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*** Official Real Estate Forum *** (2 Viewers)

I saw the "Do Not Call" list ("DNC") mentioned.

I do not believe that this applies to real estate investors asking if you have something to sell.
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I know it applies to agents asking if you have something to sell and would likely apply to anyone operating as a business which would include most investors.
 
I saw the "Do Not Call" list ("DNC") mentioned.

I do not believe that this applies to real estate investors asking if you have something to sell.
Click to expand...
I know it applies to agents asking if you have something to sell and would likely apply to anyone operating as a business which would include most investors.
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I'll have to leave this one in the "I don't know" category for now.
 
I saw the "Do Not Call" list ("DNC") mentioned.

I do not believe that this applies to real estate investors asking if you have something to sell.
Click to expand...
I know it applies to agents asking if you have something to sell and would likely apply to anyone operating as a business which would include most investors.
Click to expand...
I'll have to leave this one in the "I don't know" category for now.
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Let's just call it the $10,000 question. :D
 
Potential first time homeowner here, looking for a little advice.

I've heard that first time homeowners can qualify for certain reduced interest rates and maybe some other things, but I don't know anything about this. Is that true?

Also, considering I have no experience with buying a house, do you think it'd be wise to use a buyers agent?

What interest rates should I be expecting to get, assuming I have good credit scores (720 or above)?

What are the deals with down payments on first time home purchases?

IF a house is listed at a certain price, is there any % I can generally expect to pay below that? Any general rule that houses are normally sold at X% under listing price, on average at least?

Any info would be helpful...TIA.

Edit: Also, I'm considering buying the house, and I guess it's called "subletting" where I rent out another one of the room to a couple of my friends. Is that something I should mention in the buying/loan process or should it not be mentioned at all? Will it complicate things? Is that sort of arrangement not allowed in certain types of home loans?

 
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Potential first time homeowner here, looking for a little advice.

I've heard that first time homeowners can qualify for certain reduced interest rates and maybe some other things, but I don't know anything about this. Is that true?

Also, considering I have no experience with buying a house, do you think it'd be wise to use a buyers agent?

What interest rates should I be expecting to get, assuming I have good credit scores (720 or above)?

What are the deals with down payments on first time home purchases?

IF a house is listed at a certain price, is there any % I can generally expect to pay below that? Any general rule that houses are normally sold at X% under listing price, on average at least?

Any info would be helpful...TIA.

Edit: Also, I'm considering buying the house, and I guess it's called "subletting" where I rent out another one of the room to a couple of my friends. Is that something I should mention in the buying/loan process or should it not be mentioned at all? Will it complicate things? Is that sort of arrangement not allowed in certain types of home loans?
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Also, considering I have no experience with buying a house, do you think it'd be wise to use a buyers agent?Would probably be wise since it won't likely cost you a dime and should give you confidence and a second set of eyes.

What are the deals with down payments on first time home purchases?

Based on your credit score, zero down is definately feasible.

IF a house is listed at a certain price, is there any % I can generally expect to pay below that? Any general rule that houses are normally sold at X% under listing price, on average at least?

Varies total by market and neighborhood and condition of the home. Your agent should be able to provide you actual sales price to list price for certain neighborhoods. That said, some people are going to price their homes to move on the front end while others will shoot for an unrealistic number. So basically there isn't a rule of thumb and each offer to purchase should be constructed on a case by case basis.

 
Potential first time homeowner here, looking for a little advice.

I've heard that first time homeowners can qualify for certain reduced interest rates and maybe some other things, but I don't know anything about this. Is that true?

Also, considering I have no experience with buying a house, do you think it'd be wise to use a buyers agent?

What interest rates should I be expecting to get, assuming I have good credit scores (720 or above)?

What are the deals with down payments on first time home purchases?

IF a house is listed at a certain price, is there any % I can generally expect to pay below that? Any general rule that houses are normally sold at X% under listing price, on average at least?

Any info would be helpful...TIA.

Edit: Also, I'm considering buying the house, and I guess it's called "subletting" where I rent out another one of the room to a couple of my friends. Is that something I should mention in the buying/loan process or should it not be mentioned at all? Will it complicate things? Is that sort of arrangement not allowed in certain types of home loans?
Click to expand...
Also, considering I have no experience with buying a house, do you think it'd be wise to use a buyers agent?Would probably be wise since it won't likely cost you a dime and should give you confidence and a second set of eyes.

What are the deals with down payments on first time home purchases?

Based on your credit score, zero down is definately feasible.

IF a house is listed at a certain price, is there any % I can generally expect to pay below that? Any general rule that houses are normally sold at X% under listing price, on average at least?

Varies total by market and neighborhood and condition of the home. Your agent should be able to provide you actual sales price to list price for certain neighborhoods. That said, some people are going to price their homes to move on the front end while others will shoot for an unrealistic number. So basically there isn't a rule of thumb and each offer to purchase should be constructed on a case by case basis.
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Good job Bass.One more thing to add - don't try to haggle the price as you should rather ask for $$ back from the seller for "closing help". Depends on lender, but they can pay up to 6% of the closing costs. There are reoccurring and non-reoccurring closing costs, and the lender has to permit both of these to be covered by the seller. Then it really can be 0 down.

Don't be afraid to haggle. If the house is listed on the MLS / with an agent, or says "3% towards broker" or words to that effect, DEFINITELY use a buyer broker.

Don't sign an exclusive agreement with the broker unless you are comfy with them. No need to get stuck with one. Interview a few and pick one you like, preferably with knowledge in the area.

 
Just got back from my monthly real estate meeting.

Topic was lease options, not a bad thought to re-enter my head. I think I might even consider doing a few this year..... who knows.

I'll start re-tracing the thread and catching up.
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Now if we could just get you and Mike Anderson (strongly against) to hash out the pros and cons of the Lease Option thing, that would be great! What did you learn?
 
OK, I'm nowhere near as sophisticated about this stuff as you guys are, and I'm currently looking to buy a primary residence.  Wouldn't mind getting something I can renovate for a few months while I continue to live where I am, especially if it's going to give me significant capital appreciation. 

So I guess the questions are, what should one look for in a property that's going to be one's primary residence (aside from the obvious - what I like in a home).   It's likely that I'll hold onto this place for some time, but at the same time I want the potential for short term capital appreciation (currently single, who knows what I'm going to want in a home when I have a family/kids?). 

How does one find a good real estate agent?  Or is one even necessary?  How do I make it clear to the agent that I'm a "serious buyer" that he can work with?  How do I get the sweet deals before they get snapped up by a voracious market.  I know the cardinal rule in real estate is know your local market, but how does one LEARN the local market?
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My .02 - rennovation itself probably isn't going to give you a huge capital appreciation, what really gives you value is buying the property under value - fixing it up can raise the value, but it also makes it easier to sell, and that's the bigger deal. If Jeff/Mike/Bass want to correct me on that, go right ahead.The whole "worst house in the best neighborhood" idea is good - if when the house is fixed up it's similar to the rest of the houses in the neighborhood. If you're buying the worst house in the best neighborhood that's 1300 sqft, and the rest of the houses in the neighborhood are $3000, you're probably not going to get what you're looking for out of it.

What you should look for really depends on your market. I'd look for a single family residence in a middle class area - a place where the demand is always going to be high if you want to unload.

If you're looking for a good Realtor, I'd consider going to an investment club and asking those guys which agents they work with to find houses under value. Walking up to an agent with a pre-approval in hand is going to let them know you're more serious.
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How does one locate a local real estate investment club?
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Where are you?
 
Just got back from my monthly real estate meeting.

Topic was lease options, not a bad thought to re-enter my head. I think I might even consider doing a few this year..... who knows.

I'll start re-tracing the thread and catching up.
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Now if we could just get you and Mike Anderson (strongly against) to hash out the pros and cons of the Lease Option thing, that would be great! What did you learn?
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I wouldn't necessarily agree that Mike is against L/O, but he is against Land Contracts.I'll let him correct me if he is.

 
One for Mike or anyone else looking to comment....

Looking at a 2700 sf home that has been made into three 900 sf one bedrooms. Built in 1900, listed for $82000. Rents are $250 per month and each is rented. I think $275-$300 is a fair price. On the surface the home looks in good condition and well maintained, going inside tomorrow. Neighborhood is borderline. Similar houses in the immediate three blocks that have been averagely maintained. Two blocks from a community college. Town is basically a low rent district, old mill town, that is the county seat about an hour away from Charlotte. Basically meets the %0.01 bogey which I only see in maybe 1 in 100 deals, if that (can't stress this enough). Multi family is few and far between here. Biggest advantage, 2 of 3 filled will pay the bills. Also like that the tenants can keep an eye on each other. I'm concerned about about a house of this age and the fact that it's a 1/2 hour from me. Appreciation will be minimal, although if I could get the rents up to $300 over time I could sell it for $100,000.

