts too. Ive been buying the heaters for 75 bucks around. I hook up all my heaters on flex supplies and can change one out in 30 minutes on a Sunday.
We went on like that for an hour when the owner walked up and stood listening . He told us to keep going . Then he started talking about getting renters to pay and evictions. That went on to real estate law and it was time to head for his shop for a beer. We blew the rest of the afternoon if you want to call it that . My wife did . <G>
I said all that to say this ;
This is too hard a business to learn every thng self taught and hardly ever has an apprentice system where that guy owns properties.
The same owner shows up at my warehouse and has an idea after our talk.
He wants to form an assosiation of landlords locally. We would have meetings at least once per month. He asked if I would be willing to share fixing a hole in drywall in 30 minutes and things like that I shared? He would also share his expertise on collecting rents in different situations as he has over 100 units of apartments.
He also mentioned a black ball system where if we didnt get paid by someone the rest would know it by web site . John Jones bill is outstanding at 100 skylark lane . He mentioned the group retaining a lawyer for a set price per hour used but to pay him a retainer so we could be legal about setting this imformation up and what we could not mention by privacy. If we couldnt list his bill was outstanding maybe we could give him a rating of a letter F. They rate doctors on the net so why couldnt we give all people ratings to help them too. We get Paula Vickers on the phone and look her up and she has a B+. Ill help her move ! <G>
I think we would benifit from having local assosiations with other landlords. We could hire Bob Walker or similar to put on a class as well as other professionals to teach classes and take questions.
Tim
Tim, I've belonged to a landlord type real estate investor association. They can be incredibly helpful experiences. Most of the oldtimers in there have made their livelihoods doing every type of real estate business imaginable. Most aren't afraid to share ideas because they know there are more deals out there than they could possibly buy. Most of them also know that they don't have to fear telling their secrets becasue 90% of the potential investors will never make an offer. 90% of those that do make offers will not close a deal because they'll get discouraged after their first zero down, owner financed deal is laughed at. Of those that actually close a deal, 90% of them will never do it again, because they don't buy right and end up losing. They'll tell you that "real estate doesn't work" because they were afraid to make an offer of 50% of the asking price.
I used to attend the Oakland County REIA when I lived closer. They had everything there....low income high income lanlords, flippers, apartments, single familys , rehab, hud, foreclosures, preforeclosures, hard money lenders, investor type mortgage lenders, attorneys, title vendors, tradesmen, lease optionors, any thing and everything. If you wanted some info, someone was there for you.
Your town sounds much smaller but the idea is great. It's also kinda nice to hang out once a month with people with the same interests as you and swap war stories. I sent one guy from here (Scott, a remodeler) and he hooked up with a lease option queen (Wendy Patton) and he did rehab work for her for years afterword. He also learned how to rehab and flip houses. I haven't heard from him in a year or so but he was thankful for me introducing him to the idea of attending that particular meeting and he was involved in others closer to his home.
One of my favorite type meetings was called the Round Table. They'd set up experts in every field imaginable in real estate and you could just wander from table to table asking questions. There is a wealth of real world experience in meetings like those. Our particular chapter used to have a pre-meeting meeting where they'd set a guy like you down and just let him ramble and answer questions for an hour before the real meeting started. It was quite informational to a guy like me that had an interest.
blue
"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
well i have set here reading for a hour,i'm going to jump in the mud.
now i'm going to take a shot at these questions. as a passive income [rentals are passive] you pay no ss tax on income.my opinon on depreciation is it's a joke,years ago it was a big deal now it amounts to very little. if you want i can explain that further.
when i started in the 70's,you pulled up in front of a property at 50k,all you asked yourself was will it rent for 500.00 a month,yes! your ready to go.then the 80's hit,i wouldn't even look at something that couldn't bust 2% to value [oh those were the days!]now it's 2007 around here if something can rent for 1% it's amazing.the reason is high market values and rents that haven't moved much in 5-8 years.
i don't know about tim but i could tell my bank it was worth a millon dollars ,they don't care they have to have a written appraisal in the folder.now this gets a little sticky so many appraisors are lazy ,they look at the selling price,and if it comps out ,thats what it apprasies for. i like to take in my own comps to forward on to the appraisor or hand them to them when they inspect the property. now i will say if you are doing this and own alot of property,they will trust your numbers alot more than a young couple that comes in and claims they are stealing a property,lol.
what tim said,cash talks period. you may get a deal on owner carry,but at closing ask him what he wouls discount his note for if you wrote him a check right there at closing,then you'll see the advantage to cash.
i gotta go back to the mud now........ larry
hand me the chainsaw, i need to trim the casing just a hair.
Edited 1/13/2007 11:56 pm by alwaysoverbudget
my opinon on depreciation is it's a joke,years ago it was a big deal now it amounts to very little. if you want i can explain that further
My understanding is that a 30 year schedule is set up and you get to take 1/30 th of what you paid for it against the income it produces(after expences) If I do as Tim does and buy low, it would seem the depreciation would equal not much to get excited about. But I figured I'd ask since he does this stuff for a living.
around here if something can rent for 1% it's amazing.the reason is high market values and rents that haven't moved much in 5-8 years
That is how it is around here too. nothing we have looked at in the last 3 years would support the 1% number. there is another formula a different landlord uses, but it is even more restricting than the 1% number. He is the managing partner of a group that does student rentals, and said they have not bought anything in over 2 years.
The reason I'm asking all this stuff is my wife took a job in another city. And realestate prices are much lower there, but the rents are only slightly lower, and there are properties that make these general guidelines work. So we are debating whether I should move there and not try to re-establish my business, and just do rentals and flips. Because the billing rates that contractors are charging there suck.
We have equity in our properties here, that would make buying stuff there not a big problem. Interesting that Tim suggests to VAVince to try another city.
cash talks period. you may get a deal on owner carry,but at closing ask him what he wouls discount his note for if you wrote him a check right there at closing,then you'll see the advantage to cash.
Quick story:
when I bought DWs engagement ring, the diamond place got down to "...as low as we can go..." price. So i said I would buy it on a credit card. When I came in to pick it up I had a stack of greenbacks with me and offered to pay cash if they would give me the 4% they were going to lose to the credit card company. they said, "Sure, no problem"
Bowz
when people talk deprication,all your really talking about is a tax deduction that you take this year,but someday when you sell you pay it back.it's nothing but a loan from uncle sam.the only way you beat the system is when you die your heirs get to set thier base at market value,so you win the game!!! 1031 tax exchanges are the greatest tax reason to own real estate,i don't know of another investment that has that advantage. larryhand me the chainsaw, i need to trim the casing just a hair.
There are many speculations about buying properties and you cant call all of the plays thats available to you. I watched football today and IMO a ball game was handed to another team. Still becuse of mistakes the team that won deserved to win because it took adavantage of those mistakes . Yes if the losing team could just bring back one decision, it would have turned a different out come . Theres a saying too that says; Thats why they call it Poker".
I could have addressed this to all but wanted you to read it after your observation about depreciation being a moot point if I bought the property so low. Its true that if thats all the point actually contained , but its not all of that. Its all you can do and all that can happen while you hold a property like the football game today over ball control. Things can happen that change your outlook.
If you want to put on an addition to your home , your income that pays for it will be taxed. If your rental income pays for an addition on a rental its not . Its a gain to you either way. One is taxed and the other one isnt at the time. Yes of course if you sell other than electonic tax exchange it will be . If you sell your homestead after two years you wont be taxed twice . Ever think about it that way?
While you live and make payments on your homestead , the money not only comes from your own pocket but its taxed before you make the payments . You also pay the taxes and insurance while you feverously pay down that principle . The longer you keep it you have a chance of appreciation but you never have any depreciation at all.
I think a win is a win and a loss is a loss no matter how you arrived there like the ball game today. If you look in the paper tomorrow you will see the teams that did get a win so it goes down in history.
We only have so many miles and hours in us before we depart our life but more important how many hours and miles do we have before we cant do what we are doing tomorrow? We must think about the fourth quarter. What plays do we have for retirement ? How many years will we live retired and what will be the needs of cost?
