Are the numbers good enough to pursue this house? This is a followup of thread:
http://forums.taunton.com/tp-breaktime/messages?msg=53316.1
I looked at the rental house today. This is a 1900 sqft, 2 story house with 2 rental units: first floor/basement unit (3br, 1ba..basement is storage) and second floor unit (1br, 1ba). I will post an exterior pic when I get them off the camera.
Location: “ok” neighborhood. I doubt there is a drug dealer on the corner, but I sure wouldn’t feel comfortable leaving my power tools unattended in the front yard. In this part of the state, a 1900sqft home in reasonable condition in a “decent” neighborhood would run you about $90-200k. In an “ok” neighborhood, a reasonable condition single family home would probably run $70-120k.
Both tenants (neither of which answered their phones) turned out to be home (at 11:30AM). Now I’ve been told that I tend to lean towards ‘slob’, but compared to these two groups of tenants, I’m practically a candidate for House Beautiful. Stuff piled all over the place, kitchen looks like it hasn’t been cleaned since the Carter administration, CATS (2-4 on first floor, 1 on second floor).. strong cat piss/crap odor, stains on carpet, crud on floors, walls, and ceiling, bags of garbage on the back porch…
The filth of the units made it hard to determine what the property was needing in way of repairs.
But from what I could tell, roof looks to be nearing the end of its useful life, needs new storm door on front. Needs probably 2-3 exterior doors (one on basement entrance, one on back of 1st floor, one on back of 2nd floor). Needs probably 4-6 windows replaced. Electrical is 2-prong with fusebox. Siding ain’t the most stylish color, but is in reasonable condition. Boiler looks like maybe 1960-ish. It works. 2nd floor looks to be forced air, not sure of age. Both BA’s need a good going over. First floor kitchen needs some work. And then all the regular cosmetic stuff you’d expect when changing tenants: paint on all interior walls, new miniblinds, carpet/linoleum, etc.
11 years ago, the property appraised at $56k, but obviously hasn’t aged gracefully. They are asking $50k, but would probably take around $40-45k. The combined rent of the units pulls in about $750/mo.
What do you think? Need more info?
jt8
Our lives improve only when we take chances — and the first and most difficult risk we can take is to be honest with ourselves. — Walter Anderson
Replies
Good info. Question, with a clean and fix up can the rents go up?
I figure with no labor involved 10-12k in repairs. So at 45k for the place plus 12 k for rehab you are in the 57k neighborhood. So at 6% for 20 years thats $408 a month plus whatever your insurance and taxes are. If they are $1800 a year then you are at $558 a month with a positive cash flow of roughly $200 on a recently renovated place. I'm ok with that.
If the rents can be raised even a little even better. Don't forget that all "repairs" can be deducted this year against the income of the property and any loss, up to 25k, will reduce your amount of taxable income. I always figure a freshly rehabbed property is good for 3-5k in my pocket at tax time. Your milage may vary on this based on your total income.
I like rehabbing them in this manner for the same reason Tim like new stuff. Low maintenance cost for the first 5 years at least. My figures are usually a 1k a bath, 1.5k a kitchen, carpet $10 a yard installed with pad, roof will vary. Good luck but you get my vote. And that and buck will get you a black coffee at most any gas station lol. DanT
DanT, your number crunching is a good start.
John, if you want to start out right in the landlording business, and avoid the landlord trap, I'd add a few more line items into your monthly cashflow calculation
I'd add at least 10% for vacancy, another 10% for managment, and another 10% for reserves.
That basically adds another $180 cost to your monthly outlay, which reduces your effective positive cashflow to $20 unless your able to raise rents.
If you think property values are going to rise, then a slim positive cashflow in the first year will be fine. By fixing things up, raising the living standards, you'll be able to raise the rents. If you decide to allow pets, I'd charge for each one.
Because this deal is so slim, it should be easy to get this one with nothing down, except your fixup costs. If you are putting 12k into the house, that represents almost 20% down. I'd use the Tyler Hicks negotiating methods to get this house on an owner finance or lease option and offer nothing down.
If the owner insists on new financing, which gives him an all cash deal, I'd offer about 35k tops. I'd probably start at about 30k and keep talking about how hard it is to get the smell of cat urine out of a house.....
Robert Allen says cat urine smells like money to him!
When you make the offer, it might be a good idea to offer three alternative closes....owner finance or lease option/purchase or all cash.
The lease option may very well be the ticket to a healthy positive cashflow in the first few years of the lease.
Personally, I'd go for a big discounted owner finance and then just flip the deal to a rehabber.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Blue,
Had a bad day. Cranky at the moment. None the less.
I don't mind if you disagree with me. But base it on fact and not fiction from a book or seminar. I know all those guys made lots of money in real estate and property managment prior to hawking seminars.
And I am not the most creative soul on earth. But I have done this successfully for 20 years. How about you? What management fee are we discussing for a would be starting out landlord that needs a 10% portion? DanT
Dant, its okay if you choose to not pay yourself a management fee...but its not good business.
If you go up in this thread, you'll find a post by another failed landlord...he decided that "it wasn't worth it". The reason his landlording efforts failed was because he paid too much.
Your 20 years experience is yours to keep...congrats to you. Just think of how much farther ahead you'd be if you payed yourself 10% to manage them! Or...better yet, what if you simply subcontracted out the management and you truly had passive income?!!!!
Passive income is the goal that I seek. I was just making sure that John understood the realities of the business.....if he chooses to ignore the suggestion and decides he wants to work for free, thats up to him....I wouldn't advise it though.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Again you are preaching to the choir. There is no need to pay myself 10%........it my money anyway. I can have 10% or all of it. It is my choice.
Now I suppose it I had tied it up in a trust, corp, shell corp, annuity etc maybe that would not be the case. But no, I have it all in my name so I can have the money.
Look, all I am saying is the advice you are giving a guy just starting out is like saying your first car should be a Porche. He doesn't even know if he likes landlording or not and like most things in life he won't unless he tries it. And this property IMO is good enough, especially if the rents can be increased, to float that learning curve and make money.
Is it capable of making him rich over night or allowing him to operate like IBM? No. But it is a property that can make some money, allow the learning process to happen, let him get his feet wet and make an informed decision. I would buy that property with those figures in my area and make money every month from it.
Feel free to recite from a book or quote a guru in response but we both know this is not your area. I would not attempt to correct your framing practices by sighting a book or speaker as I am aware that there are many ways to do the same job. Real estate is an area where there are many ways and formats to be successful in it. Participation is the number one requirement though. DanT
DanT, I'm not just a book reader, I've owned investment real estate for 8 years now, I'm just not too keen on residential landlording. I currently have a nice place that you might be interested in renting this summer. I can get you in for a mere $2500 per week. Or, maybe you might be interested in getting into a couple of nice suburban homes on a lease option.....
One of the main reasons that I wouldn't miscalculate expesnses related to property management is because I know firsthand how costly in terms of time it really is. I'm just trying to get Mike to understand that if you start out calculating correctly, and make all offers using "real" numbers, he'll propbably be able to create the foundatioibn for creating a very nice business without creating the dreaded "landlord trap".
I fully understand that many investors don't include money for reserves, management etc, but that doesn't mean that it's sound business practice. There are a lot of carpenter subcontractors that don't figure their overhead right for bookeeping, estimating, vehicles, equipment etc, but I wouldn't advocate that either.
Your statement about tieing up money in a trust indicates that you don't truly understand what a trust really is/does. The process of establishing a trust is nothing more than filling out the trust agreement which includes some very basic information....beneficiaries, trustee, etc. The property gets deeded to the trust and the trust's name appears on the public record. The actual trust gets stored in your safe and no one ever gets to see it. There really isn't any financial fees associated with it.
If you look back to my original suggestion, I said to make the offer and include the words "or assigns". I was only trying to get Mike to understand a very important point...that if he's serious about getting involved in real estate, there are a ton of really basic things he should know and do. I also mentioned that if his deal is accepted that he should run around for the next week doing his due dilligence, one of which includes the investigation into assigning the deal into a trust or some other entity. There are plenty of books at the library or Borders that will give plenty of enough info to set up a basic trust....it wouldn't cost but pennies to a guy that is starting out.
I stand by my statment....especially if this property is going to be a buy and hold property.
blue
Just because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Again we will have to agree to disagree.
Management fees in residential rental real estate are a figure to be used when volume reaches a given point. If you included all of the theory based financial allowances on one duplex while owning no others you will never buy anything unless your grandmother dies and leaves you a house.
Volume is the key to making steady money in the this form of investment. By volume I am not suggesting 50 or 100 units but certainly 5 to 10. Once you hit that plateau you can ride out the occasional vacancy, afford to fix things you should when you want and pay yourself a salary sort of speak. But again if you try to charge all of these costs to one small duplex you will never find one that can be bought and operated at a profit. They will all wind up in your column of don't do's.
As far as your prowess at the residential investment market I knew about your occasional investments as you mentioned them in the past. While a vacation home on the lake somewhere is nice and can be profitable (I have a couple of friends with cabins in Tenn.) it is simply not the same market nor the same operation. Same with lease options. And as far as the $2500 a week. So what. Want to be impressive? Tell me how you rented it for 8 months strait and netted 30k. At that point I will be impressed. DanT
When ever some one starts talking about rentals , negatives seem to always overlay the conversation. I guess thats the same deal as putting out fires. It takes a lot more time to put out a fire than it does to light a match to start it and energies are comsumed. I wrote on horror stories and explained they didnt happen to me . There is always going to be someone saying something to distract you from making decisions and their is also people ready to help. I hope God gave you the sense to figgure out the difference.
This addressed to all and its meant the same way.
"But Harris doesn’t buy the theory that more renters are choosing to rent single-family homes. He notes that between 1991 and 2001 the number of renters in single-family, detached homes fell by 6.1 percent. Two-to-four unit buildings were hit even harder, down by almost 8 percent.
On the other hand, he says the number of rental townhomes increased by 31.7 percent."
“Once touted as affordable owner-occupied housing, single family condos are being converted back to rental housing at a rapid pace,†Harris says. “Apparently, those who desire a detached home are able to buy one.â€
This would seem contradictory in the fact the author is telling us rentals are dropping vacancy. The only reason I could imagine in switching condos to rentals is that the condos arent desirable for resale probably becuse of age and hood conditions. I see it as the property dropping a class to rentals and does not reflect the article. In fact it reverses its meaning in the comments.
Now the first part of what I pasted; The author says "someone else says" that town house rentals are up 31.7 percent while single family houses are down 6.1 followed by duplexes and four plexes down to 8. The author doesnt give an authorized statistic and then assumes his own response from his head with no figgures authorized. While he started with statistics that said that folks were buying homes and falling out of the rental market, which is true and verified.
Now, this is the way it is verified by only my experience. The hardest rentals to keep full are large apartment complexes which seem to me to be the least desirable excluding condition. Anytime you add more people to a problem , its becomes a larger problem with people getting along and amenities being shorted. Many times they only have one parking space and sometimes its cut so short that if you have comany , they must park behind you! Many share the same wash rooms at a cost ! There is no room for children to play with out being subject to sharing with what ever renters choose to join your children! Police show up frequently and knock on doors loudly often getting the wrong apartment . Raids even happen from the drug task force. They are the cheapest rentals normally in a newer age bracket.
Four plexes and duplexes offer less shared living with more parking and yards which sometimes are separated by fencing in the back. Room for a dog or a child to play unsupervised insome cases, but at least safer. Garages are offered and washers and dryer rooms. Some even have fire places and more than one bathroom. But the norm is 2 bedrooms.
Houses offer single family living like they had at home before they moved out . Most people were raised that way. Now theres room for gardens , flower beds , privacy at its maximum in rental units. They mow their yards and water the lawns and hang stuff like bird houses and hanging plants. They are able to make their rental a real home. I insist on it and use the word" home " , when I ask they take care of it and treat it like they like to be treated because , after all , it is" their home ".
Apartment units in townhouses have stairs which complicate matters for older people and toddlers. Same other problems with apartment complexes trying to share with a crowd with out enough room.
Single family rentals have proven in my area to stand the toughest in competition. Three bedroom , two baths , two car garages, in nicer hoods with full appliances. An apartment cant compete with that and "if " you are vested or rooted" , which means you at least owe less interrest than principle on the note or they are owned out right , You can steal renters anytime from apartments with low prices. You are there no matter what against apartments. PARENTS ALWAYS WANT A HOUSE , whether its for their kids or for them selves. In tough times , you can take three singles in a house all making an income or daddy & mama fed. Then you completely beat out one bedrooms and make it dang tough on two bedroom apartments.
Thers no way in h*ll that town house apartments rose to that figgure while houses fell negative . That has to be a lie . The pig eats the corn the same way and as far as Ive ever heard , hes never started eating at the butt.
Tim Mooney
D%mn it I think I lost it! I contacted the lawyer to confirm my $37k offer. He said they had a verbal MID-50's?!
Gawd, in its current condition, that house isn't WORTH mid 50's!! And I told the lawyer so. He said (not sure he should have) that the guy is going to have to put down at least 20% to get it financed.
Must be somebody with deeper pockets than me (which is about 99% of the world).
Darn.. Know I shouldn't have gotten worked up about it, but I was. ha ha, I must have a good eye for properties, because apparently they still have people calling and asking about the house.
jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Edited 2/4/2005 11:31 am ET by JohnT8
Edited 2/4/2005 11:32 am ET by JohnT8
John , I dont get but about one out of twelve that I bid on.
Tim Mooney
John , I dont get but about one out of twelve that I bid on.
I doubt I put an offer in on 1 out of 12 that I look at. So I SURE hope I don't match your winning bid percentage. Although you and Dan are old hands at this, so you probably bid low on a lot of properties and don't expect to win that many.
I think you offered to send me a copy of your favorite lease agreement? I don't know if I'll follow up with another attempted rental, but I'd still be willing to read it through.
[email protected]
(someone already had johnt8).
jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
John,
Don't give up on it completely until the guy comes up with the money. Also, no research is wasted. Look at all the infor you have gained for the next time.
I am in the same park as Tim. I look at 30-50 a year. Make an offer on 5-10, all to buy 1. Sometimes 2.
True rehabs are out there because most turn their nose up to that much headaches, or that much work. Keep looking if your interested. It will happen. DanT
At noon today I looked at the small bungalow. Wheeeeewww! Like walking into a musty time capsule! The elderly lady has only been in the nursing home for a year, however the inside of the house (very cluttered) didn't seem to have anything newer than the 1960's!
If it had been 1200-1400sq (with a $80k-130k finished value), I might have been willing to challenge the dragon. But it was quickly obvious that it needed too much work and is too small (so I only took 2 pics). House proper is maybe 1k sq with a small corner lot. In good shape, you'd probably be doing good to get $65k for it. As it is, it needs a lot of plaster repair, some roof repair, all floor coverings, few windows, BA redo, appliances, ...etc.
What was kinda bizarre about it... It was originally a bungalow with porch on the front. Well, probably around the 1950's (guessing) they had enclosed the porch to create a beauty shop (some of the equip was still in there). The basement stuck up 3-4' above ground (porch would have had several steps up to it), BUT the enclosed beauty shop was AT ground level. So what they did was create a subfloor in the basement (maybe 2-3' above basement floor).... which put the beauty shop floor at sidewalk level.
This created a rectangular space with at least 12' ceilings. Really a weird space! And it looks like they may then have bumped it out a bit into the yard. So they ended up with two large bays and a 1/2 bath.
But to fit the house back into character with the neighborhood, you'd have to reverse the beauty shop conversion. Chaaaching!$
The attached pic shows the 'front' of the house (looks like the side, doesn't it?). With the beauty shop windows boarded up, the side looks like a side... and the back looks like a back. I call this the "House without a front". ;)
edit: upon reflection, the beauty shop must have been the "front room" and porch of the original house. The porch would have been supported by piers, so the modifications to the basement tells us that the front room of the house was part of the beauty shop. Hmm. Strange.
jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Edited 2/7/2005 12:27 am ET by JohnT8
JohnT8, if the FMV after fixup is $65k, then you should offer 60% of 65k, less the fixup costs.
The offer would look like this, assuming 10k fixup: 65,000 x .60 - 10000= $29,000.
I'd offer 29K cash.
If you follow this formula, you'll make money. You'll be buying wholesale, then you will be able to sell it retail.
If you want a fast sale, you'll have to fix it up for the ten grand, then discount it...let it go for 60k or something like that.
Don't let anyone talk you into offering higher than wholesale. In a appreciating market, you may be able to make offers at 70% of fixed up FMV.
Keep in mind that you might have to make a lot of these type offers to get one, but when you finally land one, it will be profitable...and that's what you want, isn't it?
blue
Just because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
John,
Always good to know when to walk away if the value isn't there. Again I never think looking and making a decision, even if its not to buy, because there is a lot of knowledge gained just running the numbers. I have done the rental thing so long I can walk through a house and know in 10 minutes what I can give for it, what it will take to rehab it and what it will rent for. Just the benefit of doing what you are doing over and over again.
I do have a friend who has done well buying selected small houses in decent neighborhoods and putting additions on them and then reselling them. No experience myself but just a thought if you think the area would support it. DanT
I see everythin is in order here . Now I think hes looked at two now . Well keep count . hehehe
Tim Mooney
I see everythin is in order here . Now I think hes looked at two now . Well keep count . hehehe
I average 1-2 a week (some weeks I don't see any, other weeks I might see up to 4 or 5). I've really got a hill to climb if I use your 1 in 12 offers is successful, because I'm not making offers on very many. But ok, if we reset the counter as of Sunday Jan 30, then the count is two viewed, one offer, no wins.<!----><!---->
I don't like my current housing (no workshop space), so it wouldn't make me cry if I had to move into the next one. That would also avoid the capital gains thing if I hold onto it for 2 years.<!---->
Sniffing after another one. Haven't scoped the neighborhood yet though. 1700sq ranch.. I think its new. Rumor has it the fellow building it ran out of $$. They are asking $85k with a 'motivated' seller ($75k?). It isn't a new listing, cuz I've seen it in RE mags and online (so it ain't a hot deal, but still might be doable).<!---->
For $85, I would HAVE to move into it. Couldn't swing it as a separate house payment. It would more than likely be a fix & sell (or in this case finish & sell).<!---->
jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Tim,You mentioned earlier that you make an offer on 1 in 12 properties. Why don't you offer on more?I believe that 99% of all houses on the market are worth something, whether it be $5k of $55k. If you're going to the trouble to look at 12 houses why don't you determine what you would be willing to pay and make 12 offers?
Jon Blakemore
No, Tim said he is WINNING 1 in 12 offers. I'm the one only making offers on 1 in 12 houses (and hoping it is NOT going to take me 12 offers to win).
I suspect both Tim and Dan are fishermen. Casting the line out to see if they get a bite ;) (I'm waiting for one to jump up on the bank).
jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
You misunderstood and John corrected it , but its still a good subject .
I would like to make offers on everything I look at . Time is money and it takes time to consider buying a building . If the owner of the building is upside down its an ice cold case for me at that point. If the owner even owes what its worth , its a dead subject. For me to do any good with my time I need to buy the property at 60 to no more than 70 percent on the dollar. Im a wholesale buyer and I will not be subjected to paying retail. Retail deals are all over the paper . A retail buyer chooses the property. I dont . I take what they will "give " me . I will take anything for a price but the owner has to be able to accept my offer. I will take property in any condition which the retail buyer will not. I dont "qualify" for a loan, whereas retail buyers normally do and is a condition of sale. My offers are good to close in 2 weeks on my part. My offers are not cash , but my bankers are happy to colose with the money in quick time since they got these things;
70 percent loan to value
My signature , in which a default would jepardize my other properties and kill our relationship. It aint happening .
I put my own money in the rehabs , so Im improving the property with my time and money in addition to his 70 percent loan.