10% 7500 down

10% 7500 2nd at $65 / month

80% 60000 1st at $300 / month

Taxes and insurance $90 / month

Water and sewer $90 / month

$545 per month expense or basically $200 profit. $2400 per year or $1800 at %75. Looks like a 25% return initially going to 10% at year 30 when it's paid assuming no rent increases. A $25 per month rent increase would cover $900 a year in repairs.
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Am I seeing this to say that you only carry the Water/Sewer bill? If that's all you carry, it's tight. Doable, but tight.Only you would know, but where did the $300 a month come from. I am in a bad market, and that would be very low here.

In my Market, just off the top of my head I would want to buy it right around $70-75K. How much room do you have? If the thing has been on the market for awhile, hit them low with everything you can. Seller paid closing costs, repair allowance, Unfair tax split in your favor, call for repairs, anything you can think of. Then be prepared to give all that up for a low $70k final price where you wave everything and buy as is. You have the resources with your profession to get the work done.

Worst case scenario is that they scoff. From there, someone else buys it, or they come back to you "Standing Offer"

As for the age, I will say that 1900 is a newer house when you look at my stable. Most of my properties are 1800's. Older Multies are my bread and butter.

 
Rents are $250 per month and each is rented. I think $275-$300 is a fair price.
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I am in a lower Market as well.Now, please understand that my Wife built this website, it is not from a Professional. That said, it looks pretty good now, where it used to be terrible.

Here is a list of my Available properties, you can see that I deal with Lower rents than much of the country. I do hold out for excellent candidates, and expect my units to stay in great shape.

A 900 sq ft one bedroom here would be $375-$425.

My Available Properties

 
Great stuff here.  As far as chasing down a deal, would you cold call people in a place where you wanted to get?  Still looking for a condo myrtle beach area and I've found all the owners names through the registry of deeds.  Know a lot about them through this.  What do you think?
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I wouldn't cold call, personally. Wouldn't have a service do it, either.Write a letter to the owners you know and do a mass mailing. I forget how you do it, but I think there is something that you can do via US mail to get the forwarding address if there is one. That's worth it if you can't find the owner.

Make the letter semi-personal, like personally signing and addressing them.

Then follow up a week or two later with a call. It won't be as cold then - you can say "I sent you a letter, did you get a chance to look at it?".
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NOT THAT I WOULD DO THIS!!!!There is a guy in my Local market that ONLY works out of the Obituaries. He reads then every day, sees that Old Helen Watts passed away, and goes to the funeral. Finds the oldest man there (Assuming that is the Executor, or aleast can get to the Executor), offers condolences, and hands him a letter of introduction, along with saying that he knew Helen well, and Helen had always said that when the time came, she would sell the property to him.

MY GOD does this guy get people mad at him, really mad. However, he does come up with some of the biggest sweetheart deals you ever saw.

Not any better than a Land Contract Weasel, he prays on people when they are sad and weak, and steals properties that really no one in the family wants to deal with.

He also is a big option to buy guy (Bird dog) where he sells the option to another.

Anyway, blanketing the market with letters is better than cold calling.

 
OK, I'm nowhere near as sophisticated about this stuff as you guys are, and I'm currently looking to buy a primary residence. Wouldn't mind getting something I can renovate for a few months while I continue to live where I am, especially if it's going to give me significant capital appreciation.

So I guess the questions are, what should one look for in a property that's going to be one's primary residence (aside from the obvious - what I like in a home). It's likely that I'll hold onto this place for some time, but at the same time I want the potential for short term capital appreciation (currently single, who knows what I'm going to want in a home when I have a family/kids?).

How does one find a good real estate agent? Or is one even necessary? How do I make it clear to the agent that I'm a "serious buyer" that he can work with? How do I get the sweet deals before they get snapped up by a voracious market. I know the cardinal rule in real estate is know your local market, but how does one LEARN the local market?
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A Buyers agent is FREE TO YOU. You would be foolish not to use one.
 
OK, I'm nowhere near as sophisticated about this stuff as you guys are, and I'm currently looking to buy a primary residence. Wouldn't mind getting something I can renovate for a few months while I continue to live where I am, especially if it's going to give me significant capital appreciation.

So I guess the questions are, what should one look for in a property that's going to be one's primary residence (aside from the obvious - what I like in a home). It's likely that I'll hold onto this place for some time, but at the same time I want the potential for short term capital appreciation (currently single, who knows what I'm going to want in a home when I have a family/kids?).

How does one find a good real estate agent? Or is one even necessary? How do I make it clear to the agent that I'm a "serious buyer" that he can work with? How do I get the sweet deals before they get snapped up by a voracious market. I know the cardinal rule in real estate is know your local market, but how does one LEARN the local market?
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A Buyers agent is FREE TO YOU. You would be foolish not to use one.
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How true is this? How "free" are they really? I mean, isn't the cost of the house going to be inflated to take into consideration the sellers Real Estate agent, as well as the buyers "buyers agent" if they use both?
 
neither was/am II posted earlier I didn't want my kids dumping $6-8K+ each in rent yearly, so using the back page of the local paper I started going to real estate auctions, to get a feel for what property was going for that way vs market.....40-60% appeared to be reasonable range of expectation

I took my daughter to several, and we settled on a small 2bd/1b 2 story colonial on 1/3a...was old, needed paint and new windows, but otherwise was in good repair

paid $60K(only 1 other bidder!)...my wife and I held the paper, as my daughter just changed jobs...when she qualified a year later, my daughter had a rediculously low mortage of ~$365/month, when small 2 bdrm apt in area went for ~$700/mo

she repaid us, and we purchased a similar property for my son the same way

sold her property recently for $126K, while putting less than $5K into it, holding it for ~4 yrs...after putting 20% down on her new house and paying closing costs, she had a check for ~$26K left over...and I had a VERY happy 26 yr old little girl!

find the "real estate auction" section of your local paper, and attend a few to get a feel for how they work

terms, address and sale date are listed---once you go to a few, you'll know if this "is for you or not", as there is an element of risk if you have absolutely no "feel" for this (you do seem to have some aptitude, as you express a desire to do some rehab work yourself)
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Very cool story. Let me take the opportunity to ask the experts a question about these "sheriff's sale acutions". I attended several in a row last year, just out of curiosity. Just like I think someone else mentioned, it seems like it might be easy to overpay. It seemed 90% of the properties did not get bid on. 8% were bid on by an investor, but counterbid by an attorney representing the bank. 2% were won by investors, but only after a pretty good amount of bidding between the investors. 1.) Am I right in my understanding that you don't get to inspect these houses before buying them? Is this a bit risky?

2.) They state you have to PAY before you leave. How do most investors handle this? Obviously some people have 6 figures liquid to throw down, but I'm guessing most of the investors I saw don't. Do they have a relationship with a lender that allows them to take a "blank" cashier's check to the auction?
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I have never found that a Sheriff sale is NEVER worth it. Anything you want is exact what the other 50 guys there want.You do not get to inspect these properties. You deal with it for the right equity position, which you won't find in this type of sale.

In my area, if the Sale is in the morning, you get to run to your bank, and have it paid for by 3:00 pm. If it is after Noon, you have until the doors open the next morning at 8:00 am or whatever it is. Be at your Bank as the doors open, and get over to the County building right after that.

 
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OK, I'm nowhere near as sophisticated about this stuff as you guys are, and I'm currently looking to buy a primary residence.  Wouldn't mind getting something I can renovate for a few months while I continue to live where I am, especially if it's going to give me significant capital appreciation. 

So I guess the questions are, what should one look for in a property that's going to be one's primary residence (aside from the obvious - what I like in a home).  It's likely that I'll hold onto this place for some time, but at the same time I want the potential for short term capital appreciation (currently single, who knows what I'm going to want in a home when I have a family/kids?). 

