What's new
Fantasy Football - Footballguys Forums

Welcome to Our Forums. Once you've registered and logged in, you're primed to talk football, among other topics, with the sharpest and most experienced fantasy players on the internet.

*** Official Real Estate Forum *** (4 Viewers)

These are really general questions but if it makes a difference you can apply them to a residential rental property that costs 200k-300k and can be rented out for 1100-1600/month.

Thanks.
That is an ABSOLUTELY terrible deal.I would want $3K a month on a $200K purchase. I might take $2,500 a month if there was a VERY good reason, but not a penny less.

Remember that I specialize in Multies. That's the return I need to see for the extra headache.

Last deal in that range was right about $200K with $2,500 a month, but the rents were some $700 bellow Market in total. Just biding my time.

 
Last edited by a moderator:
Modular, Mobile, Manufactured...

Manufactured is the new term used in Michigan rather than "Mobile".  Unfortunately, these terms are often bungled by most everyone who doesn't fully understand the technical distinctions.  (And believe me I'm included in this as well)  What this leads to in my market is a stigma.

Somebody asked if Mike A and I are referring to modular panel and truss construction.  I'm not, and based upon Mike's answer regarding effective life I doubt he is either.

Here are some definitions/distinctions from the Mich. Manufactured Housing Assn:

http://www.michhome.org/definitions.html

I'm very familiar with the style of construction you're referring to Jeff and there are a couple of large developers who have cranked together a large number of affordable housing developments quickly with this method.  A quicker, more precisely fit, with less waste construction process.  These residential properties have much less stigma, and the commercial none.
These definition problems are a major issue. Using "MODULAR" was a bad call for the industry. Many think "MODULAR" = "MOBILE", which is absolutely wrong.Afer reading Michigan's definitions, I have to say they stink.

To them, "manufactured" = mobile OR modular. Hence, a stigma. The only difference is that modular is defined as a type of manufactured, which is absolutely wrong.

Older mobile homes were tin cans that could be ported around. Newer double-wides were hard to transport. Neither are really "mobile" any more as it costs way too much to move them.

The only thing that modular has in common with mobiles is that they both are built off site and transported to the site on a truck (or trucks).

Mobile homes are placed in mobile home parks where they get utility hookups and pay ground rent / leases. They are registered in many states with the Department of Motor Vehicles (DMV) or Motor Vehicle Administration (MVA), and aren't considered real estate AT ALL.

Modular homes are placed on permanent lots with permanent foundations, even with basements at times. They are a part of the construction of real estate and are treated as such.

I wish the best of luck to Michigan - they will need it.
Jeff, you're right on. The worst thing about this is that I've seen "modulars" placed on private property on top of basements. Owner gets into really bad financial straits. Lender forecloses on the mortgage. Owner declares bankruptcy to try and save themselves. Modular home is titled and considered "personal property". Bankruptcy court attaches to it since they can seize personal assets for creditors' benefit. Personal home exemption doesn't save it since it's not real estate.Creditors' representative shows up on site with crane to remove house to liquidate and pay off creditors. Bank ends up foreclosing on a hole in the ground.

Bad, bad situation.

 
These are really general questions but if it makes a difference you can apply them to a residential rental property that costs 200k-300k and can be rented out for 1100-1600/month.

Thanks.
That is an ABSOLUTELY terrible deal.I would want $3K a month on a $200K purchase. I might take $2,500 a month if there was a VERY good reason, but not a penny less.

Remember that I specialize in Multies. That's the return I need to see for the extra headache.

Last deal in that range was right about $200K with $2,500 a month, but the rents were some $700 bellow Market in total. Just biding my time.
LOL, hey Mike, tell us how you really feel. :lmao: Folks, don't take this as discouraging at all. YOU CAN'T BUY THIS KIND OF ADVICE. I tell all my new investors in training that it is far better for me (or any experienced investor you trust) to tell you that the deal is horrible BEFORE you buy it rather than AFTER you get saddled with a loser property. You may feel silly for asking, but at least you won't lose your money. I'll take a pride-beating now and then to save $10K or more any.

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 occassional home run.

If I have 10 properties and I make 20% of 5, lost 20% on one, broke even on 2 more, and made 60% on the last two - that's good enough for me. (By the way, that would be up an average of 20% for all 10).

 
Modular, Mobile, Manufactured...

Manufactured is the new term used in Michigan rather than "Mobile". Unfortunately, these terms are often bungled by most everyone who doesn't fully understand the technical distinctions. (And believe me I'm included in this as well) What this leads to in my market is a stigma.

Somebody asked if Mike A and I are referring to modular panel and truss construction. I'm not, and based upon Mike's answer regarding effective life I doubt he is either.

Here are some definitions/distinctions from the Mich. Manufactured Housing Assn:

http://www.michhome.org/definitions.html

I'm very familiar with the style of construction you're referring to Jeff and there are a couple of large developers who have cranked together a large number of affordable housing developments quickly with this method. A quicker, more precisely fit, with less waste construction process. These residential properties have much less stigma, and the commercial none.
These definition problems are a major issue. Using "MODULAR" was a bad call for the industry. Many think "MODULAR" = "MOBILE", which is absolutely wrong.Afer reading Michigan's definitions, I have to say they stink.

To them, "manufactured" = mobile OR modular. Hence, a stigma. The only difference is that modular is defined as a type of manufactured, which is absolutely wrong.

Older mobile homes were tin cans that could be ported around. Newer double-wides were hard to transport. Neither are really "mobile" any more as it costs way too much to move them.

The only thing that modular has in common with mobiles is that they both are built off site and transported to the site on a truck (or trucks).

Mobile homes are placed in mobile home parks where they get utility hookups and pay ground rent / leases. They are registered in many states with the Department of Motor Vehicles (DMV) or Motor Vehicle Administration (MVA), and aren't considered real estate AT ALL.