A proven track record
Once Im done we [the bank and I] appraise the property to finally use the new value for the underwriters and I.
So, my offers are the same thing as cash as it can close just as quick with no questions. Ive got two bankers and I chose them over the others because they have building knowledge. Its pretty simple for them to figgure when Im at an auction and Im wanting 60 percent on a home in a nice hood . They know the figgures just like I do. Green light to buy on a cell phone.
I explained all this to show its easy except the owner accepting the low offer. Thats the key to the whole thing. I would own 100 times more than I do if the owners would just"get with my program" ! <G> Thats why Im lucky if Im successful in 1 out of 12 offers.
Theres still a tremendous amount of work involved too. What John has done in this post is what Dan and I do for part of our living. We do the same thing he is doing right now. House hunting is work when we get so many that wont conform to our program. <G>
Tim Mooney
@#%$&*! those non-conforming sellers.
<G>
"A hard head makes for a sore a$$."
Tim,Thanks for your response and thanks for all the posts that you have been making on these subjects. That goes for Dan, Blue, and the others as well.I'm soaking it all up and (hopefully) learning a lot.
Jon Blakemore
I see everythin is in order here . Now I think hes looked at two now . Well keep count . hehehe
Scratch the new house off the list. 1700 sq my butt. It is a 900 sq with a 'finished'basement. I don't pay $75k for 900sq.
And there was a big electrical substation maybe 50 yards away. Not ideal.
jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Edited 2/8/2005 5:03 pm ET by JohnT8
Edited 2/8/2005 5:11 pm ET by JohnT8
Scratch the new house off the list. 1700 sq my butt.
You are getting initiated quick. Its normally somthing stickin in the way.
Tim Mooney
I'll ditto Jon Blakemore's comment.
I'm currently buying a 3-plex fixer for 38k (house divided into 3 units) and a nicer 4 unit appartment with 4 garages and a workshop for 112k. Wish I could get some of that 6% money you mention.
The 4 unit I'll just collect the rent and gradually update. The 3 plex needs lots of minor work and then I'll pull out some money from it to get the seed money for the next deal I find. I plan to make the shop mine when the lease on it is up I'm tired of working out of my garage.
And I too would like to see what your lease contracts look like.
I'm in Omaha NE and we just got 2.5" of snow.
I bought a house to get the shop. Infact it has a well and enough room for a trailer house and septic to be added. It was a mechanic`s garage and he lived in the house I rent out. I dont use it for a shop , but I store things in it so I can have a real shop. I think you posted something like this before , cause I remember it from sombody and my memory is not so good.
Anyone that would like a copy of my lease , send me an email at the bottom of the page , email sender only . Email your mailing address to me and I will send out a copy of my lease to anyone that wants one.
Tim Mooney
Edited 2/9/2005 4:55 am ET by TIMMOONEY52
Same with me. On all account lol. I bought a property for the shop and rented the house. I have bought a couple through the years that had decent garages that were accessed through an alley in the back and those building suddenly became mine!
Also my email is [email protected]. Take out the 2 and you can email me your address and I will send you a copy of my rental agreement.
Bill, watch the 4plex and up thing carefully. You need to make more than average money with those as they fall under a different catagory in terms of codes, fire codes etc. Anything over a 3 unit is suppose to fall under a commercial heading where 3 and down are residential. A lot of small apartment buildings are run as though residential only to struggle when an insurance claim comes up or a major repair is needed and the inspectors (guys like Tim Lol.) get involved. DanT
Well, I actually looked at one today.
Across the river in a town of 210 that has beer joints[ our county is dry] They have a couple of trucking firms and a walmart distribution center . Seems the deal is trucking and we dont allow trucks to park here in this town at residences. I saw some apartments , so there is some rentals. The house I looked at has truck parking or could have it in the back .
Im taking the night to think it over . I can make my offer as usual but in a town of 210 has me wondering .
Hey , it felt good to get out today and do it . Satisfies an itch. Im supposed to look at 10 acres tomorrow with a mobile home on it . Looks like Im in the saddle and Im a little excited about it .
We otta keep a runnin thread about this stuff . Or create our own site, one. They got one fer every thing else. <G>
Tim Mooney
Edited 2/9/2005 10:03 pm ET by TIMMOONEY52
What are you thinking of doing with the 10 acres? Subdivide?
I have NO houses to look at right now. Seems like realtors are the best source for massive numbers of houses for sale, BUT... by the time the realtors get the house, most of the bargain has evaporated.
I think Mom was chasing after one nearby. Old farmhouse sitting in the way of suburban sprawl. She thought maybe she could get a deal on the house so that the HO can just sell the property to a developer. She then found a couple lots for sale..a few miles away. And there is a company in STL that moves houses (among other things).
So get the house cheap, cheap.. and pay to move it to the new location. Somewhere I've got an email from the moving company that estimates their per/sq/ft moving price. Then you just add all the other costs... Another one of those situations where if the numbers come out just right, you can do it. Don't know if Mom was looking at the prospect for herself or for me. But turns out the guy with the lots wants an outrageous amount for them (to the tune that you could buy a HOUSE in that area for what he wants for a 1/2acre lot).
I'm back to sitting here with my thumbs up my backside, cuz I ain't got a project house to work on. And watching various minor emergencies crop up and deplete my small capital fund. Grrr! And not that I have a huge amount of free time, but out of boredom I keep putting more money into the money pit shack I'm living in now (that will never make me a dime).
GGGRRRRRRRRRR!!!!
Let us know how your looking goes, Tim.
jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Edited 2/9/2005 11:56 pm ET by JohnT8
"What are you thinking of doing with the 10 acres? Subdivide?"
This land is right out side of town. Really good location if the trailer is gone , but Im gonna see if the trailer will pay for it in rental. If not , then look at subdivideing now.
"I have NO houses to look at right now. Seems like realtors are the best source for massive numbers of houses for sale, BUT... by the time the realtors get the house, most of the bargain has evaporated."
You are getting an education. You cant rely on realators. I know the feeling about wanting to llok all the time and theirs no houses . sucks
Tim Mooney
"Let us know how your looking goes, Tim"
I made an offer on the house in a town of 210 people . Well, actually I turn in the offer this morning . The realestate didnt have a legal. wow. Fannie Mae repo.
I went to look at the trailer house and 10 acreas and its all pretty rough. I tried to speculate a way , but I think its a sunk ship because of what they want for it .
Im outta houses to look at !
Tim Mooney
Im outta houses to look at !
I'm STILL there. Might have to break down and cruise around a bit over the weekend. FSBO are only about 2 hairs better than realtor listed homes, but I don't have any leads right now. So time to go in search of fizbos.
Did they take your offer on the "giant" metropolis house? Codilis handles a bunch of FNMA around here. They are a PITA to try and deal with. Its pretty much going to foreclosure auction if they've got it, and don't even bother asking to view the property. jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Im fixing to turn this offer in this morning . He faxed it to me last night to sign and return. DW has signed it already. Says here an answer will be by Tuesday by 5 pm. The goverment dont get in a hurry.
Tim Mooney
Good luck!
Although... based on your own formula, you have to make 11 more offers before one is accepted ;)
jt8
The reason so many people never get anywhere in life is because when opportunity knocks, they are out in the backyard looking for four-leaf clovers. -- Walter Percy Chrysler
By the way Bill ,
I checked with my lady banker today.
Construction loan money or rental buying money including my discount is 6.5 percent. A rental is bought on the same type of note as a construction loan till I get the building remodeled and rented . It is then ready to go into the fleet rentals as a long term investment with at 5.125 percent at todays price @ 15 yrs note. So , the money is still cheap.
Tim Mooney
I agree with your assesment. In my area single family homes are the one thing in down times that the rent rates don't drop. And although we have a soft market currently it is primarily in apartments, not houses.
The only thing I can think of is that his study was done with primarily large city renters and not middle america and rural areas. DanT
You may get another chance at it later. For the right price. If they aren't going to be living there, they paid too much. IMHO.
One thing about RE; they aren't making more of it is not really true.
Someone always has to buy and someone always has to sell.
There will be another.
"A hard head makes for a sore a$$."
some thoughts:
*it can be impossible to get rid of a tenant. so putting that as a condition to any offer just may not be enough. typically, the law is on their side. in some places, it can take longer than a year. and there you are, with someone who ain't paying money, they may be destroying the property, and Your Hands Are Tied. sigh. it ain't pretty.
i liked DanT's suggestion about making it financially possible (and desirable) for the tenant to leave. pretty slick, and i have never heard anyone else suggest that! another reason to like these boards
* go get some books on being a landlord. it is not just about fixing up a house. it is gonna take some smarts about it, too. you're gonna need to know the laws and know then well. and be prepared to possible spend time in small claims court. it's like Murphy's Law -- if anything can go wrong it will. it's also like the bible, God favors the prepared mind.
*one tact that we have decided to take is to buy houses in slightly more upscale, pretty nieghborhoods -- the kind you would be happy for your daughter or grandmother to live in. this is the marketing part.
when ya go fishing, you use the lure and fish in the place that will net you the fish you're looking for. here, we are "fishing" for a tenant that will have some pride in the proprerty, pride in themselves, pride in thier credit rating. well, that's our phiolosphy anyway. we thought about being slumlords but decided not to. didn't want trashy tenants trashing the place, and never leaving.
so, to catch a desirable tenant, ya gotta buy a desirable house in a desirable neighborhood, and keep it that way. including landscaping, trimming shrubs, etc. make sure they have good garbage cans, make sure the parking area is safe and well-lit. pretty vinyl in the laundry area. you know.
so, think hard about who ya want living in your house, and how to attract that kind of tenant.
and go read a couple 20 books on the subject.
the repair/fixing up part's the easier part. the rest of being a landlord may disuade you. best you know about it all before you get started (unlike my mother-in-law who just jumped in, with a fourplex, without knowing anything at all!!)
sorry if this has repeated any previous advice!
and if you don't get this house, there'll be another one! keep looking and learning
oh -- one last thought. there are likely professional landlords who scout around houses all the time. if THEY passed over this house, ya gotta wonder why....
just my two cents.....
Doug
Northeast Indiana
so, to catch a desirable tenant, ya gotta buy a desirable house in a desirable neighborhood, and keep it that way. including landscaping, trimming shrubs, etc. make sure they have good garbage cans, make sure the parking area is safe and well-lit. pretty vinyl in the laundry area. you know
What I was going to shoot for was to create a nice house in an "ok" neighborhood. Can't afford a "good" neighborhood. Basically I was going to go with "oooh" and convienience ("oooh" is a watered down "wow"). For the oooh, I put just a little extra attention into the areas they first see when walking in the door (to make them more eager to sign). For convienience: things like dishwashers... or similar items that might make them inclined to shell out an extra $50/mo or more. But that is just a theory at this point.
oh -- one last thought. there are likely professional landlords who scout around houses all the time. if THEY passed over this house, ya gotta wonder why....
I've run into a few of those. Typically it quickly becomes obvious WHY they don't want it. But in the case of the one I made an offer on, it was in demand. I still suspect a slum-lord bought it. He/she will do the bare minimum, and then let the house run down another 10 years or so.
Its just frustrating that I don't have any good prospects to look at at the moment.
jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Dan, I wasn't trying to "be impressive" when I mentioned the real estate that I have to offer, I was just trying to counter your post that essentially accuses me of only knowing about real estate from "books". The truth is that I've created more wealth from real estate investing in a few short years than I saved and made from stocks in 15 years or so. I put my money where my mouth is but I'm not afraid to read lots of books and learn some common sense things.
I'd ALWAYS suggest using the proper reserves to structure offers. If I couldn't get the offers accepted using the proper numbers, then of course I'd reconsider and keep negotiating, especially in a market that is appreciating. If I did purchase a house with a $20 positive cashflow knowing that I wasn't covering my management fee, I might not be too unhappy, but I still wouldn't kid myself....I'd still know that I wasn't covering a very basic expense! As I fixed the property up and raised the rents, I'd simply be trying to get the thing to truly "cashflow". I wouldn't necessarily refuse to buy property with a negative cashflow either for various reasons.
As far as getting 30 weeks of rent on my resort property....I'd be estactic. Unfortunatly, I live in a cold climate and 30 weeks just aint going to happen, I would be semi-thrilled to get 12 weeks of rent this year. That would probably mean that I couldn't enjoy any of the summer on the Lake and that wouldn't make me too happy....one of the reasons that we chose this particular property is that we want to be able to have a nice place to live when I come back to Michigan visiting family in the summers and fall. I guess you could say I'm a sucker for hanging out on lakefront property.
You are right lease options is definitly a different beast. So is the resort rentals. My next venture is probably going to be commercial strip malls. I like the idea of triple net leases!
Heres a pic of the Lake Huron property. It can sleep 12 comfortably and I could probaly cram in another 16 if I had too! Resort property is kind of a nice "repeat" type business...once they rent it a week, they always sign up for next year!
I'll probably spend some time up there this spring putting in a deck over the patio. We've always planned on having one, but it just keeps getting pushed back...too much lounging and taking it easy.....
blue
Just because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Question, with a clean and fix up can the rents go up?
Dan, that is an area where I still need to do my research. It has been probably 8 years or more since I've really been hanging with 'rental folks', so I am not up to date on rates. The delicate balance would be to increase the rent so as to pay the bills, but not to get so high that you're going to be vacant for a long time.
If I end up getting the rental property, the FIRST one needs to be a positive experience. Doesn't have to be all positive, but enough so that the fledgling sprout doesn't get stomped on ;)
jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Edited 1/31/2005 8:08 pm ET by JohnT8
If it hasn't already sold, I'm going to walk through the house again tomorrow. A friend is going to meet me there, and he is a veteran of many an old house, so between us I think we can get a good estimate of how much repair is involved.
If the ball stays in the park, I'll go ahead and make an offer on the property. My question now is, what conditions do you put on your offer?
I was thinking:
Offer is $xxx, assuming:
1. acceptable financing is obtained
2. tenants (and their garbage) are OUT by closing date
3. Contigent on a final walk through.
What do you all think?
Question, with a clean and fix up can the rents go up?
Dan, getting back to this question: Preliminary research (newspaper and half dozen websites) indicates that the property is in the average rental price range. If the top floor (1br/1ba) unit were real clean, I think I might be able to charge $350-400/mo without paying utilities (right now its pulling $400/mo - 200 in utilities).
As far as the first floor unit, $545 might be able to bring 600 if clean.. might take a dishwasher and/or w/d in addition to the cleaning.
Oh, and on a related note: The small bungalow fix&sell house is scheduled for a walk through on Sunday. If I end up buying the rental, I won't buy the bungalow.
jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Edited 2/1/2005 9:58 pm ET by JohnT8
I like the conditions. Plan on some junk being left over. Never bought a property that was totally empty. I always wonder how people who can't afford a house can afford to buy so much stuff!
I usually don't put too many conditions in my offer. Just simple ones. I always figure someone selling a rental probably is burned out or inherited it so the just want away. The easier I can make it for them the better the price.
I would use the 200 and 350 figure for you base line, then once rehabbed ask for the higher figures and see how it goes. When I am rehabbing a 2 unit building I try to focus on the items that affect both units first then I finish the easiest unit (usually the one BR) and rent it out as quick as reasonably possible. Get the income coming in.
Sounds like you have a good shot at getting one or the other. Always nice to find a couple at once. Usually good potential deals only come one at a time here and there. Good luck! DanT
Rental House update: The bank has taken over the property.
Yesterday I went by for a second viewing on the house. First floor tenant had cleaned up quite a bit (upgrade from "sty" to "a little messy".. actually its probably less messy than MY place now). The cleanup made it easier to get a picture of the maintenance/repair situation. We did find several additional items, but overall felt that it was still worth pursuing.
Went to talk with the bank's lawyer this morning. I had 4 conditions with my offer:
1. I was able to get agreeable financing
2. Tenant was gone (with all their junk) by closing
3. Final walkthru (ie, tenant doesn't trash place when they leave)
4. Passes termite inspection
He didn't have a problem with #1 or #4, but wouldn't go for #2 (which in turn kills #3). He said he would provide me with documentation that the tenants hadn't made their full January rent payments, but that the bank wouldn't evict.
At this point I pockted my offer so that I could think that part over. In theory, I would think that I could do a "five day notice" on them and proceed with the evicition. But I don't want to get tangled up with them trying to pull a bankruptcy or some other situation where I might have trouble prying them out.
What are your thoughts?jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Banks don't like to fool with details and legalities if they can avoid it. Offer a little less and handle it.
I bought a property once where the tennant was bullying the landlord and not paying. They asked 34k, then 29k, then 27k. Once I realized the situation I offered 18k and I would handle the problem. We agreed on 21k and I handled the problem. One week before closing I went to the tennant and said that I thought I could see what was happening. I further said one of my goals was to get into the property as quickly as possible and rehab it. His response was "so?" I said "you have a $350 deposit with the landlord, if you move out and meet me here one week from tonight with all your stuff out and hand me the keys, I will pay you $750 and the past due rent is forgotten. He was gone in a week.
Sometime the issue of getting rid of a tennant is simply helping them afford to leave. You could make a case for the fact it shouldn't have to do that but its a lot cheaper time wise than you think. But.......with the legalities in my state you can give a 3 day notice, then a 30 day notice to anyone on a month to month agreement and have them out in 2 weeks after the 30 days are up if need be. Check the tennant rights law book at your local library or see if your area has a rental property association, most do. Frankly if it were me I would evict the filthiest one and start to work still collecting from the other, then evict them unless they have come around. Some due once they see the new sherrif is in town. DanT
Walking away from the meeting, my first reaction was:
Informal meeting with the tenants. Not to give them advice or anything... but to point out that to my knowledge it didn't appear that the bank was going to sue them for past rents... And therefore when their tax returns came in, they would be better served to use them to find a new rental, rather than needlessly throwing it at past due rent (assuming they actually work).
To me its a no brainer for the first floor folks. The basement isn't sealed, and they're getting hit with monster utility bills..and that is while IL is having a mild winter. What happens if it gets cold? Another month or two of those utility bills would more than pay for the new rental.
I've been trying to get ahold of someone I know who has been a property manager in the past. She knows the IL laws in the area and would know how hard/easy it will be to get the tenants out.
jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Thats one approach. Just don't give in to the temptation of trying to befriend them. Unfortunately being a land lord while not dictating cruelty certainly constitutes an air of authority and being on guard at all time when dealing with tenants.
Also local knowledge is a good idea. In our state you can simply go to the next county to see evictions handled 2 weeks slower. The judge there is somewhat sympathetic to tennants so she simply slows the process down some. Here our judge requires that you follow the law to the letter but as long as you do so and you are proven right then the eviction happens rapidly.
When sifting through all this stuff and dealing with the ups and downs of rehabing older properties as well as the landlording thing in general I have to remind myself occasionally that if it were easy everyone would do it! DanT
Whenever I go in to look at a house, I try to remember my camera. I don't have a chance to see everything in one visit, but I can pick up a lot if I've got the pics to look at later.
For this house, I got mostly exterior shots (it looked much better than the interior). The tenants were following me around on the inside, and I didn't really want them to think I was snapping pics of their mess. If they hadn't been there, I would have snapped 50 or more shots of the interior.
That cedar tree needs to go bye-bye. Someone should have zapped it YEARS ago! I can just imagine what all those roots are doing to the foundation wall.
On the chimney pic, I was actually standing in front of the neighbor's garage. gotta love that 8X optical zoom.
jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Edited 1/31/2005 8:08 pm ET by JohnT8
I dont believe a rental needs to give positive cash flow, just pay for itself. Some day the mortgage will be paid off, courtesy of your tenants. then you can go to the bank and take another mortgage against the property. Stuff all that money in your pocket and keep on collecting rents
I could not disagree with you more. Break even property or negative cash flow is flirting with disaster. We never know what turn our financial situation will take, one bad period and you are bleeding money like there is no tommorow.
