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[avoiding injuries]

Tile Overview: Remove old flooring- this is the worst part of the whole job. When flooring is removed you lay down backer board(This is a cement board that comes 3x5 and is easy to cut to fit) with a layer of thinset underneath. Screw down backerboard and make sure you have a smoth, flat surface. Find center of the room and mark with chalk lines. This will give you four squares in the center. Using the same thinset lay your tiles using plastic spacers to keep tiles straight and sseperated evenly. Cut tiles to fit against the wall. This is pretty easy and the tile cutter I used cost under $20. Wait 24 hours and then grout(white paste that goes in between tiles). Wait 24 hours and put a sealer on your grout/tile.

 

[jeff_eaglz]

Ok Jeff, one more question.

I'm a newbie, part time real estate investor right now - just bought my third property, but want to get more involved. I realize that it's been easy pickings out there the last few years, and as we see opportunities dry up others will present themselves, but I'm not sure what that looks like.

One day I'd like to segue into this full time. . .can you talk about what had to happen before you could invest in RE full time?

One word - experience.There are two paths. One is to get enough cash flow from RE to supplant your monthly income so when you quit the day job, you can survive. That can be tougher if you make good $$ or have a lot of debt (or both).

Keep ALL costs in mind when you're ready to "jump" - including health insurance, 401K, etc. You can get a SIMPLE to replace the 401K plan and NASE or others can give you insurance (some RE clubs can also help with this).

The other is usually faster, but you need to get moving and push to get those first few years under your belt. You have to have all the pieces of the puzzle ready to go - money, title company, realtor, wholesalers, contractors, etc. It helps greatly to write a business plan to crystallize your thoughts for both yourself and future investors (and banks). Also shows that you are serious and treating this as a business (as you should) and not doing things ad hoc / off the cuff / by the seat of your pants.

I still work part time because I enjoy it, but this will probably be my last year at that.

But I'm adding commercial holdings throughout this year to have monthly income to add to my rehab properties (buy, fix, sell).

Hope that helps.

 

[jeff_eaglz]

What are your feelings on modular homes? Do you feel that they've caught up too and surpassed site built homes in quality? I often hear this, but usually from the mouths of the biased.

Good question. . .I really like the idea of a home without contractors.

Some are required though. For the foundation and hookups.It is definitely significantly less expensive to purchase a modular home and a piece of land, than to purchase a home that is already built on a comprable piece of land. Like 6 figures of less expensive.

I know you can go through a modular contractor and not worry about any of the details at all, but I don't know if that is similarly inexpensive as if you were your own GC.

This is something that I've contemplated for the past 9 months. Its tough to find an unbiased source though.

3 birds with one stone I hope here.Modular homes - just so we're all on the same page - are not MOBILE homes. (They really aren't very mobile, but that's another topic / post altogether).

MODULAR homes are built at a factory and trucked to a location. Many big builders are now going this way, and if you've ever driven by a group of townhouses and wonder how they went up so fast - that's why.

They come in sections / pieces built in the factory, and as such they are inspected and quality controlled at the factory before they are ever shipped. It saves builders costs via theft of materials (often happens) and time on the site to erect the home.

Pour a foundation /basement (properly done, right size, right prep - an art unto itself) and have the pieces delivered. Get it "dry" (closed, out of the elements - think of the house with a roof and 4 walls after assembly) and then finish the inside.

Costs vary, but a decent rule of thumb is that it costs about $60-70 a sq.ft. to build a house and $30-40 to "finish" (interior, plumbing, cabinets, counters, etc.). Modular costs about 40% of that to build and similar to finish. That works out to be $100/sq.ft to build normally, about $60ish for a modular. Cheaper and faster. Better quality. Controlled environment.

Modulars also don't need a crew of construction workers to show up each day to the site to make sure things are getting built correctly.

The technique has really improved and many will work with people to adjust floor plans and such (yes you can do multi-story). I have not personally done one, but fellow investors have.

Some buyers have a stigma with them, only because of ignorance IMO. They hear MODULAR and think double-wide / mobile home / trailer park.

Go check out a builder in your area and ask if it is modular. See if there's a difference to you.

 

[jeff_eaglz]

any info on real estate in New Mexico. My father-in-law is a real estate developer in Ireland and has had somer luck in FL and now he said he is driving to NM to look at land there (he mostly builds in golf course communities or multi-dwellings in college towns.

Sorry, I don't have any info on New Mexico.Drove through Albuquerque once - nice place.

Could be the next Arizona, but I don't pretend to know enough about it to ask.

There are RE clubs in NM though. Might want to ask there (or at CREonline).

 

[jeff_eaglz]

what's the deal with NC cabin properties? my parents have shown interest in them and now my wife has started looking round the net.

Personally I wouldn't invest in a niche-type house like a cabin. I stick to what the masses will likely like - "bread and butter" properties that are nice 3-4 BR, 2 Bath houses.Niches are harder to sell.

As for the houses for a personal residence - they have made great strides in building "faux" cabins that look like log cabins but have wall-like materials between the logs.

I don't have a link, but they are built modularly and look like log cabins. Cheaper way to go and a better product (less drafty, electrical / plumbing in the walls, etc.).

 

[jeff_eaglz]

Good stuff.. I'm waiting for permits to GC our home renovations and we have a few investments but, still need to learn a ton.

