The current prices are squeezing me out

[George P.]

During the short time that this housing crisis lasted, i was able to obtain 6 rentals. they were all between 55-80k, SFH's, which currently rent for between $1k-$1,275. all but one have a mortgage, so i had to come up with a significant down payment for each one + rehab costs.

the cost of bring them up to rental condition was between 5k and $25k. (it's amazing that the more experienced i became, the more i put into a house to fix it up, but that's another topic).

anyway, the current market for the same type houses are 80k and above. the filters that i have for the MLS alerts have dried up and they were set for 3 bedroom homes under 90k. I can go into lower income area, but that's not an option for my wife, so we are sticking with the same 2 sq. mile area.

at 80k purchase price i will make some money, but not as much as an investor would want. i do not want to buy more houses just to say i have more houses. at $100k (total, purchase and rehab costs), i'd net around $250/month and that's if it's rented quickly. One major repair and my yearly profit is gone.

I have two short sale offers that have been accepted by the homeowners and have no idea if they will actually happen.

if these two potential deals do not happen, this was the last of my involvement with the rental business.

i need to find other avenues to invest in since i need to do something with my money. I have a (very good) full time job and my contractors are not like J Scott's to get into the flip business. I'd lose money if i do that in a hurry.

I am considering lending money for investment purposes, but have zero experience in that field..

are you experiencing similar issues? feedback/suggestions are welcome.

[Account Closed]

George: I have sold properties to one landlord buyer for the past 12 years. I remember selling him a small fixer house for $65k in 2006. At the time he was in the same quandary as you. He had never paid over $50K for a house (he had about 25 doors at the time). $65K plus rehab for an $800 rent was truly his max. He didn't start buying again until the REOs started coming back on the market a few years later. He bought a lot between 2009 and the beginning of 2012 and he's not bought again since. I haven't had anything that would work for him for over a year, but there are plenty of landlords with different criteria so there is no shortage of buyers for me.

I think you're right not to buy just to add inventory. If you are buy and hold and the rents aren't on the rise, your choices are don't buy or change your bottom line. From what you describe about your current rentals, I would not change your bottom line. You might want to look at how to find deals to buy directly from the sellers. That's how it used to be done. The MLS is just one tool and right now it's just too competitive in some markets.

[Dawn Anastasi]

In Milwaukee, you can still get SFH for around $25-$35K that need some renovation but the prices are not close to what you are describing. There's still good inventory. I think it's a great market.

[Bill Gulley]

George, might partner with others, you provide the money, not as a lender but inside the company, you can have interest owed by the company and share profits. Flippers/rehabers.

Are you interested in other types of RE, commercial? What about businesses, anything you're familiar with?

Transactional funding might work for you, just funding at the table on these double closings investors want to do. Funds are not released unless other good funds are there, pretty safe bet. Again, jsut partner for funding to stay away from lending to the public.

[Account Closed]

George: I have sold properties to one landlord buyer for the past 12 years. I remember selling him a small fixer house for $65k in 2006. At the time he was in the same quandary as you. He had never paid over $50K for a house (he had about 25 doors at the time). $65K plus rehab for an $800 rent was truly his max. He didn't start buying again until the REOs started coming back on the market a few years later. He bought a lot between 2009 and the beginning of 2012 and he's not bought again since. I haven't had anything that would work for him for over a year, but there are plenty of landlords with different criteria so there is no shortage of buyers for me.

I think you're right not to buy just to add inventory. If you are buy and hold and the rents aren't on the rise, your choices are don't buy or change your bottom line. From what you describe about your current rentals, I would not change your bottom line. You might want to look at how to find deals to buy directly from the sellers. That's how it used to be done. The MLS is just one tool and right now it's just too competitive in some markets.

[George P.]

thank you for your replies..

bill, i am interested in commercial, but i would not have $100k for a downpayment on a $500k+ property. can you elaborate a little on "not as a lender, but inside the company"? also regarding transactional funding... i know nothing about that. maybe it's something i'd like.

K. Marie, you are talking about the yellow letters, right? And buying directly from wholesalers... how can i find the wholesalers in my area?

[Bill Gulley]

Those who have an LLC, you join as a member and make the loan inside the company, a contribution to capital. You could share profits in that arrangement, when the deal is done and you have your money, you resign from the membership.

Your LLC could be a member of another LLC as well.

Transactional lending is just using the money for a few minutes, to close a transaction on paper with the closing company, then the other transaction closes and you have your money back. Really, you have certified funds and you get certified funds from the title company/closing agent through escrow, risk is almost nothing, unless the title company messes up, even then, doubt you'd have a loss. :)

[Account Closed]

Originally posted by George P.:

thank you for your replies..

bill, i am interested in commercial, but i would not have $100k for a downpayment on a $500k+ property. can you elaborate a little on "not as a lender, but inside the company"? also regarding transactional funding... i know nothing about that. maybe it's something i'd like.

K. Marie, you are talking about the yellow letters, right? And buying directly from wholesalers... how can i find the wholesalers in my area?

I'm never talking about yellow letters. I don't like them and don't use them. I laughed pretty hard the first time I got one in the mail. I turned to my husband and said: I wonder which guru is teaching/selling that! Regardless, it's not my MO to send marketing to make me look like something I'm not. (Uneducated, inexperienced, not in business for the long haul). I have a hard enough time trying to convince people I'm not an agent....cause I'm not!

I wouldn't look for wholesalers. Rather I'd look for sellers. If you're local and on the ground, you would/should be talking and communicating with all the owners of the neighboring properties you already own. Everyone one at your day job and church and gym would know you want another property. And before you say your co-workers don't have anything to sell or there is a socio economic difference or whatever, just know that people everywhere end up with property they want to sell. A lot of them just don't wear it on their sleeve because it's not considered polite (especially in Michigan!). It's our job to make us the go-to person when people have questions about their RE. Just another angle for acquisition. It's not for everyone. But for people who aren't shy and have an easy time talking to people, it's kind of a no-brainer.