In our area in the 70's a couple of gurus pitched negative or break even property to many of the doctors and lawyers in town. The economy soured, we actually lost 10% of our population and suddenly these folks were trying to come up with 1 to 2k a month to cover losses. A lot of professionals in this town spent years rebuilding their finances due to forclosures.
Property needs to support itself. It will over time produce its own cash emergencies that you can't plan or anticpate. DanT
Property needs to support itself. It will over time produce its own cash emergencies that you can't plan or anticpate. DanT
Absolutely correct.
Ever had three water heaters go out at once?
"I was glad that when everything finally hit the fan I was holed up in a little beer joint in Robstown, Texas called the El Gato Negro."
Property needs to support itself. It will over time produce its own cash emergencies that you can't plan or anticpate. DanT
Absolutely correct.
Ever had three water heaters go out at once?
Water heaters don't bother me as much as furnaces going out would, but point well taken!jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Whatever it is, always seems to happen in three's.
Good luck on your investment.
"I was glad that when everything finally hit the fan I was holed up in a little beer joint in Robstown, Texas called the El Gato Negro."
I dont think youve got any problems unless the rehab is too great for you to handle . I couldnt see the roof already had three layers. Oh man! It actually looked good in the pics.
But , its just work if you do it your self and hire a friend.
Tim Mooney
I couldnt see the roof already had three layers. Oh man! It actually looked good in the pics.
WAG. Just looked at the zoomed in chimney shot and the edge of the shingles looked like about 3 layers. see attached.jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Break even should of course includes a line item for those scenario's. I would'nt charactarize that as positive cash flow.
Positive cask flow is something you could claim as income
There are investors and then there are collectors.
Sounds to me like you really like this house and are on the path to being a collector.
I have said it so many times but it is so simple it gets overlooked: it's got to bring in at least 1% of its value a month. That is $1,000 for every $100,000 in value. Consistently.
OR the appreciation has to be so substantial that it will make up.
"I was glad that when everything finally hit the fan I was holed up in a little beer joint in Robstown, Texas called the El Gato Negro."
I have said it so many times but it is so simple it gets overlooked: it's got to bring in at least 1% of its value a month. That is $1,000 for every $100,000 in value. Consistently.
Well... in its current state they're asking $50k while the combined rent is around $750. That puts it over 1%.
I might be tempted to offer them $35, but I know someone beat me to that number...and they didn't take it (but IMO they should have). So even if I haggle them down to $40k, I'm still looking at probably $65k-ish (and that might not include the roof).
So would $750/mo meet your 1% guideline for $65k, or are we deducting for things like vacant months?
jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
John, the biggest mistake that you will make is to rush into buying something for more than it's worth, in an effort to do a deal.
If you set up your business plan, then stick to your formula's you will ALWAYS BUY RIGHT. If you are going to adjust your numbers up, then rationalize the true expenses away, you will always be giving away money.
Don't be afraid to offer the right amount based on sound business prinicples. If the guy already turned down 35k, and hears the same offer again, he might just agree that since two people have offered it, it's the right price. The other guy passed on the deal when it became apparent that more than fair value was needed.....maybe that guy knows something that you dont?
If you can get owner's terms and get into this property with zero down, maybe then you can afford to go a little higher, but you're still goiing to have to put some serious money into it if you don't want to be a slumlord.
Your cashflow looks good until you factor in the fixup costs. When you analyze the ROI after putting in 25k cash (that's your cost of improvements according to this post)...things don't look so good.
If you haven't looked at at least 25 or fifty of these type properties, I wouldn't rush in.....This isn't a steal...you're not getting any great return on this.
I'm not into landlording, so my feelings might be jilted, but I'd pass on this one.
blue Just because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Good. So now it's a possibility. But 1% is minimum.
Now what is the real cost value of this house?
From what I'm reading it sounds like it would be safe to say $75,000 after you buy it, rehab it and all costs involved.
Remember you will have to get the current tenants out and then there won't be any rent coming in until you get done and get some new tenants.
So to be in a safe ballpark let's say you'll need to get rent of $1,125 per month. Do you realistically think it will generate that much rent per month?
Calculate out your expected income after allowing at least a month per year vacancy compared to your expected expenses. Payment, taxes, insurance, management (your time and expenses), advertising, legal, repairs and upgrades, etc.
What do you come up with there? Are you still in the ballpark?
I think the only time to consider the tax advantages is when you need to write off some other additional income and really believe the appreciation will make it up.
Appreciation is elusive. Everyone has stories about the one that got away. The one that would have made them a mint. Those are far fewer than the tales that are told.
There is one other thing about the rental market, especially older houses that has not been mentioned much.
With allthe incentive programs available nowdays for 'first time buyers', etc. You have a very big competitor in rental housing. The US government. It's a friend and a foe.
A foe because a lot of potential renters can buy now as cheap as they can rent from you. They may be back renting in a few years but right now they can buy.
A friend because there has been an increase in the allowance in the HUD programs. Rents have increased.
You should check with your local HUD office to see what would be allowed on the HUD program. There are some guidelines and restrictions and qualifications you will want to know about even if you don't put it on the progaram.
I have never used HUD in the past. This year I bought a 3 br 1 1/2 bath frame needing some work, eventually, not immediately, for $60,000. Planned to get my $900 for a few years and then do some upgrades. HUD told me it would be $1200 per month on their program.
I had some good looking tenants ready for $900 and leased it to them for a year while I look into the HUD a little more.
Hope you do well in whichever direction you decide to take.
"I was glad that when everything finally hit the fan I was holed up in a little beer joint in Robstown, Texas called the El Gato Negro."
Holy Moly. I just can't get over the fact that you guys are talking about a 1900 sf house for under 50 grand. In this neck of the way, you'd be talking 10x that much for the house. Funny thing is that the rents wouldn't be 10x! Where is this place? Pigsknuckle Arkansas?(I'm in Eastern MA)Alec-----
Will GWB soon undertake a "liberation" of us blue-staters who live without the freedom we are crying out for?
"Where is this place? Pigsknuckle Arkansas?"
Watch it ! Youre gettin close to me ! <G>
Tim Mooney
Edited 2/1/2005 9:27 am ET by TIMMOONEY52
Alec, you just need to move somewhere with a bit more breathing room. Mass. isn't exactly one of the roomier states.
I'm in IL. jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
Dirt filth and bad smells can be your friends. I personally am blessed with almost no sense of smell....The best rental my wife and I ever bought was a four unit house that had been similarly neglected for some time. One apartment had 2 guys, 2 dogs and 3 cats in a 500 sqft 1 bedroom apartment. It was so bad that I dumped half a bottle of bleach on the kitchen floor after I finally got them out. It also had a tree (16" diameter) growing out of the foundation. You could see the tree from inside the crawlspace where it had knocked down the curtain wall. But, it was bringing in $1000.00 per month and we purchased it for 65,000.00. And much more importantly, it was surrounded by houses divided into apartments where the rent for a 1 bedroom apartment was closer to $400.00 per month. We spent some money and a bunch of time on this house and within 2 years it was grossing 1650 per month. The most important consideration is the surrounding rents and the neighborhood. If the house you're looking at was bringing in good rents and didn't need any work, then someone without the time or ability to do the work themselves would have already bought it.
O.K., I'm hardly an expert on rental units. But I do have some thoughts to add. First - I'm really surprised that the 2 apartments would only bring in $375 a month each. That would be low even for Carlinville. So up in Springfield I would expect them to be MUCH higher. We have nicer 2 bedroom apartments here going for $500. Anything less than $400 won't get you much more than a trailer.Second - Places ALWAYS take more to fix up and take more time than you think. You're gonna have a bunch of cash hanging out there while you do repairs and then look for renters. Third - Bad neighborhoods don't tend to get better. If it ain't great now, what will it be like in 15 years when you're still trying to pay off the mortgage?Don't know if any of that helps. Just thought I'd throw out a few thoughts.
No one is listening until you make a mistake.
1 ; I just did a rental comparison of apartments in a 30 mile radius. I found as much as 100 dollars difference for the same thing . Im building in a hot spot or an area thats crying for rentals. It can change in 5 miles or less. Numbers dont lie when they are published in the paper.
2; Dan and I have streamlined that business to no foolin around. We know going in how much , how long and what it will rent for and when. Its not any different than a truss company having to scatch their head over 24 ft trusses 4/12 pitch. Weve got the numbers down and doing a repo or bringing a rental up for rent is just another song to a country band. You rehearse enough , you know them by heart.
3; Im singing in your choir!
Tim Mooney
I don't doubt that you have your numbers down pretty well. I probably wouldn't have chimed in at all, but I kinda feel like I know John a bit, and have some knowledge of the town he lives in. (He's an hour north of me)I almost hate to ask what you think of the rental situation I'm in now. (-:
He uses statistics as a drunken man uses lampposts... for support rather than illumination [Andrew Lang]
" almost hate to ask what you think of the rental situation I'm in now. (-:"
You would need tell me for me to know . Email me if you would rather and Ill be happy to give an opinion and Im sure Dan or Keith would too. But if you are happy thats all that counts.
Ill tell a story since Im inside this thread. Might make you feel good .
Ill devulge the numbers .
7 years ago DW wanted a house . It was very small with a carport and about 40 years old. 900 sg ft. 2bd 1 ba. I didnt want it at all because it was too small and too high. In fact it ended up being retail.
Two things it had was LOCATION, and it was very sexy. Charm was dripping off this place . Wonderful yard with big shade trees. The carpot is huge and people sit under the front half. Very comfortable place to be .
It stays rented . When someone moves out someone else moves back in for it rents in hours after a sign in the yard is put out. Its the quickest rental we have and DW loves to rub it in. We actually show plus rents on the charts becuse people pay ahead of time when its actually up and deposits that are kept for cleaning. A lawyer has it rented now for her son and her office staff mails the check the 1rst of every month like clock work and she wants to buy it , but I wont even price it .
I paid 30,000 and it appraised for 30,000, 7 years ago. Retail! The house has drwn 400 per month rent the whole time till the lawyer rented it a 4 months ago. It draws 450 now. The new appraisel is 40 thousand dollars. The renters have paid the note down to 20,000. So , in 7 years its doubled in value to me and paid its way plus some. Its made 6300 in profit .
So the end of the story is that I bought a house at retail and that house has brought back to me 26,300 and paid its way. That little sexy house! A realator told me one time that If I loved a house to buy it caue other would too. She told me they will pay off no matter if you give retail. I thought that was a line of crap comming from a salesperson. It wasnt in this case.
I had it reapraised this week and refinanced with another lender.
Tim, you should know by now that DW is always right ;)
jt8
Nothing so needs reforming as other people's habits. -- Mark Twain
I probably wouldn't have chimed in at all, but I kinda feel like I know John a bit, and have some knowledge of the town he lives in. (He's an hour north of me)
You're driving too slow, Boss. Get it out of 3rd gear ;)
And I'm always ready for folks to chime in, no matter their experience level on whatever topic. You never know when someone is going to have that piece of information that you need. It isn't always the professional electricians that give you the wiring advice you need. Some times its the guy who has just wired up a couple outlets.
jt8
Nothing so needs reforming as other people's habits. -- Mark Twain
Tim is correct. I rarely am fooled by the numbers or the amount of time. Frankly I am sure he isn't either. The only thing that throws my timing off is when I get side tracked making money elsewhere.
Bad neighborhoods are often great rental neighborhoods if you can deal with the clientel. Mine are middle to lower middle class but I have a friend who makes great money with 80 units, all slums. We don't have Harlem like areas here but we certainly have the lower class areas and his units are in them.
You are correct that bad neighborhoods don't get better but many good neighborhoods go bad in a 10-20 year span of time. Should you not buy in them? I think you can drive yourself crazy trying to predict the future of an area. If you want to invest then make the number work today and they will take care of themselves in the future.
As far as your present situation I gave a little advice on that once and felt it wasn't welcome. So I pass. DanT
"Tim is correct. I rarely am fooled by the numbers or the amount of time."
I don't doubt it - You guys have been doing this for a long time. I only said that to John because it's happened to me. And I suspect his situation is closer to mine than yours. (beginner having just one rental house)
"As far as your present situation I gave a little advice on that once and felt it wasn't welcome."
Really? I don't recall that. I'd be interested to know what advice it was that you're referring to.
A clear conscience is usually the sign of a bad memory.
You were at the point of renting the spec house for the first time to a local executive or a friend of a friend. I said you should get some references and maybe do a credit check. You said you wouldn't insult his integrity with such a request and that he came well recomended and that was good enough for you. So I assumed you would rather not hear the "normal business practice" ideas and would prefer to stick to your own. DanT
Dan, I don't doubt it happened, but I don't remember it. As for references - The guy came highly recommended enough from someone I trusted a great deal that I took that as being a good enough reference. As for a credit check - I wouldn't have a clue how to go about one, so I never considered it.Maybe it's from being in a small town - Word gets around pretty quick as to whom you can and can't trust. If I don't know someone personally I can check 'em out pretty quickly with a couple of phone calls. Don't suppose I should tell you that I rented the house on a handshake agreement with no written lease. (-:(I won't do that again, though)
Let's get started, I want to finish the monologue before Al Gore interrupts me. [Jay Leno]
"Maybe it's from being in a small town - Word gets around pretty quick as to whom you can and can't trust. If I don't know someone personally I can check 'em out pretty quickly with a couple of phone calls. "
What I am about to say is not to chastise but simply to say I understand but.....
I am well aware of the small town deal having spent my first 18 years in a farming town of 450. But it is still a business deal. And after all you have read here about business deals gone bad one would think the bell would go off.
To each his own. If you are ok with it then that is fine. But I run my rentals like I run my other business interests and that is with a mild form of paper trail. Keeps all the expectations clear and does a decent job of making people feel obligated. Some of the nicest people I have met are people that can't handle their money. That included one boss who had 2 degrees and was well respected and vouched for by all. Except anyone he owed money to. DanT
I honestly don't doubt that you're correct. If I was going to be in the business of renting stuff on a large scale I would definitely have to be more businesslike. That's one of the reasons I'm not a contractor - I HATE doing the things that are necessary to run a successful business. Although I'm getting better at it. Given enough time, I'll probably come around to your way of thinking. (-:And keep in mind - Just because I don't pick up on something the first time I read it doesn't mean I don't eventually learn from it. Some guys just have tio take a leak on the electric fence for themselves...
He has Van Gogh's ear for music [Billy Wilder]
What Dan said!
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
How did you make out on the tax appraisal situation?
Can you give us an up date? Hope you were able to get it lowered.
"Tell me again, Mr. Ledbetter. What's a Mississippi Flush and how's it beat this hand?It's a small revolver and any five cards."
I got my taxes lowered a LITTLE, but not much. (Don't have the paperwork here with me)Still, it will save me some money for many years to come. They generally jack up the assesments by a blanket percentage every year. So every percentage jump for several years to come will be a hair smaller.
Christopher Robin Hood steals from the rich and gives to the Pooh.
First - I'm really surprised that the 2 apartments would only bring in $375 a month each. That would be low even for Carlinville. So up in Springfield I would expect them to be MUCH higher.
We have nicer 2 bedroom apartments here going for $500. Anything less than $400 won't get you much more than a trailer.
$375 tends to be a 1BR. Although if the neighborhood is crappy enough, 1BR can go as low as $150 (at which point you're probably in a small attic or one or two rooms). When the slum lords take over a 100yo house they will convert it into 2-6 apartments. Which is where the $150 1BR's come from. Slum lords are destroying entire neighborhoods in Springfield when they buy 2-3 properties in a marginal area and turn them into low-income housing. It pushes the neighborhood down, and then makes neighboring houses even cheaper to pick up and sub-divide.
If I had the substance ($$), I would buy up those marginal houses and keep them as single-family rentals. More likely to maintain the neighborhood with a single-family rental.
2BR can run $375-800 depending on neighborhood. 3br maybe $500-1200. Possibly cases where they're higher or lower, but wouldn't be a property I'd be buying.
Springfield has a glut of rentals, so even though its a larger city, it is probably going to be comparable to Carlinville on rents. Too many Tims and Dans in Springfield already ;) Makes it tough on us 1-horse (or 1/2-horse) operations. ;)
jt8
Never put off until tomorrow what you can do the day after tomorrow. -- Mark Twain
Didn't know Springfield had a glut of rentals. In Carlinville, it's hard to find anything to rent.That is a heck of a range of rent rates. But obviously a larer city is going to be a lot difference than a small redneck town.I also didn't realize you were dealing with a 1BR apartment. That would definitely keep the rent down around here too. Since I don't spend a lot of time up there, I don't know who "Tim" and "Dan" are. But I'm guessing they're slumlords, which we have a few of also.
If cowardly and dishonorable men sometimes shoot unarmed men with army pistols or guns, the evil must be prevented by the penitentiary and gallows, and not by a general deprivation of a constitutional privilege. Arkansas Supreme Court, 1878]
Second - Places ALWAYS take more to fix up and take more time than you think. You're gonna have a bunch of cash hanging out there while you do repairs and then look for renters.
How could I forget to comment on that one! Wheeeeew! I should have that on a brass plaque somewhere! "It always costs you more than you think"
If I can ever get out of being a 1/2-horse operation, I'd LIKE to get it down to Tim/Dan's science of hard numbers. A large part of their 'hard' numbers is damage control when deciding what to fix and what not to fix. Since I'm really just a buy-it-fix-it-sell-it person I'm more likely to waste $$ putting crap in that won't give me a return. Especially if I'm moving into the house.
jt8
Nothing so needs reforming as other people's habits. -- Mark Twain
OOPS - When you said "Tim and Dan", I thought you meant someone in Springfield - Not Tim and Dad here on BT. Hope they didn't take offense.........
If pro is opposite of con, then what is the opposite of progress?
Congress.
When you said "Tim and Dan", I thought you meant someone in Springfield - Not Tim and Dad here on BT.
Yeah, I meant the T&D here. Tim & Dan's come in all flavors. Some are slumlords, some are just 'normal' rental guys (like the REAL T&D), some are in it for the tax writeoffs.
Slum lords are bad cuz they destroy neighborhoods. 'normal's are bad because they're in direct competition with you. 'writeoffs' are bad cuz they'll pay outrageous prices for properties (out bid yer a$$).
Boss, if Carlinville isn't suffering economic woes (like Decatur and Jacksonville), then it sounds like you've got a prime rental market. jt8
Nothing so needs reforming as other people's habits. -- Mark Twain
"...if Carlinville isn't suffering economic woes ... then it sounds like you've got a prime rental market."
No worries here - We're getting a super wally world, and that will solve all our problems.
(-:
The town isn't doing great, but isn't really growing either. A lot of the economy is based on farming and small businesses. It doesn't tend to fluctuate a great deal.
The problem from a landlord's perspective is that rents tend to be low due to the proliferation of slumlords with a bunch of trailers. Why pay $500 a month for a decent house for when you can rent a trailer for $250?
Government does not cause affluence. Citizens of totalitarian countries have plenty of government and nothing of anything else. [P. J. O'Rourke]
No worries here - We're getting a super wally world, and that will solve all our problems.
Well that means you'll be able to buy all of downtown Carlinville for a song.jt8
Nothing so needs reforming as other people's habits. -- Mark Twain
"11 years ago, the property appraised at $56k, but obviously hasn't aged gracefully. They are asking $50k, but would probably take around $40-45k. The combined rent of the units pulls in about $750/mo."
Thats the only information Ive got as Dan T was the one who was saying what he thought you could spend on it. You havent said. I dont know the hood and am worried a little . I dont know comparable rents and you must get that figgure.
Let me take this approach. Payments on 50,000 @ 6 percent =422.00 per month for 15 years. My insurance and taxes on this baby would be 600.00. The house looks solid and I dont see a lot wrong with the roof. Looks like a layover to me in worst case senario. Do it your self and buy the shingles from a salvage building yard in white. Thats the approach I would use on this house if I wanted it . Since I dont know the cost of rents , Im going off what Ive got. Im not spending any money except to keep my investment covered up and dry.