How does one find a good real estate agent?  Or is one even necessary?  How do I make it clear to the agent that I'm a "serious buyer" that he can work with?  How do I get the sweet deals before they get snapped up by a voracious market.  I know the cardinal rule in real estate is know your local market, but how does one LEARN the local market?
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A Buyers agent is FREE TO YOU. You would be foolish not to use one.
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How true is this? How "free" are they really? I mean, isn't the cost of the house going to be inflated to take into consideration the sellers Real Estate agent, as well as the buyers "buyers agent" if they use both?
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Simple answer is no. In most markets, seller signs a contract to list and market a property. The seller is paying the listing agent only, but the contract language will talk about marketing in MLS and co-broking with other agents. When a property is entered into MLS, a buyer's agent commission is generally entered. If the listing agent captures both sides, they're entitled to 100% of the commission. Sometimes in tight negotiations and slow markets, this may be adjusted down to make a deal work. The reality is that in most major markets, another agent will usually bring the buyer to the table. I guess technically you could research your own properties and work directly with each listing agent on every property you want to see and hope for a tight negotiation where you might get the agent to eat $500 to $1000. Of course in this instance you will miss out on some of the population of houses and will be negotiating thru an agent working in the best interests of the seller and who legally shouldn't be giving you any advice during the process.This also applies with any sizeable builder with a sales staff. You may think you're getting a discount, but in reality your working with a sales agent in the builder's pocket collecting full commission and maybe even a bonus.

 
OK, I'm nowhere near as sophisticated about this stuff as you guys are, and I'm currently looking to buy a primary residence.  Wouldn't mind getting something I can renovate for a few months while I continue to live where I am, especially if it's going to give me significant capital appreciation. 

So I guess the questions are, what should one look for in a property that's going to be one's primary residence (aside from the obvious - what I like in a home).  It's likely that I'll hold onto this place for some time, but at the same time I want the potential for short term capital appreciation (currently single, who knows what I'm going to want in a home when I have a family/kids?). 

How does one find a good real estate agent?  Or is one even necessary?  How do I make it clear to the agent that I'm a "serious buyer" that he can work with?  How do I get the sweet deals before they get snapped up by a voracious market.  I know the cardinal rule in real estate is know your local market, but how does one LEARN the local market?
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My .02 - rennovation itself probably isn't going to give you a huge capital appreciation, what really gives you value is buying the property under value - fixing it up can raise the value, but it also makes it easier to sell, and that's the bigger deal. If Jeff/Mike/Bass want to correct me on that, go right ahead.
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Depends on the Renovation. I have gotten huge value from Outdoor spaces and basic Curb appeal. MONSTER value. A brick Patio is worth it's weight in gold.
 
Rents are $250 per month and each is rented.  I think $275-$300 is a fair price. 
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I am in a lower Market as well.Now, please understand that my Wife built this website, it is not from a Professional. That said, it looks pretty good now, where it used to be terrible.

Here is a list of my Available properties, you can see that I deal with Lower rents than much of the country. I do hold out for excellent candidates, and expect my units to stay in great shape.

A 900 sq ft one bedroom here would be $375-$425.

My Available Properties
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I went and looked at this property on Thursday. All I can say is that the next time I feel like life isn't going my way, I'll visit this place and count my blessings. 2 of the 3 units were in bad condition and one unit was packed with 6 people...3 being kids. Laundry piled 3 ft deep in the closets, food laying everywhere, and a 6 month old lab leaving fragence thruout.Really too much liability for my tastes. Potential great return, but who knows about the roof, electrical system, heating system, etc. No feasible way to remodel short of spending big bucks and this neighborhood will never appreciate. 2 bedroom waterfront condos can be rented as low as $750. With two people sharing, that's $375 a month for a modern place in a nice area on the lake. That's the reason for the low market cap on 1 bdrm rents. I don't think I'm ready to jump into the market of high risk tenants at this time.

Mike...great website!

 
Looking to purchase an investment condo for about $125000.  I have an equity loan- $50,000(left to pay)  6 yrs left 5.9%(775 a month).  I have a mortgage on my house $265,500 --$250000 left @5.375%(1500 a month)Taxes and ins. bring this up to $2000- a month.

No money to put down on this condo so I want to re-mortgage equity loan to the tune of $175,000.  Quoted 6.9% 30 yrs :eek:   for amount of 1156 per month.  POA=165 Taxes =60 for a total of roughly 1365- per month. This will bring monthly real estate bills to over $3300-

This condo can rent and guestimate from broker is 10,000 in rental per year.  Annual income is$130,000. Is there a better way to do this? Or going in over my head?  TIA.
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By no advice I take it this is a bad thing to do? :confused:
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Sorry, must have missed this one. You got me right between 2 postings.you say you can get 10K a year, which isn't much for that condo. That's <1K a month ($833.33 to be more precise), and you'd be buying it for $125K.

That SEVERELY violates the 1% rule of the rent being > or = 1% of the sales price.



DO NOT DO THIS DEAL.
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This deal is a dog. Just to make sure, the Incoming is $130K and the operating costs are $120K????? The rent is surely not $11K a month????I'm not sure I understand enough to give advice on this after all. However it works, $800 and some change a month is not worth an investment of $125K. Quick math has this losing money monthly. At a good clip.

Your Broker is not looking out for your interest here.

 
Looking to purchase an investment condo for about $125000.  I have an equity loan- $50,000(left to pay)  6 yrs left 5.9%(775 a month).  I have a mortgage on my house $265,500 --$250000 left @5.375%(1500 a month)Taxes and ins. bring this up to $2000- a month.

No money to put down on this condo so I want to re-mortgage equity loan to the tune of $175,000.  Quoted 6.9% 30 yrs :eek:   for amount of 1156 per month.  POA=165 Taxes =60 for a total of roughly 1365- per month. This will bring monthly real estate bills to over $3300-

This condo can rent and guestimate from broker is 10,000 in rental per year.  Annual income is$130,000.  Is there a better way to do this? Or going in over my head?  TIA.
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By no advice I take it this is a bad thing to do? :confused:
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Sorry, must have missed this one. You got me right between 2 postings.you say you can get 10K a year, which isn't much for that condo. That's <1K a month ($833.33 to be more precise), and you'd be buying it for $125K.

That SEVERELY violates the 1% rule of the rent being > or = 1% of the sales price.



DO NOT DO THIS DEAL.
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Jeff, could you talk about this 1% rule?Am I reading right that if the rent isn't 1% of the sales price, you don't want it? Were that the case, nobody would have rentals up here in Seattle. I've got a rental property I bought under a year ago, put 10% down for, rent is $1750, paid $313,500, total PITI is about $1625. This doesn't seem like a bad deal to me, but it severely violates the 1% rule.
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Totally depends on your Market and what you want to accomplish. Jeff wants in Cheaply as possible to unload for a gain never seeing a tenant. For me, Cash is King, and it's ALL about Flow.Lets say you have a 15 (I guess even 30) year note, will pay it off, and be looking at over a Grand a month in extra retirement income. If that is your goal, you did Great!

Lets say that the Pacific North West is HOT (Which it is) and you are seeing $5K a month appreciation gains. You did Great! No matter what your plan was.

For me, the deal is not one I would want in MY market. I don't gain thousands a month in appreciation. I would look at it as making $125.00 a month.

When the Current tenant moves out, if I don't have it re-rented IMMEDIATELY, no down time, no damage, prior tenant leaves it PERFECT, and gets out when they said they would so the new family can be moving in. Assume that this transition isn't PERFECT, EACH AND EVERY TIME until your note is paid off.

If it isn't, you just lost $1625.00 out of your pocket in costs, and you will never regain that amount without a time machine. Let's assume that it's not winter, and you don't have to carry the gas on 40 Degrees to protect your pipes. Lets assume nothing else, no damage, nothing, you just lost a month of rent, and had to pay your costs.

At $1625.00 lost where you make $125.00 a month in a perfect month, that's 13 months of gains you lost in that one empty month. Assume it is two months before you find the right renter. That's 26 months of perfect rental going forward just to get back to Zero.

If you have a string of Great Tenants who only stay one year. Every year, you have one month of vacancy before you fill it. Under that assumption, you lose $125.00 a year to own this rental.

I couldn't do that.

If you are in it to have retirement income, and $125.00 loss a year now is worth over a Grand a month for the rest of your life once it's paid off. Great buy.

If your rental is now worth $400K, Great buy.

What are you in it for?