From some of the accounts weve heard in this very thread I would predict that some of you will draw from one house rental more than some will draw SS per month. Thats an outstanding account .
Some of you will draw SS and from a retirement . Will it be enough? With the raising prices , will it be enough?
Its true SS gives small raises or has but will it be there after the next ten years? Thats when its predicted to run out . Theres already plans to give some of it to illegals . Still speculation if you ask me but some believe it and others that want to.
Life itself is a specualtion of its quality and length.
Thats an important piece of speculation right there !
Ill make another post and continue ;
be continued
Tim
Bowz, I can make the 1% rule work here (small town) and there's also enough room to let a property manager handle EVERYTHING!. I just said no last week to a 3-1 at 54k that would rent for 700 per month.
Why would I pass on this? I don't want to be in the residential landlord business in real estate. I might consider buying an apartment complex if there was a strong property manager available to handle it but I'm not willing to get myself involved in Single Families.
I've passed on many with good numbers like this....and at least one of them was zero down owner finance. The guy would let me take over his payment and take a second and that would be enough for him to pay the condo rent that he wanted to move into.
I don't want to invest the time, when the property manager that is available here can't get the job done. So, I wisely stay away from something that will aggravate me. I'm telling you this just so you'll know that they are out there...somewhere. I'd suggest making friends with a realtor in that new town and hang out there every day "looking for a project". That's how I found my school. I did ride my bike around and walk around town talking to everyone too. That approach will certainly put you in contact with motivated sellers.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
I don't know how frequent "Owner Finance" occurs nowadays.
It's frequent. It's done all the time on every type, size and priced property. Everything I own is offered right now as an owner financed property and everything ALWAYS WILL BE! Understand that this doesn't mean that the entire amount will be owner financed, but everythings possible depending on the terms.
It's all about terms.
You've pointed out two classic examples of how/why owner financing works.
There are countless others. Sometimes tax situations dictate that owner financing is preferable. Sometimes the sellers don't want that lump sum today and prefer it to be spread into the future. Like I said, there a variety of reasons...
Lets look at the school project that I'm currently involved in. At this point in time, I've got an agreement and a closing date. We haven't ruled out a assignment of this contract and if we begin to pursue that as an option, one of our primary enticements would be the offering of our "profit" on a owner financed basis. If we felt we had to be extremely aggressive to make the assignment happen, we might postpone all of our cash into the future after they do the development and sell their last unit! The option is ours...we can sell this paper anyway we want!
Owenr finance deals do happen all the time...especially on bigger deals.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
The real estate market will stagnate for the next 4 to 5 years with small increases. We are going thru a correction. It can not continue to increase because of peoples earnings.
The rental market is all so going thru a correction. Properties will rent closer to the value.
This looks like agood place to drop this nugget.
Planning_assumptions_final.pdfSamT
Now if I could just remember that I am a businessman with a hammer and not a craftsman with a business....."anonymous". . .segundo <!----><!---->
appox 7 years ago bought one house 150 grand , payments 900, rents for 900, now same house worth 375thousand still rents for 900, other house paid 45 grand rented for 500, now worth 200 still rents for 500, Not sure how these numbers make it work here in this market, Although i am happy to see my houses go up i would rather have seen it go up slow each year where i could havebought more and done better in the long run, I think in the long run it was bad to get everyperson that thought they could lift a hammer into flipping, It set the trades back, Everyhouse wife orwhite collar man thought they could be ruthless donald trumps.
wow,as investment property and todays values,i'd be selling. 575,000 worth of r.e ,base cost 200k,profit is 375k approx tax due is 90k. put the 485k in bank at 5% you make 25k a year. right now your making 16,800 less taxes and ins. surely at the rent factor you have nobody is moving! are you sure the rents couldn't be raised?if you doubled them it would help but still would be at .5% to value.i'm not sure where your at but have you thought about selling and doing a 1031 exchange into a property in the midwest. for 575 i just looked at a comm. property that throws off 92k a year in income.i know apperciations great but bringing in 70k more a year x7 years is 490k in income. larryhand me the chainsaw, i need to trim the casing just a hair.
thank you for the reply, first i should move in one and live there for 2 years, but being a carpenter my house is not done, then this might be the only place property still holding or going up, im on the oregon coast, yes i might get more rent but i know the renters now, im trying to hang on, i said i would weather a slowdown or 2 and wait for the next peak
I probably missed the boat about six months ago.
There was an old mobile home park (eight trailers) for sale for 80,000
It had two trailers that came with the deal and six empty spaces.
I was going to try to find six cheap trailers and drag them in.
I was hoping to spend little or nothing or I don't know maybe 20,000 total for all six that I had to buy.
Anyway have you guys ever looked at numbers like this?
My payment and expenses would have been what? $1,500 ? For prin interest taxes insurance, water, trash for all eight trailers.
Maybe expense would have been $2,000
Then we look at income. Eight times $400 equals $3,200. (eight times $500 equals $4000 K !!! )
$3,200 minus $2,000 equals $1,200 cash flow.
Not Bad for $100,000 property.
You can't make that kind of cash flow on a 100,000 house.
I chickend out when I thought about trying to keep 8 trailers operational.
All those old furnaces, water heaters, frozen pipes in the winter, what about A/C in the summer? It would be like an oven in there.^^^^^^
S N A F U (Situation Normal: All Fouled Up)
Its not the cash flow to start with its letting the trailers pay for the land.
Once its clear , youre gone to the races.
Tim
i know a guy here that does that,i'm not sure how much time 8 mobiles would take to keep running,he has about4times that many with 8 vacant most the time. now if you could vacate the spaces ,clean up the park and rent each space for150 and just p.u. check on the 1st . sounds better to me.also with mobile parks i think here in wichita now you have to have a underground shelter.larryhand me the chainsaw, i need to trim the casing just a hair.
Well, this threads been fun. It's a nice sendoff. I'm off to help Frank re-establish himself out west, or somehwere in the South. I'll be back before the end of January for any important meetings about the school project.
Update on the school project: the banks want 20% cash on the contruction budget that we estimated and two years worth of note payments. They like the project. The one element that I didn't like about their terms was the personal guarantee. We probably are not afraid to personally guarantee the project, but we think we have such a huge equity position that we will be shopping for a bank that will make that loan and use the existing building, in it's improved state as the sole security. I know that is asking a lot but hey...it's my right to ask.
I mention this update because it interesting fits in with this thread. After digesting the banks position (frankly, I thought the terms would be much tougher, given MI's enconomical climate), we've decided to use an owner finance approach. We intend to ask the owner to carry 100% paper on this deal while we build a loft model and sell out the gymnasium. We don't know if he'll take it and we expect to have to sweeten our offer but we see this as an alternative to accepting any personal risk. We formulate a proposal and take it to the owner. He can take it or leave it. We'll have to have good reasons why he should but in the end, the choice is his. If he has Tim Mooney in his bloodline, it will be a no. If he has B.E.D in his heritage, he'll see the wisdom. Already, one building owner lost out on a sale this year becasue of their hard line position. The guy won't lose out because we will be closing this deal one way or another.
I won't be able to answer anything in this thread for at least two weeks but I just want to say to those that are looking for a way into the world of real estate, without banks: its there if you take the time to learn about it. There are dozens of ways to get financed and only one of them is with banks. Sometimes the banks terms are more expensive than the alternative methods. Financing is not a one stop shopping idea. It can be sought and obtained in many different ways using many different forms of security. I was fortunate to have the 3k in my account to put down on the school and tie it up enough to talk to bankers about more than a million dollar loan, but I also know I could have done the same deal with 1$. There will always be guys that are skeptical but for those that only have a dollar, take heart....don't listen to the naysaysers. They are right...you won't qualify for conventional bank financing on an ordinary deal but if you find the right deal, there will be a bank that will see the opportunity.
Off the soapbox and into the wild wild west.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
OK , thats Blues send off into the wild West.