Now , its worth 45,000 to you at 379.00 per month at 6 percent @ 15 years. Figgureing a current income of 1250.00 it will fix its self as time passes. One bathroom and then wait for it to pay for a kitchen . Mebbe carpet after three deceased cats and a no pet policy.
Even though its worth 45 to you , Ill give a green light at 39,000 cash to buy [329.10 per month] or 45,000 in payments to the owner@ 6 % int with 3000 down payment .[303.79][ give the dog a bone] Id do that deal this morning where I live. I wouldnt even bother calling DW until it was accepted . I like it.
Make the sucking calf raise it self .
Tim Mooney
You havent said. I dont know the hood and am worried a little .
"ok" hood. Not good nor bad. If I don't bankrupt myself renovating it, I should at least be able to get my $$ out of it (if not my time) by selling it.
I dont know comparable rents and you must get that figgure.
Tim, take a look at the reply I just gave to Dan. That has some preliminary rent info as well as a question. With both units clean and leased, I'm probably looking at $1k/mo rent.
Let me take this approach. Payments on 50,000 @ 6 percent =422.00 per month for 15 years. My insurance and taxes on this baby would be 600.00.
Property tax is $1644 based on a $59k value (I think Dan guessed 1700, so he was DARN close!). Insurance will probably be 600-ish (as you were suggesting). I've got a couple different finance directions to decide on if I make the offer. But I'm going to push it out as far as I can. It might mean paying more interest in the long run, but I will need the breathing room the first year or so.
As long as the roof isn't leaking, I think I'll let it go for a while. That is always something I could do with tenants in the place. Looking at some of the zoomed shots, it looks like there might be three layers of shingles on there already.
I do like your idea of 'no pet' policy.
I think its going to sell this week, its just a matter of whose signature is on the bottom line ;)jt8
Our lives improve only when we take chances -- and the first and most difficult risk we can take is to be honest with ourselves. -- Walter Anderson
FYI
But Harris doesn’t buy the theory that more renters are choosing to rent single-family homes. He notes that between 1991 and 2001 the number of renters in single-family, detached homes fell by 6.1 percent. Two-to-four unit buildings were hit even harder, down by almost 8 percent.
On the other hand, he says the number of rental townhomes increased by 31.7 percent.
“Once touted as affordable owner-occupied housing, single family condos are being converted back to rental housing at a rapid pace,†Harris says. “Apparently, those who desire a detached home are able to buy one.â€
Mobility — the tendency to change residences frequently — is a major reason Harris believes many people choose to rent rather than buy.
“If fewer households are moving,†he says, “homeownership becomes more prevalent. The percentage of households reporting a move during the previous year has declined somewhat in recent years.â€
http://recenter.tamu.edu/news/2-0904.html
This is one reason I feel that the rental properties we buy today must be valued competively.
"A hard head makes for a sore a$$."
Good info. One thing that I learned working in the hotel industry that I believe applies to the rental property market also.
I worked in a high rise business hotel which sat on a strip of hotels/motels. I asked my boss how we could stay in business since we were the most expensive on the strip and how they managed to sell the hotel to industry when cheaper rooms could be had. He said that it was because the types of hotel were so different that they simply don't view the others as competition.
Yes they would lose some rooms to lower priced hotels but the people that stayed in a Microtel would simply not consider our hotel anyways and vise versa. I really think rental property is similar. The majority of my tennants simply would not stay in a 40 unit building even if the money was the same.
My point is although I must be competative, and I firmly believe this is a competative industry, I am competing against property of the same economic type and style. Not the large condos or multi unit complexes. Yes occasionally someone will leave us for them but generally we only lose people to other units of like and kind with maybe more room, single floor plan etc. DanT
Niche marketing.
You found your niche.
(hope I spelled that right)
"A hard head makes for a sore a$$."
For the record ;
I turned in an offer on the house in the metro area of 210. It was also the Fannie Mae property. They countered at full price. Game over .
I looked at a FSBO this week and although shes fixin to lose it , she thinks its worth retail. I saw about 20,000 dollars worth of work and shes not even discounting her house from retail like it was perfect. I didnt have to spend much time with her . The hardest part was getting away
Tim Mooney
I looked at a FSBO this week and although shes fixin to lose it , she thinks its worth retail. I saw about 20,000 dollars worth of work and shes not even discounting her house from retail like it was perfect. I didnt have to spend much time with her . The hardest part was getting away
Most of the "we want perfect price for a in-need-of-repair house" I can spot prior to walking in. But did waste my time on one around Oct/Nov. Needed lots of work... and they were behind on their payments... BUT still wanted "perfect" price (priced as if it were in perfect shape).
Had a HECK of a time prying myself loose from that lady. She was willing to come down a "thousand or two" and I had to force myself not to laugh. She should have been coming down $20-40k!
Makes you wonder what people are THINKING?! She ain't gonna get ANYTHING for it when the bank takes it..except for a black mark on her credit report.
It is all about knowing when to cut your losses. I've gotten to that point on Dad's place in OK. Haven't had anyone with good credit (ie. they can't get a loan) make an offer on the place, and its too far away to maintain as a rent-to-own. So the bank is gonna get it back (there was very little in it for us anyway).jt8
The reason so many people never get anywhere in life is because when opportunity knocks, they are out in the backyard looking for four-leaf clovers. -- Walter Percy Chrysler
John, I might be interested in that OK "problem".
What are the numbers? HOw much is owed? How much is needed to get it to fixed up value. How much is FMV for that style house in that area?
You are a classic example of an out of area motivated seller.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
John, I might be interested in that OK "problem".
Blue, we are just waiting for the lawyers goahead to deed that property back to the bank. Les Gibson at Armstrong Bank (918) 473-7800 is familiar with the property and will probably handle the sale for the bank. It is 9 hr drive away, and I'm not looking to make anything on the sale, so back to the bank it goes.
The property was part of Dad's estate (it is close to lake Eufaula). Even if it had sold for full value, all we would gain is paying the realtor, lawyer, and banker off. By deeding it back, we avoid paying two of them anyway, so no real difference (from our point of view).
It is a mobile home in Eufaula, OK (of which there are no shortage in that area) on approx 1 acre, with a 2-car garage. The mh needs some work. Previous owner had a water leak that wasn't taken care of promptly, so it needs a new floor in a BA and part of hallway. Needs new flooring in the other BA. Might get by with a good steam cleaning and paint elsewhere. And other misc stuff.
First time we talked to the banker, he was putting the property value at $36k. The bank has about $22k in the property. Depending on what you want to fix, you could probably spend $500-5000 cleaning it up. Pretty narrow margin.
Since its close to the lake, it should become a very active showing in the spring. We have had a fair number of showings on it, but most of the folks who want it don't have the means.
Don't know if this link will work (just shows mh, not garage):
realtor.com/FindHome/HomeListingjt8
The reason so many people never get anywhere in life is because when opportunity knocks, they are out in the backyard looking for four-leaf clovers. -- Walter Percy Chrysler
Hey, right after my whine session I went and looked at a couple of houses today. One already was in contract so I went to look at the least favorite of the two.
It is a 3 BR ranch in an low income neighborhood, repo and had a fire. (named lucky) Anyway I go in, the ranch is roomy, smoke damaged but little fire damage. 2 bath already sided and newer roof. Looks to be 30 years old and best of all..........a double lot! Bought it for 18k.
Realtor says re rocked with new baths, carpet, kitchen and bath should bring 55-65k. But I still have the other lot! So maybe build, maybe team up or sell it delayed for 10k. We'll see. Love when it all falls together. Especially when you least expect it. Oh! And they wanted an $800 deposit, I refused until they accepted an offer. Have to take the check over in the morning. I am happy, picture me.......happy. DanT
You snagged a deal! Congradulations!
Are you thinking any at all to adding to the rental fllet since you are in it that cheap?
Sounds like fixed up right it should bring 5 to 650 !
Yeah, in that neighborhood $550ish. But no, business is a little slow and this would be a good filler during slow moments that would turn a profit in the end. So for sale it will be.
I am going to call about the lot build issues tommorow. I just got off the phone with a buddy that builds customs and he says a number of the track builders here are building on slabs for 55-60 a SF. So a build might work there and still be profitable. We'll see. Even if it doesn't work out I can market the house as a double lot which never hurts although it adds only minimal value in terms of cash. DanT
Congrats DanT!
It looks like you picked up a nice property at the right numbers.
If your target cash buying price is 60% of FMV, then it looks like your going to hit it right on the numbers. If you can get it fixed up for 15k or less, you'll be at 60% of the 55k fixed up fmv.
If you can keep the lot, that's a bonus.
I'd probably keep the lot, even if I couldn't build one on it. I'd use it to put a marketing sign on it. The sign would offer the lot for sale and also alert the neighborhood that "I buy houses". IF it was a truly worthless lot, I'd let it go back for taxes unless they were really, really low.
That's cheap advertising.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
"I'd probably keep the lot, even if I couldn't build one on it. I'd use it to put a marketing sign on it. The sign would offer the lot for sale and also alert the neighborhood that "I buy houses". IF it was a truly worthless lot, I'd let it go back for taxes unless they were really, really low."
More solid advice. In the middle of a residential neighborhood in a town of 40k I am going to keep a lot and put signs on it. Or better yet keep it and let it go back so my name will be in the local paper numerous times during the forclosure of the lot. Yeah, great idea on both accounts.
Or maybe I could just sell it with the house if I deem it worthless to me...... Nah, let me take the way out that you suggest that will infuriate a number of my customers. DanT
Well, I assumed that you had tasteful signs. And you did mention that it was in a bad neighborhood.
Furthermore, the only reason that anyone would know that your name was on the deed and you were being foreclosed is because you took title in a way that publicizes it.
Oh yeah...you don't like the idea of land trusts....I forgot.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
I see. So the reason I should learn and use trusts is to avoid taxes that are rightfully owed on a piece of property that I willfully purchased. I have a hard time doing business in that manner although I am aware it doesn't bother some.
In a small town it may be different from where you live but I would feel as though I were doing even a poor neighborhood a diservice by filling a lot full of "attractive" advertising signs. But hey, maybe I am just squemish. Maybe I will die broke because I feel this way. Or maybe I should read more how to books for more inconsiderate ideas on making money. Yeah, thats it. DanT
I were doing even a poor neighborhood a diservice by filling a lot full of "attractive" advertising signs
I wouldn't suggest filling a lot full of anything. I might suggest putting a for sale sign in it, along with an addtional addon sign mentioning that you buy houses. If you're truly interested in serving your community, that sign might actually help a lot of people that need someone to buy their houses and since you intend to fix them up, you might actually become the catlyst that revitalizes the neighborhood.
And...God forbid, you might actually find someone to buy the lot! Good grief....I suppose your against that too!
Sorry I offended you so much. I didn't know you were so thin skinned about talking about business. Your condescending tone is somewhat surprising.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
I have no issue discussing business. Real business. Not a never ending list of suggestions from the investment book of the month club.
My issue with your ideas is simply that I don't believe you have tried many and just spew information that you absorbed in a reading session. I believe in self education and read frequently myself however I practice in the areas that I offer advice. I simply don't believe you do. And I tire of having to discuss the various ins and outs with someone that spouts information that sounds like direct quotes from books with no real life info to back it up.
Now I know you are going to tell me about the one rehab you did, or the 2 rentals you were involved with etc. etc. I have framed a 2 garages and one addition. Even with this experience I would not dream of giving advice on framing. And yes I have read numerous books on framing however any information I would give would simply be quoting a source that I don't have any idea as to their accuracy in terms of what would or wouldn't work in the real world. You evidently don't feel the same.
I pay my taxes on each and everything I own, on time, as I consider it a responsibility not a matter of business. I also feel that the upkeep and appearance of properties I own are a matter of responsibility that I need to adhere to in order to help my community improve and prosper.
I am a catlyst in my community and have been for over 20 years as I have purchased numerous properties that were as rough as they come and rehabbed them into good looking homes and small apartment buildings that then improved the value of the area. In turn the homes around usually improved as owner saw improvement and improved likewise.
I am not thin skinned but I am condesending when I feel that the input being given is based on poor information. It is my opinion pure and simple. I have gotten what I have and where I am however good or bad that may be by following my own principles and will continue to do so as I am sure you will. But feel no obligation to agree with you simply because you quoted it or have read it or because you think your idea is ok to do in my area. DanT
I am not thin skinned but I am condesending
I rest my case.
No matter how/what/why you feel about my experience doesn't give you the right to be condescending. Your condescending attitude sends the discussion off on another needless track.
For instance, if you really wanted to understand how I would deal with the deal that you just entered into, I'd discuss that. I've said many times that I'm not interested in doing the rehab, but instead I would flip it to a rehabber. Instead of discussing the merits of the different ways to handle a property like that, you choose instead to attack a sound marketing idea and in the meantime attempt to belittle me. I find it interesting.
If you really want to understand what I do, all you have to do is ask. I'm not ashamed to say that I'm a carpenter contractor and not at all afraid to say that I dabble in real estate investment and am gearing up to enter it in a different way, but not until I get the contracting business on track. In the meantime, I'm well on my way to reading at least one book per week, sometimes two and probably half of them deal with real esatate in one way or another. Some of the stuff I read makes sense and I'm not afraid to relay the info.
If you look at some of the recent threads about real estate investment, you'd see that guys were told, by you, that "if you wait around for (i'm paraphrasing) 60% deals, you'll never buy anything". That statement was directed at me, because I suggested that the poster pass on a deal that I thought was very marginal. It didn't come close to the deal that you just made, yet you were coaxing him into buying into it. Since I've read a ton, and also have made some mistakes in the real estate investment business, I see fit to sound the warning. I know that waiting around for 60 or 70% deals takes more time, but why would anyone advocate rushing into a marginal deal? You can pick up losers every day in less than an hour!
As far as the sign suggestion, I stand firmly behind my idea and see nothing at all wrong with it. Your original post stated that the lot might be worthless and all I did was try to point out that it actually had some value. If it was indeed worthless, then it shouldn't be taxed at all and therefore would never have the chance at being foreclosed for failure to pay taxes. If it had a very low value, and you don't mind buying properties in that neighborhood, then I simply pointed out that it might be more valuable to you to keep it and put a for sale sign on it.
A suggestion like that hardly seems to send out signals for you to get on your "I'm the only one doing the business right and everyone else in the world is full of crapola". I'm going to find it very illogical if you're going to tell me that your going to put any for sale sign up in the lawn of the house that you are rehabbing, but think it's wrong to put one up on the vacant property. That shows me that you're only interested in demeaning me, rather than discussing intelligent marketing methods.
If you feel that there should be a self-imposed time limit to put on the empty lot, as you contribution to the community, then I'd say fine, I'd admire your integrity, but if you're simply going to dismiss the idea, simply because I made the suggestion...well, I guess that says something about your pigheadedness. So, instead of making yourself look good by discussing the topic in a levelheaded manner, you diminsh yourself.
Lastly, for those that really want to help out their neighbors, I'd suggest to put the sign up for a "normal" period of time, try to sell for a profit and if it doesn't sell, take the sign down and donate the lot to Habitat for Humanity or some other charity....or simply sell it to the neighbor for $1.00.
Good grief....this is quite a discussion...all for one marketing idea.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
"No matter how/what/why you feel about my experience doesn't give you the right to be condescending."
I disagree. I can and will be condescending anytime I wish.
"For instance, if you really wanted to understand how I would deal with the deal that you just entered into, I'd discuss that."
I don't and that has been my point all along. I am interested in your information on framing, just not in real estate deals.
" That statement was directed at me, because I suggested that the poster pass on a deal that I thought was very marginal. It didn't come close to the deal that you just made, yet you were coaxing him into buying into it."
Yes it was and the fact that you can't see the difference in the two deals is a matter IMHO of a lack of experience and proves my point. I would have done either deal. But it is always subjective and based on the true information of the area and market. Easy for either of us to have an opinion when we know little of his area and its not our money.
"As far as the sign suggestion, I stand firmly behind my idea and see nothing at all wrong with it. Your original post stated that the lot might be worthless and all I did was try to point out that it actually had some value. "
I at no time refered to it as worthless or inferred that. I simply said that if it sold with the house it would add little cash value to the deal. Two statements that mean completely different things. Again.
"I'm the only one doing the business right and everyone else in the world is full of crapola".
I do business the way I do for me, not for you. I think Tim does a great job. I think Tim D. in my town is one of the best I have ever seen. I think Jack R. in my town is very good although we do things entirely different. I think you have a big hat and little cattle.
"I guess that says something about your pigheadedness. "
Ahhh, name calling. Who diminishes ones self?
DanT
Easy for either of us to have an opinion when we know little of his area and its not our money.
Evidently, you're forgetting that he posed the question in here with the sole intention of soliciting opinions. I offered my opinion based on the numbers given. I suppose without fully understanding all the objectives, both short term and long term, it's somewhat assuming to offer an opinion, but hey, he asked.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
So Dan, did you decide what you were going to do with the fire-sale house and its extra lot?
I think last we heard, you were going to renovate and sell the house and were looking into building on the extra lot.
jt8
The reason so many people never get anywhere in life is because when opportunity knocks, they are out in the backyard looking for four-leaf clovers. -- Walter Percy Chrysler
Looks like Dan T is on a trip.
Update .
I reoffered at 25, 500 and they accepted this morning. The house was sold three years ago for 49,900. Thats the same as the old appraisel. They had dropped their price to 39,900 when I offered my first bid of 25,000. My payments will be 220.00 per @ 15 yrs pay out. I have a verbal acceptance from a renter I already have in place at another property to lease with option to purchase . 2,000 down and a lease of three years to recapture at the amount of 450.00 per month non refundable through the term of the lease and a purchase price of 39,900 as is with no warranties. They may close at any time with out fulfilling the three year term. If they dont close in the set time the monies will be forfeited and our contract will be null and void.
Tim Mooney
Tim, I love those lease options!
I could see where having tenants would be advantageous because you already know a lot about their character and paying habits.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
They will have been with me 8 years the 1rst of April. They want over there as the husband works there . If it happens I wont have to worry about that house , just the one they will be moving from.
I would rather keep it , but I told them Id do it . Sounds like 200 per month for 15 years to me if they dont .
Another way of looking at it is that its a 15,000 dollar lick either way in value. Thats a little over half what I grossed last year being an inspector. Ive got about 6 hours in it and a check for 500.00 thus far.
Tim Mooney
Edited 2/24/2005 2:02 pm ET by TIMMOONEY52
Another way of looking at it is that its a 15,000 dollar lick either way in value. Thats a little over half what I grossed last year being an inspector. Ive got about 6 hours in it and a check for 500.00 thus far.
That's how I look at it! I always laugh when someone says that real estate isn't that great of a deal.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Way to go Tim. Funny they refused your iniial offer and then acepted the revised offer of only $500 more.
I agree with Blue - you wrote of pretty nice deal with the tenants as well.
Scott
Sounds like we are both doing the hit the lottery thing this month. Good deal! Distressed sales. Some of my favorites.
I have never done lease options. Closed minded I guess but would look at it if I couldn't move something. Anyway I have a buddy that has sold the same house 5 times now on land contract and got 5k down every time. 3 times the called him and offered it back and two of those cleaned the carpets. Amazing. Good luck. DanT
Lease option
Well, it isnt really any difference to me than renting to sell at a later date or to keep as a rental, other than a down payment . Things get along the same as a lease with nothing diferent . I dont count on selling at all, but its a legal instrument to sell if they comply to the terms . If I have a house thats worth 50 thousand and I option it on lease for 50 and collect rent monies for the full time period , Ive got rent monies in addition to the sale price. If they forfeit by any terms of the legal instrument then the down payment and all other monies become mine. While all the time its going on the renters feel home ownership although they are only leasing. They may call it their home and they can make plans which helps their attitude and makes a better renter.