Can I ask - On the GC side, are there any real bargain places to get Windows, Doors, tile, lumber etc or do you just shop at locally and get the best price? I'd love go to a web site and order a bunch of Anderson windows at a deep discount - as I'm sure everyone would.

Best one-stop shops are found via local RE clubs. Seriously.I've saved a ton of money just through using recommended vendors found from there.

DirecBuy is a decent vendor, but they take a LONG time to get stuff.

Start at Home Depot / Lowes / 84 Lumber to find pricing of stuff, then start to push for cheaper products with other vendors found from contractors, RE clubs, and other local contacts.

Windows if I recall are around $100-180 installed, depending on type (single, double, etc.)

Aside - always replace windows on a rehab. Easier to do and that's the biggest source of issues with lead based paint (LBP) issues. Just walk through the place and count them up and multiply for your estimate.

 

[Flying V]

Aside - always replace windows on a rehab. Easier to do and that's the biggest source of issues with lead based paint (LBP) issues. Just walk through the place and count them up and multiply for your estimate.

Does this mean that you do not rehab homes less than 30 years old?

 

[no3putts]

I'm a real estate investor based in Maryland.

Any opportunities or underappreciated areas on the bay?

 

[(HULK)]

What can you tell me about this development in PG county?

National Harbor

 

[jeff_eaglz]

Aside - always replace windows on a rehab. Easier to do and that's the biggest source of issues with lead based paint (LBP) issues. Just walk through the place and count them up and multiply for your estimate.

Does this mean that you do not rehab homes less than 30 years old?

Baltimore has many over 100 years old, and I'll do them just fine.LBP isn't bad at all - more of an issue if you are fixing up existing conditions. On ones where you strip them down to the brick / stone / studs, LBP doesn't matter.

LBP has become an industry until itself - they have LBP mitigators and abatement specialists.

If you encase the windows and fix any peeling paint, that's 90% of the job.

 

[jeff_eaglz]

I'm a real estate investor based in Maryland.

Any opportunities or underappreciated areas on the bay?

I assume you mean the Chesapeake?Eastern shore will be going up over time at a more rapid rate than the Annapolis side.

Unfortunately there's no Eastern Shore RE clubs that I know of. That's a shame - both OC and Salisbury are growing fast. I hear good things about Denton and Easton as well.

The more rural you are, the more likely you are to appreciate (over time) in Maryland. The space in Maryland is finite, and the central part of the state (Baltimore to DC to Frederick) will be fused / completely sold out within about 10 years. Then there's no choice but to expand outward.

I cannot just rattle off a community on the bay that's cheap. Even Deal (below Annapolis) is getting bought up rapidly (or already has).

As you can see just in the first 2 pages of this thread, there are lots of localized investment pockets of Maryland. The Eastern Shore is (relatively) untapped, but the people are coming. If that's about where you want to be, grab something near a semi-big place (like Easton) and run with it.

I'm generalizing now - along the Bay I like Essex and anything in Harford / Cecil counties.

 

[jeff_eaglz]

What can you tell me about this development in PG county?

National Harbor

First I've seen this community.Looks like a mini-Columbia. Great location for convenience, but we all know how arduous that Capital Beltway can be (and the Woodrow Wilson Bridge).

Probably won't be cheap but looks like it would be a nice location. I don't know what else is going on there right now, but I'd check the train station availability and also what else is going in nearby. The convention center looks like a good addition.

This reminds me of Camden, NJ's waterfront project (Trenton as well).

 

[Ten Yard Fight]

Jeff, thanks for doing this. Do you sell homes on contract? I have seen some of these deals done and they look sweet. I have a modest 3BR/2BATH and I don't have much equity. If I'm able to upgrade in a couple of years, I might like to sell this one on contract. The way I understand it is that the buyer often does not complete the sale. You keep his down payment and monthly payments. I also understand that you structure the deal so that if he does complete the sale after the allotted time, you still do fine. Is my basic understanding correct? What more should I know?

 

[Flying V]

Aside - always replace windows on a rehab.  Easier to do and that's the biggest source of issues with lead based paint (LBP) issues.  Just walk through the place and count them up and multiply for your estimate.

Does this mean that you do not rehab homes less than 30 years old?

Baltimore has many over 100 years old, and I'll do them just fine.LBP isn't bad at all - more of an issue if you are fixing up existing conditions. On ones where you strip them down to the brick / stone / studs, LBP doesn't matter.

LBP has become an industry until itself - they have LBP mitigators and abatement specialists.

If you encase the windows and fix any peeling paint, that's 90% of the job.

The reason I asked is that because LBP hasn't been used since 1978, it wouldn't be an issue on homes built since then. I recently rehabed a home built in 1980, and the windows were in very good condition. They were still single pane, but I didn't feel I could recover the cost of replacing them.Actually, my attitude towards rehabs has changed drastically since I started doing them three years ago. In my limited experience (five homes), the difference in profit margin between rehabing and just flipping a home without pumping any money into it has been pretty small.

The only reason I made out better on the rehabs was because I was able to do most of the work myself. The $40/hr that I paid myself (rather than a contractor) was then taxed as capital gains instead of regular income.

The market in my area has been pretty dead since the end of October. I'm thinking the best oppurtunity for me right now is to buy lots and sit on them until April. Have you any experience with that?