Modular homes are placed on permanent lots with permanent foundations, even with basements at times. They are a part of the construction of real estate and are treated as such.

I wish the best of luck to Michigan - they will need it.
Jeff, you're right on.
Your check is in the mail. :) .
The worst thing about this is that I've seen "modulars" placed on private property on top of basements. Owner gets into really bad financial straits. Lender forecloses on the mortgage. Owner declares bankruptcy to try and save themselves. Modular home is titled and considered "personal property". Bankruptcy court attaches to it since they can seize personal assets for creditors' benefit. Personal home exemption doesn't save it since it's not real estate.

Creditors' representative shows up on site with crane to remove house to liquidate and pay off creditors. Bank ends up foreclosing on a hole in the ground.

Bad, bad situation.
Sounds like legislation is needed :ph34r: .
 
Last edited by a moderator:
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. Similiar 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 intially 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.

 
Last edited by a moderator:
Looking to purchase an investment condo for about $125000. I have an equity loan- $50000(left to pay) 6 yrs left 5.9%(775 a month). I have a mortgage on my house $265500 --$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 $175000. 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.

 
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. Similiar 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 intially 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.
Are you looking for a "deal or no deal" statement?Looks like you have good payments arranged - $365 on $67,500 of notes - that's about 5 1/8% for 30 year loan (I assume I/O).

1. Examine the leases and see what you can do. I'd consider a $20-25 rent increase year-over-year until they hit market then either 5% a year rounded up to the nearest $5 or $20 a year. Your choice, but I like the 5%.

2. How strong are the track records of current tenants? Who manages the property now? Would any of the 3 want to be the on-site manager?

3. Zoning ok for multi?

This may sound off-beat, but that's what I do. What would it take to turn the house back to a single family home (SFH) or a duplex and sell it? Is it sub-dividable into lots?

Look for the biggest payoff you can. Fast nickel beats the slow dime. If I could sink $20K into it and sell it for $160, done deal.

Back to the evaluation -

5. You're putting $10K down. You hope to clear $2400 before expenses, which drags you down to $1800. That's an 18% return on your cash (aka Return on Investment, ROI). Are you satisfied by that?

Tax implications beneficial?

6. How are you financing it? If you can, structure the contract to be broken into land, house and appliances. For example, you are paying $10,000 for the land, $85000 for the house and $5000 for appliances. That will help you a bit for depreciation (appliances depreciate faster than houses while land cannot be depreciated).

Write the offer for the land to be at about 1/2 of what the tax records say it is assessed for. Cheaper than that might raise a flag.

If you're happy with all the above, go for it. It meets the basic criteria.

Personally I'd explore mobile homes in that area....

 
Are you looking for a "deal or no deal" statement?

Don't understand your terminology here.

Looks like you have good payments arranged - $365 on $67,500 of notes - that's about 5 1/8% for 30 year loan (I assume I/O).

10 yr I/O converting converting to fixed at 6.75% and a second at 10%.

2. How strong are the track records of current tenants? Who manages the property now? Would any of the 3 want to be the on-site manager?

Don't know yet

3. Zoning ok for multi?



Will check...good point.

This may sound off-beat, but that's what I do. What would it take to turn the house back to a single family home (SFH) or a duplex and sell it? Is it sub-dividable into lots?

Look for the biggest payoff you can. Fast nickel beats the slow dime. If I could sink $20K into it and sell it for $160, done deal.

Not sub dividable. I'm chasing a different path here. I would like 12 properties paid for and spinning of $7500 per year each in 20 years. Retirement plan.

Back to the evaluation -

5. You're putting $10K down. You hope to clear $2400 before expenses, which drags you down to $1800. That's an 18% return on your cash (aka Return on Investment, ROI). Are you satisfied by that?

Yes, those numbers work well for me.

Tax implications beneficial?

6. How are you financing it? If you can, structure the contract to be broken into land, house and appliances. For example, you are paying $10,000 for the land, $85000 for the house and $5000 for appliances. That will help you a bit for depreciation (appliances depreciate faster than houses while land cannot be depreciated).

Write the offer for the land to be at about 1/2 of what the tax records say it is assessed for. Cheaper than that might raise a flag.

Land is $5k. Thanks for that tip, I didn't realize you couldn't depreciate the land on a home lot.

Personally I'd explore mobile homes in that area....

This I'd like to here more about. Mobile homes a a liability in my book. Buyers can't get financing and they do nothing but depreciate.
 
Are you looking for a "deal or no deal" statement?

Don't understand your terminology here.

As in do you take the deal / like the deal = "DEAL" or do you walk / run from this = "NO DEAL".

Didn't mean to jargon you - it was supposed to be a simple phrase.

Looks like you have good payments arranged - $365 on $67,500 of notes - that's about 5 1/8% for 30 year loan (I assume I/O).

10 yr I/O converting converting to fixed at 6.75% and a second at 10%.

That'll work. You'd probably refi within 10 years anyway.

2. How strong are the track records of current tenants? Who manages the property now? Would any of the 3 want to be the on-site manager?

Don't know yet

3. Zoning ok for multi?



Will check...good point.

Glad to help.

This may sound off-beat, but that's what I do. What would it take to turn the house back to a single family home (SFH) or a duplex and sell it? Is it sub-dividable into lots?

Look for the biggest payoff you can. Fast nickel beats the slow dime. If I could sink $20K into it and sell it for $160, done deal.

Not sub dividable. I'm chasing a different path here. I would like 12 properties paid for and spinning of $7500 per year each in 20 years. Retirement plan.

Fair enough.

Back to the evaluation -

5. You're putting $10K down. You hope to clear $2400 before expenses, which drags you down to $1800. That's an 18% return on your cash (aka Return on Investment, ROI). Are you satisfied by that?