If I wanted to sell a house and that was my only option ,[needed or had to sell] then I wouldnt do a lease option. I would do a sales contract which is still the same but the down payment must be bigger as 5000 down as minimal and they pick up the insurance and taxes although the deed is still in my name. Then they are written a contract pretty much like a lending company writes us. But, its still just a sales contract listing them as third party with us holding the waranty deed. We are still the owners on record. That is a little more risky to me because of the conditions of sale . They can alter or change things legally with the structure or add on , remodel, etc. Of course they dont hold a first mortgage so they can bank borrow , but they can use credit cards. Of course we couldnt do a real closing unless we first owned the property and then I sure wouldnt do either one tying up my MONEY LONG TERM.
Anyway , even if you didnt want to sell , theres a price you would sell mebbe . <G> Say you would sell it at 60,000 which is 10,000 over appraisel or a would be ap. If they are willing , you could still do a three year lease w option to purchase as stated above. Sometimes I get renters who tell me they want to buy but cant right now , so I bring this up to them if they are interrested. Even if they actually bought the property , you could pay full price for another to replace it and be in the same place . I wanted to mention that because its important in our thinking . Somtimes our judgement gets clouded on somthing we think we dont want to sell, but if we actually sold somthing for more than market value with out losing realator fees , then we could replace the house at market value using the sale money not to exeed. Of course you and I would do better and hunt another discount deal.
Tim Mooney
Tim, you forgot to mention that you retain the tax depreciation on a lease option.
Almost everything else you said makes sense to me. I like your style.
The one thing I might question is that you claimed that "They can alter or change things legally with the structure" I would agree that under most standard land contract agreements, you would be correct...but...if you so desired you could add language that would prohibit alterations without cashing out the contract.
I understand that contracts are no guarantee that the buyers wouldn't ignore that clause....
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
"Tim, you forgot to mention that you retain the tax depreciation on a lease option. "
Thats correct . Untill the filing changes at the court house.
I would not bring the other thing up as you are right , they would spot it on a contract.
Tim Mooney
Dan, do you have HUD section 8 there ?
You do any of it ?
Timothy
They don't call it Section 8 here they call it Metropolitin housing. They don't pay all of the rent just a portion of it based on all the usual econcomic factors. I have 3 rented to Metro now. One is the house I used at an example where the lady has lived there since I bought it and it will be paid for soon. So I guess the gov. has bought the house. Damn that feels even better!
We will accept applications from Metro but they have to pass the same screening as all our tennants. The few I have have done well. And its nice to get that check on the first no matter what. But I wouldn't make any concessions in my standards for it. DanT
Thanks .
There seems to be a little bit of a problem with then paying enough money for a house. I spent about two hours with a girl last night that acts like she knows the system , lol. I asked if they would pay the same for a trailer and she said yes if its tied down and can pass the check point list. I was wanting 450 and they would pay 400 . But like I said , a trailer would go the same money. I thought DAMN! Dollar signs started clicking.
Now with Metro they can only pay so much the first year but there is no limit to the amount you can raise it after the year lease is up. And you get another years lease at that amount. So you might ask that. I have had situations where the tennant went in $50 under and after a year I raised the rent $75.
Metro only pays so much of the rent (sometimes all sometimes partial) based on their income, kids etc. So the tennant may be in my $450 unit and I am only getting $400 but they are only actually paying $75 and the rest is from the government. If they are a good tennant and like where they live and like the fact we keep our properties up when we raise the rent they don't mind because they know its a bargain compaired to what else they can find. So I eat the year and make it up over the next 2 or 3.
I have one metro tennant thats been with us 7 years, another is 12 years and the other is about a year. I just found out today my long term buy me a house tennant is thinking of moving to a retirement home. 5 months short of buying me a house. The nerve! DanT
I gotta tell ya one that just happened.
This really nice couple that wanted to buy the house across the river and couldnt ended up renting it . I listened to all yall and DW & daughter . Letum have some slack. Of course its my fault . I letum move over there with out a deposit. I tiold them I needed them to move last week which gave them two weekends and a full week between. When the first rolled around they would still owe me 450 . I told the lady to clean her house and to buff the house she was moving to a little and we would be fine . She agreed and we have no lease. I was so proud of my self for being nice which DW says is a switch. I told her what yall said as a group and she agreed . Still Tims deal which you mentioned clearly.
She took two weeks and she isnt completely out. She didnt clean a damn thing . I helped them move all day one day with both my trucks and trailers with no thanks or even gas offered. I worked all day on the one they moved from and I still havent got the carpet ready. The bath and the kitchen is a greasy mess. Once they moved the washer and dryer ,, theres a hole in the floor and in the wall from leaks . Storm door broken at the hinges and I cant buy a damn hinge. I turned 53 the other day and Im still getting experience. Two houses tied up for two weeks and still havent seen the rent yet on one of them. I think Im losing my mind er somthin.
Ive only told my self all day today that there wont be another chance at this old man. Ya right !
Whoa! Whoa! Whoa! You said they were nice hard working people that got themselve in a financial hole. That you visited with them and you liked them.
Now if you visited with them and all didn't you notice before how the lived!?
And I sure didn't suggest you give them a house to rent with no deposit, no rent and no clean up. Wrong guy!
I said you should be able to find a way to lease option or sell them the house profitably if you really wanted to help them out. That it would give them a goal and if it fell through to structure it so you got the house back.
I didn't say nor imply that you should go from Tim the landlord to Tim the sucker! Come on, you've been at this long enough. No paper, no money, no keys! Shame. DanT
Youre 100 percent !
{Im crackin up}
That was a good laugh for the evening .
I worked this week and the weekend on the rental the folks moved out of and Friday I noticed a goverment forclosure sign in the window around the corner , on the next street. I thought mmm Ill check on that Monday! These are normally the best deals around . They are only adverised in a small line add three times in our weekly Graphic. A US marshall shows up and handles the auction and in a little bit hes all in and all done . Someone is the owner of a repo. Friday evening on the way home from work when I rounded the corner, someone was unloading a new fridge. I missed a sale !!!! I had to chuckle. I had been all wrapped up in the Fannie Mae house I bought and had dropped the ball on this one . I might not have been able to geter done at my price and not been able to purchase it , but you dont catch many fish at home. Im gonna have to get on the ball so I can call the ball.
Timothy
Ooooohhhhhh, thats alright! We all have that moment. A few months ago I saw a vacant house. Looked it up on the internet and sent the lady a letter. Decent neighborhood so I figured 35k and 10k in repairs should bring 55-60. She doesn't respond. 2 months later I drive by and see a for sale sign, from the company one of the realtors I use works for.
Great!! I'll call Larry. He says, sorry man, didn't realize you would be interested (stopped using Larry that moment.) It just went into contract for 29k. The lady said someone tried to buy it but she lost their address, was that you? Hot enough to F if you get my meaning. I am calm now. It is rehabbed and for sale. I just try not to drive by. DanT
Follow up.....I think I read somewhere that it may take as many as 8 contacts.
Follow up. That's a good thing to remember and focus on in any business.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Ouch!
Well at least I dont have any information to get glad or mad over , but you ARE right on one thing 100 percent . Larry just lost his future paychecks with your company. It will take him a while to realize it but sooner or later it will set in sour. I just keep thinking about the sign on DWs door ;
The customer is the boss. They can fire every one of us simply by taking their business somewhere else.
Larry would never have a chance at making a penny off me again for the next 20 years hopefully.
But , that said , Dan we both dropped the ball. I dont say that to be critical. Ive had to stay on my doctors , realators, lawyers at times, the lumber yards , renters , etc. I dont know why but people dont do their jobs and we cant trust them or depend on them when out living is at stake. We have to be on the ball to call the ball. JMO.
Next subject ;
Im 53 years old and not in perfect health. I hate to write that . Ive been playing with numbers today. Ive been to the bank to refinance two houses and a friend of mine is losing my business . The new girl on the block out bid him bad and shes taking the last two hes got of mine. . He had a total of 12 at one time . He also was my first banker and I believe took a chance on me when I started. Ive been with him for 15 years commercially. Those renters made my mind up to not be soft again. BTW , Ive decided to raise their rent as they got moved in with out a lease and Im glad the way that turned out. Ill do it when I want the house back to add a closet and a shower to make it a 4 bedroom 2 bath and up it 100 per month. So thats not over yet. She gave 5 years & balloon @ 6.5 percent . He gave 6.5 for one year or two years @7 percent. I dont believe interrest is going down.
So , Im talking to her just 30 minutes ago in her office and asked what she thought about 30 years now at my age instead of trying to pay them off . She didnt comment except to say as long as she had her vested interrest , she didnt care. You are planning on selling yours at retirement and as you said they are not really part of your retirement . Im planning on having mine till my death. They are my retirement and Im thinking of getting a lot more of them in this final chapter of mine .
What do you think?
Lemme take the time to give some numbers.
Ive estimated the new duplex on the free lots across the river at 67,000.
1600 sq ft @42.00 per foot . Brings in a yeild of 800 per month total gross.
Payments @30 years = 424.75.
15 years = 585.38
I dont expect to see the last payment of 15 years .
You ever thought in reverse?
Edited 4/4/2005 7:04 pm ET by TIMMOONEY52
Tim,
I think when you are out making money in other ways then it really doesn't matter how the numbers add up. So usually I just finance for 15, sometimes 20. But if I was looking at retirement and income you bet I would go with the 30. By the time 10 years roll around the rent roles should be up another 100 or so and that duplex alone will net a comfortable 300 in your pocket a month.
This whole senario points out the nice thing about real estate and that is its flexability to adjust to our needs in life. Your needs have change so why not change your strategy to match. Frankly if you don't meet your total number in time for retirement I wouldn't hesitate to consider refi-ing the whole package to 30 to pull more month to month cash flow. But only if needed of course.
As far as the health statement. I believe that one of the main reasons that people do poorly at money management and strategy is because they don't face where they really are and where they really want to go. You have done both in that statement and should be commended for it. You are a sharp guy my friend. DanT
I hope someone else gets benifit out of this ;
Im at the tail end of part of my rentals . Others have just been out there a few years . I could probably take 10 to the finish line if I live to retirement . But of course thats all speculation.
I read one of my books that said you were better off putting 10 thousand down 10 times on ten different properties than trying to own one 100,000 property. Of course they are talking about leverage difference . But actually its very true when you figure the rent off of 10 properties compared to 1 . Im saying the return is greater even though you owe for the 10 props. Then of course its 10Xs at pay off which any fool knows.
So any way it got me to thinking . {Im using you as a back board here please] Ive got 12 rentals now with one in bad shape not rented. In a month , that will change . I have done the numbers trying to take those to the finish line. Its doable with some help from life expectancy. BUT,.... if I go on and hit 24 quickly which Im talking 12 more at the average prices Ive paid which is a number thats not realitive . I end up doing better on 24 units on 30 years now than taking 12 to the finish line. Since Im partially disabled now , taking care of 12 more rentals is a lot easiar than working every day subbing or bidding construction work. Then that got me to thinking that the rentals are hardly any work at all comared to a job we both have done . Ive held a full tiime job and handled up to 11 houses. I didnt do then justice though after my sickness. But I did before that . I cant say how much time I spend on them , but it isnt a part time job. You? So heres the crazy part Dan; Why not 50 in my final run? Its a lot of wheelin and dealin for sure. If I put every thing Ive got on 30 right now it would be like going to the air in the super bowl to reach 50 by the end of the fourth quarter. I think that would finance the deals to make it go depending on how well I did at buying.
Definately a different stategy than Ive ever had before. I always thought I needed them paid for , but these numbers dont show it .
I guess my biggest question is ; Have you ever thought of taking your equities you have now and making a final run ? That was out side my thinking a year ago to be truthful.
Tim
Edited 4/4/2005 9:47 pm ET by TIMMOONEY52
This is off the apartments new but Ive done better on the houses in return . Gotta start somewhere ;
12 units @ 32,000 per = @ 30 yrs current numbers,
408,000 adds up to 2578.84 per month with a total expected gross income of 4800 leaves a sub total of 2222.00 per month
Double that is 4444.00 per month off of, zero money down and full finance for 30 years buys a job of taking care of 24 units you never owned in addition to the ones we have now that Im planning on keeping mine anyway.
Its not as crazy to me after the numbers as it was before I ever figgured it up.
That was figgured not using any equity, but if equity was used it should show the added support in payback per month. I still dont suggest using money down , but to make some of those deals fly it takes reconstruction money and trading money. As the only problem as I see it is aquiring the proerties quickly enough to add the returns. It wouldnt be as sweet if it took 10 years to put together so I think its calling for more aggressive actions as going to the air in the fourth quarter. So investing equities may be a play by play decision.
Tim
Tim, have you ever considered trading all your 12 properties in for one bigger property?
If you use your net equity for a 20% down payment on a larger property (I'm thinking Monopoly Hotel) wouldn't that put you into some serious positive cashflow on a large appartment building? Everyone that I look at shows some serious positive cashflow.
That said, the big game around here is to buy apartments and turn them into Condos. Apartments have been out of favor to big institutional buyers, but the Wall Street Journal says that the trend is in the beginning stage of reversing itself after a few years of poor growth in the industry.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Its an easy answer.
I dont need my properties to buy a bigger one unless I built one which requires quite a bit of cash to make it happen. You cant afford to sell a rental at any reasonable price. Yes , I could do an exchange but I dont need to. Heres the reason why;
I can buy anything I want for 85 percent loan to value and prove I can make payments on it . Anything I can think of in the rental market.
First thing first , Im not going over 70 percent loan to value. Thats my line or I walk. I live by it or else I could become complusive. I go to auctions and bid up to 70 percent and stop cold turkey and actually walk away cause that helps me feel definate in my decision. Yes I could play with numbers asking them to work, but that represents you thinking you could make a bid cheaper by knocking off your price as you mentioned. Youre are in it to make money and at your price or look for another deal. You end up only taking the best deals . I dont need help on those deals .
Blue I showed numbers the other night that the little rental house would draw 75000 in rents in 15 years when it cost 25,500. Then it would continue . I would have to have 75,000 for that house to sell it and then Id pay 49 percent services on it . You add the depreciation, the increase in rents, tax deferments and you cant really sell a rental wisely. My theroy today is all in or get out. I need them all.
I dont have the situation you have over the condos. We dont have our first condo yet. I was called a pioneer of three bedroom rent houses in this town, but Im not braving wilderness being the first one to do a condo.
What I probably need to do is hire a professional to advise me from real data collected in this area.
I should check the big apartments and see if theres a deal there . I do need them quick.
Thanks Blue,
Tim
" Everyone that I look at shows some serious positive cashflow."
My appraisels on commercial rental property has the rent approach. Thats how I ask for it to be valued, not by construction prices. That cash flow is the value of the property.
I use a 1 percent value from rents. The house I bought , I figgured the value at 45,000 which I imediately rented for 450.00 per month. Thats the only way I came up with it being worth 45000 with the exception that it could go the distance of 15 years with out serious expense.
So your statement is the measuring tool that I use to buy, not what the property is pysically worth.
Tim
Again we are back to the versatility of real estate. Of course that will work.
I have a good friend here that worked a full time job in a factory. Over a 20 year period he built up 46 properties. Always paying 20% down and almost always doing a complete rehab on each one. Somewhere along the 20 year zone he was offered a buy out and took it. He now has around 60.
During his work career he managed all properties himself and handled repairs working part time and having 2 full time employees. Needless to say he is quite comfortable and has a really big boat on Lake Erie.
Another associate and I figured it one time that to take care of maintenance and repairs and still pull a reasonable income, starting from scratch, you needed in the area of 20 units. In your case you have a head start on that number.
I think Blue's idea is sound and maybe something to think about. I think per unit single family homes are more valuable and appreciate faster. But a multi unit, say 30-40 units is nice in the fact you can have an on site manager. You can still do the maintenance if you chose or hire it done. In our area we have a guy that buys smaller apartment buildings like you and I buy houses.
I do think leverage is the way to go for income. You simply can control more property using other peoples money. Where some get into trouble as we both know is not having enough cash flow from them to withstand down turns in the economy etc.
As far as how much time spent. I suppose over the last year we have 5 hours a month in management average and 100 hours in repairs. But we did some updates on one property so you could make a case for half of that. DanT
"As far as how much time spent. I suppose over the last year we have 5 hours a month in management average and 100 hours in repairs. But we did some updates on one property so you could make a case for half of that."
Youre not making much of a case for time either .
Dan, while I was recovering I didnt do anything . I hired some stuff done but I dont remember it being over 5000 in a year for every thing and that was at my house too, plus the cabin and some vacant properties I mow. Just so happen everything was in pretty good shape. It isnt as good now . Its always been hard to put hours on it trying to figgure it. I to have worked a full time job and rehabbed most all of them or built them plus others I sold to pay for all the rehabs. I used to flip everything that didnt qualify for a rental and nicer homes I found to make a living during all of it . I moved a lot too living in the nice ones. If I hadnt of had to make a living and do all that moving , this would have been easy. LOL.
I too have been critical of the bad times . There wasnt any except for 9 percent interrest for a while and I thought it was going to 10 which one banker had went there. Thats when it crashed.
Tim
Wanted to tell you that I appreciate the suggestion.
This needs to happen pretty fast and I need to look at every alternative .
Im going through apartment plans today . Im going to the city council meeting tonight to submit them. They dont have a building inspector over there so Im not sure as to the reason I would need to go to planning and zoning . But Ill see and Ill start contacting large aprtment owners.
Thanks ,
Tim
Tim the reason I suggested apartments is because you already are in the business of landlording, so you might as well play with the big boys.
One of the reasons that apartments properly cashflow is because their value is based on cap rates, and the financing is subject to a more serious review by the bankers. The obvious reason for this is the numbers. When the banks are loaning 750k on a million dollar project, they tend to look at the cashflow projection carefully.
One of the advantages of dealing in the larger commercial bldgs is that the bankers won't loan you the money unless the deal makes good financial sense: i.e. it MUST cashflow. They also are careful about verifying expenses and income.
Almost every property that I look at in the MLS that carries a value of 750k and up provides a significant annual positive cashflow of somewhere around 10%. If I was truly interested in landlording, I think this would be my target market.
One of the things that Mr Gandalf has proposed to look at is refurbishing large apartment complexes. This would involve the finding of undervalued bldgs and bringing them up to date, then raising the rates which raise the cap rate. I'm not particularly fond of, or opposed to doing this. If it's profitable, I'm interested.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
I took the long way around cap rates. Its the same thing using different numbers Dan and I use .
Youve heard Dan and I talk about 30 percent . The way our rentals figgure up is that it takes 30 to do the deal on 15 years. Dan and I both like to rent for 1 percent of the value.
400 per month x 4 = 160,000 of worth. The appraiser wont use the cap rate and will use what I shown as an example. That would be a new building or close to. Again , I deduct the life of equipment and add repairs on an older unit . Deduct the roof much like a home inspector does and give it a number of years service left. The age of the unit gets depreciated too. 60 year old apartments require a lot of maintence. I always work backwards to obtain value getting the top number first and backing out if you will. That method lets me have a good understanding rather than give it a cap rate which to me is not sufficent enough becuse it doesnt give deduction differences in age. Take a 30 year old apartment . The price on it will be cheaper than a new one and will be with in several dollars of bringing the same money. You would think thats a better deal and it could be but that apartment is not going to have the easy maitenece of a new one . A lot of people buy old rentals to make more return and they will until the hood gets old and less desireable. Often a lot of things are out of date and obsolete and will become that way if they arent already. Cap rate is ok , but to me its misleading .
Anyway the new fourplex is valued at 160 , but I wont give over 112. That method uses the rent alone and when it gets down to it thats how we make it .