 

[BassNBrew]

what's the deal with NC cabin properties?  my parents have shown interest in them and now my wife has started looking round the net.

Personally I wouldn't invest in a niche-type house like a cabin. I stick to what the masses will likely like - "bread and butter" properties that are nice 3-4 BR, 2 Bath houses.Niches are harder to sell.

As for the houses for a personal residence - they have made great strides in building "faux" cabins that look like log cabins but have wall-like materials between the logs.

I don't have a link, but they are built modularly and look like log cabins. Cheaper way to go and a better product (less drafty, electrical / plumbing in the walls, etc.).

First rule of thumb...Real Estate is local in nature.In Charlotte appreciation in housing has been virtually nil in most areas. That means "bread and butter" properties. You can also still build in the $70-$80 sf range...finished! An acquaintance of mine just sold a "niche" property for $400,000 that she purchased for $80,000 2.5 years ago.

Jeff...I'm getting a lot of value out of most of your posts, but I think sticking to the nuts and bolts of how to would be a better service as your market is not representitive of the country as a whole. I work with a lot of NE investors losing their rear ends in this market because they're apply they're expecting their NE history to be applicable in the south.

 

[jeff_eaglz]

Jeff, thanks for doing this. Do you sell homes on contract? I have seen some of these deals done and they look sweet. I have a modest 3BR/2BATH and I don't have much equity. If I'm able to upgrade in a couple of years, I might like to sell this one on contract.

The way I understand it is that the buyer often does not complete the sale. You keep his down payment and monthly payments. I also understand that you structure the deal so that if he does complete the sale after the allotted time, you still do fine. Is my basic understanding correct? What more should I know?

I believe you have two different things mixed up.Let's sort them out.

1. Owner financing. If you sell your house and keep the mortgage note ("note"), you are selling the house with owner financing. If there is no other debt on the house, you can do owner financing completely (not saying 100% owner financing) and hold a first mortgage. You get the payments and once the note is fully paid, they get the deed.

2. Wrap-around mortgage. This is probably what you're thinking of here. You write a new mortgage between you and the new buyer, and they pay you as if you were doing the full owner financing. You, in turn, make payments on the original mortgage. Once the first mortgage is extinguished, you still collect payments until that second agreement is satisfied. Then the new owner gets the deed.

Wraps aren't very common, but they do happen. You must get paid more for the wrap than the underlying payment (i.e. 1500 a month on the wrap to pay the 1350 original payment) so there's benefit to you.

Either way, you should most likely try and get a good sized deposit.

If your new buyer has decent credit there shouldn't be a need to sell your primary residence this way.

 

[jeff_eaglz]

Jeff...I'm getting a lot of value out of most of your posts, but I think sticking to the nuts and bolts of how to would be a better service as your market is not representitive of the country as a whole. I work with a lot of NE investors losing their rear ends in this market because they're apply they're expecting their NE history to be applicable in the south.

Thanks - point taken. Never meant to try to put an umbrella over all the country. There's markets close to me I'm not involved in so I wouldn't speak to them either.If I know something definitive I'll comment, but I'll try to focus on the nuts and bolts.

 

[GregStarling]

know anything about Oklahoma (esp. Oklahoma City/Edmond)?

 

[jeff_eaglz]

know anything about Oklahoma (esp. Oklahoma City/Edmond)?

Nope. See above.

 

[Ten Yard Fight]

I'll be more clear about what I know, or think I know.1.) I believe this method IS targeted toward buyers that have difficulty getting a traditional mortgage.2.) A downpayment is collected, in this case, about 1%. 3.) Monthly Payments slightly higher than market rent are collected4.) A portion of the monthly rent is set aside toward the eventual purchase of the home.5.) There is a time period agreed upon during which the buyer can complete the purchase for the orginal sale price minus his down payment and monthly payments.6.) Great for buyer because it is better than renting, if you complete the sale. Making timely payments on this house for a year or more helps greatly in the eventual mortgage application process. Often the mortgage payment will be lower than what the buyer has been paying, and has shown the ability to pay.7.) Great for the seller because he either gets his (inflated I think) asking price, or he keeps the buyer's down payment and inflated monthly payments.The only first-hand perspective I have of this is two friends who have BOUGHT houses this way due to credit issues. One has already complete the purchase, just a few months after entering into the contract to lease to own.

 

[Ten Yard Fight]

I almost forgot: Better for the seller than renting because your tenant takes better care of the property because they are working towards owning it.

 

[jeff_eaglz]

I'll be more clear about what I know, or think I know.

1.) I believe this method IS targeted toward buyers that have difficulty getting a traditional mortgage.

2.) A downpayment is collected, in this case, about 1%.

3.) Monthly Payments slightly higher than market rent are collected

4.) A portion of the monthly rent is set aside toward the eventual purchase of the home.

5.) There is a time period agreed upon during which the buyer can complete the purchase for the orginal sale price minus his down payment and monthly payments.

6.) Great for buyer because it is better than renting, if you complete the sale. Making timely payments on this house for a year or more helps greatly in the eventual mortgage application process. Often the mortgage payment will be lower than what the buyer has been paying, and has shown the ability to pay.

7.) Great for the seller because he either gets his (inflated I think) asking price, or he keeps the buyer's down payment and inflated monthly payments.

The only first-hand perspective I have of this is two friends who have BOUGHT houses this way due to credit issues. One has already complete the purchase, just a few months after entering into the contract to lease to own.