Yes, those numbers work well for me.

Tax implications beneficial?

6. How are you financing it? If you can, structure the contract to be broken into land, house and appliances. For example, you are paying $10,000 for the land, $85000 for the house and $5000 for appliances. That will help you a bit for depreciation (appliances depreciate faster than houses while land cannot be depreciated).

Write the offer for the land to be at about 1/2 of what the tax records say it is assessed for. Cheaper than that might raise a flag.

Land is $5k. Thanks for that tip, I didn't realize you couldn't depreciate the land on a home lot.

Yep, picked up on that one a while ago (I even think Carlton Sheets has it buried somewhere. You can NEVER depreciate land. EVER. IN ANY CASE. Only assets that can possibly deteriorate or die (livestock - yes you can....).

Personally I'd explore mobile homes in that area....

This I'd like to here more about. Mobile homes a a liability in my book. Buyers can't get financing and they do nothing but depreciate.



Needs a new post. Hang tight.
 
Deals on Wheels

Mobile Homes can actually make you money. Yes it is true. The tin cans can actually add up for you, especially if you like the rental philosophy.

Lonnie Scruggs is THE MAN regarding this. Bar none. Period. End of story.

Don't believe me? Google "Lonnie Deals" and see what pops up.

Now, I don't do mobile home deals personally. Not my style, just because I seek the bigger deals. I may venture into it, as I broaden my horizons. but mobile deals wind up the creature of (A) landlords and/or (B) low capital investors. Not knocking either, but once you start to play with bigger deals, those are what you chase.

(I almost bought a whole park once, but the price was too high. Long story, but a good one. Another time).

However if you have a deal, let me know. I never say no the first time someone asks.

All that aside. The easiest way to learn is from Lonnie. It is true.

His books are dirt cheap. Really.

Creonline has them on there and he's on that site rather often (last I checked).

He hosts the Mobile Home Forum over there. Good stuff.

Two books he has there are Deals on Wheels and Making Money with Mobile Homes. $30 each. From what I hear, worth every penny.

There are more articles on CREOnline about how to work the mobile home angle. Basically you buy the place for cheap (an older one), owner finance the place with a big down payment, and you keep the $$. You can even buy stuff and rent to own those things to that owner (like appliances, TVs, etc.).

Like I said, Lonnie got so good at it they called these techniques "Lonnie Deals".

 
Last edited by a moderator:
Another way to make $$ in RE is paper. Mobile home paper is a good one, since they can be hard to finance.

You can buy owner financed notes and sell them to investors for a different rate of return. You keep the spread.

I'll expand on the thought later.

 
Jeff,

Thanks for all of the great advice so far. I'm looking into a potential commerial property as my first investment. I was wondering if you had any particular advice that would pertain to commercial property that you haven't covered already?

What are typical lender requirements for a commercial loan? I can put 20% down but I don't want to if I don't have to.

The asking price is 129k, its 1,100SF in a high traffic area in the downtown business district. Taxes are about $800/year. The property is currently vacant.

I'm thinking my total PITI would be around 1k/month. So a positive cash flow should be feasable. Is there anything else I'm overlooking? Thanks.
Ah, commercial. How I love to talk commercial.....Please let me know where you are. The more details the better. I promise not to scarf up your deals (I rarely go out of state, but will for really good ones).

I'm in the upstate SC area near Charlotte. Small typical mainstreet type town that is booming due to the growth in this region.

20% down is typical, but the funny thing about commercial is that the sellers are often even more flexible than residential sellers. Why?

1. They are business savvy. They bought commercial, didn't they? That was for an investment not for a home (unless it is a Mom and Pop store with living space over it / behind it - then that's a special class called "mixed usage").

2. They know (or should know) that the market is smaller for commercial buyers.

3. They know the financing can be difficult.

You know where you stand as soon as you find the property. How you find it is telling. Online? Friend? Realtor?

The property is listed in MLS and has been on the market for some time. So there is some reason for concern there. Looking at the comps I feel it is overpriced by 30k. This may be why it hasn't sold.

Few people know that most realtors are not legally allowed to sell commercial real estate, yet many do.

They can tell you it is not true, but it is. Realtors will try and use a NAR contract for commercial, and that contract will get laughed out of any court or bank. For example, if you say that you're going to buy a farmhouse on 120 acres and develop it, would you write a contract to buy the "house" for $2 million dollars and take that to the bank? That doesn't make sense.

The correct realtors have a CCIM license. Real estate attorneys can also do the deal. CCIM's will defer to attorneys anyway for the contracts.

The listing agent does not have a CCIM designation but I am liscensed. I have never done a commercial deal though. But I am researching what I need to do.

But anyway, to your deal....

129K, 1100 sq ft, high traffic, vacant.

You need to figure out some numbers.

What's going to go in there?

Not real sure, it is set up as an office space right now. The previous tenant had some type of consulting business. The make up of the rest of the street is mixed; barber/hair salons, several antique shops, a couple of restaurants, attorney offices, etc.

Do you know what the lease rate is in the area? How much per square foot?

Not sure yet. I did speak with one tenant a few doors down that runs a small boutique and she only pays $500/month. So thats definately not good. I'm going to check some of the office spaces in the area to get a better idea though.

How long are the typical leases? Is "triple net" ("NNN") typical?

Not sure, will find out.

For those who don't know, a "Net" is something the tenant pays. Taxes, Insurance, and Maintenance compose the 3 Nets in a Triple Net, aka NNN, aka Net Net Net property.

Once you have a lease amount, you need to figure your expenses. If you have a NNN property, there's basically no expenses.

I'll make a couple of assumptions to evaluate this, then backfill in with your real numbers.