Yes , Im going to have to have apartments if I get bigger quicker. My houses have always beat apartments bad , but its taking too long now with my new plan staying with houses.
Tim
I think about 8 or 9 times out of 10 when I've helped folks move, they SERIOUSLY underestimate the amount of time/work involved.
You talk to them on the phone 4 days ahead of time and they're saying, "we've only got a few things left to put in boxes and we're ready to move." You show up that Saturday and NOTHING is packed! So then they are frantically trying to put stuff in boxes and organize while half the crew is standing around trying to find something to carry to the truck.
Mom had one situation where she moved twice within 12 months. The first one was a disaster. Lots of people standing around without having stuff ready to go. The second move, she was organized. It was a thing of beauty how fast it went!
My personal move preference (for local moves) is to shift some of the stuff to the new location by myself ahead of time so that I can have more room for organizing the main load.jt8
Don't accept your dog's admiration as conclusive evidence that you are wonderful. -- Ann Landers
That was exactly what happened .
The floors were covered with loose stuff. What a wreck.
Is this too far away?
http://forums.taunton.com/tp-breaktime/messages?msg=56382.1
I can see it now.... Mooney acres.. Biggest dang trailer park in all of OK! wow, that actually might be saying something considering how many trailers there are down there.
jt8
Don't accept your dog's admiration as conclusive evidence that you are wonderful. -- Ann Landers
John , an old friend of mine told I could make a living off 40 acres. You dont have any restrictions here if you own that or more. You can put trailers in and dig holes for all any one cares for septics..
Man....wish the neighborhood was a bit nicer. Neat looking house, good price ($39k). If you put that house in a clean, small town, it would bring $150k or more.
View Image
http://www.realtor.com/FindHome/HomeListing.asp?snum=19&locallnk=yes&frm=byzip&mnbed=0&mnbath=0&mnprice=0&mxprice=99999999&js=off&pgnum=2&fid=so&mnsqft=&mls=xmls&areaid=62704&typ=1%2C+2%2C+3%2C+4%2C+5%2C+6%2C+7&poe=realtor&zp=62704&sbint=&vtsort=&sid=049CB1C4E4CDC&snumxlid=1046589309&lnksrc=00001
jt8
Nothing so needs reforming as other people's habits. -- Mark Twain
Looks like a neat old house. There are some like that down here.
Liberals support freedom of speech, the press and assembly because it’s vital to their agenda of persuasion and organization to restrict other liberties [Walter Williams]
Looks like a neat old house. There are some like that down here.
There a bunch of them on the near north side, some of which are MUCH fancier.... BUT, the slum lords have taken over the area (that purple house could be 3-4 apartments to a slum lord). You could have a crack dealer for a neighbor, and a $150k house turns into a $60k (max) house (if you can find a buyer).
Really sad. If there was an easy exit route, and the price was right, I'd buy one of these and move it somewhere better. We were running the numbers last August on one. It was really too big (3k+ sq ft) and needed WAAAY too much work. But I might still have considered it (but got called out of town the day it was auctioned).
jt8
Nothing so needs reforming as other people's habits. -- Mark Twain
How old are you John?
When I was 20 ,... up to about 30,...
I thought those houses were a lot of fun. They require all the skills,..... mechanical , carpentry , drywaller , painter and trash man. Probably missed a few. Ya need to feel good too cause its lots of hard dirty work. I dont feel that good anymore . Women dig those type houses . I never made any money on one for my self but I made plenty spending other peoples nest eggs and helped crack and pop them. Several people have made money pits out of them. Carps that live in them rarely ever finish them . Its like the beer and firewood. You vow not to run out , but its only a mental promise. You still end up in a cold living room and no beer to drink.
I deleted the post because I havent bought it yet and theres no telling who from here reads this stuff.
Tim Mooney
35
There are different levels of 'renovation'. I'm not looking for one of those old house remodels that takes 10 years, 10,000 hours, and tons of $$. They might be personally rewarding to know you got it done, but typically they aren't financially rewarding.
But I have a weak spot for old houses. If I see one in sad shape, the thought enters my head, "if I don't step up and fix it, it might get torn down." Which is NOT what I need to be thinking (see first paragraph!). I have to be careful not to get hooked into a massive renovation (like the auction one last August would have been).
Another problem with the old houses, is that I'm more inclined to want to keep it historically accurate. Histocially accurate is typically at odds with the budget, with time contraints, and with liveability.
Whereas a 1960's ranch that needs $5-20k in repairs is a much better candidate. You can tear it out however you want and put it back however you want. And you can probably get it done in 6-12 months.
My next house needs to make me some $$. I can't just break even anymore (or worse). And maybe that is one of my problems, I'm trying to get too good of a deal. jt8
Nothing so needs reforming as other people's habits. -- Mark Twain
" My next house needs to make me some $$. I can't just break even anymore (or worse). And maybe that is one of my problems, I'm trying to get too good of a deal."
The one I just did was a heck of a bring home deal.
The one I emailed to you is another solid deal .
Neither of the two properties will cost me anything. The first one didnt and the second one wont if I get it done.
They are out there . Dont give up . You need the confidence to go the distance . As Dan said ; The good thing about real estate , is that it can fit your needs what ever that might be.
Ill never forget the time I found a really good deal. I didnt have even a thousand dollars to buy it, much less fix it . I went straight to the banker and told him the whole truth. The house would make money and I needed a job. I had the tools and knowledge to do the job in a month, but no money. I could however afford to make payments on it till it sold." So there ya are banker , whatta ya think? I dont even need money to live either while I fix it ".
He grinnned and said, " this is gonna be one of those hundred and somthing percent loans . How much are you going to need to buy it and fix it ?"
If I had been a praying person at that time I would have given God credit on that one. I worked night and day for two straight weeks with out a day off and some of those days went to midnight. I gave it all I had with nothing left . I worried the whole time about borrowing all that money and I had nothing. It sold as soon as I finished it and closed two weeks later. I owned the property for 30 days !!!! I payed it off when the first payment was due.
I havent had that kind of luck always . Im taking a licking right now on a rental Ive had for a few years. Seems I keep having to get this experience on bad situations , so Im not immune .
Tim Mooney
Thought you might find this interseting, generally, in respect to Real Estate values today.
MONEY, MONEY EVERYWHERE
COLLEGE STATION, Texas (recenter.tamu.edu) – Dr. Mark G. Dotzour, chief economist with the Real Estate Center at Texas A&M University, said he is concerned about the amount of speculation going on in land and housing markets. Dotzour, who was speaking at the 15th Annual Outlook for Texas Land Markets Thursday, said there is an enormous amount of speculative fever globally. Money is cheap (interest rates are low) and investors are wary of the stock market, as corporate fraud continues to be uncovered. These conditions make real estate investing especially attractive.
Additionally, stock market returns have not been as high as investors once expected. From 1950 to 1999, the S&P 500 produced a real return of 10.3 percent per year, Dotzour said. However, the current yield for stocks is closer to 4.8 percent when dividends, earnings growth and change in price-to-earnings ratios are considered. Academics who Dotzour referenced expect stock market returns of from 2.93 percent to 5.2 percent in future years.
According to Real Estate Center data, Texas land appreciated 16 percent in 2004.
The predominant word for capital markets investing in real estate now is “insane,†Dotzour says. “We are playing with gamblers now. Investors are buying land sight unseen.â€
Dotzour says Federal Reserve Chairman Alan Greenspan is determined to pierce this speculative bubble by raising interest rates. Dotzour suggests that the time for investors to start selling land or properties is when the stock market throws off its “case of leprosy†and starts looking good to investors again.
Another issue is the value of the dollar. To Europeans, everything in the United States is on sale for 30 percent off because of current exchange rates. Europeans who have not already invested here may be waiting for an even greater discount.<<<<<<<<<<<<
As for myself, I'm ready for the bubble to burst. I want some bargains.
"Tell me again, Mr. Ledbetter. What's a Mississippi Flush and how's it beat this hand?It's a small revolver and any five cards."
"As for myself, I'm ready for the bubble to burst. I want some bargains."
What I am about to say isn't meant specifically for you as I don't know your situation well enough to comment. But I hear this statement frequently. And it is usually from people who either wouldn't know a bargain if it were a train and ran over them or it is said by folks that are always thinking about better ways to make money but never do it.
I started investing in real estate 19 years ago. In that time if I wanted to buy a property to make money on I have never had to look more that 6 weeks to find one. Didn't matter what the economy, what the interest rate, what the market was there is always something available that will make money. And in that time I have had only 2 properties that failed to make money and I broke even on both of them. Actually made a little on one when you take tax savings into account.
A bargain in investing is nothing more than a below market rate that will allow you to make a better than average profit. They are out there. There are some markets that it is tough to make money in but frankly if you live in So. Calif. I doubt a major roll back in real estate of 20% would even help areas like that become profitable in any reasonable way. But in most areas there is something available everyday. You just need to learn how to recognize it and go find it. DanT
I don't disagree with you, DanT. I've been investing in RE since 1977 when I moved out of my first house into another and kept the original for a rental.
But, nevertheless, the market is pretty hot right now and when it cools there will be bargains. Some of the best I got when everything went down in the early 90's.
I like to keep it and never sell so my philosophy may be a little different than yours.
"Tell me again, Mr. Ledbetter. What's a Mississippi Flush and how's it beat this hand?It's a small revolver and any five cards."
Sorry John.
I was forced to take my wife to Hawaii for a week. Man, I hate what we have to do to keep them happy and keep them working!
Anyway the only thing at this point that is in the air is what to do with the extra lot. The house will get rehabbed an sold. I need to get to the local code officer to check on set backs etc and see if it makes sense. The numbers look good so far so we will see. I let you know. DanT
I was forced to take my wife to Hawaii for a week. Man, I hate what we have to do to keep them happy and keep them working!
Geeze, the things ya gotta put up with ! ;)
What island did you stay on? got a friend who moved out to Maui about a year ago. They love everything about it EXCEPT the cost of houses. A $120k house here would be $500k+ out there (and his company isn't paying him 5 times as much as he was making in STL).
jt8
The reason so many people never get anywhere in life is because when opportunity knocks, they are out in the backyard looking for four-leaf clovers. -- Walter Percy Chrysler
Kauai is where we were. The wedding island but we did the wedding 23 years ago.
I was going to do a post about this but this is a great time. That is one of the few places I have been that I could figure no practical way to buy property and make money at it.
No house, none, were listed in the real estate papers or local paper for less than 250k and there were only 2 of them. The rest were listed at 300k plus. And these houses were lower middle class at best. The rents for these were around 1500 a month plus utilities. Unbelievable.
And to top it off they have numerous job listing offering jobs at $8-10 an hour. Talk about an area with no middle class. Pretty depressing area all in all. Beutifull scenery but a lousy culture underneath. DanT
"I was going to do a post about this but this is a great time. That is one of the few places I have been that I could figure no practical way to buy property and make money at it."
Im sorry , but thats really funny! LMBO
U were on your second honey moon and you were checkin out realestate and tryin to figgure a way to make money on it . Damn !!!!!! Im proud of ya boy! Youve got it as bad as I do !
Tim Mooney
Mike Smith says theres no way at his place either .
If I would have gone up there to that fest last year , I was going to study it while I was there . I believe he doesnt belive there is a way , but Im not convinced there isnt .
Tim Mooney
Yeah I rarely find those areas. So. California was one that was difficult and sometimes you see it in resort areas or areas of temporary booms but it settles down in time. They will be years fixing Hawaii's issues I am afraid. Maybe a few generations unfortunatley.
I do study everywhere we travel and we usually go somewhere of distance a couple times a year and then in the 5 state area during football season. And like you I buy the paper, any real estate sales info and go at it. Always have. Wife is patient. I also study all the equipment for sale etc. Consumate deal maker I guess.
Hey! Just before I left I bought a Gold Wing! Found a used one, 84 with only 16k on it. Great shape. Going to Kentucky Wednsday to get it! Wife said I needed a hobby cause I was working all the time again. Ahhhh, another toy. DanT
Sounds like an Ebay deal.
I bought a boat on Ebay last year.
Tim Mooney
Well, I closed yesterday on the house . Went pretty smooth.
People thats going to be moving into it want to lease-purchase it , .... or did till last night . I didnt try to sell it but I could have and been richer but I was honest and open . Dan , what do you think about it ?
On another question have you ever tried to buy or sell on land contract?
Timothy
Tim, I've purchased on Land Contracts. I did them before I fully understood all the ramnifications. I'd still do them, but I'd be much more attuned to the contractural provisions. It could get ugly if the sellers died and the deed wasn't in the hands of an escrow agent with explicit instructions as to when the deed is supposed to be handed over. Luckily, I haven't had any problems at all getting the deed on payoff, but I'm a lot wiser now.
I just read a book written by a closing agent named Sandy Gadow that offered some interesting insights about the perils of a Land Contract.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
It rained all day yesterday a cold rain. I had that closing at 3 pm. I studied that stuff all day and part of the evening. I called my closing company and spoke to the owner for a while. Hes done a lot of land contracts but doesnt do lease purchase. I kinda like the lease purchase for controlling the property and making more off it .
Timothy
I like the idea of lease purchasing too. Basically, you are grabbing a couple of years worth of appreciation. It open the market up a bit and allows you to help someone into a home that they might not qualify for. As long as you are ethical and not greedy, I see this as a win/win.
Did you look at John Reed's site? He's angry at lease optioners.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Greedy is a big word that might belong in that other thread , but I think its business. Mebbe your thinking opposite of your partner again. <G> I was thinking like that yesterday and killed the deal myself. I should have had your partner sqeeze off the trigger and have a closed deal <G> I had set the deal for me to win big and they were willing. Sign here>.......................................................... is all that was left.
Heres the wrap if I could have been ice cold;
A 5 year lease locked with them providing maintence. 49, 900 on a sales contract with 50 dollars per month added money to that over 5 years. They furnish fridge and stove and take the house as is condition which should be good but water and gas isnt turned on yet to know . They wanted it really bad and a place to call HOME , which was their main objective. They have a huge credit problem they cant fix thats child support on 3 kids over several years. Now the guy is in another marriage and is loaded with 3 more kids and a wife that has a pittlally job. He works all the time driving a truck taking every load he can get. They have been with me for 7 years the first of April. They are in place now in one of my houses in town. They have never missed a beat with me. We have a good relationship. We are friends dammit. LOL. Hes 42 and never owned a home and dw wants one really bad ~! Salavia was dripping off their mouths on this house. They just wanted to feel like they owned somthing. I thought it was a good deal for 5 years because they have no options . Then in the course of 5 years or less if they could get their credit in order they could buy it . Im getting a good price plus collecting 5 year rent with no maintence. They pay like a slot machine on Fridays. If the 1rst falls on Monday I wont see them till Friday. Ive never worried about it and let it slide. One time they got a half a month behind and stayed there for three months but caught it up paying me 20 dollars or so every payday.
Heres the kicker;
I told her I had closed and it was time to sign papers and for them to move into their new home. I read the deal and she had one question; Can we do it another 5 years and keep renewing ? I said on my part sure , but I dont think you want to do that . She well, how come ? I told her because of math;
50 per month x 12 =600 per year x 15 years= 9,000 dollars! You will never pay for it . [which wouldnt hurt my feelings ] You will also be paying me 84,000 in rents! I advised against it and killed the deal.
Thats the same property I gave 25,500 for and still have lots behind that are now clear. I had the house and two lots appraised and the deal stood on its own. I asked that deeds on two lots be cleared to me and they are . I own them clear and Ive yet to spend one dime of my money. In fact Im getting a check today from Fannie Mae to pay the taxes for this year!
Now Im going to lease it to them for the normal rental price off 450 and maintain it . Im going to buy a fridge and a stove at lowes today. Ill mow it and clean it up out side but the inside is remodeled . Fannie Mae paid to have that done plus paint and a new roof out side. Im no where close to as good a deal. But Ill manage. <G>
Timothy
Edited 3/22/2005 11:20 am ET by TIMMOONEY52
Tim, I don't know why you wouldn't let that excellent couple start buying their house. A five year lease option is plenty enough time to get their credit fixed and you can apply enough of the cash flow to make the numbers work out.
As long as they have the ability to exercise earlier, I see this as a win win.
If they get to the end of the road and can't exercise the option, you can do one of a couple things. You could lower the buyout and be thankful for the five years of your relationship. Or, you could simply extend the term of the lease option.
Everything you could do is up to you. I don't see why you cant restructure your offer to help these deserving people and still make a fair profit. They are seeking the American Dream of home ownership and it's only a small agreement away. Im not advocating that you give your profits away, but there must be an ethical solution in this case.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
I did advise them to get their credit in order. Up to that point it was a win win.
She stated their was no way they could do it and asked for an additional 5 years. I told her that it wasnt smart to do that and advised against it. I would have done it as long as they would have wanted . You got it wrong somewhere or I didnt make it clear . I was willing but advised against it for the reasons I stated. They can do it any time with me .
I will not give away my rents as Ive got that now . I can rent it to someone else this weekend for 450 and the one they are in now . I also told them that . Makes no difference to me either way. I could also make a better lick by doing a lease purchasre with someone I dont know and closing the deal. I couldnt do the deal with out disclosing that imformation to them, unlike that other thread we are participating in my old friend. <G> From the sounds of that thread they would have been throat cut with out any disclosures. Theres a point Blue that we all have in us and I reached it . Im not even sure I could have went for the throut to stangers and those people screw me all the time.
Whats the link to that site? Ive never heard of him that I can remember.
Timothy
Theres a thread in this floder that asks if anyone has read John T Reed. Reeds site is http://johntreed.com/rateseminars.html
Hes got a contrary point of view about real estate investors. He makes some good points but he's also stereotyping.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
You said something not long ago about som kind of reading not being very exciting.
I just spent an hour in the site and dont feel like Ive been a lot of places in that hour.
So lets discuss it .
One , I dont think my lender cares. When I was younger , poorer , and really stupid , and considered unstable financially , I can see leaving me like an ugly girl on Sunday morning after the bars closed. If a lender would use the due on sale clause on me for lease purchase , I would have another bankers support in 15 minutes. I pay a lot of money to the banks . I understand thats why they are there to "help me " . <G>
Two, most lease purchases fail and we are the blame ? I guess he describes us as vultures. Well , what about the things that are for sale we dont really need to buy. My greatest wonderment isd why men hit balls on a lawn grass when they know damn well their gonna lose it . If I live to be a hundred Ill never understand grown men chasing a white ball . Think about that please.
Timothy
I have read John Reeds stuff a number of years back. He just takes the contrary view of the aggressive real estate investor. And granted their are a lot of hucksters in this business but most don't last.
I do think that pesonality wise part of what makes a good real estate investor (active one that is) is a combination of an opurtunist, love of deal making and people management skills. A good dose of being a cynic when it come to people never hurts as well as being handy with some or a number of the trade skills.
But Reed takes the negative and exploits it for what I believe is the same reason you can buy some many courses and books on the very same subjects. Money. Just like the rest of us. DanT
What I meant to Blue about chasing balls , is that people invest in things knowing they wont get a return. Tobacco, alcohol, high dollar entertainment tickets , high dollar dinners, fishing , hunting and their huge markets , race car stuff , and just watching football games on Sunday is an investment of time and money that wont profit them. Of course I just named a few , but we make those choices because we "want " to spend our time and money for them and take no requard to value.
I watch people here go to spas or gyms and pay them to be there . Strikes me as really an odd way of spending their time and money. Why dont they invest in an unimproved acre of land to clean up and reap all the rewards of a work out and a pay day. There are several houses that need to be torn down here and can be bought cheaply enough but theres that old house sitting there in the way. Buy it and clean it up. We make our own choices.
To the couple I advised against, they are not as happy today even though they are better off. They wanted to blow their money to call a house a home and feel they were buying it . As Blue said , they wanted the American dream and they were willing to pay for it. They dont have that option now.