That's a lease option.And it is more like 3-5% for the deposit - which is called an "NROC" - Non Refundable Option Consideration.

70% of the time lease options aren't triggered (they don't buy) so you keep the NROC. Nice problem to have - either sell for top dollar or get the house back to lease option again.

Note: Common abbreviation is L/O.

 

[Reaper]

I work with a lot of NE investors losing their rear ends in this market because they're apply they're expecting their NE history to be applicable in the south.

Can we here more about "Losing your shirt"?I'd think the best way to lose your shirt would be on a Pre-construction or anything else you are looking to flip fast.....

Would love to here a few real life losing scenarios and where they went wrong...

 

[Ten Yard Fight]

I'll be more clear about what I know, or think I know.

1.) I believe this method IS targeted toward buyers that have difficulty getting a traditional mortgage.

2.) A downpayment is collected, in this case, about 1%.

3.) Monthly Payments slightly higher than market rent are collected

4.) A portion of the monthly rent is set aside toward the eventual purchase of the home.

5.) There is a time period agreed upon during which the buyer can complete the purchase for the orginal sale price minus his down payment and monthly payments.

6.) Great for buyer because it is better than renting, if you complete the sale. Making timely payments on this house for a year or more helps greatly in the eventual mortgage application process. Often the mortgage payment will be lower than what the buyer has been paying, and has shown the ability to pay.

7.) Great for the seller because he either gets his (inflated I think) asking price, or he keeps the buyer's down payment and inflated monthly payments.

The only first-hand perspective I have of this is two friends who have BOUGHT houses this way due to credit issues. One has already complete the purchase, just a few months after entering into the contract to lease to own.

That's a lease option.And it is more like 3-5% for the deposit - which is called an "NROC" - Non Refundable Option Consideration.

70% of the time lease options aren't triggered (they don't buy) so you keep the NROC. Nice problem to have - either sell for top dollar or get the house back to lease option again.

Note: Common abbreviation is L/O.

Thanks for the clarification. So you think that's a good way to sell / acquire your first tenant?

 

[ffjunk]

what's the deal with NC cabin properties?  my parents have shown interest in them and now my wife has started looking round the net.

Personally I wouldn't invest in a niche-type house like a cabin. I stick to what the masses will likely like - "bread and butter" properties that are nice 3-4 BR, 2 Bath houses.Niches are harder to sell.

As for the houses for a personal residence - they have made great strides in building "faux" cabins that look like log cabins but have wall-like materials between the logs.

I don't have a link, but they are built modularly and look like log cabins. Cheaper way to go and a better product (less drafty, electrical / plumbing in the walls, etc.).

First rule of thumb...Real Estate is local in nature.In Charlotte appreciation in housing has been virtually nil in most areas. That means "bread and butter" properties. You can also still build in the $70-$80 sf range...finished! An acquaintance of mine just sold a "niche" property for $400,000 that she purchased for $80,000 2.5 years ago.

Jeff...I'm getting a lot of value out of most of your posts, but I think sticking to the nuts and bolts of how to would be a better service as your market is not representitive of the country as a whole. I work with a lot of NE investors losing their rear ends in this market because they're apply they're expecting their NE history to be applicable in the south.

The rate of return not too good there? How about Myrtle beach condos? Looking to invest in one but do want a good return in about 8-10 yrs.

 

[jeff_eaglz]

I'll be more clear about what I know, or think I know.

1.) I believe this method IS targeted toward buyers that have difficulty getting a traditional mortgage.

2.) A downpayment is collected, in this case, about 1%.

3.) Monthly Payments slightly higher than market rent are collected

4.) A portion of the monthly rent is set aside toward the eventual purchase of the home.

5.) There is a time period agreed upon during which the buyer can complete the purchase for the orginal sale price minus his down payment and monthly payments.

6.) Great for buyer because it is better than renting, if you complete the sale. Making timely payments on this house for a year or more helps greatly in the eventual mortgage application process. Often the mortgage payment will be lower than what the buyer has been paying, and has shown the ability to pay.

7.) Great for the seller because he either gets his (inflated I think) asking price, or he keeps the buyer's down payment and inflated monthly payments.

The only first-hand perspective I have of this is two friends who have BOUGHT houses this way due to credit issues. One has already complete the purchase, just a few months after entering into the contract to lease to own.

That's a lease option.And it is more like 3-5% for the deposit - which is called an "NROC" - Non Refundable Option Consideration.

70% of the time lease options aren't triggered (they don't buy) so you keep the NROC. Nice problem to have - either sell for top dollar or get the house back to lease option again.

Note: Common abbreviation is L/O.

Thanks for the clarification. So you think that's a good way to sell / acquire your first tenant?

It isn't a bad option at all - provided that the payments cover your mortgage.Just understand that if you go to buy another place, that mortgage will be listed as an unpaid installment loan / mortgage on your credit, and you'll have to show the lease to any lenders. They will only give you 75% credit of the rent against the payments (they account like this - 10% management, 10% repairs, 5% vacancy).

 

[jeff_eaglz]

Bump for the night crowd.Back later tonight / tomorrow to keep this rolling.