Hes trying to bring home a million dollar deal with 3 grand according to his information. He wants the building itself to hold up for the full collateral of the loan.
I think he takes offense to my veiw points and that is part of the reason Im typing this post but also to clear up anything in the tussle.
If I was on the board of the school system which I assume this will be voted on , I would have to have their point of view and the circumstances plus I would want to know the value versus the offer . It also would be imporant to know if I though we could sell this property and do better . I dont have any of that imformation .
However , this will probably surprize Blue ;
If this property is like any other abandoned property that Ive ever seen such as a school and a hospital we have had here , it may only be worth cents on the dollar . Theres not many people that want such a property because transition is normaly hard for another use . There was two grade shcools that made a transition bu wo of them was finaly torn down. The property would have to be worth an awful lot to figgure demolition of a school.
If the no money down offer suited me with payments comming in 30 days and I didnt care what they did to change the property , I would take a serious look at the offer .. If I didnt think anyone in their right mind would take it , Id buy their dinner .
Ok, in other words this school board may be figgurring they have nothing but land with a building in the way of it . Costly and no one would rent it? No one to buy it ? Thats a point to me and if thats the truth I would let it go gladly if it was a burden empty.
On the other hand , if he offered me a low price on a nice rental unit that was currently rented with nothing down , I would be a fool to take an offer that gave me nothing above its rent . I could easily sell it on paper to a retail buyer at a higher price which would be above appraisel. Ive had several chances to do just that even with 3 grand down.
Now if he came to me with a third down and I finance the rest on paper at a greater percent than Im paying at top price I would definately consider his offer .
The whole point I want to make or remake is you have to consider both parties . What are you getting out of the deal and what are you giving them? This school doesnt have an income off this property if I was guessing while Im getting more rent than hes offered payment ? I cant do that and he knows it . Because Ive got a valuble property I could sell to a homeowner in 30 days retail.
It depends on the conditon of sale . Depends on all parties .
Now Ill say this if its been misconstrued.
Start somewhere . If you only have a dollar and you dont have the credit , trying is better than nothing . Go out and try to make somthing happen just like Blue is doing right now . You probably wont run into too many people like me . Arent you glad.
You may be able to fill someone elses need and they may be able to reward you.
Like Zig Ziglar said or somthing similar , if you help enough people get what they want they will help you get what you want .
Just be yourself and travel with a good heart for people can see you.
If you can help them and it in turn helps you then you made the world a better place to be for all of us .
Story alert;
Several months ago we took an elderly lady in to live with us from the hospital that had a stroke and doc said where is she going ? She cant do for her self . She has one blind son and no other realitives . Robbi had been doing things for her for some time , like 10 years , getting to be more and more . When she brought her home she half lived at her house taking care of her and she asked me if I could do somthing . I built her an apartment in my garage which is no use to me . Ill have to remove it to sell the house . We got her moved in after I worked night and day to make it happen to get a load off my wife . The lady decided she wanted to give us her house and she deeded it at that time . I just got done with remodeling it and its the one that set the reccord rent for a 3 bd 1 ba.
I didnt ask for that house but it came as a gift to repay a gift was her words so we will go with that . Both parties are happy and TJ got a Granny. Granny finally has a family and doesnt have to live alone anymore . Shes 82. Her only other choice was a nursing home so let me tell you about that ;
This is for every ones benifit to know and the reason its being told. This is the real wild world of getting old. We are all headed there ! Unless we die first so whats the difference ?
Un assisted care homes would not take her and said NO.
Two nursing homes would take her for 3500 and 3600 dollars per month each.
She draws 1200 per month and change which she has been able to spend with out paying us while shes been here . I duno. We havent asked her for anything but a rotor rooter bill. We have no complants .
Her house draws top rent after 7 grand of work @ 600 per month. We are going to take that but she was worth 1800 per month with the house fixed with me involved.
Where was the other money going to come from ? The nursing home would have taken her house and her full check. After that ran out she would be the states problem. She would have lived the remainder of her life in a nursing home with out any money so she would be with out the right to complain about it and no ability to move out.
Thats another reason I want you to take a hard look at your own retirememnt.
Tim
I always enjoy reading your posts. ^^^^^^
S N A F U (Situation Normal: All Fouled Up)
Thanks , I feel like IM becoming a preacher here .
I promise I wont be after this thread is over . <G>
Tim
Excuse me,sir, but, with all due respect, I refuse to accept that promise.
I want to hear more in the next thread.SamT
So much of the success of a company is not determined by degrees but temperature. gb93433 83537.46
Yall quit it . <G> Im retiring as a preacher .
TY
Tim
I dont mind the preaching but dont think that gives you the right to pass the hat!
Doug
Thats the best part . I dont get paid ? Im outta here . <G>
Tim
Another way of finding these houses is to advertise your company and your website in the paper, radio, TV, etc.
One approach I've seen is that the ad comes across as "call us we can help".
They encourage people to call if they're behind on payments or if they need out quickly.
One guy uses the approach "if time is of the essence".
He tells people it will take 3-4 months or longer if they sell the house through a realtor.
He promotes his business by saying you will have cash in hand in one week if you work with him.^^^^^^
S N A F U (Situation Normal: All Fouled Up)
I'm halfway west and I already miss you guys...so I stopped into a hotel 8 to say hello. I thought we'd drive straight through, but I was wrong.
Now, lets set the facts straight about that school. I've already posted the numbers but I'll repeat because you probably missed it...or maybe I didn't post them. Sometimes I get secretive...but not too often.
The school is under contract for 160k on a 6 month study with a couple months option. Weve agreed to pay cash, but I know the seller is very anxious to close. We we think he will be open to an owner finance arrangement but we haven't approached him on that yet. We put a total of 5k down and have 1k in escrow to pay the utilities, which we've agreed to pay during the due diligence period.
The request for the million dollar plus loan was made to a local bank for the purpose of redeveloping the property and off 25 to 40 condos/loft units. The numbers look extremely favorable showing upwards of a 50% markup. The bank was receptive and indicated that they'd need the normal collateral. We're debating the wisdom of providing that or seeking outside investors to fund that amount.
blue
"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
I'm guessing you've had the following experience Tim.
You buy a rough house and go in and get started.
After you clean up the yard and paint the outside, the people in the neighborhood come by to thank you.
The neighbors who own their home and care about the neighborhood, come over one by one and thank you for taking care of the eyesore that has plaqued this street for many months, years, or decades.
You've made their homes more valuable by cleaning up the eyesore next door.
Some come over and ask for your help with a problem on their house.
Some come by and want to hire you.
I just thought of something else. On the last one I did I had quite a few guys coming to the house looking for a job and wanting me to hire them.
Anyway, it's kind of rewarding to feel like you've made a difference.^^^^^^
S N A F U (Situation Normal: All Fouled Up)
Or it could go like my first flip, Around 1980 or so a real estate friend of mine and me bought a 20 grand fix up, Yhe idea was we would both work on it and resell it, him coming up with the money plus doing work, After a few days of working i was in the attic when i turned around and someone was standing there, It was the building inspector yelling at me in his best boss hogg voice,Boy you inna lotta trouble, No permit, At this point i was only cleaning up so i politly informed him this house is in my name and he needs to leave, he came back with the local swat team i would not let them on my property, I was right, turned out the word was to bust my chops that long haired hippy was gonna be run outta town, I did have longer hair but never been a hippy but to these good churchgoing people i was some sort of threat, Every time i turned around they gave me a hard time while the good ole boys on the block did what they wanted, My partnerwould not work but sent his wife over to work She was very pretty and wore a bikinie while she worked, Then everyone said i had girlfriends while married, The neighbors waited till i left then robbed us, We had a big drainege ditch they would not let me put pipe in it for a bigger driveway, The other people did it without asking Anyway i worked for 3 months straight when we got done the market dropped my real estate partner got the listing and selling commision plus his and his wifes time I made 5bucks an hour and was happy to get out, Out timing was the worst ever plus the location was bad I did learn a hard lesson or 2
Thank you for a good laugh - At least I'm not the only one who has Murphy's Law issues^^^^^^
a Smith & Wesson beats four Aces
A mistake I made when first starting out was refinishing all the woodwork in an old house we flipped.