 
I know investors here (Maryland) that look for $150 or more a month per unit, but they still don't want to be that far below the 1% rule.
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I want to see $200 a UNIT, and I own Multies almost exclusively.My worst performer is three bedroom home that clears $125.00 a month. The same renter has been there paying like Clock work since I bought it with only one Hiccup that cost me about $300.00 Freaking GRRRRR on that one.I pulled $8K out at the closing table, and I Needed it at the time, so I have always felt it was worth it.I will say that as soon as I can get this place to not be upside down when you take Realtor fees into account, I will move it.Anyone want a poor buy to you in the Midwest? ;)
 
Great stuff here. As far as chasing down a deal, would you cold call people in a place where you wanted to get? Still looking for a condo myrtle beach area and I've found all the owners names through the registry of deeds. Know a lot about them through this. What do you think?
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I wouldn't cold call, personally. Wouldn't have a service do it, either.Write a letter to the owners you know and do a mass mailing. I forget how you do it, but I think there is something that you can do via US mail to get the forwarding address if there is one. That's worth it if you can't find the owner.

Make the letter semi-personal, like personally signing and addressing them.

Then follow up a week or two later with a call. It won't be as cold then - you can say "I sent you a letter, did you get a chance to look at it?".
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NOT THAT I WOULD DO THIS!!!!There is a guy in my Local market that ONLY works out of the Obituaries. He reads then every day, sees that Old Helen Watts passed away, and goes to the funeral. Finds the oldest man there (Assuming that is the Executor, or aleast can get to the Executor), offers condolences, and hands him a letter of introduction, along with saying that he knew Helen well, and Helen had always said that when the time came, she would sell the property to him.

MY GOD does this guy get people mad at him, really mad. However, he does come up with some of the biggest sweetheart deals you ever saw.

Not any better than a Land Contract Weasel, he prays on people when they are sad and weak, and steals properties that really no one in the family wants to deal with.

He also is a big option to buy guy (Bird dog) where he sells the option to another.

Anyway, blanketing the market with letters is better than cold calling.
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Interesting / off-beat methods of finding properties is a good idea, but this is a bit over the top.....Post cards are also cheaper than letters.

 
One for Mike or anyone else looking to comment....

Looking at a 2700 sf home that has been made into three 900 sf one bedrooms. Built in 1900, listed for $82000. Rents are $250 per month and each is rented. I think $275-$300 is a fair price. On the surface the home looks in good condition and well maintained, going inside tomorrow. Neighborhood is borderline. Similar houses in the immediate three blocks that have been averagely maintained. Two blocks from a community college. Town is basically a low rent district, old mill town, that is the county seat about an hour away from Charlotte. Basically meets the %0.01 bogey which I only see in maybe 1 in 100 deals, if that (can't stress this enough). Multi family is few and far between here. Biggest advantage, 2 of 3 filled will pay the bills. Also like that the tenants can keep an eye on each other. I'm concerned about about a house of this age and the fact that it's a 1/2 hour from me. Appreciation will be minimal, although if I could get the rents up to $300 over time I could sell it for $100,000.

10% 7500 down

10% 7500 2nd at $65 / month

80% 60000 1st at $300 / month

Taxes and insurance $90 / month

Water and sewer $90 / month

$545 per month expense or basically $200 profit. $2400 per year or $1800 at %75. Looks like a 25% return initially going to 10% at year 30 when it's paid assuming no rent increases. A $25 per month rent increase would cover $900 a year in repairs.
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Am I seeing this to say that you only carry the Water/Sewer bill? If that's all you carry, it's tight. Doable, but tight.Only you would know, but where did the $300 a month come from. I am in a bad market, and that would be very low here.

In my Market, just off the top of my head I would want to buy it right around $70-75K. How much room do you have? If the thing has been on the market for awhile, hit them low with everything you can. Seller paid closing costs, repair allowance, Unfair tax split in your favor, call for repairs, anything you can think of. Then be prepared to give all that up for a low $70k final price where you wave everything and buy as is. You have the resources with your profession to get the work done.

Worst case scenario is that they scoff. From there, someone else buys it, or they come back to you "Standing Offer"

As for the age, I will say that 1900 is a newer house when you look at my stable. Most of my properties are 1800's. Older Multies are my bread and butter.
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Good negotiation techniques here. Remember - whoever wants the property LEAST will get the deal. Price is just a PORTION of the deal - terms, payments, interest, seller financing can be way more important. Determine what matters to you.

For me, seller financing is big. Interest isn't. Points are (but that's on a lender, and I'm really really tired of mortgages - hence I'm working commercial lines of credit now). I'm in a rehab property well under a year so I don't care about interest - just what my costs are for those 12 months (preferably 5-6).

 
Yep.  Wouldn't want it.

That's why I abandoned the buy and rent method of getting rich (slow).  The property has appreciated $100k since February.  That's fast enough for me.

At $1625, your rent barely covers your expenses (+$125).  If you have a management company, away it goes.  One month vacancy, away it goes.  Repairs?  Away it goes.  I get another $400 or so per month in tax breaks

As for your finances, banks / lenders will take 25% away from your rent and have your income ACTUALLY LOWER than if you didn't own that place.  They'll have you bringing in $1312.50 and putting out $1625 (if you escrow taxes and insurance).  You'll be a net -$312.50.  I'm self employed, I'll be doing stated income loans forever.

You are fortunate to only have a PITI of $1625 against a $300+K property.  You get tax benefits and all, but little / no cash to spend and possible headaches to boot.  I know.  Interest rates like that aren't around anymore.

I know investors here (Maryland) that look for $150 or more a month per unit, but they still don't want to be that far below the 1% rule.

As with any "rule", it isn't hard and fast.  But if you violate the rule, you at least have a signal that (1) you may be getting in trouble and (2) if you continue you better have a good reason.

Now I know your answer already - don't use a standard loan of 30yr financing, use Interest Only (I/O) and lower your payment.  That helps cash flow, sure, but wasn't part of the rental plan "buy it down, buy it down, rent it out, pay it off"?  That's certainly not my rental plan. 
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My only concern with this rule is that it essentially states that in the areas you've got the most to gain from hanging onto a property, you shouldn't rent them out. There's nothing within 100 miles of me that would be ok in the 1% rule. I do think it may be a fantastic rule for your market, but want to make sure you're not scaring people away by making blanket statements that may not be applicable elsewhere.
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Goes back you your Market. It is not my Plan, but I could easily see losing a SMALL amount each month for Tremendous gains in Appreciation.What is $100.00 a month lost for $100K in five years? I will trade you $6K for $100K any day of the week.

This type of an investment strategy is NOT guaranteed, and I am programed to shun it like an amishman coming from my Market.

But if you honestly make $100K for a $6K loss, you are my hero, and CAN throw a bunch of this out the window.

It seems that Jeff, Bass, and I are in weaker Markets, and the advice here is how to survive those markets. Anyone could have made a fortune in a hot market like CA or South FL in the last 5 years. (And parts of the Pacific North West among other areas). Will it continue? I think yes, Which is actually bad for me.

Just don't base your financial future off of some guy on the Internet saying that he thinks Hot markets will continue to run wild.

 
OK, I'm nowhere near as sophisticated about this stuff as you guys are, and I'm currently looking to buy a primary residence. Wouldn't mind getting something I can renovate for a few months while I continue to live where I am, especially if it's going to give me significant capital appreciation.

So I guess the questions are, what should one look for in a property that's going to be one's primary residence (aside from the obvious - what I like in a home). It's likely that I'll hold onto this place for some time, but at the same time I want the potential for short term capital appreciation (currently single, who knows what I'm going to want in a home when I have a family/kids?).

How does one find a good real estate agent? Or is one even necessary? How do I make it clear to the agent that I'm a "serious buyer" that he can work with? How do I get the sweet deals before they get snapped up by a voracious market. I know the cardinal rule in real estate is know your local market, but how does one LEARN the local market?
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A Buyers agent is FREE TO YOU. You would be foolish not to use one.
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How true is this? How "free" are they really? I mean, isn't the cost of the house going to be inflated to take into consideration the sellers Real Estate agent, as well as the buyers "buyers agent" if they use both?
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Simple answer is no. In most markets, seller signs a contract to list and market a property. The seller is paying the listing agent only, but the contract language will talk about marketing in MLS and co-broking with other agents. When a property is entered into MLS, a buyer's agent commission is generally entered. If the listing agent captures both sides, they're entitled to 100% of the commission. Sometimes in tight negotiations and slow markets, this may be adjusted down to make a deal work. The reality is that in most major markets, another agent will usually bring the buyer to the table. I guess technically you could research your own properties and work directly with each listing agent on every property you want to see and hope for a tight negotiation where you might get the agent to eat $500 to $1000. Of course in this instance you will miss out on some of the population of houses and will be negotiating thru an agent working in the best interests of the seller and who legally shouldn't be giving you any advice during the process.This also applies with any sizeable builder with a sales staff. You may think you're getting a discount, but in reality your working with a sales agent in the builder's pocket collecting full commission and maybe even a bonus.
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Now, here's something that I do as an investor. If I see a listed property that could be a deal, I call the listing agent. They ask if I'm an agent or if I need one, and tell them I like to deal with as few parties as possible and that if they are willing to work with / for me as well then I'm happy to see them get the whole commission.Pause for :moneybag: :moneybag: to take effect.