Timothy
To the couple I advised against, they are not as happy today even though they are better off. They wanted to blow their money to call a house a home and feel they were buying it . As Blue said , they wanted the American dream and they were willing to pay for it. They dont have that option now.
Once again, my reasoning is that you seem to like these folks and they sound like hard working people :
Its the "light at the end of the tunnel", Tim. People can shovel a pretty big pile of $hit if they think they're doing it with a goal in sight... no matter how far off that goal might be (or how expensive). As long as they are doing it for a reason, they can get up in the morning and pick up that shovel, thinking "someday it will be better."
But if you know you're going to be shoveling it for the next 30 years --at the end of which you'll just be 30 years older and that much more tired-- well it gets harder to pick up the shovel each morning.
I am NOT saying to give away the house. You can still make a nice profit while making it possible for them to eventually own the house. You and Dan are old pro's at this and you'll find more houses, whereas it sounds like your tenants dont' have many options.
So from my inexperienced real estate point of view, I'd say come up with a solution that makes both parties happy.
And in other news... Must be something in the water down there. Just had a second uncle move to the Mountain Home area.
jt8
Opportunity doesn't knock. You knock, opportunity answers. -- American Proverb
Right .
Also my point being that it doesnt make the investor/ seller through lease purchase necesarily a vulture. If they were then many other people in other avenues would be as well as I mentioned above. Im not even sure its our job to disclose those things as if I were to buy a gun in a store they dont tell me all the awful things that can happen when I bring that gun home . This is comming partly from the other thread. In Reeds site he mentions young people being lured in. If Im not mistaken our young peiople are better educated then my peers . You know its something when you have to call your daughter or son to get something computer related or what ever explained. My daughter has a business degree in marketing . Shes writes loans for John Deere credit union. Her husband is a controller in a hotel chain and is degreed as well. I would say bring it on if someone thought they could slip the wool over their eyes in business. They are pretty sharp. But , if they had no other options , they might make such a decision. Thankfully they have me and her mother help guide in such a subject but little reining is ever needed. She was raised in this house so she understands the rental business and marketing any home. Thats why she chose her field, although we thought she had peanut butter in her ears when she lived here . We laugh at whats rubbed off and she thinks were a little smarter now . Not much smarter though. <G>
Timothy
So from my inexperienced real estate point of view, I'd say come up with a solution that makes both parties happy.
That's what the Lease Option business should be about John.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
I thought I would add to every one that reads this thread.
Blue was probably snickerin about an old man roofing er somthing like that . Maybe more . I cant roof and save a dime and probably wouldnt make wages. I still have a point to make .
Every body get a loan calulator book if you dont have one . Theres purposes to it other than using one on line . With out going back to look lets say those people were gonna pay 80,000 for that 49000 dollar house . Now ,.... the point I wanna make is that if you keep a house or unit for the term of the loan your laboe is minimal. Ill show it ;
75000 @ 15 yrs 716.74 8 percent
80,000 same 764.74 same
48.00 x 12 = 566.00 per year not counting amoratization deductions
JUst for kicks, 566.00 x 15 yrs = 8460 off of 5000 more money.
Just playing with numbers to show that youre saving more than what it costs to pay someone to do it. In reality it will pay you more than someone else.
Ive searched for an answer of the almighty aligator money eating carpet that hits rentals so hard. My best answer now is ceramic tile seconds which cost .89 cents for 13x13 tiles. If you pay labor its high dollar . If you buy a saw[ if you dont already have one ] youre only out the tile supplies. Order 100 feet too much and stack it in the return air cavity. Store the grout there in two liter coke bottles and moisture wont get to them. Leave a note saying you dont mind going back to prison and killing again if any one takes this stuff. Or plywood screw it off making a false wall. You will be able to fix bloopers if you have any for many years. So far I dont have even one to tell about. Its tough stuff . Go ahead and allow pets and charge the normal double deposit for pets. Bleach water rinse after the initial vinegar bath will remove all from tiles and smell. That one floor will save thousands of dollars and lost rents over the course of 20 years from saying no to carpet. Just say no like we tell our kids to drugs.
Blue Ive read a bit more of the site and I think its going to take me awhile by the time I click every reference . Its very good reading for me thank you. I always buy on negatives so I wont be surprized even though I know I can beat negatives. I really cant say I can argue with him other than to say he sounds cynical since hes selling literature him self . I think hes 110 percent right about some things. I was shocked to read what happend to those authors. Ive got a lot of Allens books. And what about Rich Dad Poor Dad ? It was a very high reader in its time and is still sold in book stores.
I believe hes hard on us over most things for making those deals. He blames the investors, instead of the people . I think the example I gave prooves it . Those people need hope and right now its lost. I think that the lease purchase would be an upper in their lifes to enjoy their first home at 40 years old. No, Im not thinking about me making money off the deal. Im serious to say I think it would make their life happier. If they went 10 straight years and didnt get it bought , their kids would be raised and all would have known a home. But you better believe I would be the one cussed in the end . All the blame would be on me for being such a scoundrel and taking advantage of them. I think thats what that site is saying and maybe that couple would as well.
Timothy
Edited 3/24/2005 12:17 am ET by TIMMOONEY52
Aaaaah, yes, another money saving tip from Brother Tim. Who at this very moment is constructing his reinforced concrete duplexes with the ceramic tile floors, stainless steel countertops & kitchen cabinets, and 40 year shingleson the roof (just stain the exterior concrete walls to look like adobe).
:)
When the tenant leaves, he just rents the high pressure washer and hoses the whole place down inside and out! Then a pass through the whole place with the paint gun and its ready to rent in 24 hours. Any other item that needs replaced is considered damage by the previous tenant and will be deducted from their deposit.
Don't tell me he hasn't got this stuff figured out!
jt8
Opportunity doesn't knock. You knock, opportunity answers. -- American Proverb
My insurance agent been sharin pictures with you of my rentals? Wait till I get a hold of him!
You got me all wrong !!!!!!! Have you ever figgured the rental sum amounts in averageing renting small equipment ? Its atrocious. Its better to borrow a pressure washer. <G> BTW, U got one ?
Timothy
Edited 3/24/2005 12:34 am ET by TIMMOONEY52
Tim, I think you and Dan, and other real estate investors might like this site: http://www.realdata.com/book/forms.html
It has a couple of interesting calculators. Backtrack to the home site to find more goodies. I haven't looked too hard yet.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Thank you , Ill take a look see .
Timothy
What would be your ethical solution?
Remember Ill be making that money any way on rents . Thats mine already with a good profit . I did that deal and feel its mine. What differnce does it make how much profit I make ? Right ? Remember the other thread.
Timothy
Sorry for the miss. I read about the 2 year thing and it didn't sink in. Missed the have to live in it part. Sorry. :-)
You know with a tennant like that and someone you like I can't believe you can't find a way to do the deal, make money and get them into the house. I mean what if........you rented it to them + $150 month for 20 years and gave it to them. I mean the figures could be whatever and the length whatever but you could still do the lease purchase deal so you control it but at the end of a period of time, 20-25 years whatever they own the house or get it as a gift.
My only thought is you are satisfying their urge to own and have roots, you are making money and have somewhat of a lock on a long term deal. If they bail early you have made a little extra and if they don't they get a house. I think you are trying to help them but you aren't. And I don't say that with any malice I just think thats how it is coming out. Think about it. I think it can be a win win as is, maybe you throw in the appliances and a plumbing check to get things going.
My house is going to sell with a double lot. The layout, width and all make it tight to build another house so I think it makes more sense to use it as a marketing tool to help move the house. Did you see the pictures? I'll post more as soon as I get back to work on it. We got it gutted and are fixing framing and wiring now. Wiring is interesting to say the least. One circuit had two boxes 8" apart and they wire nutted the wires together between the boxes! Amazing what you find. Would like photos and info on your new build. DanT
One circuit had two boxes 8" apart and they wire nutted the wires together between the boxes! Amazing what you find.
A friend and I joke about if either one of us builds a house from scratch, we're going to put an outlet in every 12". Hate to see the panel when we get done with that! ;)
jt8
Opportunity doesn't knock. You knock, opportunity answers. -- American Proverb
As I just told John , I could up the annie a little , but its still a bad deal for them for a 10 year stretch. As long as they know it and I have disclosed it , I would be more than fine doing just what all three of you mention.
But, you know as well as I that the profit for me is in keeping it all. Once a property has been bought like that one for half the price plus two lots given to me clear, those properties are no service . It all became possible on the deal I made . I dont know why , but we differ a little it seems . Maybe because you have a partner or you are trying to keep you both busy. Yes I know we can sell our butt off if we can buy right . I just believe that you really cant afford to sell a rental that has no service. If I sold that house out right Uncle Sam and SS would get half the deal. You know what it will do stetched out as rentals. If I couldnt make enough on the duplex , then sure sell it for a profit cause Im too old to be paying off new properties to benifit me . Mean while it will rent until its sold unlike a spec house . Its hard to sell a spec when you have it rented.
Timothy
I wasn't trying to say it was the most profitable deal. I just got the impression you were trying to help this couple out and still make money but you are right the most money is keeping it. The IRS thing and SS is only involved at sale, not during the lease option process though. Anyway, your property, your call and frankly on a deal like that they are all good calls!
There is no partnership on mine, unless you include my wife lol. But I do use it as a filler if work is slow we work on the house, which of course when you have the house they are never slow. Kind of a good thing to have to keep business hopping I guess. DanT
I did want to help them up to a point .
My years are numbered to get to the checkered flag of retirement . Im still not in good health and wont be . What Ive got now isnt going to get any better and Im not sure how long I will have what Ive got. Ive got two ateries down they couldnt stint or ballon which caused my second heart attack . Medicine is the only thing keeping me from having another one. My mind rests on the principle that my time is short and I dont need to waste it . Thats why I quit my job . Ive already done better on this deal than I made as an inspector in 2004 plus got several other things done that wouldnt be other wise acomplished . Im in the middle of a remodel of yet another rental and Ill raise the rents when Im done. If I can stand up for a breather , Im going for another house over there with land with it . Maybe Ill get to accomplish two this year and the duplex when spring sets in here for long days. That would be a good year by myself. Ill do most all of the interor of the duplex by myself and all the dirt work and line digging. Might roof it if I can get the shingles loaded and run cement siding and trim on it . I might build a triplex of one bedrooms instead and put the heat pump units in it to save the hvac. My nep is a master electrician I can work under to do the electrical. Ill need a plumber but Ill provide his ditches.
Timothy
Edited 3/22/2005 5:13 pm ET by TIMMOONEY52
Dan , have you got any experience with one bedroom apartments?
Pros, cons ?
I have had a few. It seems to depend on location. If you are close to a professional area one bedrooms for young attourneys, accountants etc. are a good deal as they stay put because they only come home to sleep.
I had one that worked ok because it seem to end up with a lot of single working males that stayed a few years. But then I had one that turned over like water over a dam. I typically don't like them because no one ever stays but we have a guy in our town that only builds single triplexes. Under the state guidelines for commercial construction and fire protection and he has a design that will work on about any city lot. He seems to keep them reasonably full and premium priced as they are new but in older residential neighborhoods. Thats all I got. DanT
Ive been working on figgures this morning and I think the one bedroom will have the best return. The plumbing will be high but the sg ft prices are a lot higher . They bring within 50 dollars of a 2 bedroom. Ill have to get some plumbing numbers and push the pencil a little more. Id say it takes kids out of the picture. Mebbe. They have two bedroom and three bedroom over there now , but no ones . I dunno. Seems anything I build in that small an area is a crap shoot. Ive always had 100 percent good luck getting renters. Might not want to keep them but boy I can draw them like flies. The lot will hold singles better and of course more of them for a bigger income on one property.
My take on them is they make more money than anything and involve the most amount of attendance. Im one of the most aggressive lanlords around here so it should be a good hat to wear. The baddest toughest lanlord moved and tried to sell me his units but he wanted retail. He had ones and rented by the week! He collected every payday . He hid the costs by paying the bills . Little hot water heaters on timers and 1/2 inch supply copper with a regulator out side cut way down. Super effecient with heatpump air conditioners.40 watt bulbs in sealed light fixtures. He had a pay laundry coin operated. Anyway, by the time he got done with them he was charging more than nice two bedrooms apartments and bragged on 110 percent occupancy. He kept deposits by charging for every little thing and his prices were high to replace things even light bulbs. 5.00 for a round light bulb over a lavatory. Sonny and Jerald would have slobbered over the set up . LOL. He would move someone in the day someone else moved out and be fixing things while the two were doing the moving . I dont know if all that was true , but knowing him I didnt doubt it one bit . He told it to be the truth anyway.
Tim
Tim, a while back you talked about a piece of property that got away.
I've got a story now to tell too.
Back in the winter of 2003, I talked to a guy that had building lots available. There were about 60 in the development and I mentioned that I might be interested in 10 of them. After doing a little market research, I decided that I'd rather not get started in this particular market because the market values of houses is relatively low as compared to other areas that we work in. So I never bothered to followup on that project, but I didn't notice that there wasn't any activity.
After a year of non activity, you would think someone that is interested in real estate (me) would take notice and start investigating. Instead, I drove by that development every day, not giving it another thought.
Well, since I've recently started hunting down possible subdivision developments in different areas, I finally re-thought the circumstances regarding the stalled development. I've been attempting to locate the owner of that development and found out that it went into foreclosure and is in the court system right now. Of course we are tracking down the new owner of record and will be attempting to buy it, but I just want you to know that things are happening right under our noses but we have to be smart enough and proactive enough to see and take advantage of it.
I used to jog past that development every day!
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Tim, does Arkansas have some strange RE closing rules? Someone was telling me that a HO has 30 days AFTER the closing before they actually have to be out of their old house. Is that accurate?
jt8
Never put off until tomorrow what you can do the day after tomorrow. -- Mark Twain
It is true .
Our contracts give a date for possesion.
It makes sense to me to give 30 days .
What if you paid a measly 500 in earnest money and backed out the day of closing ? Ive just moved out od a 4000 sg ft house and bought another one or moved into a rental? Sold my extra stuff and hauled stuff to the dump.
Nope , you give me a sizeable down payment non refundable and Ill give you posession at closing. Otherwise , show me the money . <G>
Tim Mooney
Sounds pretty crazy to me. Closing date is closing date around here. Your butt has to be outta the house or you're going to be paying rent.
So in Arkansas if Joe Homeowner decides to trash the place in that 30 day period, I suppose the new ho has to take them to court for damages?
jt8
Never put off until tomorrow what you can do the day after tomorrow. -- Mark Twain
Well lets play this like it was real.
How do I know yu are gonna pay me ? You didnt answer me about backing out on the deal and losing measly earnest money the realator wants to keep for their trouble anyway.
I want payment and you want the house at closing .
We can work this out one of two ways;
You pay me a 10percent non refundable down payment and youll have a cleaned out house at closing . Possesion.
Ill pay you an agreed upon fee per day up to 30 days past the successfull closing date or penalties to me.
Pick one . Im not moving from my home until I see some real money and Im not buying or renting either till I see enough green.
Tim
Edited 4/20/2005 3:19 pm ET by TIMMOONEY52
But shouldn't those things be negotiated and evaluated during the deal?
If you're giving sufficent EM to say that you're going thru with the deal (or to compensate if you don't) couldn't the buyer expect that you'd be out and surrender possession on closing?
Is it a law or is it just local practice?
"Tell me again, Mr. Ledbetter. What's a Mississippi Flush and how's it beat this hand?It's a small revolver and any five cards."
They have 30 days by law .
The rest is negotiation.
Sure , we could make a deal to do anything , but if we dont it kills the sale. Everyone needs to be happy or at least in a perfect world.
Tim
It is true .
Our contracts give a date for possesion.
It makes sense to me to give 30 days .
You've got a contract. If they back out, they've violated the terms of the contract. Call in the bloodsuckers... oh, I mean lawyers. When that puppy closes, its mine. They don't get their stuff out (and don't have an arrangement with me), its MY stuff (in which case its probably just junk which I'll have to dumpster). :)
jt8
Nothing so needs reforming as other people's habits. -- Mark Twain
Seems like you are fond of these folks. So what about taking the middle ground? Instead of $50/mo extra plus they do all the maint and provide appliances....$50/mo extra with YOU taking care of maint. and appliances? In 5 or 10 years they may have their credit repaired enough so that they can get a loan. With the $3-6k in built-in equity, that should make it easier for them to get the loan.
Meanwhile the house doesn't get appraised for its sale price until they actually go to get the loan. By which time you will have put in your duplexes or whatever...thereby influencing the property values in the area.
Still a good deal for you, because they're paying the house off TWICE (once with rent, once when they actually buy it). Still a good arrangement for them, because it lets them feel that they are working towards owning their own house. So even though they will never pay it off via the $50/mo, they can at least feel like they're workings towards a resolution.
While I've never had the 'bad credit' monster clawing at me, I have been in the buried-in-debt-to-my-eyeballs pit. And any little light at the end of the tunnel (no matter how small) can make a BIG difference! :)
jt8
Opportunity doesn't knock. You knock, opportunity answers. -- American Proverb
Im think all four of us are softies. <G>
Yea , I like um . When I go see them I always stay too long visiting with them. Im welcome at their table or the living room and I always ask them in my house . DW and I think a lot of them.
I would do what you said if they were willing , but its them that said no after I advised against 10 years. She says there is no light at the end of the tunnel. Its hard to believe that to be honest as Blue said that 5 years was enough time , but she at least believes different and didnt share the bad information with me. I dont know how bad it is , but I know hes been in prison too.
Timothy
Tim,
I have bought using land contracts, usually with a 3 or 5 year balloon. I have never sold using one. Nor have I done a lease purchase but have read some about both and given the choice to sell I would choose the lease purchase for the exact reason you mention and that is control of the property should all go bad.
But my personal big deal whether selling or buying with owner financing is that my attourney writes the deal not theirs. I am not a good detailed reader of legal documents so I want the guy in my corner to handle the verbage so I know I am on top.
Glad it went well though. This is the one with the extra land right? Any more info on the trailer court idea? DanT
You of all people . <G> Youve missed part of this thread .
Trailers are out . They have to be two years or newer and Ive found out you have to live in them. I aint doing that .
Ive finally decised to build a duplex . Ill have a new property with low up keep and make a couple of hundred off them per month plus the note being paid down. I might sell them too and put the profit on older stuff that makes more money. Im getting too old for the new stuff. 15 years is now too far out there . 30 seems to make better sense and pick up an extra hundred or so. 330 is what its figguring on a 1600 ft duplex. 200 on 15 yrs. Ill be making 200 off the house net as well.
What did yu decide on your lot ?
Timothy
Dan, I really think that it is a situation where TOO much money came in. A bad example of what happens when money comes flooding in and rising prices force most of the locals out of the market. And it isn't like they can just move to the next county over...
The friend over there mentioned that most of the "locals" have to work 2 or 3 jobs just to keep a roof over their/family heads. Kinda defeats the purpose of living in paradise.
Kinda reminds you of the way things were BEFORE the United States became a country. Maybe we should give the rich folks titles... baron..duke..prince, and the rest of us can be the share-cropping peasants living on their estates ;)
Serf John.
jt8
The reason so many people never get anywhere in life is because when opportunity knocks, they are out in the backyard looking for four-leaf clovers. -- Walter Percy Chrysler
Found gold!
I finally got the signed offer back on the house Ive been talking about . No one had a legal. I stated my offer was contingent on seeing the legal . Actually I tried to get a free survey. My main reason is the lot looked huge . I mean like a lot of land behind the house . I had found an old driveway at the back and a gas meter . I figgure there was somthing there but didnt investigate cause I didnt think it went with it since I saw those two things.