It was 70 to 80 years old and it had beautiful old panel doors and beatiful trim around all doors and windows. It was a two story home with lots of woodwork.
The base trim was 10 to 12 inches wide.
All woodwork had been painted.
It was yellow pine.
Anyway I stripped 4-5 coats of paint just to get down to the old varnish.
I tried every kind of paint stripper.
Nothing worked very well.
I finally ended up using heat guns and getting as far as I could and then varnish stripper to try to get down to bare wood.
I did all this in the winter.
I was heating, sanding, scraping, old lead paint and probably breathing in enough lead paint dust and fumes to kill a rhino.
I'll never do it again.
It looked good when I was done but when we sold it, it really didn't increase the value of the home. Not much anyway.
I've often wondered how much of my brain I fried breathing those lead paint fumes.
This was about 10 years ago and I didn't know about the dangers associated with lead paint.
Oh well, live and learn.
^^^^^^
a Smith & Wesson beats four Aces
You bring up a point I was going to ask Tim and the other landlords about. Lead paint in rentals.
Any comment on that ?
Bowz
I inspected a house for a friend that had asbestos siding and he was going to tear it down until I mentioned the liability.
Ive been working in lead base paint all my life . All I can say is smoking was worse.
Tim
If the house was built before 1978 it may have lead paint.Someone buying one of these houses receives a lead paint brochure from their realtor.They sign a document saying they've received the brochure.Around here, Landlords are giving out the same brochure to tenants.The brochure is sold at the local board of realtors office for about 25 centsThe brochure tells you to keep young children away from lead paint chips.It also says to avoid lead paint dust.I'm not going to do anymore stripping or sanding lead paint, although I will probably continue to use my disk sander on the exterior on facia prior to painting.^^^^^^
a Smith & Wesson beats four Aces
You are on a subject thats very important .
To all;
Of all the "failures I see" where some of the modern age fixer uppers that got their training off tv shows and lowes , etc., dont have a good game plan.
Most of the time they dont do enough period but most all less experienced leave things that worry buyers.
I dont know that I can attack this subject here but Ill give it a try to lightly scratch the surface.
Theres a house next door an investor bought and it needs about 50grand of ram jack work as it had cracks all over it but especially in the middle of the ceilings. We expect a few over windows and doors of an older home but this puppy had them all over the ceilings. 12 inch rafters A frame . One floor in the basement looked like hamburger meat cooked in a skillet stirring it . This is by far the worst sellting house I have ever seen on a concrete slab and it has a basement . It has three finished floors and is a monster.
The guy that bought it does no work at all and he talks like the guys on tv. Hes a real good talker like a used car salesman.
I bought a piece of property this week from him that adjoins mine . I was invited in the house two different times 6 days apart. Hes very proud of his investment and showed it off to me . I got the grand tour. This guy has been my competiton for at least 15 years standing toe to toe with me bidding at the court house sqaure . He says he has bought 89 houses which beats me pretty soundly as Im forty somthing and never tried to keep a good count but this guys numbers blows me away if hes truthful.
From my estimates hes sunk 50 grand in the house and hes done facial things inside and out . He bought it for 117,000 in a foreclousure . Its listed for 225,000. He stands to make a good piece of change.
He bragged that he spent a lot of money on drywall repair and had told the taper he wanted "every crack fixed" . In fact he mentioned that three times to me. They have been gone about two weeks before my first viewing . On my first visit I noticed 12 hairline cracks in the house just on a walk through.
So which was it ? Did they fix every crack or did they miss the 12 I saw? I questioned that my self . A week later I made the deal final and worte him a check in the kitchen in exchange for a quick claim deed to the land. I was in the kitchen and dinning room which are two separate rooms . I saw 4 cracks through new paint that werent there before .
If he sells the house quick he might get away with it , like next week. If it sits for 6 months , hes a dead man walking . Under the law hes supposed to disclose everyhing . I got a feeling he wont disclose this. Does he have enough knowledge to actually know ? I dont have a clue . Somebody is gonna get screwed big time is my feeling . Hes a top notch seller and presents himself well. Hes one of those guys that could sell ice to Eskimos.
Thats an extreme story but Ive seen litterally many more to a less to degree and descriptions .
I dont know what a home inspector would do in the shape its in now but few people here use them. I can see it and I can see its structural however it told a much clearer story before the had tapers come in. I saw a home inspector do some exellent work on a hvac system, but can one catch this one ? I dont know .
Tim
Edited 1/19/2007 5:02 pm by Mooney
When I worked at the rental place, we were descended upon by all the inspectors one day. Building, housing, plumbing, electric, and fire marshal.
I think we had had a permit and renovated one apartment of a 4-plex. we were doing something in a different apartment and somebody complained. Anyway the apartment we were in only had one exit. It was going to be renovated when the tenant moved out. But the fire marshal stood there and solemnly declared that he was not leaving until a second exit was opened up.
My supervisor looked at him and said, "Well, I hope you brought lunch and a sleeping bag."
Bowz
A broker and a banker both said that about us to other people .
If you see them buy in your neighborhood they will leave it better than they found it every time .
I appreciated hearing that .
Tim
I probably missed the boat about six months ago.
Here is one we "missed the boat" on, about 9 years ago.
We were looking for country property, at least 5 acres so we could have animals if we ever wanted to.
A friend of mine who was looking for the same thing as us came across a parcel from a guy he knew. Friend couldn't come up with the money, so told us about it. Low and behold, it is a guy I used to work with. Wife and I look at the property and sit down with the seller at our kitchen table and agree on $21K.
We shake hands on it, and turn it over to our attorney to be properly written up. We get the forms to the seller, and he takes them to his attorney. Comes back to us a few days later with a counter of $25K.
Property was worth it, but the fact that we had shook on it didn't set well with us. Figured we would always have a bitter taste if we built on it. told the seller to take a flying leap.
DW was in a bible study and told the story. One of the other women in the study came up to her afterwords and said, "We have about 9 acres with a shop on it, would you be interested in that?" That was how we found the place we are now.
Regarding painting everything the same color: When I worked for the rental place we had one color that was jokingly known as "landlord beige". If anything needed painting, we knew what color it would be.
Bowz
You mentioned landlord beige paint.
I think they should manufacture three levels of quality for things like:
paint, carpet, tools, faucets, etc.
#1 grade would be top shelf and top of the line. These would have a lifetime warranty.
Something cheaper would be "contractor grade" & not as good.
The bottom of the line, lowest priced, cheapest worst products could be called "landlord " or maybe something like "apartment quality".
These items would have a "10 day pro-rated warranty"
Ya know what I mean?^^^^^^
S N A F U (Situation Normal: All Fouled Up)
Theres another factor too.
Im supposed to know what Im doing and Im pretty well known in this small town.
I sure get weird looks taking walmart paint off the shelf. They need a back entrance so I can sneak it out .
I got Color Place to cover in one coat by back rolling it . Sh^d.
Tim
Edited 1/17/2007 6:04 pm by Mooney
thought that was already done....Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming<!----><!----><!---->
WOW!!! What a Ride!Forget the primal scream, just ROAR!!!
this has to be the best thread i've read in years, keep it up guys.busta"It ain't da seafood dat makes ya fat anyway -- it's da batta!"
Another thought along the line of painting everything the same.
I rarely work in rentals now. But I have one husband/wife client I have done a lot of work with, and they own 4 duplex's. Back in the early 70s they had built one duplex and a friend of theirs had built the two next to them.
When they bought the 2 from their friend, we renovated one bathroom in a vacant apartment. We carefully tore the tiled walls off from around the shower, and re-did the shower walls in Corion.
They saved the hunks of wall we tore off, because the tile matched the other apartments. On 2 of the apartments that have sinse been renovated, they used the old tiles when needing to patch around the area when the tub faucets were changed.