Commissions around here of $10K+ are average to low.... Maryland is expensive (but not so much as other places - all relative). So if I can get the broker to come to my side (even though the seller is paying for him/her) then I have an instant ally who tries to get ME the deal over others.

Works more often than not. Realtors are supposed to work for the seller first, but at times they can give you more info than they should. I encourage them :) .

I've also gone the other extreme and told a broker (with the seller in the room) that if it wasn't for their commission this deal would be done. They love that.....

Savvy realtors should learn to take notes for their commissions sometimes. It does make more deals happen. 90% of realtors don't understand what investors do.

 
Totally depends on your Market and what you want to accomplish. Jeff wants in Cheaply as possible to unload for a gain never seeing a tenant. For me, Cash is King, and it's ALL about Flow.
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Hey, I resemble that remark......I just happen to think that turning a quick 15% profit on a property inside of 6 months far outpaces renting.

More of a "get rich faster" than the "get rich slow" by landlording approach.

Neither are get rich quick schemes.....

 
And don't think that every investor is smarter than you or has never made a mistake.  We all have had a clunker.  The point is, we went out there and tried.  Some will be winners and some will be losers.  The goal is to keep the losers at a minimum and to hit the occasional home run.
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I have SERIOUSLY Made EVERY SINGLE MISTAKE you can possible make in this business. I have screwed up time and time again.I have more horror stories to tell than you would even imagine.

If you want to trust some guy in the Internet, I'm telling you, post here, and most likely I screwed the position you are in up. I would be happy to tell you the down side.

I have screwed up more in a POOR/BAD market that you could mess up in years or trying to do the wrong play.

You want to post specifics, I can most likely give you a doom and gloom out come.

At the end of the day, I quit a job Just short of 6 figures, and my wife stopped as a full time teacher so we could do this full time in a TERRIBLE market.

I wish I was East coast, South FL, CA, or Oregon. I'd make a killing.

Seriously, I am beyond stupid when it comes to this stuff, I make the wrong call every day. TIME AFTER TIME. I make alot of good calls, but the potential is incredible, and that is coming from a guy in a BAD market.
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Now, we know you're not stupid Mike. But as they say, "the grass is always greener".Yes a seasoned investor has/had done well in those markets these past few years, but these "hot" markets have spurned more investors and competition. Good deals are harder to find, and thus the margins aren't as big as you might think. Doubling your money on a deal can be much harder in hot markets vs. warm, average or even cold.

Real estate is both local and cyclical. You can make money in EVERY market, even yours. That goes for everyone.

Real Estate investors make their money when they BUY, not when they sell. That means we buy cheap and at prices that price in a profit already. I NEVER assume appreciation to make me a profit.

However, many newer investors in the area do just that and so far they are getting away with it. I won't pay that high a price for these deals, so the Noobs think they are smarter and grab them. Once the climate changes they'll be begging for a way out of that deal.
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Where I was going there was Real Estate is absolutely where the most money I know of can be made without decades of specialized study. Anyone who was responsible enough not to destroy their credit can make money regardless of education, achievements, anything.I have seriously made the Dumbest mistakes in Real Estate you can imagine over the years. Blindly dumb. Things you won't even consider doing, I walked right into. Things that would make you cringe.

At the end of the day, I've made countless poor decisions, am in a poor market, and it is still my full time profession after giving up a very lucrative profession where I was about to cross into 6 figures in the Midwest in one of the lowest Cost of Living Markets in the US.

My point was more that Real Estate is certainly something I strong believe people should jump into.

At the end of the day, Land doesn't lose value. (Not exactly true in every case, but the point is solid)

 
Yep. Wouldn't want it.

That's why I abandoned the buy and rent method of getting rich (slow). The property has appreciated $100k since February. That's fast enough for me.

At $1625, your rent barely covers your expenses (+$125). If you have a management company, away it goes. One month vacancy, away it goes. Repairs? Away it goes. I get another $400 or so per month in tax breaks

As for your finances, banks / lenders will take 25% away from your rent and have your income ACTUALLY LOWER than if you didn't own that place. They'll have you bringing in $1312.50 and putting out $1625 (if you escrow taxes and insurance). You'll be a net -$312.50. I'm self employed, I'll be doing stated income loans forever.

You are fortunate to only have a PITI of $1625 against a $300+K property. You get tax benefits and all, but little / no cash to spend and possible headaches to boot. I know. Interest rates like that aren't around anymore.

I know investors here (Maryland) that look for $150 or more a month per unit, but they still don't want to be that far below the 1% rule.

As with any "rule", it isn't hard and fast. But if you violate the rule, you at least have a signal that (1) you may be getting in trouble and (2) if you continue you better have a good reason.

Now I know your answer already - don't use a standard loan of 30yr financing, use Interest Only (I/O) and lower your payment. That helps cash flow, sure, but wasn't part of the rental plan "buy it down, buy it down, rent it out, pay it off"? That's certainly not my rental plan.
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My only concern with this rule is that it essentially states that in the areas you've got the most to gain from hanging onto a property, you shouldn't rent them out. There's nothing within 100 miles of me that would be ok in the 1% rule. I do think it may be a fantastic rule for your market, but want to make sure you're not scaring people away by making blanket statements that may not be applicable elsewhere.
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Goes back you your Market. It is not my Plan, but I could easily see losing a SMALL amount each month for Tremendous gains in Appreciation.What is $100.00 a month lost for $100K in five years? I will trade you $6K for $100K any day of the week.

This type of an investment strategy is NOT guaranteed, and I am programed to shun it like an amishman coming from my Market.

But if you honestly make $100K for a $6K loss, you are my hero, and CAN throw a bunch of this out the window.

It seems that Jeff, Bass, and I are in weaker Markets, and the advice here is how to survive those markets. Anyone could have made a fortune in a hot market like CA or South FL in the last 5 years. (And parts of the Pacific North West among other areas). Will it continue? I think yes, Which is actually bad for me.

Just don't base your financial future off of some guy on the Internet saying that he thinks Hot markets will continue to run wild.
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On the timescales I work on (under a year) I NEVER factor in appreciation. That's icing if I get it.I take the going rate for the better end houses nearby and that's my After Repair Value ("ARV").

I take 70% of that and start subtracting ALL of my costs. Closing on the buy, mortgage payments for 6 months, insurance, repairs, everything I can think of.

The last 30% goes:

10% for closing on the back and with a realtor (6-7% and 3-4% closing fees in Maryland - one of the 3 highest closing cost state).

15% for profit.

5% for cushion.

After the subtraction I have a number, which is THE MOST I can pay for a rehab.

Other deals do exist where I can lease or rent the place, and in growing markets I may do just that. I do have some rentals in areas that are going up in value. However I'm likely to sell after a year and move to more commercial holdings.

 
Yes a seasoned investor has/had done well in those markets these past few years, but these "hot" markets have spurned more investors and competition.  Good deals are harder to find, and thus the margins aren't as big as you might think.  Doubling your money on a deal can be much harder in hot markets vs. warm, average or even cold.

Real estate is both local and cyclical.  You can make money in EVERY market, even yours.  That goes for everyone.

Real Estate investors make their money when they BUY, not when they sell.  That means we buy cheap and at prices that price in a profit already.  I NEVER assume appreciation to make me a profit.

However, many newer investors in the area do just that and so far they are getting away with it.  I won't pay that high a price for these deals, so the Noobs think they are smarter and grab them.  Once the climate changes they'll be begging for a way out of that deal.
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Very good points. It's just tough when you're in your early/mid 20's without much in the way of income, assets, or experience to do what you're doing, and I'm trying to take advantage of this market to build some capital and knowledge of the local market so I can eventually do what you're doing. I'm not trying to argue with you, simply looking for clarification on what you're thinking and why.Before I start to buy/sell properties for a living, I'm going to try to have a war chest that'll be living expenses for a year and about twice that much for working capital.
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Living in the Pacific North West, I wouldn't think the War Chest is as Necessary as you might think.In your shoes, I would be looking to Jeff, and follow his path. You have a moving market. Should it hold up, and I think it will, it's just a matter of buying under value, and "Flipping"

With just one to three flips under your belt, I would hazard a guess that you will have more than you need to roll forward.