 

[Mike Anderson]

Earlier you mentioned buying a fixer upper for $50,000 in a neighborhood selling houses for $200,000. I don't think that will ever happen. The land alone is worth more than that. Here in Mass. people will buy a fixer upper for $300,000+ and TEAR IT DOWN and build a new house. But if anyone can get a fixer upper for 50,000 in a neigborhhod selling at 200,000- hurry up and do it.

Also, good advice on selling by owner. We did that. Had an open house on a Sunday from 1-4. Had over 50 people and 5 offers. Pricing it right is the key. Overpricing and people will feel you are trying to rip them off and won't come back.

Perhaps his mumbers were inflated? I don't know his market, but I can buy Fixer uppers at 25% of market with somewhat regularity.

 

[Mike Anderson]

Question about mortgages:

If you don't have a 20% down payment, is it common for mortgage companies to require PMI until you have paid 20% of the house off?

If so, is it cheaper to take a second loan to supplement the down payment upfront?

You can go non-conforming. I go non-conforming with Wells Fargo for many loans. 10% down and no PMI under any circulmstance with the Non-Conforming program they are currently running.

 

[Mike Anderson]

Earlier you mentioned buying a fixer upper for $50,000 in a neighborhood selling houses for $200,000.  I don't think that will ever happen.  The land alone is worth more than that.  Here in Mass. people will buy a fixer upper for $300,000+ and TEAR IT DOWN and build a new house.  But if anyone can get a fixer upper for 50,000 in a neigborhhod selling at 200,000- hurry up and do it.

Also, good advice on selling by owner.  We did that.  Had an open house on a Sunday from 1-4.  Had over 50 people and 5 offers.  Pricing it right is the key.  Overpricing and people will feel you are trying to rip them off and won't come back.

For the record, I just bought a duplex in Maryland for $55K in November. Needs $70K of work.After repair value is $200K+.

Happens all the time.

Agreed, I bought 14 properties in 2005 at under half market value after the rehab was complete.

 

[Mike Anderson]

Earlier you mentioned buying a fixer upper for $50,000 in a neighborhood selling houses for $200,000.  I don't think that will ever happen.  The land alone is worth more than that.  Here in Mass. people will buy a fixer upper for $300,000+ and TEAR IT DOWN and build a new house.  But if anyone can get a fixer upper for 50,000 in a neigborhhod selling at 200,000- hurry up and do it.

Also, good advice on selling by owner.  We did that.  Had an open house on a Sunday from 1-4.  Had over 50 people and 5 offers.  Pricing it right is the key.  Overpricing and people will feel you are trying to rip them off and won't come back.

For the record, I just bought a duplex in Maryland for $55K in November. Needs $70K of work.After repair value is $200K+.

Happens all the time.

Mostly because a good portion of people don't know it's there or don't want to have to deal with the contractors to get the work done. Being your own GC is about the world's biggest pain in the butt, even more so if you're new at it and the subs know it.

I GC all my Jobs. It's my full time occupation now.

 

[Mike Anderson]

If anyone is selling their home soon and want a quick and somewhat easy way to increase the value, I recommend putting in ceramic tile. It's an old saying that the kitchen sells the home, and this is a great way to remodle the kitchen at a somewhat low price.

I did mine last week. It took me a total of about 15-20 hours of work and cost about $300 for tile, tools, supplies etc.(10x10) I had never done tiling before, but it's pretty simple. I attended a 30min seminar at Home Depot and was on my way. I'm guessing for the $300 investment(plus labor), I increased my home value a couple k.

I would agree, although I have found that the effort vs ease of renting and the tenant's "Wow" factor is not a fair trade off for Ceramic in a rental.I still put Ceramic everywhere as I don't want to bother with it for decades, but it just isn't noticed like you would think in a rental from my experience.

 

[Flying V]

Earlier you mentioned buying a fixer upper for $50,000 in a neighborhood selling houses for $200,000.  I don't think that will ever happen.  The land alone is worth more than that.  Here in Mass. people will buy a fixer upper for $300,000+ and TEAR IT DOWN and build a new house.  But if anyone can get a fixer upper for 50,000 in a neigborhhod selling at 200,000- hurry up and do it.

Also, good advice on selling by owner.  We did that.  Had an open house on a Sunday from 1-4.  Had over 50 people and 5 offers.  Pricing it right is the key.  Overpricing and people will feel you are trying to rip them off and won't come back.

For the record, I just bought a duplex in Maryland for $55K in November. Needs $70K of work.After repair value is $200K+.

Happens all the time.

Agreed, I bought 14 properties in 2005 at under half market value after the rehab was complete.

That's amazing! I go to sheriff's sales and auctions all the time, and deals like that are few and far between in my area. I must be scoping out the wrong locations.

 

[Mike Anderson]

Good stuff.. I'm waiting for permits to GC our home renovations and we have a few investments but, still need to learn a ton.

Can I ask - On the GC side, are there any real bargain places to get Windows, Doors, tile, lumber etc or do you just shop at locally and get the best price? I'd love go to a web site and order a bunch of Anderson windows at a deep discount - as I'm sure everyone would.

Go and check out your local Habit for Humanity site. Who knows what you will find on a week to week basis, but you will most often be shocked at what you can find. As long as you can make some changes to your frame in size you can steal windows.I always look for large sheets of linoleum. When you can find a 15x12 piece for $20.00, you know you've had a great day.

 

[Mike Anderson]

I'm a real estate investor based in Maryland.

Any opportunities or underappreciated areas on the bay?