This couple has very nice apartments, probably similar to what Tim describes his as. Another convenient thing is by having 3 buildings together, there is less travel for them, rather than running all over town.
Bowz
I was inspecting a plumber one day and we were just shooting the breeze.
He said , dont you have rentals too in addition to being a BI?
Anyway he told me he had 8 apartments in two four plexes he had just built across the river .
He had all 8 done with ceramic tile . I thought that was odd but he hasnt been out anything for the floors since . He also said there was a stack of tile and gatorade bottles of grout in every return air on the floor behind the grill.
I was impressed.
Tim
Tim,
I'm gonna be away from the computer for the weekend. I hope this thread doesn't pass into oblivion. I have a couple more thoughts and questions, but they will have to wait.
Bowz
so tim,the guy that use's the same faucet everywhere .what brand does he go with. i try and stick with delta but every once in awhile step off to something else.usally 3 years later i'm cussing myself for saving 15.00.i do stay with delta in shower faucets no matter what. larryhand me the chainsaw, i need to trim the casing just a hair.
Cant spell it . <G>
Phiester?
Tim
Believe it's spelled Pfister
The experts in real estate investing (they write the books & make the tapes) say to talk to the Seller and don't be afraid to ask why they're selling their house.I have bought two houses (fixer uppers) in which the Sellers had legal issues and needed money. In both of these situations someone had been arrested and had gone to court or was going to court, facing serious charges, and they needed $$$I'm not saying to hose them or take advantage but it is good business practice to figure out where the other guy is coming from.Have you guys had any experiences like this where is the Seller is "motivated" and maybe they're "going away" for awhile?^^^^^^
a Smith & Wesson beats four Aces
It's no secret that the secret to buying deals is to find motivated sellers. They are everywhere in any neighborhood. The cash if what makes the deals work and that explains why cash is king.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Three years ago I bought a house in October, fixed it up myself, put it on the market in December, and then had a lot of showings and a lot of interest and it went under contract in less than 30 days.I sold it in January and got my $$$ and walked away.Everything went perfectly, except one aspect.My glitch was I sold the home to people who were first time home buyers who were using FHA financing.I had to do some repairs and jump through some hoops to make the FHA appraiser happy.Anyway, the next house came along and I bought it, fixed it up myself, but this time I sold it to an investor. The process went very differently.She bought the house to use it as a rental.She did not hire a home inspector and said "they're a waste of money". She did not have FHA financing and there was no FHA appraisal.The house sold "as is"Obviously the sale of this home went much easier and smoother than the first one.I scratched my head and thought to myself "I wonder if I could buy these houses and then sell them to experienced landlords who will use these as rentals""This way I won't have to fight with the appraisers and first time homebuyers""maybe I could even get myself situated and have a buyer immediately upon completion of the remodeling. I could get in and get out"Have any of you guys ever done this - gotten hooked up with a doctor or lawyer investor or some other large scale landlord?Every town's got a least one large scale landlord. You know, the guy who owns 100 rental houses.^^^^^^
a Smith & Wesson beats four Aces
i'm here in town. heres my critera . good solid house prefer brick but no asbestos siding at all. built after 1952.[i finally have learned it gets me sheetrock and no knob and tube] no n.e area,very picky in se.area.prefer s.w or n.w part of town. take low retail deduct 25% and will do about a 10% cap rate.will pay cash or do some trading,as is no inspect. usally will close within a couple weeks. i know your going what i want to do is full retail,no problem just not for me or probably any investor that is looking to eat off the rent. really would prefer to buy the house before you spend any money on it,that way i can do it the way i need it to be.i hate it when some one has spent money on cheap carpet and a bunch of white paint i'm standing there thinking i'm ripping it out and repainting it..
i always look at if this don't work out whats it going to cost me. lets take a retail 100k house. well the buyer wants me to knock 5k off or pay his loan cost just so he feels he got a deal, 6% real estate= 5700.00, closing cost would run a grand. now since the deal didn't work that means i probably ate 3 months trying to rent,then said screw it sell it.on market another 3 months,thats 6 months of lost income another 5k. taxes,insurance utilty bills etc 1500. so the house i bought for 75 now cost me 93,200. if your going to target the landlord market with a guy that buys rentals you have to wholesale to him,just like was stated earlier theres more deals out there than 1 guy can buy.
now if you find a guy thats been watching sunday morning t.v and has decided he's going to cash his stock and get rich in real estate he is your buyer and to tell you the truth there have been a lot of them since about 9-11.i had a friend that saw his stock go down hard when the internet deal died. he cash out went out and bought 6 house's that were all in tip top shape,[because he doesn't know which end of the screwdriver to use].rented them all to the first guy who had money,you guessed it it didn't take long. 9 months and 3 were tore up big time and he wanted to sell,i have know idea how much he lost,but 1 he priced to me he had gave 62.500 for and after his tennants remodeled it for him he offered it to me for 40. man that had to hurt. oh ,i forgot he tried claiming the destruction on his insurance,'vandilisam" to say the least they didn't pay plus they canceled him cause it was vacant.lol larryhand me the chainsaw, i need to trim the casing just a hair.
Have any of you guys ever done this - gotten hooked up with a doctor or lawyer investor or some other large scale landlord?
You just put two species together that dont belong.
You have to figgure the other guy for any thing to make sense. In this case both types.
The accountant buddy on the golf course will tell his lawyer/doctor buddy what do do with ALL that money they made . How to hide it mostly. So they have had a very good year and they are in the top tax bracket with not enough expenses. They want a return but somtimes if they wait to make a decision at the end of the year they will somtimes throw the money away from them but I didnt say throw it away. They are looking at paying half or losing it to taxes and SS. So lets take that guy;
He normally wants low visibility in a rental shifting the responsebility to a management company. Its more of an off hands investment to him . The deal of hiding his money was his move of saving his money and making a return. Thats your retail buyer . He doesnt know one thing about being a landlord and is never going to learn. He makes his money on the table or in a court room. He never figgures on counting on rentals for his living . Even if the buy costs him money the next year or every year , its a write off as long as hes doing his thing. People throw money away for a write off and lets face it, its often play money to the mentioned.
A true landlord that has had his success in rentals that he has built himself knows numbers of them. Hes a player and one that has many of them will be that much sharper . You dont get 100 rentals by accident just like you dont win three super bowls accidently . My respect goes to a landlord who has 100 units . I know several of them and they are some of the best bottom dollar business men out there . You thinking its possible to sell a house retail to one of them reminds me of a story;
I had thought last year of buying a class A truck cash from money gained from the my rentals. The purchase of the truck , trailer , and operating money was figgured at 200,000 cash in hopes of making over 100 grand per year net, bottom line . If that went well I would add a driver and another truck then sell all my rentals and toss the dice at the time to keep expanding . So in other words I wanted a trucking company. I wanted 50 grand net off each truck each year .
I first went to my trucker brother and asked him what he thought . Hes no expert .
He said well, I dont know . [good answer]
All I do know is that there are lots of people with more money than you with lots more trucking experince going broke every day. [better answer]
I figgured the business and tracked the trucking business for a year reccording highs and lows, loads , prices , fuel , and all those costs most people dont think about . When I finished it didnt look so good but I passed on the hand mainly because I did not have the experience . I had no tract reccord and basically couldnt answer all my own questions precisely.
I made the decision to stay with what I know. To the world I would say if you are going to beat me it will be what Im best at . It wont be somthing I know nothing about . Not at my age. I can be beat and I can lose . I could lose everything I have at this point. Thats why they call it business . Every business stands the chance to lose. Thats called risk. Its real.
You will not sell a house retail to a person that knows the rental business. Give them more respect than that . A person who holds 100 deserves it !
Tim
Tim, I have two friends who have rentals and primarily rent to Section 8 tenants.They claim this has worked well for them.These are below average homes in undesirable locations.Rent is paid to the landlord directly from the govermentThey do complain that they have to allow the home to be inspected and sometimes get stuck with nit picky repairs.I was just wondering if you have any experience with this (section 8 tenants) and if it worked for you.^^^^^^
a Smith & Wesson beats four Aces
Secton 8 doesnt fit my class of homes .