Assume you get $2,000 a month for the space. You agree to pay Insurance and Taxes but not Maintenance ( a "Net" lease ). The $2K covers your PITI of 1100 a month.

I'm thinking $1,500 might be the high rent estimate right now. There's a brand new office building going up down the street. I'm going to look into their lease rates. If I can discount this place 15-20% compared to the new building I shouldn't have any problems renting it out.

Why not $1k for the PITI? Commercial loans are usually over 20 years, not 30, but you can certainly try. Bank relationships matter here.

Ok - so $2K covers $1100. They pay maintenance. You net $900 a month.

What's your NOI? That is your Net Operating Income, which is $$ left over after expenses on an annual amount but NOT including mortgage. Let's assume here htat you pay $800 a year for tax and $400 for insurance. That's $100 a month, $1200 a year.

Annual rent is $24K. That's $22,800 NOI. Very nice so far.

Your CAP rate is your "recapitalization rate", which is NOI / Sales Price. Here we have 22,800 / 129,000 for 17.7%.

Is that good? Um, yeah. Very. Anything over 10% is considered good in general, but your local commercial brokers can tell you would a typical office space cap rate would be. Just ask.

One last metric for you is your "cash on cash" return. You put down 20%, which is $25,800. Your NOI is $22,800, so that is 22800/25800 = 88%. I'll take that any day.

I would take 30-40% or better, actually, so if you can get that kind of rent you are doing fantastic.

I fear I overestimated your rents, so let me know. If you don't know, ask the neighboring store owners and the commerical realtors in the area (that will give you the cap rate anyway).

Thanks for the analysis. This gives me a good starting point. Just got to dig a little further.
 
Modular, Mobile, Manufactured...

Manufactured is the new term used in Michigan rather than "Mobile".  Unfortunately, these terms are often bungled by most everyone who doesn't fully understand the technical distinctions.  (And believe me I'm included in this as well)   What this leads to in my market is a stigma.

Somebody asked if Mike A and I are referring to modular panel and truss construction.  I'm not, and based upon Mike's answer regarding effective life I doubt he is either.

Here are some definitions/distinctions from the Mich. Manufactured Housing Assn:

http://www.michhome.org/definitions.html

I'm very familiar with the style of construction you're referring to Jeff and there are a couple of large developers who have cranked together a large number of affordable housing developments quickly with this method.  A quicker, more precisely fit, with less waste construction process.  These residential properties have much less stigma, and the commercial none.
These definition problems are a major issue. Using "MODULAR" was a bad call for the industry. Many think "MODULAR" = "MOBILE", which is absolutely wrong.Afer reading Michigan's definitions, I have to say they stink.

To them, "manufactured" = mobile OR modular. Hence, a stigma. The only difference is that modular is defined as a type of manufactured, which is absolutely wrong.

Older mobile homes were tin cans that could be ported around. Newer double-wides were hard to transport. Neither are really "mobile" any more as it costs way too much to move them.

The only thing that modular has in common with mobiles is that they both are built off site and transported to the site on a truck (or trucks).

Mobile homes are placed in mobile home parks where they get utility hookups and pay ground rent / leases. They are registered in many states with the Department of Motor Vehicles (DMV) or Motor Vehicle Administration (MVA), and aren't considered real estate AT ALL.

Modular homes are placed on permanent lots with permanent foundations, even with basements at times. They are a part of the construction of real estate and are treated as such.

I wish the best of luck to Michigan - they will need it.
Jeff, you're right on. The worst thing about this is that I've seen "modulars" placed on private property on top of basements. Owner gets into really bad financial straits. Lender forecloses on the mortgage. Owner declares bankruptcy to try and save themselves. Modular home is titled and considered "personal property". Bankruptcy court attaches to it since they can seize personal assets for creditors' benefit. Personal home exemption doesn't save it since it's not real estate.Creditors' representative shows up on site with crane to remove house to liquidate and pay off creditors. Bank ends up foreclosing on a hole in the ground.

Bad, bad situation.
In my area, it's not that Modular homes are bad, yada, yada, yada.....It's that they have a bad stigma, and they are worthless when it comes to lenders.

The end of the story is that you should avoid them at all costs in my market.

 
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.
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.
 
Has anyone done the Carlton Sheets series?  Thoughts and opinions?
Bass, if it wasn't you, I wouldn't bother being kind.I think there is some good that comes from Sheets. My own Mother got into this business within the last year or so, and she is a Sheets disciple. (Which means I am kinder than I might be)

I HAVE SPENT A GOOD AMOUNT OF TIME CORRECTING HER THOUGHTS.

Can you make money with Sheets? Absolutely, he has some good thoughts. Please don't just follow his thoughts, take more than that into account.

Mom has 12 units in 05, and is clipping along. I started in 94, and quite honestly, I mange her units and keep her out of trouble. Real Estate is always the best profit maker there is.

For you, one of the few guys outside of myself who understands the Dynasty Value of the entire Panthers Team, I will say that Sheets is a Pipe dream. Seriously, Ben Gay.

It's not practical. You can do better with your own mind. I personally would commit to helping YOU with each and every step of your continued properly acquisition (I know you are a Professional in the Real Estate business). I happily have your back in every way. You want to acquire property, send me an email, you have an honest response, most likely painfully honest, every time.

Outside of that, everyone else should understand that Bass is a Professional Property Manager by trade, and likely is most qualified to answer most of the questions here about what to do with your propety once you have it.. I, like Jeff can help you get it, but I am talking after you own it.

IF YOU ARE LOOKING TO HAVE PROPERTY WITHOUT A SINGLE WORRY, YOU SHOULD CONTACT BASS. HE MANAGES PROPERTY FOR A LIVING, IT'S WHAT HE DOES ON A DAILY BASIS.