Might??? be a place to start???http://www.cecil-landlords.org/

 

[Mike Anderson]

Jeff, thanks for doing this. Do you sell homes on contract? I have seen some of these deals done and they look sweet. I have a modest 3BR/2BATH and I don't have much equity. If I'm able to upgrade in a couple of years, I might like to sell this one on contract.

The way I understand it is that the buyer often does not complete the sale. You keep his down payment and monthly payments. I also understand that you structure the deal so that if he does complete the sale after the allotted time, you still do fine. Is my basic understanding correct? What more should I know?

That the damage to your property from the Failed Land Contract/Tenant will be extensive.

 

[Mike Anderson]

Jeff...I'm getting a lot of value out of most of your posts, but I think sticking to the nuts and bolts of how to would be a better service as your market is not representitive of the country as a whole. I work with a lot of NE investors losing their rear ends in this market because they're apply they're expecting their NE history to be applicable in the south.

Bass is all over this one.

 

[Mike Anderson]

I almost forgot: Better for the seller than renting because your tenant takes better care of the property because they are working towards owning it.

From my experience, this is an Incorrect statement.

 

[Mike Anderson]

Earlier you mentioned buying a fixer upper for $50,000 in a neighborhood selling houses for $200,000.  I don't think that will ever happen.  The land alone is worth more than that.  Here in Mass. people will buy a fixer upper for $300,000+ and TEAR IT DOWN and build a new house.  But if anyone can get a fixer upper for 50,000 in a neighborhood selling at 200,000- hurry up and do it.

Also, good advice on selling by owner.  We did that.  Had an open house on a Sunday from 1-4.  Had over 50 people and 5 offers.  Pricing it right is the key.  Overpricing and people will feel you are trying to rip them off and won't come back.

For the record, I just bought a duplex in Maryland for $55K in November. Needs $70K of work.After repair value is $200K+.

Happens all the time.

Agreed, I bought 14 properties in 2005 at under half market value after the rehab was complete.

That's amazing! I go to sheriff's sales and auctions all the time, and deals like that are few and far between in my area. I must be scoping out the wrong locations.

EVERYONE is at the Sheriff's sale and auctions. It used to be me and the bank on the courthouse steps. Now there are 50 "Investors" standing there thinking they are going to steal something.Find the homes yourself. Find the property you want, head down to the City/County building, find the owner. Head over to the Tax office, and figure out their home address.

Sit in on the Neighborhood Code enforcement review board and listen to Landlord after Landlord plead his case how he is out of money and needs to sell. If it is on a street you are interested in, catch him as he walks out. He will give you the property just to stop the daily fines. (I actually had a duplex that I later had appraised at $90K given to me for $5,600.00 so it would no longer be in his name, and the Code Enforcement Arrest warrant would be lifted.)

Find an aggressive RE Agent, or better yet a BROKER to work with. Let EVERY RE Professional that you come into contact with know that you are looking for a deal, that you are capable and ready to buy if they put the right deal in your lap. That Agent is going to love not having to advertise, and many times you see things before they hit the MLS. Your offer is in place and working before the listing comes out.

Talk you your accountant. He knows which of his clients has Real Estate and is pushing 70 years old. Have him set up a meeting, or at least get you in contact. At this point in their life (70 or so) they property is paid off, and they are less likely to care what they receive to get rid of the headache as they just can't get around like they used to.

There are tons of ways to be the only guy in the game. You don't want to be one of 50 guys down at the Courthouse steps.

 

[BassNBrew]

Jeff, thanks for doing this. Do you sell homes on contract?  I have seen some of these deals done and they look sweet.  I have a modest 3BR/2BATH and I don't have much equity.  If I'm able to upgrade in a couple of years, I might like to sell this one on contract. 

The way I understand it is that the buyer often does not complete the sale.  You keep his down payment and monthly payments.  I also understand that you structure the deal so that if he does complete the sale after the allotted time, you still do fine.  Is my basic understanding correct?  What more should I know?

I believe you have two different things mixed up.Let's sort them out.

1. Owner financing. If you sell your house and keep the mortgage note ("note"), you are selling the house with owner financing. If there is no other debt on the house, you can do owner financing completely (not saying 100% owner financing) and hold a first mortgage. You get the payments and once the note is fully paid, they get the deed.

2. Wrap-around mortgage. This is probably what you're thinking of here. You write a new mortgage between you and the new buyer, and they pay you as if you were doing the full owner financing. You, in turn, make payments on the original mortgage. Once the first mortgage is extinguished, you still collect payments until that second agreement is satisfied. Then the new owner gets the deed.

Wraps aren't very common, but they do happen. You must get paid more for the wrap than the underlying payment (i.e. 1500 a month on the wrap to pay the 1350 original payment) so there's benefit to you.

Either way, you should most likely try and get a good sized deposit.

If your new buyer has decent credit there shouldn't be a need to sell your primary residence this way.

One more thing to add...know your state real estate laws!!!In NC, a lease option is not a valid contract unless it's recorded. A lease purchase should have a valid sales contract tied to it. Lease option and lease purchases are two different things. Oral contracts may not be valid. Note, this could be different in other states.

 

[BassNBrew]

Jeff...I'm getting a lot of value out of most of your posts, but I think sticking to the nuts and bolts of how to would be a better service as your market is not representitive of the country as a whole.  I work with a lot of NE investors losing their rear ends in this market because they're apply they're expecting their NE history to be applicable in the south.