How else could I have said that ?
They pay what I call a minimum amount on a minimum home in a lower end hood.
But, heres the deal;
For some reason they will pay the same amount for a 3 bedroom trailer as they will a house . Both have to pass inspection. Why rent them a 60 grand house [or what ever] when they will rent an 1500 dollar trailer for the same money?
In my area there would be good money in a secion 8 trailer park. The pay back would be tremendous on the money but you would be running a trailer park of section 8 trailers. Two sided coin but very properous . With that said ;
I had a plan written up one time where 100,000 invested in a trailer park would make more than a carpenter working his butt off . Trailer parks are kick butt money makers . Secion 8 will keep them full so theres no risk with the plan . You just have to decide if you want to jump in deep being a landlord of trailers. This job would be fit to a bouncer , a rough construction type, tough man competition, police officier , etc.
Tim
I was going to try and buy a trailer park once, although i might have swung the deal money wise the trouble was DEQ wanted a new septic that cost over 100 grand, dealing with renters would have been no fun but a good manager might work with a strict rule book, Im a nice guy and would be run over fast
Thats why I made that point .
There are differences in people and the first thing to realize is where we belong .
A long time ago an older friend told his son;
Remember who you are , where youre at and what you are doing .
Ive thought about that many times although it wasnt said to me . Ive been able to relate to it .
I told a nurse once that I had evicted a family that day. She looked at me in a different way because she is in the business of helping people.
I took a perfectly good dog to a vet to put her to sleep before she had her puppies . He could not do it and told me it was against what he was about . I said I would shoot her then . I left with him owning the dog.
I wasnt very good at handling customers because I was really asked to put their needs first for they are the customer and they hold my money. Im not someone Im not so Im not very good at BSing someone trying to sell them somthing I dont believe in. I respect the two above for admitting who they were but they arent lanlord material. They are wonderful people who serve a noble job and are needed .
Someone must handle rental property and serve them more like a cop firmly. A landlord doesnt operate for the customer where hes trying to serve them like a public official. Hes more of a director trying to drive cats. So he enforces rules and contracts and has to serve as a debt collector. I serve as a maintenence man to them.
The lower the class of rental the more of an enforcing figgure is necesary.
The physical effect of opening the door to a landlord thats 6,6 and weighs 300 lbs is as intimintating as a cop with a gun. I dont look like that but my demeanor is like that . I dont ask that it be done . I expect it to be done by 3pm today. I dont want to take this to the next level but Im prepared and I will if you dont respond . You signed a contract and I expect you to live up to it. After all , I had judged you to be an honorable man . Was I wrong ?
You dont have the rent ? Today is a good day. Its especially a good day to move . Ill be back with a trailer to help you. After all weve become friends . I know that you wouldnt want to put me out and stay when you cant pay me . I respect that so much Im going to help you move today.
The only quetions I ask are ones that the answers benfit me . I dont ask questions where I dont know the answers for I dont want to end up on a trail of excuses and bad luck stories . Its not why I came and offers no solutions for me . I have to make a bank note and Im only interrested in that solution in the shortest route.
I said that to explain to everyone that its mebbe a different type of person or at least what they might be used to at their job. I can see its certainly not for every one. Im quite sure others do the job differently than I do. Still the results have to be the same and its still the same end .
Ron White said on Comedy Tour ;
"I dont know how many bouncers it would have taken to whup my AZZ , but I knew how many they were gonna use . . Thats a key bit of information right there . "
If you give an order , you have to be able and willing to back it up.
Tim
View Image
Are you a good dancer? View Image <!---->[2 new of 21] <!---->
4:56am
View Image
Down payment <!---->[3 new] <!---->
Here they are talking about getting paid also and how to dance around the customer .
Its interrresting to read the responses. 1/3 down , imagine that . You are dealing with people who own cars and houses for crying out loud. <G> If they have to watch their business that close , Ill probably get murdered. As I stated in the dancing thread , I dont dance anymore .
Theres been talk of selling property on an up swing so you can make money. If you are not holding the property when that happens, what is the point of discussing it ? None really. Unless you have a magic wann, but they have been back ordered on me . I dont think anyone should gamble on an alligator property.
An aligator property is one that feeds out of the back of your butt. Normally the wallet is their favorite food. They dont make enough money or none at all . So they must be kept on a constant care plan. No property can be kept for nothing . Some are much more expensive than others but they are all in the same class in that all of them like to eat money. The bigger the property the larger the monster.
So a plan of holding a property must be met financially.
I prefer the best way as far as IM concerned . <G> Rents!
There are many many investors that buy property and hold it to sell with out an income from it . The profit has to be staggering to consider it . IMO.
Several years ago I was a partner on 40 acres of commercial property. It was an exspensive investment . 200,000 cash offer bought it . I never slept well with it as it just kept eating money. It ate 12,000 dollars in in six months and I was getting very concerned . It made no money at all. We sold it to the school on a quick sale for 320,000. I had estimated the properties worth at 1 million.
Tim
tim a couple things,first in this post you mention faucets to me,there is a guy on ebay that goes by thefauctdiscounters that sell the price pfister faucets that you mentioned.here is one of his items: 6 single handle pull out kitchen faucet 99.00 for all 6, the item # is 170077166364.if you hit that link you can get to his store.i just p.u 22 faucets from him all total for 315.00.if you hit the link "about the seller" you will also find he sells kwikset door knobs,very good price on them.ive bought about 150 knobs over the last year.if you decide to buy from him let me know i know a way you can save a little money .
second i gotta ask,cause your makin me feel real bad at how slow i am.you mention rehabing a rental house in a week,is that just you or do you have a crew? it takes me 3-4 days just to get my tools in place!most houses i spend 6 weeks plus on if they need cleaned up.i know i'm old and slow but man thats moving through a place.
anyway thought i'd let you know about the faucets since you had mention that the one landlord that was the brand he used. larryhand me the chainsaw, i need to trim the casing just a hair.
"second i gotta ask,cause your makin me feel real bad at how slow i am.you mention rehabing a rental house in a week,is that just you or do you have a crew? it takes me 3-4 days just to get my tools in place!most houses i spend 6 weeks plus on if they need cleaned up.i know i'm old and slow but man thats moving through a place. "
Ive got a good freind that I was able to pull off his own job. My family is in this business too . I also sent my house keeper out there .
I was trying to think about the hours I just spent if you are talking about the one I just did . 75 hrs in 7 days . Im not that fast any more .
Have you ever heard of cooking meth?
Thanks for the tip.
Tim
if tennants were cooking meth,your lucky you have a house to clean.the stuff blows up pretty freqently.isn't amazing how creative these guys can get,if the put that brain to work they would make big bucks.i had a tenant thatgot threw in jail one time for dealing pot,while his in there he runs his mouth about how much money he's got at home. well they got out before he did,and they came into my rental and tore it apart. even disassembled the furnace. i don't know if they got anything but i sure had a mess to fix. larryhand me the chainsaw, i need to trim the casing just a hair.
If authorities get to it before you do you wont have a house either .
They put tape around it and basically is held until its evaluated by a team that the owner pays from what I understand . I could just imagine that the removing of material could not just be done by anyone .
Then after its fixed its inspected again at a cost .
Then you have to inform who ever rents it or buys it what has happened and show all paper work .
The result is the house is worthless compared to what it WAS worth.
A house here wont hardly sell at any price if its a 3 or 4 bedroom. KIDS are the main concern. Any chance under the sun their kids might not be safe will make the buyers walk every time and I dont blame them .
On the other hand the landlord has been dealt a great injustice . They are never paid for that kind of damage if any at all. Most lawsuits against renters yeild about 1 dollar per hour for time spent . I dont even bother with it which just sets up the next landlord to fall. I dont have much respect for the justice system under tennant /landlord law.
Its easy to get a judgement but you dont get paid so what good is it ? Thats not an extreme statement as it happens all the time . Ask any landlord here that has tried the court system and they will tell the same story. They come to court and recieve a judgement quickly , only to wait forever on any money.
