All Forum Posts by: Christie Gahan

Figuring out the bank's logic about foreclosure is like the holy grail to me.  It seems every bank has different policies.  They are still getting rid of "shadow inventory".  I believe the banks do this so they don't drop all the houses on the market at once.  The bad thing is how much a house with a leaky roof deteriorates in 2 or 3 years.  While they wait to sell, the rot and mold are lowering the value of the house.

Oregon : Trust Note : Judicial Foreclosure: Right of Redemption

Oregon has 180 days for "homeowner . borrower" to redeem.  I know this doesn't happen a lot but I heard a crazy story .... Could it be true ?

"Investor" buys the homeowners "Right of Redemption".  If an flipper puts work in the house the owner of the "Right of Redemption"  buys back the property during the 180 days.  This gives them the title to the fixed up home at the auction price + what ever they paid for the Right of Redemption.

I think this falls in to the " Wrong but Legal" category.

Anyone else out there have experience with this ?  Is it preventable ?  How in the heck would a lawyer write up a contract for something like this ?

Michael P:

"You don't want to F with the IRS ".

Amen!

Learning all the rules of investing with Self Directed Roth, 401k etc is a headache.... but it can make a huge difference over time.

I'm speechless. This is a crazy cool problem.  Hope I have it next.  ; )

Look into retirement accounts. I believe a self employed IRA will allow 25k or 50k annual contribution. This will lower your tax burden. At a later date, you can pay the taxes and move it to a self directed Roth IRA. Getting a big chunk of change in to a Roth is a great thing. You can then use those funds for investments and not pay taxes.

Cash.

You need cash. A HML wants to see funds for 6 mos payments and 20% down. Save that up plus 3 mos living expenses and then decide. Look in to loans for first time buyer with low down payment if you want to live in it. Many cover up to a 4 plex.

Jay Hinrichs: Great success story for your wife as a realtor. The big question, would either of you buy it at that price / rent roll ?

John Thedford: 

I agree with you about the buyer doing their diligence. However, I hold realtors / brokers to a higher standard then the general public.  If they can not provide guidance, expert opinions etc; then why should the general public hire them at all ?  You are on a slippery slope if you are trying to present yourself as someone who serves others and also run your own for profit investment company.

I agree with you, Tim Chapman! Maybe he didn't do anything illegal but I wouldn't want to do business with him either.  

I can't really judge the deal because you are in a different state then I am.  Your closing costs make me feel faint.  ; )    Are you looking for long term appreciation ?  Tax benefits ?  You might get those.  Cash flow you don't have.   

This situation would be too much of a headache for me because I need to see some cash flow.  When I was married we needed the tax write off.  We could break even on a property and save more on taxes via depreciation then we "made" on the rents.  

I think you wrote you could walk away and lose 1k ?  I would skip away with a smile on my face.  Then, I would remind the realtor / owner  how huge the effect of word of mouth and social media can be in this day and age.

Great question.

I also worry about the long term market.  Twenty years ago rates on home loans were about 8%.  That is about the historical average.  The Feds raise rates slowly, but I often think that if  rates were 8% that nobody could afford their houses!  

It sounds like you need to niche down a bit.  Pick a neighborhood and study it.  For example : a neighborhood with lots of rentals next to a college, a first time buyer / working class / basic neighborhood ( many folks think this is #1), Upscale or Executive neighborhoods.  You need to start going to Open Houses.  Keep the flyers.  In a month or two look up what they sold for.  ( County tax records, a realtor might help you, zillow etc)  Everything flows from what the property would sell for after it was fixed up. ( ARV ) You need to know that number first. Let's say that you pick a neighborhood of 1970's ranch style houses. What were the highest prices and Why ??? Remodeled kitchen ? A pool ? What were the lowest prices and why ? Ugly ? Traffic Noises ? What do most of the houses sell for ? Don't put yourself in a position where you have to get top dollar to make a profit. You want to make a profit if you sell at the average price. If you sell over average , that's just icing on the cake.

Ex:  A nice fixed up house in your target neighborhood is 200k.  As a rule of thumb you want to buy for 70% of the 200k.  But this is just a rule of thumb. Look up the Flipping Calculator on this site.  Remember your costs are for repairs and expenses like : points on loan origination, closing costs to title company, monthly payments, utilities, 6% of sales price to realtor, closing costs and sell.  Let's say you find a house at 100k.  OMG!  You are going to make 100k !!!!!!  No, you are not.  Selling at 200k gets you the following expenses : 12k to realtor, closing costs vary by state...maybe $1,500, 6 mos payments and monthly utilities and insurance ....8k, paying back the points on your loan 2k.  This totals just over 20k.  OMG!  You made 80k !  Oops, forgot about the costs to fix it up .... that was another 30k.  OMG! You made 50k.  Yep.  Celebrate.  Now, imagine that you overpayed for the property and bought it at 130k.  That difference of 30k comes out of your profit.  You made 20k.  And, Uncle Sam wants his cut.

I hope this is helpful.  I want to encourage you.  I don't want you to lose money.  A key to being an investor that makes money is knowing what Not to Buy.  It's okay to pass.  You don't have to buy every ugly house.  Personally, I'd rather flip one or two houses a year with a 30k - 50k profit each then work my butt off on a bunch of deals that pay $10k.