All Forum Posts by: Felix Krull

Travis, you raise a good point about the tenants. I have been thinking about that quite a bit. I catch your drift about the wholesaling angle, but there's something about wholesaling that doesn't seem perfectly ethical to me. Maybe it's just that I don't understand the whole concept well enough, but I'm not the kind of person to make an offer and then not follow through with it.

As for watching someone and learning the ropes, that may have been a viable option if I was 22 and fresh out of college with no bills to pay but at 35 with a mortgage of my own, car note, etc., playing the role of apprentice isn't the most economically viable use of my time.

That said, I'm learning a lot from the collective wisdom on BP and I plan to continue doing so. Many of the points made have given me food for thought. When I see an asset like a house at such a fire sale price the value investor in me can't help but think there's money to be made in it somehow. Perhaps I'm wrong.

Well, I wouldn't mind turning it into a rental property if I could get in it for a small amount. Not really thinking about a quick flip. From what I've learned so far, I'm formulating my RE investment thesis in terms of buy and hold.

I'm going to see what I can do with it, if anything. I want to do a deal to start learning the ropes. Maybe it'll be this one or I'll bide my time for another to come along. But at the end of the day there is no substitute for experience.

I appreciate all the input on this hypothetical. @ Stan, I look at a property like this the same way I'd look at a penny stock. It's cheap for a reason but under the right circumstances it could be a money maker or, alternatively, it could be a value trap. If I buy a thousand shares of XYZ trading at $2, hey if it runs up to $3 then I just made $500 bucks. If it delists and goes belly up then hey I'm out $2 grand, oh well.

If it were a security I'd trade it on paper for a while to see how it behaves but I'm not sure that's as easy to do with a hard asset.

I'm looking for a slow pitch to start off with, something that considering the worst possible scenario, if everything possible goes wrong, I can still come out of the game okay.

When I started trading securities I started off with utilities, GE, steady eddie blue chips, issues that aren't going to hurt you barring the apocalypse. Then I started trading pennies in small positions just to get a feel for momentum and volume. That helped teach me about entry and exit strategies, creating a thesis for every trade. These trading strategies then helped me formulate my investment philosophy for long-term holdings (i.e., finding value in undervalued issues that return capital to shareholders).

I don't want to buy a property, have to dump a bunch of money in into it and then it becomes an albatross around my neck. I'm a value investor. I like margins of safety and I like cheap, as in on sale, not cheap as in worthless.

I appreciate your words of wisdom and the points you make. Very good stuff.

Well, I feel somewhat comfortable shooting from the hip here because of how cheap the property is. I see a cheap property like this as a great learning opportunity. If a tornado came along and swept it away to Oz, I'm not going to be filing Chapter 11 because of it.

The house is located in the city where I live, so I'm familiar with the area. What is the best way to find out what properties in an area rent for, and how do I find out what other properties in the area sold for? Other than looking at the PA website.

Thanks for the help.

I ran a screen and came across a 3/1.5 1130 sf house. I've played with some numbers and I figure with 20% down with a 4.75% note I would only have a monthly payment of about $100.

I looked the property up on the county pa's site and it last sold back in '05 for $75K. Now, just from the little research I've done I know that bank owned properties are a different animal so I am seeking some collective wisdom as to how I should proceed with this potential deal. My goal is to turn this into a positive cash flow property.

The house is located in the low income side of town, so there are obviously issues with its age, amenities and some minor crime. However, and correct me if I'm wrong, for a house that big I don't see why I couldn't get at least 2%, if not 3% monthly income.

Since this is potentially my first investment deal I want to tread very carefully and conservatively. What do you all think should be my next steps in progressing towards a deal? Other than obviously going to see it in person. Thank you very much for your help in advance.

Felix

If you look on YouTube you will find some really informative videos by some RE investors in Phonenix. I think their handle is PhxRei or something like that, but you should definitely check them out if you're considering the Phoenix area.

Thank you all for your replies. I appreciate your input. I am trying to learn as much as I can about real estate investing as my goal is to build a portfolio of properties and use the residual income to subsidize my monthly expenses by up to 15% in the near term and then 10 to 15 years out have my monthly portfolio income completely finance my lifestyle.

I am asking this honest question as a newbie, and I hope I will get some honest replies. I don't know a whole lot about REI, so I hope someone will correct me where my thinking is wrong. I am interested in buying my first rental property but don't really see the point in putting money down on it unless I'm treating it like a bond (i.e., I intend to recoup my principal at a later date).

Just to keep the math simple, let's say I buy a multi-family property for $100k, I put $20k down and I'm able to net $500/mo from the rent. It'll be 40 months before I recoup my initial investment. It seems to me that that is a long time just to break even on my initial capital outlay.

I understand the ideas of equity and capital gain from price appreciation on the underlying asset, but just from a sheer cash in the pocket standpoint wouldn't it make more sense to try to minimize the initial out-of-pocket acquistion cost on the investment?

Again, I'm new to the financial concepts of real estate. I'm a stock investor at heart so I'm accustomed to evaluating investments from a yield on cost perspective. Thank you for your insight in advance.