Ill never try to get a dime on the money I just lost but the good thing is there will never be a record of it for disclousure. I dont have any proof of anything or knowledge and dont want any. I fixed it to the best of my ability and Im ready to move on which I guess Ive already done .
Tim
terrible scary very scary, i hate meth, what that does is turn people into garbage.
we saw it in california before we left, it is unimaginable that people can get that low. they will steal from their parents and let their children starve, unimaginable i tell you. it amazes me that people survive it, if i could have one wish i would wipe it off the face of the earth.
thank god that my kids have managed to stay off that stuff, knock on wood. it has to be hell on earth for any parent to see their kids go through that. it happened to a close friend, just a nightmare.
I think the whole meth subject is very scary from any angle .
Tim
be carefull i bought a price Pfister pullout faucet series 534 last year, It failed went to the supplyer no cartridges, call pp, so i did and they said yes we will send you one for free but we dont have any, I asked dont you make them?? well we will send you a whole new faucet but its 3 to 5 days 30 bucks shipping, they did but i would not want to have my renters wait, I talked to my plumber and he said go delta next time , mos t all parts are very easy to get and a lot interchange
you know how to make a guy feel good don't cha? i got 23 faucets headed my way,oh well i'll just part some out! i am a believer in delta,they are not the absolute best out there,but everybody handles the kits for them.i just need a bunch of faucets in the next few months and decided to give these a try. i will bust one open and go see if i can buy a kit for them,not a big deal on kitchen faucet,but a shower it is. thanks for the warning larryhand me the chainsaw, i need to trim the casing just a hair.
Larry,I was wondering if you have any need a 28 ft fiberglass extension ladder. I bought it 10 years ago and paid about $300 and would trade it for ? I'm looking for some used exercise equipment (treadmill).Would you be interested?I'm here in Wichita.John^^^^^^
a Smith & Wesson beats four Aces
i've got a 30',everytime i set it up i swear i'm going to cut it off! when you need one their great.but i'm about to old for them.lol you might try graigslist to sell. thanks larryhand me the chainsaw, i need to trim the casing just a hair.
As I stated in the dancing thread , I dont dance anymore .
Tim, that's a statement worth expanding a little.
I won't disagree with you that you don't dance anymore. But I would disagree if you think you aren't involved in a dance.
What I mean is this: I would view your position as a fiddler and caller at a square dance. "You want to dance here? These are the rules, and there is no waltzing, swing, rock, or polka! ......Don't like it?.......Go somewhere else!"
You may not be dancing. But you are very aware of the dance. In my early days of self-employment, and when I had my rental, I was only vaguely aware of the dance. Still working on figuring it out too.
I think I would define the dance as a combination of people skills, and "money conciousness".
Bowz
"What I mean is this: I would view your position as a fiddler and caller at a square dance. "You want to dance here? These are the rules, and there is no waltzing, swing, rock, or polka! ......Don't like it?.......Go somewhere else!""
That would be dead on , yes.
Ill, expand a little too.
I dont know if yall can learn anything from my experience or not . I would hope you can but Im only hoping because the experience is very expensive .
Yes IM a caller , not a dancer , however I am involved in the dance .
I keep myself in a non position with them until I call it . My words are final . You dont argue with a referee and they dont have any more luck with me .
This has worked after trying many other things that didnt . I fell to it by being fed up with the whole business . They have lied , cheated , and stolen from me and my family many many times . I got sick and tired of them drinking from that well. They still do it and get by with it to a great extent . Its close to property taxes in my view point . Its not fair however its a cost of doing business .
Im evicting more people more often than I ever did before . Im getting better at it with all the practice . Its a swift process now and it doesnt miss a day lost in time except what is required.
With that said ;
Ive weighed the differences many times . I have found it better to call an end to it rather than go on an excuse mission. First you have to gain the power to end the battle before it gets started and I have found out how . I have learned how to win from the first day of eviction. The most important thing is its a win win for the landlord and a lose lose for the tennant. When you have that power , you dont have to dance .
Tim
Blue,
I am curious about your school property. You said it was going to be condos. What is your target market? Who is going to buy these places?
No offense, but I am wondering because Oscoda doesn't sound like a real hopping place. 2000 census says population 1,024.
Is the school right on or near the beach? Just wondering what you see as the value.
Around here I can think of two schools that were converted. One was to upscale apartments, but it is also a few blocks from the college. The other was turned into an assisted living facility. One other cool looking old school underwent a major rebuilding, but kept the original brickwork, and still is used as a school.
Bowz
Thats an important question isn't it Bowz?
OUr target market will be empty nesters for the upscale condos and young working people for the low cost lofts.
Oscoda is a resort town on the shores of Lake Huron and The Au Sable River. It borders the massive Huron National Forest. Every summer, the county of Iosco is flooded with about 20,000 people in the summer. This particular condo project will have significant appeal on many levels and it is generating significant buzz right now and we haven't made any formal announcements.
One significant appeal will be our price point. We will be able to deliver upscale condos at below market rates, if we need to to keep sales moving.
I've just got word about some significant news regarding the funding of this project. We have an appointment with an investor next week. The investor is a professional person who routinely joins with others in the medical field to do deals like this. She was enthusiastic about the project (lofts are one of the hottest things going in dreary Michigan). We first talked to her more than a year ago about funding a project and we told her that we wouldn't come to here until we found something spectacular. Now we are here and she's ready to go.
We also got word that our project might be of significant interest to another group. Ironically, the project would be smaller than they like if we only do the 5.5 million dollar re-development. It would appeal to them a lot more if we add the two storys and boost the project by 3 million.
Your observation about the small population is interesting because it proves that there are deals everywhere. I've indentifed two other significant deals in this town, on the river and I will be making offers before spring.
blue
"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Very interesting.
I was thinking of comparing it to Door County in Wisconsin. (the county north of Green Bay that is the peninsula sticking out into Lake Michigan) Lots of small towns, that explode in the summer with upscale tourists. One of the driving forces always seemed to be the harbors and boating on the bay side. The Lake Michigan side is not as popular due to the rougher weather. I didn't see a harbor and wondered if you could draw the "yachties" somehow.
When I looked at the Oscoda website it seemed more geared to hiking, paddling and camping. Not the stuff I've associated with rich, empty nesters .
Is the Air Force Base still active? I wondered if that would be slated for getting the axe, and what it would do to the Oscoda economy.
Bowz
Bowz, thank you for that most insightful response!!!!
There are a fair amount of wealthy people in and around Oscoda. But, I'm not sure we will have to rely on only wealthy empty nesters. Our building is flexible enough to make smaller units and get them priced to blue collar retirees, of which there are many. We'll deck out a 2 br model up top but be able to sell medium priced units in smaller sizes. We'll play to the market. If we have to, we'll sell the entire thing on a budget with vinyl floors inside the individual units.
The base closed about 15 years ago and the area declined and declined and declined and declined....I don't think it can go any farther. I think I bought at the bottom. Right now, I get to buy distressed propertys in great, safe, resort areas!!!! I don't think I should wait to see if it can get any lower.
The future looks great, even in the face of the industrial decline in the southern portions of the state. The retiring boomers have flocked here for decades and they are heading back here to retire, if they don't go south and southwest. It's their dream to retire "up north" and I have the perfect solution for some of them.
The future also looks good because of planned actions by governmental interests. A re-working of US23 will be significant and the town just entered into a process to obtain "Cool City" grants to upgrade their downtown. Guess who happens to own the largest most impressive building in that downtown area?
We have purchased a very important key piece of the townships downtown future. I believe that it will be the catalyst to the inevitable rennaisance. Or, maybe I'm just a big dreamer. I don't know...all I know is that the township supervisor wants an audience with us.
blue
"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
The Lake Michigan side is not as popular due to the rougher weather. I didn't see a harbor and wondered if you could draw the "yachties" somehow
The yachties go to Tawas and Augres if they stay on this side. We have a few sailors but there is only a relatively small amount of slips that big vessels can get into.