Thanks - point taken. Never meant to try to put an umbrella over all the country. There's markets close to me I'm not involved in so I wouldn't speak to them either.If I know something definitive I'll comment, but I'll try to focus on the nuts and bolts.

I didn't think you were meaning to do that, but I thought some people were intrepreting your posts this way. Great thread idea and please keep it up as I'm learning from this thread.

 

[BassNBrew]

I'll be more clear about what I know, or think I know.

1.)  I believe this method IS targeted toward buyers that have difficulty getting a traditional mortgage.

2.) A downpayment is collected, in this case, about 1%. 

3.) Monthly Payments slightly higher than market rent are collected

4.) A portion of the monthly rent is set aside toward the eventual purchase of the home.

5.) There is a time period agreed upon during which the buyer can complete the purchase for the orginal sale price minus his down payment and monthly payments.

6.) Great for buyer because it is better than renting, if you complete the sale.  Making timely payments on this house for a year or more helps greatly in the eventual mortgage application process.  Often the mortgage payment will be lower than what the buyer has been paying, and has shown the ability to pay.

7.)  Great for the seller because he either gets his (inflated I think) asking price, or he keeps the buyer's down payment and inflated monthly payments.

The only first-hand perspective I have of this is two friends who have BOUGHT houses this way due to credit issues.  One has already complete the purchase, just a few months after entering into the contract to lease to  own.

That's a lease option.And it is more like 3-5% for the deposit - which is called an "NROC" - Non Refundable Option Consideration.

70% of the time lease options aren't triggered (they don't buy) so you keep the NROC. Nice problem to have - either sell for top dollar or get the house back to lease option again.

Note: Common abbreviation is L/O.

One additional take on this...I've seen even fewer of these lease options works. Potentially a great moneymaker for an investor that wants to legally take advantage of people. Personally (these are my own personal ethics) I would facilitate this type of contract unless it's a potential win-win situation for both parties. If after reviewing the buyer's credit I feel like they don't have a chance in hell of making the purchase, I won't be a party to the contract. Not casting stones at others, I just prefer to build my business in a different way.

 

[Mike Anderson]

I'll be more clear about what I know, or think I know.

1.)  I believe this method IS targeted toward buyers that have difficulty getting a traditional mortgage.

2.) A downpayment is collected, in this case, about 1%. 

3.) Monthly Payments slightly higher than market rent are collected

4.) A portion of the monthly rent is set aside toward the eventual purchase of the home.

5.) There is a time period agreed upon during which the buyer can complete the purchase for the orginal sale price minus his down payment and monthly payments.

6.) Great for buyer because it is better than renting, if you complete the sale.  Making timely payments on this house for a year or more helps greatly in the eventual mortgage application process.  Often the mortgage payment will be lower than what the buyer has been paying, and has shown the ability to pay.

7.)  Great for the seller because he either gets his (inflated I think) asking price, or he keeps the buyer's down payment and inflated monthly payments.

The only first-hand perspective I have of this is two friends who have BOUGHT houses this way due to credit issues.  One has already complete the purchase, just a few months after entering into the contract to lease to  own.

That's a lease option.And it is more like 3-5% for the deposit - which is called an "NROC" - Non Refundable Option Consideration.

70% of the time lease options aren't triggered (they don't buy) so you keep the NROC. Nice problem to have - either sell for top dollar or get the house back to lease option again.

Note: Common abbreviation is L/O.

One additional take on this...I've seen even fewer of these lease options works. Potentially a great moneymaker for an investor that wants to legally take advantage of people. Personally (these are my own personal ethics) I would facilitate this type of contract unless it's a potential win-win situation for both parties. If after reviewing the buyer's credit I feel like they don't have a chance in hell of making the purchase, I won't be a party to the contract. Not casting stones at others, I just prefer to build my business in a different way.

As always in a RE thread, completely agree with Bass. Land Contracts are a lose/lose for both parties at the end of the day from my experience. There are some extremely shady characters out there that prey on buyers who never had a chance in these dealings. I personally don't really ever trust those who sell homes in this fashion.From there, the Owners generally has an unholy mess to contend with once they get possession back.

 

[Mike Anderson]

Jeff... Great thread idea and please keep it up as I'm learning from this thread.

Absolutely, keep running with that ball.

 

[BassNBrew]

  I work with a lot of NE investors losing their rear ends in this market because they're apply they're expecting their NE history to be applicable in the south.

Can we here more about "Losing your shirt"?I'd think the best way to lose your shirt would be on a Pre-construction or anything else you are looking to flip fast.....

Would love to here a few real life losing scenarios and where they went wrong...

I'm seeing these NE and Florida investors pouring into the market because they can buy 3 or 4 investment properties for what one would cost in their area. For example, 3 bdrm / 2.5 ba, 1500 sf townhome for under $110. Of course they deal directly with the builder's agents thinking they're going to save a dime and this agent gives them some story about how the unit will rent for $1200 a month (probably what they are renting back their model for each month). After the purchase, they call me to rent the unit for them. The real market price is between $750 - $800 and the community is saturated with vacancies as the builder has sold numerous properties to investors. Most are eventually OK with this as they've done a 3 yr interest only arm that carries a total payment where they're only slightly out of pocket. Problem is, they're banking on the 20% appreciation they've seen in their home market. A year later when they ask for a market analysis, they're shcoked that the property hasn't appreciated a dime and no one would want it anyway as new units are selling for the same price. Moral of the story, not all areas appreciate, even "growth markets".