I personally Trust Bass without question. Should you want to buy property on the East Coast, and not have to deal with it, get a hold of Bass in a PM or something. I would be with him myself, I just work my own market that is not on the coast.

Sorry if that seemed like a Sales pitch. Bass never asked for it, and I am on staff here and could get banned for pimping him. That said, keep it under your freaking hat. I'm not looking to get in hot water. Only, if you are looking for an Investment opportunity ONLY, send Bass a PM, you might be surprised. If it makes any difference, I used to be Drugrunner.

SERIOUSLY, as with everything, DUE DILIGENCE!!!

 
Last edited by a moderator:
These are really general questions but if it makes a difference you can apply them to a residential rental property that costs 200k-300k and can be rented out for 1100-1600/month.

Thanks.
That is an ABSOLUTELY terrible deal.I would want $3K a month on a $200K purchase. I might take $2,500 a month if there was a VERY good reason, but not a penny less.

Remember that I specialize in Multies. That's the return I need to see for the extra headache.

Last deal in that range was right about $200K with $2,500 a month, but the rents were some $700 bellow Market in total. Just biding my time.
$2,500 a month :excited: My wife is a VP at a big Intl bank in NY and her Dad is a Tax Accountant - I have a Finance back ground but, have left a lot of this up to them and I'm worried and trying to catch up as fast as I can cuz i think, while we're doing pretty well, we're making some big mistakes when it comes to financing and being creative - I think if we played our situation out properly we could parlay it into more than what it is..... I'll be in his thread for the long haul.

So, I'm on the phone back and forth with my wife going over our investments - We're about to close on a condo in Daytona and the 1% rule is no where near what we'll get but, it's being paid for with a 1031 exchange from a condo that was losing money in NC plus a small equity loan. We do feel like it will appreciate and it's a good deal compared to what else you can get there but, I'm struggling with this one.... We also have 2 investment properties in Manhattan, 1 with no mortgage that brings in around $1000 after fees and another with a small mtg also in good positive shape. One co-op will have to be sold within the next 2 years since they only allow rentals for a certain period without the owner living there as well as for tax purposes. So, Basically, we're about to have a lump some of money that we will need to invest in the near future.

Not sure if there is a question in there somewhere, I've been trying to put our situation into words and come at you guys with more direct questions....

Lets see - If you have no mortgage - Then, should you really stick to the 1% rule - we never heard of that... and What would you do with paid off properties - continue to borrow off that equity and buy More?

But, Her first comment was "WHAT THE HELL IS SOMEONE BUYING FOR $200,000 WHERE THEY GET $3,000 RENT????" As she said, you can get a sweet apt in Manhattan for $3,000 - Try to buy that place and it wil be over a million easy. Common charges kill you in NYC.

 
Having no mortgage is a bad financial move.

Many people do it, but when you take a step back....

Can you buy anything with a paid off house? The answer is no.

Even if you get just a home equity line for a few $100, you at least have the ability to tap the equity if you need / want to buy something.

Having working capital from a single-digit interest source that is tax deductible is a great thing. Just look at Bass' example a few posts ago. He's about to get 18% return on his cash.

So if you have a $100K property and just take 50% out, that's 50K - find similar returns and you will be up $9K from investing while making $300 a month payments for the "privilege" of having the money to invest. I'll take $9K at a price of $3600 a year all day long.

Find better returns on your cash and you'll do even better. 18% is ok/good, but 30-40% and better is available.

 
Bass, if it wasn't you, I wouldn't bother being kind.I think there is some good that comes from Sheets. My own Mother got into this business within the last year or so, and she is a Sheets disciple. (Which means I am kinder than I might be)I HAVE SPENT A GOOD AMOUNT OF TIME CORRECTING HER THOUGHTS.Can you make money with Sheets? Absolutely, he has some good thoughts. Please don't just follow his thoughts, take more than that into account.Mom has 12 units in 05, and is clipping along. I started in 94, and quite honestly, I mange her units and keep her out of trouble. Real Estate is always the best profit maker there is.For you, one of the few guys outside of myself who understands the Dynasty Value of the entire Panthers Team, I will say that Sheets is a Pipe dream. Seriously, Ben Gay.It's not practical. You can do better with your own mind. I personally would commit to helping YOU with each and every step of your continued properly acquisition (I know you are a Professional in the Real Estate business). I happily have your back in every way. You want to acquire property, send me an email, you have an honest response, most likely painfully honest, every time.
Thanks Mike. So basically your saying my more would be better spent on "Girls Gone Wild" or a new set of knives. I've read what you and Jeff have posted on acquisition avenues and feel woefully behind the curve. I was curious if Sheets might have some workable strategies or if it was really a case of picking cherries (examples) from the various markets across the US. Maybe I should call him and let him know I'll try the tapes if I can get them for nothing down. I kind of figured that there was better money in marketing tapes then flipping properties.
 
Modular, Mobile, Manufactured...

Manufactured is the new term used in Michigan rather than "Mobile".  Unfortunately, these terms are often bungled by most everyone who doesn't fully understand the technical distinctions.  (And believe me I'm included in this as well)   What this leads to in my market is a stigma.

Somebody asked if Mike A and I are referring to modular panel and truss construction.  I'm not, and based upon Mike's answer regarding effective life I doubt he is either.

Here are some definitions/distinctions from the Mich. Manufactured Housing Assn:

http://www.michhome.org/definitions.html

I'm very familiar with the style of construction you're referring to Jeff and there are a couple of large developers who have cranked together a large number of affordable housing developments quickly with this method.  A quicker, more precisely fit, with less waste construction process.  These residential properties have much less stigma, and the commercial none.
These definition problems are a major issue. Using "MODULAR" was a bad call for the industry. Many think "MODULAR" = "MOBILE", which is absolutely wrong.Afer reading Michigan's definitions, I have to say they stink.