Long term, the neighboring town of Au Sable intends to install a public marina that would house yachts on the North side of the Au Sable river.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Is the Air Force Base still active? I wondered if that would be slated for getting the axe, and what it would do to the Oscoda economy.
Bowz, I forgot to mention that the base is being used for many industrial purposes. Calitta Air is a company that refurbishs and rebuilds big planes....747 and such. They are a welcome diverse employer in a auto state. They currently have plans to build another wide body hangar that will employ an additional 500 people...many will be highly paid airplane mechanix type jobs. The services that support this type of industry are specialized and employ many high paying jobs too. So, the closing of the base was traumatic, but it opened a door of opportunity that continues to this day.
I rememembered that I wanted to tell you this when I read the front page of the current Oscoda press. The lead story was another company, Phoenix industrys adding 30,000 sq ft of industrial space which will create another 200 jobs. This is a very significant event in a small town and the jobs are not auto related! Whoopee!
I had that meeting with the township manager today. It went very well. He was very supportive of our planned rezoning request, without committing the zoning board to anything, but offered his assistance in any way he could. We have some very interesting things to offer the township in exchange for our rezoning request in addition to the variance for going up two stories.
This could get interesting soon. There are some other significant properties that will make great investments. There's one on the river that would make a great condo project. It's too bad that I don't have enough cash to do them all because it looks like I'll be here in MI working on this project for the next two years and it wouldn't hurt me at all to work on two or three projects simultaneously. I'll soon be out prospecting for a 50/50 partner to do some of these other developments but I don't have time to put together anything quite yet.
This town is a textbook example of an area turning upwards.
blue "...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
jim this is the point that i was making in my response to some of the early posts in this thread. i have the utmost respect and admiration (and a little envy) for your knowledge of investing and deal making in real estate.
the lesson is that if you buy right you will make money, money is made on the buy.
but here as you describe it your entire area has suffered a downturn, hit bottom (or close enough) and is now poised to grow in new ways that will support increasing property values.
one word brother, timing!
any property you buy in that area, should make money if it is indeed growing as you say. some will make more than others, but still all property should go up from where it is when its on the bottom. the closer you time it to a corrective upswing the better you would do on each prospective property. carefull research, good instincts, intimate knowledge of an area, and then you find the best bargain. how am i doing teacher?
the lesson is that if you buy right you will make money, money is made on the buy.
but here as you describe it your entire area has suffered a downturn, hit bottom (or close enough) and is now poised to grow in new ways that will support increasing property values.
one word brother, timing!
any property you buy in that area, should make money if it is indeed growing as you say. some will make more than others, but still all property should go up from where it is when its on the bottom. the closer you time it to a corrective upswing the better you would do on each prospective property. carefull research, good instincts, intimate knowledge of an area, and then you find the best bargain. how am i doing teacher?
Segundo, you are hearing right indeed.
My particular neighborhood would be the classic example of a neighborhood that is poised to make real estate investors wealthy....if they have the nads to make the offers and close the deals. It does take some gumption to buy in distressed areas because they usually are accompanied by some serious low life issues such as drug houses, crime, blight etc. It usually is scary to invest in these areas. The difference is that my neighborhood has none of these issues. Yes, there is an alleged drug house....we all know where it is. It's not really an issue because there's no proof. There is no crime to speak of...the court dockets are filled with dui's and minor misdemeanors. Blight is probably the biggest problem and in recent years the twin townships have been significantly making inroads by aggressively enforcing the new ordinances created to deal with the problem.
One of the significant reasons why I am in a prime position to take advantage of the coming upswing is because I'm an outsider. I see things as they are and how they can be. The locals see things how they used to be and how they are now. They don't look forward...they look back. An old timer (94 years young) said it best about me: "The people in this town have walked the streets for many, many years. Every day, they look at the stone laying on the side of the road. They don't think anything about it as they pass it by. You, on the other hand are new to the area. Everything is new and exciting to you. When you walk down the street, you see the stone and you stop and turn it over to see what's underneath." He continued: "You remind me of myself when I rolled into this town fifty years ago. I was excited about the possibilities and I built the biggest building in the downtown area. Everyone thought I was crazy but the building served me and my family well for many decades."
It's true, I have scrutinized every building in the downtown central business section. I met many building owners..and business owners and listened to their offers. I have made some significant decisions and formed some opinions based on a very serious comprehensive study of a very small area. It took a lot of time and it often looked like I was goofing off..just walking around town and talking to people. But....remember...I was the only one walking around and talking and analyzing and seeing things for what they are and what they can be. Even now, in the beginning frenzy of the upcoming renewal, very few people have a vision of what they really have. They are too entrenched in their pessimistic feelings resulting from the past few decades of struggle and decline. They've watched their dreams slip away and have succumbed to the inevitable emotion of depression and despair....to some degree. Basically, they are jaded. I"m not.
The school project is just one on the horizon that I intend to do. There are some very exciting possibilities and when I look back in twenty five years, I'll be very happy that I decided to invest the serious amount of time to make a market study even when my cashflow was registering a big fat zero for many straight months. I did it on blind faith knowing that I was going to find a project that would make me some money. It's akin to doing some serious marketing in the remodeling field....spend big bucks advertising and you'll get a return in the future. The same theory applies to real estate investing.
In this case, I landed in a classic area. It's not exactly rebounding yet, but all the elements are there. Therefore, I get to buy property at the lowest possible price. Is it risky? Of course, but it's calculated and managed risk. I don't have my financial future on the line and I"ll be using investors with deep pockets to temper the edge of the sword. Giving up that risk will cost me something, but I'd rather have 75% of something, rather than 100% of nothing.
Not everyone will have time to find the perfect spot like this, but there are hundreds, maybe thousands of ways to make it in real estate. I suggest getting busy reading and talking to people..both buyers and sellers and real estate people and basically everyone. Have a friendly demeanor and people will open up to you. The opportunities will present themselves.
One last thing. This deal has not closed. We are still in the due diligence period. I am sure we will close it, but even if it doesn't close, I will not be deterred. I will just move on and find another deal to do and I'll be thinking about Donald Trump's advice: "Doing a real estate deal for six figures takes as much time and energy on doing deals with extra zeros on the end. Since this is true, why would anyone concentrate on doing small deals instead of big deals?"
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.
Have you guys had any experiences like this where is the Seller is "motivated" and maybe they're "going away" for awhile?
A couple of weeks before I quit the rental place my boss bought 2 townhouses. I had plotted the locations of all the bosses rentals, and they fit into a triangle formed by two main roads and the river.
These two townhouses were well outside the triangle so I asked my supervisor why the boss bought these.
He said the owner had owned a restaurant that had a bad fire. Owner needed to sell because the fire had been arson, and all clues pointed at the owner as the torch man.
I don't know how the boss found this kind of stuff out. But the rental company was just a small sideline to his real estate sales office. He had access to anything that came on the market before most people.
I'm not saying to hose them or take advantage but it is good business practice to figure out where the other guy is coming from.
Seems some people have given themselves their own "hosing" and you are just there cleaning up the mess. Plus it cuts both ways.
When we had the fixer upper it was on a big lot. We bought a small peice of an abandoned railroad right-of-way that gave us access to another street, and enough frontage to slpit the lot. We didn't do it, because we were friends with the neighbors.
When we sold it, we sold the property to a single father who had lost his wife in a house fire. So we sold it to a guy who would have kids to play in the big yard. Within 3 years he had split the lot and either sold it or built a spec on it. So we kind-of hosed ourselves out of the $15K extra for the lot.
Bowz
Although i am happy to see my houses go up i would rather have seen it go up slow each year where i could havebought more and done better in the long run,
You can take cash out of your appreciated properties and buy more. I don't see how that is a bad idea, if you buy the next one's right and they cashflow too. It doesn't sound like you can buy in that same region though.
blue"...if you just do what you think is best testing those limits... it's pretty easy to find exactly where the line is...."
From the best of TauntonU.