All Forum Posts by: Tony Tomasek

Even some local banks in my area have had there commercial investments curtailed. Peter gives good advice about local banks though. That is where you MAY find a HELOC or a commercial loan. It is possible to also do blanket financing on the commercial end with some local banks, but from my experience in my most applicable market at least they want 5 properties minimum and preferably more.

I think you need to make sure that you are buying right and creating actual value with the rehab, and then sell the duplex to another more passive investor as a turnkey property for a decent gain. Make sure you establish an LLC and that it takes title before you sell it so that you can get all tax benefits of a company.

Talk to a CPA that specializes in RE to find out what to do to reduce it and repeat the process. As you gain more property and thus income, you will likely be able to get financing based on your company's income, not your personal situation.

Go talk to local commercial officers now to find out what would be best to do. I would also suggest that you establish an account with the bank or banks you want to do business with, both personal and company. If they see the income coming in to their accounts it should be easier to get the loan eventually.

Remeber when times get tough it forces the tough to get creative.

If your timeline is only a couple of years, that may be a rough strategy. I confess I am not an expert in either market, but in general depressed areas take a longer time to revive like up to 10-15 years. Depends on what type of profit you want though on the appreciation side. Cash flow is cash flow at 4K for 425 a month. I am interested in finding out what type of vacancy rate to plug into that equation and if taxes are low enough.

I would say that supply will probably widen a bit during the off season, and there will be a wider selection of decent deals for a few months, but in general the banks have gotten smarter. They ARE holding a "shadow inventory" at least in Indianapolis but will not flood the market if at all possible. That would be contrary to their best interest. They are holding these as best as I can figure since it now hurts less on the old balance sheet since accounting principles have been changed.

To put it simply, I expect conditions to be about the same until about late 2010 at least. Barring inflationary pressure that is.

It is a simple matter of economics and time. If you want the liquidity SFRs are probably the best bet, but will take more work and more of you time on a per building basis in general. That is why sucessful investors eventually move at least part of their money into larger and larger buildings.

I would buy 4 to 5 rental SFHs in that would rent for 650 to 700/mo.

Ok, I still dont see how this new info or qualifications of prior statements changes the fact that if prices are dictated by supply and demand then it would follow that in the worst recession in recent history that happens to be global, demand should be down. However, commodities shot up off their lows during a time of severe negative growth for most areas of the world. Such activity is a possible indication of a shift in commodities that COULD result in inflation.
"speculation" based on using logic and economic knowledge to forecast future demand is not an exact science. However, it is hard to ignore the spike in RAW materials with low demand due to current economic conditions. Demand should and most likely will only go up from here as we and other economies will get back to growing gradually. What will this increased demand do to commodity prices? We also cannot ignore the size of the emerging nations that are still growing anually and will continue to ramp up. China and India alone are how many billion people adding to demand? Where will the extra supply come from especially since the needed expertise to bring mines etc. online is at a worldwide low.

You see the capacity numbers you quote are for production of GOODS in the US,these factories use the COMMODITIES to produce the goods. If those commodity prices spike we will see a corresponding rise in prices regardless of what the factory's ability to raise production is. Their price of producing each and every good will be higher and they will raise their prices to keep profit margins the same. This is inflation, that will happen regardless of the supply of the goods in question.

P 500 here soon? With oil up so much from its lows you have to think that will have a negative effect on earnings in a couple of months. I would look into historically who has bad exposure to oil and short them too. have gotten a boost from the collapse of oil and we are now up about 80% or more from the low. Let me know what you think

Jaws,

I have to disagree on the whole capacity being at 50-60% curbing inflation thing. That would be correct if you are only concerned with capacity or ability to raise production and not profitability.

What I am talking about is commodity prices rising heavily and thus putting pressure on the costs of companies for resources which will be passed on to consumers in rising prices.

As I stated in the original post commodities ARE rising in spite of what should be LOW demand due to recession. Oil is up some 80% from its lows. Copper is up as well. Oil being down year over year is nothing when you consider that if it levels off now come Dec/Jan we will be back to the same ridiculous YOY jump we were in during the "bubble" or "speculative" point with oil at 150 a barrell.

Earnings of some companies are up on lower revenues, meaning that strong earning could evaporate in a few months.

Back to the point, cost of goods sold will rise with rising demand for raw materials. We are not the instigators of this, look to China and India where there is still growth and will be even more as the recession ends. (Steel for cars, copper for wiring etc.) COGS rising will have to pass to the consumer eventually, thus inflation. Labor reduction and economies of scale can't do anything about that. The major question is not what capacity do the manufacturers in the US have to produce, it is what capacity do the producers of the raw materials have to produce. Not enough copper etc. being chase by weak dollars equals bad economic news for us.

Matty,

I am heavy into gold and silver ETFs currently. Bought heavily with gold at 870 and silver at 11.10. Looking long term I see the agriculture play. I think we will see a bull run here on commodities and am trying to find good stocks to leverage that.

Is anyone else concerned with the fact that commodities are rising quickly DURING a global recession? Factoring in emerging economies and potential demand with current production capacity, how long will it be before this is a major problem that fuels MAJOR inflation?