To them, "manufactured" = mobile OR modular. Hence, a stigma. The only difference is that modular is defined as a type of manufactured, which is absolutely wrong.

Older mobile homes were tin cans that could be ported around. Newer double-wides were hard to transport. Neither are really "mobile" any more as it costs way too much to move them.

The only thing that modular has in common with mobiles is that they both are built off site and transported to the site on a truck (or trucks).

Mobile homes are placed in mobile home parks where they get utility hookups and pay ground rent / leases. They are registered in many states with the Department of Motor Vehicles (DMV) or Motor Vehicle Administration (MVA), and aren't considered real estate AT ALL.

Modular homes are placed on permanent lots with permanent foundations, even with basements at times. They are a part of the construction of real estate and are treated as such.

I wish the best of luck to Michigan - they will need it.
Jeff, you're right on. The worst thing about this is that I've seen "modulars" placed on private property on top of basements. Owner gets into really bad financial straits. Lender forecloses on the mortgage. Owner declares bankruptcy to try and save themselves. Modular home is titled and considered "personal property". Bankruptcy court attaches to it since they can seize personal assets for creditors' benefit. Personal home exemption doesn't save it since it's not real estate.Creditors' representative shows up on site with crane to remove house to liquidate and pay off creditors. Bank ends up foreclosing on a hole in the ground.

Bad, bad situation.
Dude, last time I check MODULAR homes are considered the same as site built homes in these scenarios.ETA: In the greater DC area

 
Last edited by a moderator:
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.
By no advice I take it this is a bad thing to do? :confused:
 
Carleton Sheets is a good course in creative financing, but you can get the same information from books for a heck of a lot less money.

My favorite is The Unofficial Guide to Real Estate Investing. It’s not the only book you’ll ever need on the subject, but the first one a beginner should pick up. I still refer to it occasionally.

If you want to be a landlord, get Property Management for Dummies. Read it before you buy rentals so you know what you’re in for.

The For Sale By Owner Kit (by Irwin) is a good guide if you’re thinking along those lines.

Tyler Hicks has a bunch of real estate books, but he pimps his other services so much in them, it’s kind of like reading a C. Sheets infomercial.

I know there are plenty more, but the point is that books are a better/cheaper source of info than ol’ Carleton Sheets.

 
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.
By no advice I take it this is a bad thing to do? :confused:
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.

 
Code:
[URL="http://forums.footballguys.com/forum/index.php?showtopic=178231&hl=eric+shelton+uprightThis"]http://forums.footballguys.com/forum/index.php?showtopic=178231&hl=eric+shelton+uprightThis[/URL] was my take coming into last year...AVOID.  His injury was bogus which tells me he wasn't progressing.  We'll have to wait for camp and the draft to sort this out for 2006.  At this time, I'd avoid the Panther running game.  Later in the summer, value will emerge.  Follow the pre-season games as Fox plays these very seriously.
For the one who PM'd me but had a full inbox.
:bag:
 
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.
By no advice I take it this is a bad thing to do? :confused:
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.
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.
Yep. Wouldn't want it.That's why I abandoned the buy and rent method of getting rich (slow).

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.

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.

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 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.

Broader discussion:



"The 1% Rule."

"A good rule of thumb is that a rental property should rent for AT LEAST 1% of the purchase price."

Why?

Examples work best.

$100K house.

10% down, new first mortgage of 90K at 7.5%.

Taxes and Insurance are $900 a year.

Rent for $1000 a month.

Monthly principal and interest - $630.

Monthly tax and insurance - $75.

Monthly property manager (PM)- $100 (10% of rent).

Monthly vacancy factor - $50 (5%). (NOTE - This is LESS THAN ONE MONTH A YEAR - about 2 1/2 weeks.)

Monthly maintenance reserve - $100 (10% for when stuff breaks).

Total expense budget = $630+75+100+50+100 = $955.

Net cash = $45 a month.

So you have a fighting chance with the 1% rule.

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"?

 
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.
I'm with you - I can't see this 1% rule working in NY too often....

And I'm not sure how the % you put down effects the 1% rule - To you it doesn't but, in the end you talk about no cash flow and more down certainly changes cash flow.

I'm asking around about this 1% rule - anywhere I can get more info?

 
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.
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.
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.

 
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.
By no advice I take it this is a bad thing to do? :confused:
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.
Thanks for the advice.
 
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

 
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
Glad you are enjoying yourself Mr. Blond. (Love that movie...).Factors for a rehab I use:

1. Don't spend more than 70% of the After Repair Value on a property to fix it up. That includes purchase price, holding costs, buy side closing cost, and repairs.

That usually means that I'm buying properties for 50 cents or less on the dollar.

2. I have to make 50% of what I put into the deal, my money or (preferably) OPM, but still the profit must be > or = 50% of $$ in.

3. When I can project the same return on two projects, take the one that will take the less time to get re-sold. I usually assume a minimum of 3 months holding costs plus one month per $20-30K of repairs.

Other rules of thumb:

1. I want to get 30-40% return on my cash in whatever I sink $$ into, if not more.

2. Cap rates on commercial properties over 10%.

I'm sure more will come out of me later.

 
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.
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 clarifiacation 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.
Not trying to argue / pick a fight either. This is a thread for helping people and sharing viewpoints as well as what the climate is like in different areas.Remember - I am trying to help :) .

That said - your "war chest" may not need be as big as you think. 3 rehab deals should be able to replace your annual salary. You can do one deal for about 10-20% of the property value. I put up about $10-15K for a $70,000 shell and I float about another $10K towards the contractor on a deal that should net me $40-50K.

If you can manage $20-30K somehow, you can do your first deal as a rehabber. After that one, do two more with the profits and you'll be on your way.