 

[BassNBrew]

what's the deal with NC cabin properties?  my parents have shown interest in them and now my wife has started looking round the net.

Personally I wouldn't invest in a niche-type house like a cabin. I stick to what the masses will likely like - "bread and butter" properties that are nice 3-4 BR, 2 Bath houses.Niches are harder to sell.

As for the houses for a personal residence - they have made great strides in building "faux" cabins that look like log cabins but have wall-like materials between the logs.

I don't have a link, but they are built modularly and look like log cabins. Cheaper way to go and a better product (less drafty, electrical / plumbing in the walls, etc.).

First rule of thumb...Real Estate is local in nature.In Charlotte appreciation in housing has been virtually nil in most areas. That means "bread and butter" properties. You can also still build in the $70-$80 sf range...finished! An acquaintance of mine just sold a "niche" property for $400,000 that she purchased for $80,000 2.5 years ago.

Jeff...I'm getting a lot of value out of most of your posts, but I think sticking to the nuts and bolts of how to would be a better service as your market is not representitive of the country as a whole. I work with a lot of NE investors losing their rear ends in this market because they're apply they're expecting their NE history to be applicable in the south.

The rate of return not too good there? How about Myrtle beach condos? Looking to invest in one but do want a good return in about 8-10 yrs.

I couldn't make an educated recommendation. I will say the NC coast has been extremely hot and is up 2x to 4x in the last 5 years as people flock from the hurricanes in Florida. Myself, I'd be very wary as I'm conservative by nature and can't afford a bad apple at this point in time. There could be huge gains left or the market could be peaking. Lord help you if a hurricane rips through there. Personally, I'd be looking for the next growth area where I could enter into the bottom end and that would have limited downside. This is a strictly a personal decision and you need to do your own due dilgence. I can't emphasis the importance of getting multiple opinions.

 

[Flying V]

Sit in on the Neighborhood Code enforcement review board and listen to Landlord after Landlord plead his case how he is out of money and needs to sell. If it is on a street you are interested in, catch him as he walks out. He will give you the property just to stop the daily fines. (I actually had a duplex that I later had appraised at $90K given to me for $5,600.00 so it would no longer be in his name, and the Code Enforcement Arrest warrant would be lifted.)

Until very recently, nobody was much interested in enforcing codes and zoning laws in my area. In fact, the last house I rehabed I didn't even bother getting a permit! Some shady contractors from out of state have opened peoples eyes lately though, and now it's a hot topic at the borough and township meetings.That's what makes your advice so good for me, though. Just in time for me to be one of the first to act on it. Thanks!

 

[BassNBrew]

Earlier you mentioned buying a fixer upper for $50,000 in a neighborhood selling houses for $200,000.  I don't think that will ever happen.  The land alone is worth more than that.  Here in Mass. people will buy a fixer upper for $300,000+ and TEAR IT DOWN and build a new house.  But if anyone can get a fixer upper for 50,000 in a neigborhhod selling at 200,000- hurry up and do it.

Also, good advice on selling by owner.  We did that.  Had an open house on a Sunday from 1-4.  Had over 50 people and 5 offers.  Pricing it right is the key.  Overpricing and people will feel you are trying to rip them off and won't come back.

For the record, I just bought a duplex in Maryland for $55K in November. Needs $70K of work.After repair value is $200K+.

Happens all the time.

Agreed, I bought 14 properties in 2005 at under half market value after the rehab was complete.

Wow, great job.Any tips on when to sell v. when to rent. In this market, low end properties have the best income return while the upper end have better appreciation.

 

[BassNBrew]

If anyone is selling their home soon and want a quick and somewhat easy way to increase the value, I recommend putting in ceramic tile.  It's an old saying that the kitchen sells the home, and this is a great way to remodle the kitchen at a somewhat low price. 

I did mine last week.  It took me a total of about 15-20 hours of work and cost about $300 for tile, tools, supplies etc.(10x10)  I had never done tiling before, but it's pretty simple.  I attended a 30min seminar at Home Depot and was on my way.  I'm guessing for the $300 investment(plus labor), I increased my home value a couple k.

I would agree, although I have found that the effort vs ease of renting and the tenant's "Wow" factor is not a fair trade off for Ceramic in a rental.I still put Ceramic everywhere as I don't want to bother with it for decades, but it just isn't noticed like you would think in a rental from my experience.

Personally I don't like ceramic with rentals as I hate cleaning science experiments from the grout. You also better keep an inventory of tile at your place as the tenant's occasionally break them. I like your $20 vinyl option and need to learn how to install it.

 

[BassNBrew]

I almost forgot:  Better for the seller than renting because your tenant takes better care of the property because they are working towards owning it.

From my experience, this is an Incorrect statement.

Same here, although I only rent to people with decent credit (most of the time).Good credit: 98% chance I get the home back in good condition.

Marginal credit: 75% chance I get the home back in good condition.

Bad credit: I know I'll offend some people, but legitimate excuses for bad credit are few and far between. It shows a lack of personal responsibility or a high risk taker...not someone I want to be renting or selling to.