I got the legal this afternoon and it says lots 12 , 13, 14 , & 15!!!!!!!!!!!!!!!!!! of said Cherry addition. Oh wow ! You can imagine how I felt. I called the water company and asked if it had sewer. They said it did ! I went to the bank and asked that the house be appraised on lot 12 only. I wanted the other three losts clear if the house and lot satisfied the mortgage. I had done that twice before. The banker had no problem with it . Looks like Ill have a small mobile home park which Ive been wanting . As I mentioned before , it has natural gas.
The odds of that happening !!!!!!!! The reality didnt have the legal so no one knew includijng me how much land there was . Theres no telling how many people looked at the property including me and didnt know . The realator was blown away saying he could have moved it a month ago at greater money.
Tim In the MONEY!!!!!!!!!!! LOL!
Edited 3/7/2005 6:38 pm ET by TIMMOONEY52
That sounds like a home run Tim! Congrats!
It just goes to show that deals are still out there for those who seek them.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Blue that part was stupid @ss luck . No one had a legal. The reality or Fannie Mae couldnt produce one for some reason . I got the legal from a court house in another county from us today. Thats the main reason no one knew because its across the river from us and the court house is 35 miles over there.
But yes it is a sweet deal with out the extra land . This is another 15 thousand dollar bonus at least. So now Ive made last years salary . I intend to borrow against those lots for three mobile homes . Should all be 100 percent O down. The house and three mobiles should clear 800 per month if I can find the mobiles. I get that all done and it will be a nice years work for me.
That's awesome Tim. I'm jealous that I can't spend the time hunting....yet.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Your future is so bright you should wear shades!!! Man what a find. Can you put mobile homes on lots there? The outlawed that around here years ago. You can do a modular but not a mobile.
Man, what a score. I am really happy for you. Ok, not happy, green with envy is the better term lol. And it has sewer and water taps already?! Man, go play the lottery.
I closed on mine today. Went in as scheduled and they said the bank (Wells Fargo) hadn't signed off on releasing the key so we can close and as soon as we get that form you can have the key. I said "if I don't get a key, you don't get a check". Ummm, well uhh, well ok ummmm. We could probably have the form faxed to us in a couple hours. I said here is my cell number call me when you get it. 3 hours later presto chango we have the form and key. Signed and done.
The girl said "gee you must be having a bad day". I said no I am having a great day but if you thought I was going to hand over the only leverage I have and wait for an unknown banker in arabia to feel he needed to get right on getting me my key since the deal is done you are sadly mistaken. Anyway, all done.
I am thrilled for you. Keep us posted on your progress and I will do the same. DanT
I must have been posting to Blue when you were posting to me. [and my supper break lol]
The town I live in doesnt allow mobiles. This town is 12 miles from us across the river in another county. Its a German town and very clean & well kept. It only has 210 people in it if I remember correctly. They have a school there that gets great reviews from the state. Part of the Tyson mills are there which employs more people than live there by far. Walmart Distribution which employs a bunch of people is just on our side of the river bridge. It would be closer to drive from there [ 3.5 miles] than my town [ 8.5 miles] . You can park a big truck over there and not here . Short story is they dont have any restrictions , but have a lot of pride in their town. Perfect place to try a small mobile park.
Someone told me the other day that a park should be named somthing funny and pleasant . Your gonna like this . Instead of , "Bud Rowes Trailer Park". Or , " Redneck Country Trailers" , ....... [are ya ready?} >>>>>>>>>>>>> hehehe >>>>>>>>>>>>
Rolling Hills Estates
Is that cute or what ?
Let us know how the house and lot goes .
Tim Mooney
Tim, are you going to put trailers on them yourself, or just rent the lots?jt8
Opportunity doesn't knock. You knock, opportunity answers. -- American Proverb
John , you wouldnt believe what a good question you just asked.
Im still tusselling with it in my mind. The mobile home business is sure hurting with the finance companies getting out of lending money for them. If they are set up on a solid foundation suchs as a footing and blocks , set up permanant then they have some room for exit by selling . Thats not my idea of a trailer park . The lot rentals alone suffers back from the financing woes for them. Ive checked and my bank will back what ever I decide to do . The area is nice enough for a duplex , but that lowers my return with the high prices of building which is what I wanted to get around. Theres also the question of selling the lots as Dan mentioned. Specs to sell is another option which isnt as risky if youre building small to turn into rentals if they dont sell. At least if i build single family rentals for sale , I wont lose. Of course the greatest amount of return is what Im striving for in the decision.
Add; There are several mobile home companies out of business as the market is just about killed and every one doesnt want to live in a mobile home.
When I did single family houses , all I got was negative comments . Even my banker at the time was afraid and told me so. He stated he didnt want to repo them, so I knew he didnt trust it either . I did it and he went along with me and its been a good relation ship. Most all the negative comments were dead wrong . You can imagine what comments Im getting now on a trailer park, except two bankers are trailing me willing after past experience and my borrowing power now which I didnt have near as much back then. It was kinda funny now looking back as my banker was looking for apartments for me to purchase. He felt I would be better off to have started with 20 to 40 units on one property. He may have been right . Theres no way of telling now , coulda shoulda woulda. Im 52 now and in the home stretch for retirement . I need to make "quicker licks" such as older houseing that have greater returns or mobiles. Building new rentals for me has lost its edge .
Tim Mooney
Tim, I think you might be able to appreciate this: I just found out that my partner's close cousin, is the filing clerk in our county. Every legal action that is filed in the county goes through her hands!
I'm scrambling to figure out the bestest way to use that info.....I have a few things in mind. What/how would you use this "inside" information?
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Ive spend most of my time in records looking up owners of property. They dont like helping people do that and since Im a regular they politely send me in there to a standing counter and what looks like a library with monster ledger books.
They handle repo sales and the ones they dont handle they post on the front of the court house. All sherriff sales they handle. Most others that have been forclosed on they get the notices to post. I dont know how far in advance they get the notices. I know you wanted to buy pre forclosure. Normally the sales posted are repos by banks and lending institutions. Normally they are upside down and they seem to take a lot of wasted time. That is digging deep however and I imagine it would turn over an acorn or two. It takes time to search out each property. Most here are rural and have Rt 1,2 or 3 box 000.addresses. You get the postings from the filing clerk and head over to the post office to speak to rural carriers before their routes. Goes like , Bob has RT 1 and Bill has RT 2, and so on. So you ask bill where RT 2 box 148 sits. He will give you directions. You decisde if you want to invest more time and call the people in charge which are normally lawyers that handle repos , ot if its an in house bank loan , you call them. The lawyers are hard to talk to and dont have much information. What you want to know is, what is pay off or how much they are going to set the sale in for . Then you gotta decide if you want to make the sale. If the sale goes through and noone bids they all have routes they go by. Some list the properties and other adverize them for sale themselves. There are companies also that handle their repo sales. Its quite a bit of work.
I would ask her , but be forewarned . Realators and uneducated puplic bug the h^ll out of them which sets their temperment . Most dont make very much money except the one elected official and she might be the only one that cares. She however usually wont be found on the front counter as she keeps the peons for that experience. They dont seem to be having a lot of fun in that office.
I started a thread asking where you were in the tavern. Mikes been mouthin really bad about you in there . <G>
Tim Mooney
Tim, don't expect to see me anywhere in that Tavern. I don't drink and I don't smoke, so there's nothing in there that interests me...it's all a bunch of raspy throated drunk bsers!
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Why you honery old dude! <G>
Thanks John , you set me in motion.
I went over there and had the power turned on. Looked up city hall.
They require mobiles to be two years old or newer.
They require mobiles to be two years old or newer.
Well that certainly raises the bill a bit. Mobile homes tend to be like cars. Expensive to buy new, but depreciate something fierce. It is easier to do the math with a regular house that holds its value.
I've heard rumors that mh financing has been tough lately. Greentree got bought out by Conseco and then I think they dropped mh's.
What would the lots be worth on their own?jt8
Opportunity doesn't knock. You knock, opportunity answers. -- American Proverb
Thats a good question, Ill have to find an answer.
I went back again last night . I found the sewer and its on the property. Runs the whole length of it as a matter of fact conviently across the back in what should be an easement as it should be.
I also drove the streets and talked to some people . They got sewer 4 years ago. The scenario I saw was that most folks bought at least two lots and many looked to have four. Im going to make the assumption it was over the spcae needed for perk tests and the space needed for septic systems. As far as I could tell , no one has capitalized on the extra properies. Theres some nice lots that people are just mowing . My initail reaction from that is the lots could be bought by buying more houses there and doing the same. There is not any developement or new construction going on , but all decent buildings are occupied. I did go to the court house and look up past sales with in a year . [very important] They are undervalued by an average of 5 thousand compared to my city. I had guessed up to 10 thousand. Lots in my city bring 10,000 and up. So for now I estimate that they are equal to the amount of 5,000 apeice using that deductive thinking. There are no lot sales on record for the past year. Remember theres only 210 people pop. With the sewers in tact , theres room for growth and some opportunity with the extra land attached to these houses. So to answer your question to the best of my ability its looks like 3 extra lots at 5,000 each. That brings the potential profit up to 30,000 on the whole deal. Its a little early to be counting chicks cause their not hatched yet.
Im pretty cautious not knowing the area except I found out that the area has a 4 plex and an 8 plex. City hall there and several other people [one lady that lives in 8 plex], says theres a waiting list all the time. Thats not proven and I know no way of proving it . I know the guy that has the 8 plex and he didnt mention that pertinant information. <G> Ive got more respect for him than to ask him out right .
My closing is Monday.
Tim Mooney
Im not gonna step in front of Blue , if he wants it .
If he doesnt and if he does , how much today , or tomorrow , u know . <G>
How close to this lake is it ? What would it rent for?
Its not but 1 1/2 hours from me .
Tim Mooney
Tim, if you are only 1 1/2 hours away, it would make sense for you to take it over. Good luck!
May the first 22k take it!
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Tim, I've attached a couple Mapquest screen shots of my best guesstimate of its location. There are people on the opposite side of the road who have access to the lake, however unless you're friendly with one of them, you'd still be taking your boat to the nearest ramp.
I have no idea what rents are down there, but I do know there are a fair number of "weekenders" who frequent the area. They drive down from OKC and Tulsa and other cities. Some buy, some rent weekend places. If you're catering to weekenders, you will probably have good business during the summer and it will dry up in the winter.
The lawyer OK'ed the deed paperwork, so the bank will have it back by Tuesday (assuming I can get ahold of a notary tomorrow). They have around $21.5k in it.
Good luck finding anyone local to work on it. Things seem to progress at a MUCH slower pace down there (as compared to IL). We tried for several months to get someone in there to repair the floor. Must have gone through 9 different people. They just don't see very motivated.jt8
The reason so many people never get anywhere in life is because when opportunity knocks, they are out in the backyard looking for four-leaf clovers. -- Walter Percy Chrysler
Thanks for the informataion John.
Does it have an address? You X on the map doesnt have a street name . And the realator link doesnt have an address, which is weird to me with people on the internet looking . They are a stingy bunch though always loking over their shoulder qith the people they work with! Never seen one yet that trusted their peers. Then they end up being non trusting people.
I dont know whats up on you not being able to get peple to do work. But then again maybe I do know. Let me see if I can guess it and then yall critique away! LOL.
Ive seen the type of area a few times before . This area on the map is some less desireable land since its off the water and on a slough. People with a flat bottom boat or what ever can get in the water . If you study the map there are additons aroud the lake that would aford a nice view of big water . There should be some money on the big water . They may not be responding to work because of the address or area since theres not a lot of money there AND any time you work for someones out of town on something you sure can wonder if you are going to get paid . Piffin dont have to worry on his island for his are rich is the big difference. I bet there still is a need for a repair business there .
OK guys , since this problem cropped up. How would you work for someone out of town and feel sure about getting paid?
That trailer and the double car garage would make a good base for a business there. There should be some more room on 1 acre of land and Ill bet in that area you can build more sheds with out much restrictions. That would be a layed back life wouldnt it ? There should be a bunch of boats and related for sale in the area and they sell cheaper in those places and higher where theres less water .
Tim Mooney
Edited 2/18/2005 7:39 am ET by TIMMOONEY52
Now .
What Dan T did is a VERY good example of why its worth fishing and not catching. It reminds me of fishisng for 100 pound catfish. Youre not gonna catch many , but oh boy when you do its sure cause for celebration, which brings up a couple of points. Dan T can celebrate NOW. Not when he sells it ,... NOW. If he wants to sell it and lead the market on price , hes in control. This is an awsome find and if ya notice he pulled the trigger on the spot . He really didnt want that one and neither did anyone else. He tried to bid on the one he wanted and it was under contract already which meant he was beaten to the punch because it must be a desirable property. Id make a bet though that Dan got the BEST buy. This is a very good catch on Dans part and is worth more than an atta boy. <G> This is what keeps you looking through the dry times.
The hardest part is getting them.
Tim Mooney
Tim, what I see in his purchase is proof that propertys can be bought for wholesale, if you look for them and make wholesale offers. I've known more than a few that tried to invest in real esatate but instead of searching long and hard for a wholesale deal opted instead to pay close to retail just so they could say they are in the business.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Thanks for the compliments. Coming from a man with your experience it means a great deal.
I went to look it over again today and am still pleased. Ok, thrilled. It comes complete with 4 non running riding mowers, a pop top camper and a home made wood trailer. Ah, the side benefits of property. Also an unusual assortment of smoke covered clothes.
Works out to be around 1100 sf and has 2 bath, WD hook up in the kitchen and has large rooms. Looks like it was heated with a heating stove, not something you see around here much anymore. So a new furnace will be in order. But my figures are good and the damage is where I expected. Thanks again. DanT
Sounds like a really good find, Dan. I think this falls under the category of "successful people MAKE their own luck."
jt8
The reason so many people never get anywhere in life is because when opportunity knocks, they are out in the backyard looking for four-leaf clovers. -- Walter Percy Chrysler
Does it have an address? You X on the map doesnt have a street name . And the realator link doesnt have an address, which is weird to me with people on the internet looking . They are a stingy bunch though always loking over their shoulder qith the people they work with! Never seen one yet that trusted their peers. Then they end up being non trusting people.
Lots 39 and 44 in Carr Creek Ranch. Basically just a matter of getting off on 150 (Days Inn on the west side of the exit) and drive east. You'll go over a RR track, past a mini-hardware store (on left), small farm (w/ buffalo) (onleft), car wash/laundry (on left), some kind of flea market area with little shacks (on right)... Turn right into the 'carr creek ranch' (which doesn't have a sign). Follow that as it curves around to the right. MH is second to last on the righthand side.
Strange area... you'll have total trashy looking trailers... then decent looking houses.. then trashy house, then decent trailer.. all on the same street/road.
Around here they stay in their own areas and don't mix.
I don't have the listing paperwork with me, but that thing has GOT to be expired by now. We signed it back in August. I would NOT talk to the realtor, talk to the banker.jt8
The reason so many people never get anywhere in life is because when opportunity knocks, they are out in the backyard looking for four-leaf clovers. -- Walter Percy Chrysler
Isn't that a Corps lake? I don't remember seeing much development right on the water from when I drove by there last year.
"A hard head makes for a sore a$$."
Isn't that a Corps lake? I don't remember seeing much development right on the water from when I drove by there last year.
Yeah, I think it is. Pretty darn good size lake for a man made. I don't know what the shoreline development rules are, but in the Lake_zoom pic it looks like there are houses on the shoreline.
I had stopped the truck just beyond the 150 exit and taken the numbered pics. Basically just a string of pics to create a panoramic (I just rotated to the left snapping pics). This isn't the widest point of the lake, but still a fair piece across for a manmade.
Wish I'd had time to wet a line.jt8
The reason so many people never get anywhere in life is because when opportunity knocks, they are out in the backyard looking for four-leaf clovers. -- Walter Percy Chrysler
Yeah, I was right thru there last year. Looks like a really large lake.
I think that's the bass pro Jimmy Houston's home lake.
My observation on lake area property is that it can be very hit or miss.
Hope you come out on the deal. Sounds like it could be good for the right person.
"There is no such thing as ex-wives"
... and they were behind on their payments...
I have never bought a house from someone behind in there payments! Tried a number of times in a number of ways and each time they held out for the miracle terms or price instead of biting the bullet and selling the house.
I know numerous people make money doing this but every time I have been involved in these situations (3) they ended up losing the house instead of working it out and getting out from under it. Interesting. DanT
Dan, if you ever have an appt to meet some more sellers that are behind in their payments and are going to lose their houses, you probably need to use the four step offer that Conti and Finkel offer in their latest book. I know I struggled with making offers to sellers in financial trouble and never really had a handle on how to best make the offer. The program that Conti and Finkel layout makes total sense to me and I will find it quite easy and comfortable to use it the next chance I get.
Even if you don't read any more of that book, you'll appreciate the simplicity and effectiveness of that one chapter.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
We have had a number of reposessions on the market in my area in the last year or so. I have done ok waiting for them to get through the sherrifs sale and then negotiating with the bank, now holding company, and buying them. The last two of three that I bought were that way.
Anyway recently even though there is a glut of them and money is tightening up some the lenders have gotten tougher to deal with and have resorted to a number of new tactics. The will often require a $5-800 deposit with any offer, not accepted offer but offer. This isn't the end of the world but in our state the money has to go into the realtors escrow account and you can't get it back if the offer is turned down until the seller send a formal letter of release. Which with these out of state lenders takes 3 to 9 months! Sometimes they wait until they have sold the house to finally get around to sending the letter.
The other tactic is to wait unitil they have a couple of offers and then say to each that they are ready to sell, submit your best offer as they have multilple buyers. Now whats interesting is they usually don't take any offers although they lead you to believe they are selling to the highest bidder. All the investors in our area that I have talked to have now started to shun these lenders. Oh, and one of the ones with delayed deposit deal is the VA.
Oh well, looking at a couple more tommorow. DanT
"The will often require a $5-800 deposit with any offer, not accepted offer but offer. "
Well guess what !!!!!! Same thing happened to me . I think I already said that I only ad one realator and lost her. This fannie mae I bid on required 500 earnest money and a letter of credit. I dealt with a new realator I had never dealt with before. I was shocked .
He also told me the same thing that he was getting several repos. He said people qualified for loans that should not have got them and now its starting to hit the fan. Some of these he said have been sitting over a year waiting to go up on the block or in reposesion. . wow.
Oh yea
I picked my check up today because they countered a full offer. They called me and asked if I would go up 500.00 . I said well, ya . I dont think they are gonna let me walk so easy. The broker tried to get me to go up this morning and I told him there was too uvch wrong with the house and the area was a low area for me to be investing in any way. Yall better think this offer over again. Well, I got that call from them at 4 pm. I guess we will see . They are probably playing several like you say.
Tim Mooney
John,
<note: I posted this without realizing I hadn't read to the end of the thread, looks like you got the kind of deal you deserve!>
I am not in the rental business but I have supported myself most of my life by buying and selling something or other. You don't need THIS house, you need -A- house. Your shopping for a DEAL, if this isn't one, if the numbers start to look edgy, pass and keep looking. The deals are out there. This is especially critical for your first one.
Start looking at everything and give a lowball bid for anything that suits your needs. Somebody will bite. One of the posters mentioned asking for owner financing and a cheap price, perfect! What do you have to lose, a marginal deal? Someone else mentioned COLLECTOR VS. INVESTOR, good point. If you got money sitting around gathering dust, buy up a few marginal deals, but I bet you don't so don't buy marginal deals.
If your shopping for a truck you need, find a decent deal, buy it and get back to work. If your shopping for a rental, you don't NEED one, so take your time and only buy it if you can steal it.
The only thing that would change it, and your area doesn't sound like it, is if values are skyrocketing. I live in Sacramento and bought a dump, only 850sf but it was downtown with a big yard. Did it for 80k in 2000 and it is now worth $325k. ONLY in that case was the cash flow from rents unimportant, ESPECIALLY for your first one.
Best of luck,
Michael
Edited 3/17/2005 10:34 am ET by Michael