If you don't have $20-30K, learn to find deals for investors and sell them your "leads" (it is called bird-dogging). Then you can get $1-2K a lead, and learn how to put property under contract from a helpful investor. That will lead to wholesaling, which is selling a cheap property under contract. That can be $5-10K or more.

Finally, you should have the $$ to start being a rehabber if that is what you like to do. Some like being birddogs, some wholesalers.

 
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?

 
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?
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?".

 
Ok, let's look at my situation then. Tell me what you'd do, or maybe give me some ideas?

I've got one property aside from my primary residence, worth about $410k, I owe about $285k on it, with another $25k available in a line of credit. I've got a little money in the bank, but just sunk most of it into buying a primary residence in December - I'd like to keep the $$ I've got in the bank as my income varies wildly from month to month.

I've got a tenant in this property for a year, so I can't liquidate until then. I've got access to 0 down investor loans and I could put the word out that I'm looking for a property under value to a few of the agents I work with that are good at that sort of thing.

I don't want to do any work on the property myself. Don't have time, energy, or any desire.

I'm looking for a way to create income, and build up my war chest so I can have more flexibility in what I can do. Ideas?
Up the line of equity to $80-90K on the $410 house. That leaves $35-45 of equity in the place, 10%, which is acceptable by most anyone who would scrutinize you.Take that "nest egg" and find investment properties with it. Don't use it unless you have to - OPM is the way to go - and find either rentals that work (1% or better) or rehabs that make sense. Hire a GC and get the project done (see how to run a project earlier in this thread).

Use a draw schedule and "pad" the first draw a bit to get a little more $$ back in your pocket. Do one deal at a time. Hopefully something inside of 6 months, not a "shell" but not a money pit either. Carpet/paint/landscaping and some modernization is about the right pace.

Two weekly visits should be enough - one on Friday to check on progress, the other at your discretion. That way, the contractors know that you check up and also know that they can't just "staff up" on Fridays.

Decide if you are a buy and hold person or a rehabber (buy and sell). Work towards a definitive goal (2 houses a year, $70K a year, 10 rentals in 2 years, etc.).

 
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?
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?".
And if you're calling, be sure to reference the "do not call list".
 
The 1% rule is a carry over from the years of 8% interest rates. I think you can get by using a 0.8% rule, especially if you cut guys like me out of the equation. Most of my clients are operating at 0.75% and treading water, some are at 0.7% but don't have options in a soft resale market with investors pouring in. Personally 1% is almost a no brainer, but 0.8% works with all the creative loan options available. My theory right now is to lock up as much cheap money as possible. If/when interest rates go up, two things will happen. a) Rents will increase. b) You'll have a leg up on new investors entering the market. I guess what I'm saying is that I'll survive at 0.8% deal if I believe the deal will support a better rate of return later.

That said, think very carefully about what Jeff is saying. For example, let's look at a 100K house fully paid for.

$100K - $750 rent x 12 months = $9000. Less $1000 taxes, $400 insurance, $750 repairs, $900 management (either a service or the value of your time) = $5950.

That same $100K earning just 5% somewhere will net you $5000.

Of course I didn't factor in appreciation which is a key to the equation.

 
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?

 
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?
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)

 
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?
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.
How does one locate a local real estate investment club?
 
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)
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?

 
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?
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?".
And if you're calling, be sure to reference the "do not call list".
Another tip - your lender can get a list of properties that match very specific criteria from the title companies at no charge. If you're going to do loans through him, he'll be very happy to find this info for you, and you can get it pre-scrubbed through the DNC list - and they'll even print address labels for you.
That sounds better. The DNC list, isn't that for people selling not buying?
 
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.

 
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?
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?".
And if you're calling, be sure to reference the "do not call list".
Another tip - your lender can get a list of properties that match very specific criteria from the title companies at no charge. If you're going to do loans through him, he'll be very happy to find this info for you, and you can get it pre-scrubbed through the DNC list - and they'll even print address labels for you.
Nice tip. I don't have a lender like this, but I'll start looking..... :stalker:
 
The 1% rule is a carry over from the years of 8% interest rates. I think you can get by using a 0.8% rule, especially if you cut guys like me out of the equation. Most of my clients are operating at 0.75% and treading water, some are at 0.7% but don't have options in a soft resale market with investors pouring in. Personally 1% is almost a no brainer, but 0.8% works with all the creative loan options available. My theory right now is to lock up as much cheap money as possible. If/when interest rates go up, two things will happen. a) Rents will increase. b) You'll have a leg up on new investors entering the market. I guess what I'm saying is that I'll survive at 0.8% deal if I believe the deal will support a better rate of return later.
Well, using the 1% rule can give you some quick math in your head (sort of like figuring out tips quickly at 20%). Like I said before, you may choose to violate the rule, but at least you have an idea that you are (and by how much).

1% is a nice round figure. I was blessed with a quick mind for numbers, many aren't.

That said, think very carefully about what Jeff is saying. For example, let's look at a 100K house fully paid for.

$100K - $750 rent x 12 months = $9000. Less $1000 taxes, $400 insurance, $750 repairs, $900 management (either a service or the value of your time) = $5950.

That same $100K earning just 5% somewhere will net you $5000.

Of course I didn't factor in appreciation which is a key to the equation.

Also remember the tax advantages.

Remember the acronym for real estate investing.

I Income.

D Depreciation.

E Equity.

A Appreciation.

L Leverage.
 
Last edited by a moderator:
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?
[LHUCKS]Please don't be intimidated by our intellect. [/LHUCKS]Lots of questions. Don't be shy - this thread is for all comers looking for help.

When looking for a place to live, appreciation is a consideration but should NOT be the primary reason for buying the place. I think you know that, but I just wanted to reaffirm it.