Now, I am imagining your market, but the Pacific North West is hot, and primed to Flip. Only you could know the exact details. Tons of People from CA are moving North to take advantage of your RE pricing. If there is any area in the Country that I think will continue and actually become more white hot, it is your Market along with NM and AZ. The Exodus from CA of people with a great amount of Capital to purchase (And not exactly knowing the going rate, so they spend too much) is going to drive those three markets.

With that in mind, I think you are in one of the best areas of the country to be in. I would certainly consider the concept of buy for appreciation in your market.

Once again, you know the specifics of your market, and I could be off base here as I am lumping you into the greater Pacific North West.

 
And don't think that every investor is smarter than you or has never made a mistake. We all have had a clunker. The point is, we went out there and tried. Some will be winners and some will be losers. The goal is to keep the losers at a minimum and to hit the occasional home run.
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I have SERIOUSLY Made EVERY SINGLE MISTAKE you can possible make in this business. I have screwed up time and time again.I have more horror stories to tell than you would even imagine.

If you want to trust some guy in the Internet, I'm telling you, post here, and most likely I screwed the position you are in up. I would be happy to tell you the down side.

I have screwed up more in a POOR/BAD market that you could mess up in years or trying to do the wrong play.

You want to post specifics, I can most likely give you a doom and gloom out come.

At the end of the day, I quit a job Just short of 6 figures, and my wife stopped as a full time teacher so we could do this full time in a TERRIBLE market.

I wish I was East coast, South FL, CA, or Oregon. I'd make a killing.

Seriously, I am beyond stupid when it comes to this stuff, I make the wrong call every day. TIME AFTER TIME. I make alot of good calls, but the potential is incredible, and that is coming from a guy in a BAD market.
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Now, we know you're not stupid Mike. But as they say, "the grass is always greener".Yes a seasoned investor has/had done well in those markets these past few years, but these "hot" markets have spurned more investors and competition. Good deals are harder to find, and thus the margins aren't as big as you might think. Doubling your money on a deal can be much harder in hot markets vs. warm, average or even cold.

Real estate is both local and cyclical. You can make money in EVERY market, even yours. That goes for everyone.

Real Estate investors make their money when they BUY, not when they sell. That means we buy cheap and at prices that price in a profit already. I NEVER assume appreciation to make me a profit.

However, many newer investors in the area do just that and so far they are getting away with it. I won't pay that high a price for these deals, so the Noobs think they are smarter and grab them. Once the climate changes they'll be begging for a way out of that deal.
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Where I was going there was Real Estate is absolutely where the most money I know of can be made without decades of specialized study. Anyone who was responsible enough not to destroy their credit can make money regardless of education, achievements, anything.I have seriously made the Dumbest mistakes in Real Estate you can imagine over the years. Blindly dumb. Things you won't even consider doing, I walked right into. Things that would make you cringe.

At the end of the day, I've made countless poor decisions, am in a poor market, and it is still my full time profession after giving up a very lucrative profession where I was about to cross into 6 figures in the Midwest in one of the lowest Cost of Living Markets in the US.

My point was more that Real Estate is certainly something I strong believe people should jump into.

At the end of the day, Land doesn't lose value. (Not exactly true in every case, but the point is solid)
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:goodposting: I still have a property I need to unload and would sell at cost in Hagerstown, Maryland. It looked like a winner - 9 unit property, needed light rehab, yada yada yada.....

After owning this pig for over a year I've had issues with the crew, the (ex) partner, and the city. I'd be happy to walk with what I sunk in it, maybe less.

All that said, and with all the angst, Real Estate has made more millionaires than everything else - combined. Period.

If you ever go to a RE seminar or an investment club meeting, 50% or more are likely to be Noobs / Newbies. 80% of people never even do ONE deal.

Go out and try it. Find someone who does it, partner with them getting more than 50% if you have to. Just go and learn what to do.

It will pay you big time in the long run.

Just remember - even the best investors lose now and then. It is part of being "a player" in the game. Everyone understands that. You take your lump now and then and press on.

Happy investing to one and all. I hope everyone here learns something, or at least enough to get a house. Owning two would be fantastic for everyone to do in their lives. Imagine having 2 houses when you retire, not one, and one is free and clear (or you at least refinanced big $$ out).

Ask your questions, don't be shy. There is some serious experience available to you here for free....

 
Yes a seasoned investor has/had done well in those markets these past few years, but these "hot" markets have spurned more investors and competition. Good deals are harder to find, and thus the margins aren't as big as you might think. Doubling your money on a deal can be much harder in hot markets vs. warm, average or even cold.

Real estate is both local and cyclical. You can make money in EVERY market, even yours. That goes for everyone.

Real Estate investors make their money when they BUY, not when they sell. That means we buy cheap and at prices that price in a profit already. I NEVER assume appreciation to make me a profit.

However, many newer investors in the area do just that and so far they are getting away with it. I won't pay that high a price for these deals, so the Noobs think they are smarter and grab them. Once the climate changes they'll be begging for a way out of that deal.
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Very good points. It's just tough when you're in your early/mid 20's without much in the way of income, assets, or experience to do what you're doing, and I'm trying to take advantage of this market to build some capital and knowledge of the local market so I can eventually do what you're doing. I'm not trying to argue with you, simply looking for clarification on what you're thinking and why.Before I start to buy/sell properties for a living, I'm going to try to have a war chest that'll be living expenses for a year and about twice that much for working capital.
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Living in the Pacific North West, I wouldn't think the War Chest is as Necessary as you might think.In your shoes, I would be looking to Jeff, and follow his path. You have a moving market. Should it hold up, and I think it will, it's just a matter of buying under value, and "Flipping"

With just one to three flips under your belt, I would hazard a guess that you will have more than you need to roll forward.

Now, I am imagining your market, but the Pacific North West is hot, and primed to Flip. Only you could know the exact details. Tons of People from CA are moving North to take advantage of your RE pricing. If there is any area in the Country that I think will continue and actually become more white hot, it is your Market along with NM and AZ. The Exodus from CA of people with a great amount of Capital to purchase (And not exactly knowing the going rate, so they spend too much) is going to drive those three markets.

With that in mind, I think you are in one of the best areas of the country to be in. I would certainly consider the concept of buy for appreciation in your market.

Once again, you know the specifics of your market, and I could be off base here as I am lumping you into the greater Pacific North West.
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Mike, You make it sound that "flippers" can only operate in appreciating markets.

That's not true.

Everyone can find a junker house and fix it up to look like one of the neighbors. If you can do it for 70-75% of the after repair value, you can "flip" for a profit.

(by the way, "flipping" has a bad connotation in Maryland due to scandals with bad mortgages years ago, so we prefer "buying wholesale, selling retail" or "rehabbing").

There are deals in EVERY market. Mike, you're a testament to that. I know you get deals below market all the time. Everyone can if they know how/where to look or who to ask or buy from.

Housing is a need across the country. Rundown houses are everywhere. Find one and fix it up, then sell. Repeat.

In a strong market, you may have fierce competition for deals (Maryland can get that way). I'm sure California, NYC and Seattle are like that as well. There is a place within an hour's drive that has deals of virtually anywhere in the US.

The "Trick" is to know what works best in your market. All techniques can work (renting, lease options, rehabs, etc.), but some may work better in some markets than others. Cleveland is a depressed market so there's little appreciation, but rentals seem to make sense there. York PA is similar. Maryland is a rehab and retail area. However if the market cools off and no one can afford to buy, lease options may start to be the cool thing to do.

Another example: "The Short Sale". This is when a homeowner has fallen behind on the mortgage and the mortgage company is pressing to foreclose. Sometimes you can negotiate with that company to buy the mortgage at a discount - "Shorting" the note - and getting a deal that might not have been there otherwise.

This works in areas like Mike's - flat values year over year. The mortgage from 2001 is about what the place is worth. Foreclosures cost finance companies 15-25% of the mortgage balance to do. So unless the property went up 30% in value since the note was written, they don't really want to foreclose.

In Maryland, we've gone up 20% year over year for at least 3 years. No way you can get a short sale (or it will be a bear to try).

