All Forum Posts by: Dave Bingham

@Steve Rozenberg 

Whew that was a close one! When I read it at first I was confused. Then I thought "Man, this is verbatim!" All I could think then was "Wow, the cojones Steve has". Glad it turned out the way it did. Good luck to both of you.

I've read this somewhere before.

http://www.biggerpockets.com/forums/87/topics/167808-how-to-look-at-property-like-an-investor?highlight_post=1130240&page=1#p1130240

Crediting sources and in this case crediting an entire copy and paste would be a great move to increase credibility.

@Aaron T. 

Hi Aaron. You can definitely get your license even if you are working full-time and are an investor.

I can tell you what was on the test and handbook 13 years ago. The study material is primarily information dealing with FREC, legal situations, how to read metes and bounds and other forms of property identification systems, and ethics. I imagine much of it is still the same. I'd call up Bob Hogue school of real estate with specific questions.

I learned to write and read contracts from a 2 week class at my brokerage before beginning to work. Though I think you can go to Staples and pick up a Farbar contract with various addenda and read it over. If you have any contacts at a title company I'd ask for a few copies of contracts where names and addresses have been blotted out. That way you can see the dance party of all the initials when something new happens on the agreement along with the dates. Basically see how starts and how it ends up.

To find a good broker that specializes or is at least friendly with investors I'd start with Hud homes for sale. Find out who they have selected in the local market to list it. I'd also go to your bank and community banks and ask who handles their REO's. The same names will probably start popping up. You can also ask local investors on BP who their brokers are.

I found value in being a realtor with my lockbox access. It was nice not having to have my agent arrange with the sellers agent. I could just call up the sellers agent and save a lot of time, days at times. I used to have to carry around a big clunky box but now they have fancy apps. so your phone can open it.

The benefit I liked the most though was the ability to see the days on market for houses in a neighborhood, price adjustments, length of time into the listing agreement the price adjustments occurred and the amount of the price adjustment. This was great for quantifying demand for a specific neighborhood and also gives a reasonable estimate what the sellers mindset is. Are they euphoric because days on market is very low and there is hardly any price adjustments or are they optimistic but willing to capitulate to reality because days on market are long and multiple, sizeable price reductions have occurred repeatedly in the neighborhood? Are the same model of homes hot and others not? The last thing you want is to go into a neighborhood thinking it's hot when really 2 floorplans in there are and you wind up buying the bad one thinking you got a deal based solely on "comps". 

You can run comps with info available at the property appraiser website. Jump in your car, find the target area then go to google maps and write down the street names. Input the street names into the property appraisers website. Make sure you scroll down and check out floor plans to make sure you're comparing apples to apples.

@Kesgn Kesgn 

In quantifying areas in the appraisal field the age of the market was definitely something we would be interested in. However this was just a generic metric for trying to understand what sort of infrastructure has had time to occur in a given market. Even this could be wrong though depending on the foresight involved in the Master Plan and how much was actually implemented.

I think @Brian Burke , @J. Martin have some great information. For me personally I determine classes of areas by:

The local businesses-What types of businesses are in the area? Are there franchises? What types are they? Are there a preponderance of check cashing businesses, pawn shops, businesses that do not support checking accounts but rather focus on a cash driven/non saving type of local economy? Go to multiple businesses in the area including several big box retailers. How are you treated when you ask for help or when you check out your items? Are there many businesses that support debt and items that are non essential? What are the conditions of the interior and exterior of the businesses? Visit the local Chamber of Commerce. Talk with them about the businesses in the area. Do businesses get any sort of tax break for bringing jobs? What has the job growth been like for the past 2 years? What types of jobs are being created?

Support from local government-Are the streets in good repair and wide enough to handle the traffic? Are traffic and street lights working well? Are street signs posted in appropriate areas and in good condition? Is there a obvious concerted effort to keep the area clean by both the government and the citizenry? What do the schools look like? How are they rated? What are the crime statistics as compared to their counterparts nationally? Are there libraries? What is their condition and usage from the general population?

Immigration/Emigration- How many people are coming and going? Who is coming and going? (To be fair this last question is more for prognosticating what an area will become than current conditions).

Here's the subjective part. You can start at a D and work your way to a AA or vice versa. What value you assign each point of information is up to you. Each of these questions (and others I haven't mentioned) represent a pixel. You'll never have enough to form a complete picture but hopefully you see enough to make an informed decision about the class of an area and it's prospects.

@Matthew B. 

Hey Matthew I don't know about Central Florida but some counties in Florida require hurricane rated windows now. You might want to check that out before you buy new windows.

@Jennifer Talcott 

Hi Jennifer. We talked about something similar to this in another thread an it actually created the impetus to create the REIA. Here's the link:

http://www.biggerpockets.com/forums/311/topics/163766-tampa-hillsborough-county-foreclosure-auction-help

@Account Closed 

Hi Tommy. Usually with 4 or fewer units a GRM (gross rent multiplier is used) and not a cap rate. That's not to say you can't but it's not conventional to do so.

Say your gross annual rents are $12,000 and your purchase price is $120,000, then your GRM is 10. This multiple reflects how long it would take to pay off the property when multiplied by your gross rents. Some people may say when the multiple is X or a range between X and Y it's a steal but that's not always the case. Most of the time you have repairs that increase your asking price and consequently bump the multiple up.

Bear in mind that the 1%, 2% rules are really ideals you want to strive for but not set in stone. They validity of these rules is highly dependent on your market and the activity within it. The 50% rule is good when determining what your overall operating expenses will be over time. If you buy it new most likely you will not experience that directly but you will have paid a premium for that by having newer units/appliances/roof, etc... The advantage is that by purchasing it new you can roll that cost into your financing, lower your capex amounts you set aside and in general increase your roi. The bad part is if you get any type of investor that has half a brain on their head when you sell will realize stuff is about to break down in a few years and make his/her bid appropriately.

As for your last point I can't help. I'm completely ignorant on that market. There are other markets around the U.S. that are in various stages though. No one says you have to stay in one place and sit it out.

Good luck!

@Andrew Young 

Hi Andrew. Welcome to BP. I'd suggest reading Gary Eldred, Steve Berges, and David Lindahl. Reading these guys books really helped me get a decent foundation from an investing perspective when I jumped into multi-family.

This one here from the Appraisal Institute is really great too.

http://www.appraisalinstitute.org/the-valuation-of-apartment-properties-second-edition/

Good luck and go get 'em!

@J Scott 

I've noticed the same phenomenon. I'm not sure if it's a problem with individuals not reading or just bad reading comprehension and strange non-logical leaps. I appreciate your comments and thoughts. In the appraisal field the expense ratio was one of the first numbers we looked at. If it was under 45% it was definitely a flag for us to dig more deeply. While conversely if we found it to be above 60% the prospective borrower got rather excited for obvious reasons. This is analogous to the sniff test with food. If it's odiferous we don't give it a second thought. The same goes for "deals".

@Bill Murphy 

Welcome to BP Bill!