You are likely not going to be able to pull $$ out of the place for a year, so don't expect "significant capital appreciation". However, do your homework. Find out what areas you'd like to live in and check the newspaper for numerous factors:

1. Where are the houses for sale in your price range?

2. Who's name is on the realty signs the most? Pick a few and contact them for scrutiny. Hold that thought for now.

3. Read the paper for OTHER FACTORS that impact value. What schools are good in the area? Which neighborhoods are in that district?

4. Any major developments (shopping centers, roads, community centers, etc.) going in nearby?

To pick the best house for yourself, you have to like it. YOUR house is the time when you are allowed for emotion to enter in to the equation (I still don't, but that's me). If you fall in love with a place, paying a (small) premium may still be ok.

But if your main concern is value, like me, find one you like that has good location, which means where the lot / house is and also where the neighborhood is (roads, shopping, schools, etc. easily reachable).

Do pick a house that is not the best house on the block. Pick no better than the second one unless emotions override you.

Look at the house with the vision of what it (easily) could be. Does it need new carpet? Landscaping? Kitchen upgrade? All of these things are relatively easy and get a lot back on value.

Also think a little out of the box. Is there room to add on, or is the house smaller than its neighbors? No garage / 1 car when the others have 2? If something CAN be added to add value later on, you have what we call "upside". The value / growth potential is there.

Back to realtors - interview them. Get references. Ask why people chose their realtor. Find someone who lives near the area you want to live in or specializes there. My favorite local realtor has lived in our county for 20+ years.

Realtors can be good especially if you don't know the area. They also can find deals you may miss. Mine didn't mind me, which is big :) . I emailed her MLS numbers and told her to set appointments, and she took it as my helping her and went with it. She liked my active role. It is a people business.

Finally, how do you appear serious and not miss out deals. Simple answer to both - get the money ready. Go and get a loan all squared away with a mortgage broker (and interview them too). Try banks too, but they may want more $$ down. Pre-qualified is worthless, almost as much as pre-approved. You want a "COMMITMENT LETTER" which is basically a letter from a lender that says "Joe B. is approved to buy a house up to $200,000" and signed by someone from the lender, not the mortgage broker, or a high-up at the bank.

That shows commitment to anyone that asks. Make copies and include them with offers.

Good luck.

 
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?
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.
Why thank you :) . Don't mind if I do. Actually, he has it nearly 100% right. There are renovations that can give you big returns - mostly adding "curb appeal" (landscaping) or modernization (carpet, paint, replacing the 60s or 70s styles in the house, etc.).

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.
To clarify I think he means 1300 sq. ft. vs. 3,000 sq. ft. but spot on otherwise. Carry on.
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.
I disagree here. If you're looking for a retail place or one that just needs a little TLC, that's probably a normal realtor. It can't hurt to try a realtor at an investors club, but you probably won't find what you want. The main reason is that a realtor working with investors may not be looking in the same neighborhoods you are. Local knowledge is better. But you can still try.

NOTE - if you use 2 or more realtors, make sure everyone is aware and that you're not using a buyer agent exclusively. Don't sign that junk. If they ask, tell them that if you find me the house I want, you will get the commission. You can play hardball with all the realtors, but if you have one you like and they know the area you want, lighten up a little and say that you'll sign ONLY if other realtors can look and that you'll release me from this if another agent brings me one. Get it in writing.

Happy hunting.

 
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.

 
neither was/am I

I 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)
Yes that is a good story, but auctions vary widely across the country. Maryland auctions may not play out like that in other states (and they don't). You can still try, but I would NOT recommend it for someone new.They can also be very intimidating to novice investors. And you WILL NOT be getting ANY inspections for a property at an auction. Of all the ways to buy real estate, this is the RISKIEST that is available out there. Committing to a property all at once and often you haven't seen the inside. OK for an investor, not so good for someone looking for a place to live.

They are also NOT good indications of market value. I've seen properties overbid. I've seen properties underbid. Rarely are they bid to a market value level. It also gets confusing to novices as there is often a "buyers premium" that may or may not be announced. For example, a house may be auctioned at $300K and everyone thinks that it was a deal. The house really sold for $330K (10% Buyers' Premium, or "BP"). Deal doesn't look as good now.

Now you could face sticker shock if you start shopping that neighborhood looking for houses at $300K.

Many auctions of this type are geared towards investors as buyers or that there is some issue with the property (or both).

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.
Each state has different laws about auctions. Some have foreclosure auctions and sheriff's sale auctions, some just the sheriff's sales. Foreclosures have at least one bidder, which is the bank. First bid will be for the amount of the foreclosing mortgage - usually the first mortgage - and the bank will bid the balance of that loan.IMPORTANT - If the bidder is a 2nd or 3rd mortgage - the property will be sold "Subject To Other Liens and Encumbrances" - which means that you can't forget the other mortgages. I've heard people bidding $100K for a 2nd mortgage on a $200K house, forgetting that their is a $150K first mortgage. Whoops.

Auctions are good ways to buy, but really for experienced investors. Don't dive in quickly. Now THAT'S a Shark Pool. There's also often collusion at the auctions...

1.) Am I right in my understanding that you don't get to inspect these houses before buying them? Is this a bit risky?
That's usually the case with state and county auctions. If the auction is at the property you will likely be able to walk through (but for only a few minutes).
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?
In Maryland you have to put down the $$ that is required to bid, which is usually about 10% of what the property may go for, or what is owed. At a foreclosure auction of a $200K mortgage, $20K down in cash / cashiers' check is usually required.The balance is due 10 day AFTER the auction is ratified / certified by a judge. That can take a 1-2 months. There's your time to get the rest of the $$ or find another buyer.

But - this is Maryland law. Other states vary, a lot.

 
Last edited by a moderator:

Users who are viewing this thread

Top