 
Jeff/Bass/Mike - Thanks for all the comments and feedback, this is a great thread.

I've seen mention of various numbers to rate potential deals. Is there a way to list the factors or qualification that any real estate deal must meet in order for you to proceed...such as the 1% Rule.

Even if you would move forward with a deal that did not meet all your qualifications, what do you look at to rate a deal?

TIA
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Depends on your Goals. Jeff will give different advice here.I want to see $200.00 a unit per month. Cash Flow is King to me. I don't care about the Annual Figure. What can you do this month. My mind is locked into a single month.

Jeff is most likely locked into the overall deal.

Carlton Sheets will tell you to look at the Annual figure.

For me, what exactly am I going to do THIS month.

The 1% is a solid place to start, and likely works out. I am more at 1.2%, just where I run my numbers. I need month figures to buy groceries.

0.8% or 0.7% are most likely the figure used in a white hot market. Then again, if you are gaining $10K in value just by waiting in escrow, you can certainly afford to look at things differently.

If you want a better answer, what kind of a market are you in? Where does Mr. Blonde rest his head each night? I might be able to help more understanding that. I understand my Market, and to a greater extent, the Midwest. Outside of the Midwest, I can only make logical assumptions.

In a White Hot Market, I could see LOSING money on a month basis, wait two years, pull $60K out of the property, lose more money monthly, and repeat in a couple of years.

I have a buddy in Atlanta that does just that. He LOSES money on every deal, but refinance 7 properties a year pulling $50K on average out of each. His annual salary is some $300-350K. He can do that as long as the Market climbs. Been doing it for years.

Part I like best about his plan is that he robs the property of Value every two years, leaving NOTHING on the table to be sued for. That is one of the flaws in my program.

 
I've got a tenant in this property for a year, so I can't liquidate until then.
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Of course you can. Your Lease follows the property. Tenant rights apply. Tenant might not be very helpful, and could cost you a good buyer by being a pain in the backside.Serious here. If you want to Liquidate, sell it to your tenant. Go into it up and up with a Lease Option and unload it. Lease Options can still be abused, just go into it with the best of intentions, and don't be a weasel.

No clue why you would want to in a good market, but that is the easy way, and you avoid Realtor costs.

 
Potential first time homeowner here, looking for a little advice.

I've heard that first time homeowners can qualify for certain reduced interest rates and maybe some other things, but I don't know anything about this. Is that true?

Also, considering I have no experience with buying a house, do you think it'd be wise to use a buyers agent?

What interest rates should I be expecting to get, assuming I have good credit scores (720 or above)?

What are the deals with down payments on first time home purchases?

IF a house is listed at a certain price, is there any % I can generally expect to pay below that? Any general rule that houses are normally sold at X% under listing price, on average at least?

Any info would be helpful...TIA.

Edit: Also, I'm considering buying the house, and I guess it's called "subletting" where I rent out another one of the room to a couple of my friends. Is that something I should mention in the buying/loan process or should it not be mentioned at all? Will it complicate things? Is that sort of arrangement not allowed in certain types of home loans?
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The Wife is all over me, so I need to wrap up. Quoting this to bring it forward so I can comment later.
 
OK, I'm nowhere near as sophisticated about this stuff as you guys are, and I'm currently looking to buy a primary residence.  Wouldn't mind getting something I can renovate for a few months while I continue to live where I am, especially if it's going to give me significant capital appreciation. 

So I guess the questions are, what should one look for in a property that's going to be one's primary residence (aside from the obvious - what I like in a home).  It's likely that I'll hold onto this place for some time, but at the same time I want the potential for short term capital appreciation (currently single, who knows what I'm going to want in a home when I have a family/kids?). 

How does one find a good real estate agent?  Or is one even necessary?  How do I make it clear to the agent that I'm a "serious buyer" that he can work with?  How do I get the sweet deals before they get snapped up by a voracious market.  I know the cardinal rule in real estate is know your local market, but how does one LEARN the local market?
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A Buyers agent is FREE TO YOU. You would be foolish not to use one.
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How true is this? How "free" are they really? I mean, isn't the cost of the house going to be inflated to take into consideration the sellers Real Estate agent, as well as the buyers "buyers agent" if they use both?
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Unless you are talking FSBO, it is absolutely free.If the seller has already hired an Agent, they have already factored the cost of a buyers agent into the price. The 3% or 3.5% has already been factored in well before you even got into the process on this particular property.

You can use a buyers agent who should be working in your best interest, or you can use the sellers agent, who although there are rules in place to handle this, is working for the seller.

Even if it is a FSBO, if you don't know what you are doing, pay for the buyers agent.

 
Mike,

Fantastic work here.

Now I have a thought that may help YOU.

You're obviously a buy and hold, rent 'em guy.

Why not hold title in a company, move everything over to one (or more) LLCs, and talk to a local lender about a blanket loan?

Take 80% equity out of all of them (or more if they allow, but 80% should be cool), have them under one lender with cheap $$, and then have no mortgages under your name aside from your own property? They may even offer you a deal on that one (although not in the "blanket").

Structuring your ownership that way allows for blanket insurance policies and more legal protection. You're at 80% LTV, less equity that can be sued for (even less if you put a couple in an LLC at a time and have a few), and they are out of your name.

Portfolio lenders should be able to do that (local banks).

They would love to work with an investor like you, I'd have to believe.

Corporate structure would allow for more tax deductions (including company medical, car, insurance, etc.). An accountant would help you more, but you get the idea.

As for "if you get sued" - I know that you can only be sued for the assets of the entity. So if you think you might get sued on a property, mortgage it to the teeth (and own it OUT OF YOUR NAME). Then there's nothing the court can take.....

I've also heard another investor use the LLC name game. He names them odd things that you wouldn't want to sue, like "Sister Mary LLC" or "Children of the Blind LLC". Tacky, but he likes it.

Go in to a bank with a list of your assets and ask the commercial VP for a meeting or a loan package. You may wind up with a line of credit to go buy more....

 
I've been lurking in this great thread from day 1 and thought I would throw out our current situation:

38 years old, wife, two kids

We have an a contingent offer to buy G547766 for $173K Link to MLS

Not a great price but a little lesser home in same development sold for $176K this past summer.

Offer contingent on selling our home listed at $120-130K. We get 1% of the 173K because we listed with agent that is selling the home we want.

Its a simple "move up in house" issue. The market pretty soft here and we can't get our home sold. We have it listed with an agent who is marketing the heck out of it (cable, newspapers, open houses).

Our current home has $76K remaining on a 5%, fifteen-year mortgage. PITI of $1000. We currently are knocking off $400 from principle a month.

5% is pretty cheap money.

We currently only have about $10,000 in cash to play with. Should we try to rent our current home to keep the 5% money? I figure we could only rent it for $800/month so its a negative cash flow situation. I certainly wouldn't buy this place to rent out as an investor. Still, after considering 10-15% in vacancy and maintenance it might be worth it.

Downside is taxes go way up as its no longer owner-occupied. Also, the mortgage on new home would be $300 more a month since we would be putting less down. I think we should be able to swing the $600/month difference from what we are currently trying to accomplish. Credit scores just north of 800.

1. We would be paying $7200 year ($300 extra per month on home we are buying plus $300 negative cash flow on current home) for 13 years to own a $150,000 house assuming slight (2%) appreciation.

2. We have very little in retirement savings (20-30K).

3. No college savings for the kids yet.

4. Could be a way to have a little nestegg for when we retire.

5. Headache costs to rent out must be applied.

6. Depreciation has to be considered... no clue what this would net us.

7. Capital gains after 13 yar sale (or have to exchange if possible)

8. The same $600 a month would net $131,000 at 5% interest over a 13 year period Source

Not looking to become a RE investor but was wondering what others thought? Best way to attack this if advisable? TIA

 
I'd like to dig into this further (we touched on it before) from the buy and hold, go slow method as I can't seem to justify the LLC/corporation. I believe the yearly filing fee here is $250 plus start up expenses. If I have 20 properties in an LLC they are all open to attack unless I have 20 separate LLCs. I can't justify 1-2 months profit just to file a report with the state plus the time or accountant expense involved. Seems like that money would be better applied to a large umbrella policy and say sue away. Any good lease should limit your damages to incidents of willful negligence on your part.

I also don't see any tax benefits. I forget if it's an S or a C, but one leaves you open to double taxation while the other severely limits your deductions. As a sole proprietor (with or without an LLC), I still have all the tax advantages on my schedule C that I would have under a corporate structure. I've looked at this at the beginning of the last two years and have yet to find enough advantage to incorporate. Maybe someone can point out something I'm missing.

 
I'd like to dig into this further (we touched on it before) from the buy and hold, go slow method as I can't seem to justify the LLC/corporation. I believe the yearly filing fee here is $250 plus start up expenses. If I have 20 properties in an LLC they are all open to attack unless I have 20 separate LLCs. I can't justify 1-2 months profit just to file a report with the state plus the time or accountant expense involved. Seems like that money would be better applied to a large umbrella policy and say sue away. Any good lease should limit your damages to incidents of willful negligence on your part.

I also don't see any tax benefits. I forget if it's an S or a C, but one leaves you open to double taxation while the other severely limits your deductions. As a sole proprietor (with or without an LLC), I still have all the tax advantages on my schedule C that I would have under a corporate structure. I've looked at this at the beginning of the last two years and have yet to find enough advantage to incorporate. Maybe someone can point out something I'm missing.
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You can easily get wrapped around the axle on this one.PM me and I can ask my accountant or put you two via email together to see if we can't figure that one out. It is difficult to explain, I'm sure, and keeps the accountants busy. If I knew the answer, well, I'd still not be an accountant :) .

By the way, he specializes in RE investors.

The short answer is that he told me to "buy and hold" within an LLC structure, but "flip" in the C corp.

 
I've been lurking in this great thread from day 1 and thought I would throw out our current situation:

38 years old, wife, two kids

We have an a contingent offer to buy G547766 for $173K Link to MLS

Not a great price but a little lesser home in same development sold for $176K this past summer.

Offer contingent on selling our home listed at $120-130K. We get 1% of the 173K because we listed with agent that is selling the home we want.

Its a simple "move up in house" issue. The market pretty soft here and we can't get our home sold. We have it listed with an agent who is marketing the heck out of it (cable, newspapers, open houses).

Our current home has $76K remaining on a 5%, fifteen-year mortgage. PITI of $1000. We currently are knocking off $400 from principle a month.

5% is pretty cheap money.

We currently only have about $10,000 in cash to play with. Should we try to rent our current home to keep the 5% money? I figure we could only rent it for $800/month so its a negative cash flow situation. I certainly wouldn't buy this place to rent out as an investor. Still, after considering 10-15% in vacancy and maintenance it might be worth it.

Downside is taxes go way up as its no longer owner-occupied. Also, the mortgage on new home would be $300 more a month since we would be putting less down. I think we should be able to swing the $600/month difference from what we are currently trying to accomplish. Credit scores just north of 800.

1. We would be paying $7200 year ($300 extra per month on home we are buying plus $300 negative cash flow on current home) for 13 years to own a $150,000 house assuming slight (2%) appreciation.

2. We have very little in retirement savings (20-30K).

3. No college savings for the kids yet.

4. Could be a way to have a little nestegg for when we retire.

5. Headache costs to rent out must be applied.

6. Depreciation has to be considered... no clue what this would net us.

7. Capital gains after 13 yar sale (or have to exchange if possible)

8. The same $600 a month would net $131,000 at 5% interest over a 13 year period Source

Not looking to become a RE investor but was wondering what others thought? Best way to attack this if advisable? TIA
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Interesting scenario. If I base your depreciation on $120K at 27 years, you're talking a $370/ month tax advantage to add into your numbers. If that's the case, maybe you should consider renting your next home as home as ownership appears to be a huge liability in your market, especially if you're not going to stay there for 5+ years. 5% is cheap money that I'd be hard pressed to let go of. You should also base your calculations on a 30 year mortgage and your $300 negative cash flow goes away. Obviously you can't refi, but this $300 negative cash flow is in reality a $300 forced savings plan. Relative to the 1% rule, I calcualte you at just above 0.7% which is common in many markets. You can tread water here and if the new house is important to you and you shouldn't damage your financial position. Also that extra $300 a month on the new house may be cheap money if interest rates continue to rise.
 
For me, what exactly am I going to do THIS month.
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One of my favorite movies of all time is Glen Gary Glen Ross. And it's about selling investment real estate. Classic Al Pacino: "What am I going to do this MONTH?"

 
The short answer is that he told me to "buy and hold" within an LLC structure, but "flip" in the C corp.
Click to expand...
That's the exact answer my research gave me. As I add more properties, the cost of the LLC goes down. I know I need to do it as I'm starting to work with a partner and we need to keep personal and business assets clean.One thing is certain, being self-employed has given me a lot more respect for "evil corporations".

 
I've been lurking in this great thread from day 1 and thought I would throw out our current situation:

38 years old, wife, two kids

We have an a contingent offer to buy G547766 for $173K Link to MLS

Not a great price but a little lesser home in same development sold for $176K this past summer.

Offer contingent on selling our home listed at $120-130K. We get 1% of the 173K because we listed with agent that is selling the home we want.

Its a simple "move up in house" issue. The market pretty soft here and we can't get our home sold. We have it listed with an agent who is marketing the heck out of it (cable, newspapers, open houses).

Our current home has $76K remaining on a 5%, fifteen-year mortgage. PITI of $1000. We currently are knocking off $400 from principle a month.

5% is pretty cheap money.

We currently only have about $10,000 in cash to play with. Should we try to rent our current home to keep the 5% money? I figure we could only rent it for $800/month so its a negative cash flow situation. I certainly wouldn't buy this place to rent out as an investor. Still, after considering 10-15% in vacancy and maintenance it might be worth it.

Downside is taxes go way up as its no longer owner-occupied. Also, the mortgage on new home would be $300 more a month since we would be putting less down. I think we should be able to swing the $600/month difference from what we are currently trying to accomplish. Credit scores just north of 800.

1. We would be paying $7200 year ($300 extra per month on home we are buying plus $300 negative cash flow on current home) for 13 years to own a $150,000 house assuming slight (2%) appreciation.

2. We have very little in retirement savings (20-30K).

3. No college savings for the kids yet.

4. Could be a way to have a little nestegg for when we retire.

5. Headache costs to rent out must be applied.

6. Depreciation has to be considered... no clue what this would net us.

7. Capital gains after 13 yar sale (or have to exchange if possible)

8. The same $600 a month would net $131,000 at 5% interest over a 13 year period Source

Not looking to become a RE investor but was wondering what others thought? Best way to attack this if advisable? TIA
Click to expand...
First, that's a VERY good credit score. Max is 850 and you're close. North of 720 is A+.Thoughts:

Without knowing your market (I know you are trying to educate us some), but are there homes out there that are offering either a Lease/Option or some owner financing?

Some people cannot afford a home or have iffy credit. L/O and owner financing can help them out.

Some are victims of the FICO score system, but some are bums. Credit reports are cheap and REALLY cheap compared to what not having one can cost you.

If you sell a home Lease/Option, you get a Non-Refundable Option Consideration, or "NROC", that is usually 3-5% of the cost of the home. You also get a contract to sell it in a year or so at top dollar (for you I'd guess 140K).

You can write the lease such that you always have the right to inspect and should once a quarter if not more often. Defects found / not respecting the property can void the Lease and they lose the option to buy.

So you could get $6000 for someone to move in and "rent" your house for a year, get tax deductions from your "rental property" (which it would be considered), and you would sell and rent for top dollar.

Other option is the seller financing. You can offer to finance someone (who can't get their own mortgage) via a "wraparound mortgage" (you write a new mortgage that pays down your existing mortgage - you pocket the cash difference). You can also just owner finance the balance between what you owe and create a new second mortgage, or also offer to hold the 2nd mortgage for someone bringing in a new first mortgage.

Interest could be quite favorable for you. 10% interest on a 2nd mortgage isn't out of line, and if the 2nd is smaller than the first, the rate doesn't affect the buyer as hard. (Ex: First of $80K at 7%, Second of $40K at 10% works to be around 8%).

Any of these - get some $$ down - preferably 10%.

Here's something I just noticed.

You have a 15-year note.

You can refinance your property, pull out $$, and have a 30-year interest only loan. Even if you just pull $100K out at 5% that's $500 before tax and insurance. You could rent for a breakeven at that point.

Bottom line - you have options.

 
I asked about selling my house this way several pages ago, and was surprised at the reaction. Like it was a dishonest way to sell a house...still not sure the difference between Land Contract and lease option, but from the way you just described it, Lease Option was what I was describing and Mike thought it was a terrible idea. Perhaps we can talk about the pitfalls of L/O again.

 
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