All Forum Posts by: Gilbert Dominguez

First why are you even thinking about investing in real estate? The key word is investing, meaning you want something that will earn more for you than you are going to spend. 

Eventually if you do something enough you come to a point of wanting to make it an efficient process as well as a profitable one. The 1%, 2%, 50% and 70% rules simply are a manner of determining that you can take on debt, pay for cost and still earn a profit either more immediately or over the long term given what we know and rely on which is based on like anything else historical data. 

The stock market has historically returned from 8% to 20% over the years so people use that to calculate risks and returns. Maybe bond have historically returned from 3% to 9% and when the stock market is doing poorly historically bonds are the better investment so during those times more people will move their investment dollars over to bonds etc. 

Historically real estate investing has proven to yield good and consistent returns and they offer security as a fixed asset class.

It is not that you are offering a selling 70% of what their house  is worth, it is 70% of what the market would pay for your product once you make it equal to market value. That is generally the most you can expect to get for your property. If everyone around you is paying $120K for a 3 bed/2 bath 1500 square foot home and you also have a 1500 square foot home that is a 3/2 you would not expect to be able to sell it for $300K, no one would buy it because all around they can find such a home for $120K. 

A fixer upper may not be worth the same $120K if it needs $30K in repairs but you can calculate based on the $30K in repairs that your purchase price must be somewhere around 50% of market value, that would be your Maximum Allowable Offer to account for the risks you are going to take in spending $90K in purchase and repairs plus all related transaction and carrying costs. Somehow you have to determine that you will be able to make a profit. Generally you can expect that you can buy at most 70% of market value leaving you room for added expenses and still sell at market value and profit. It is just a guide but it just so happens it is also a proven guide. 

You can say ARV = market value

If your market value or ARV is $120K and you also pay overall the same $120K then there is no sane reason for you to do that deal.

You are looking for your greatest source of supply as well. You need a product to sell or a house to rent. You may be able to pick up turn key properties that you can buy under market such as a foreclosure that has been discounted by the mortgage holder or even a house you can buy that is in good shape for a seller that for whatever reason has gotten themselves in a tight financial situation and need to sell with a sense of urgency but that supply is low. 

You want to have an investment strategy that will keep you supplied with product and you also want a source of product you can buy at under market value. This is to assure yourself of operating at a profit, or increase your chances of a profit. You can also buy properties at full market value and depend on appreciation over time. It does happen but you are lessening your chances of profiting. 

You are talking about a private lender, someone you would include in your circle of privately and personally known people to you. Now if you were talking about a HML then that person is in the business of lending money and maybe has already set a schedule of how much time he or she is willing to give anyone looking to borrow money from them. They would expect you to talk about your business and reasons for a loan immediately and expect you to have things like a business plan, charts and all the data you are relying on to determine you can operate and therefore use the money profitably. They may not really care that you are a respectful person or as considerate of anything in their personal life. They want many people to come to them for money. A private person would use personal criteria more than simple business reasons to deal with you.

Not that a HML would not have personal reasons or preferences but they are playing a numbers game and the more people go to them for loans the more money they can expect to earn, their motives are more geared toward profits than personal satisfaction and they are also completing with Joe lender down the street where as a private lender is not so dependent on lending their money but maybe open to the idea of it.

Sad to say but it sounds like someone has lost their income. Offer cash for keys that is your most economical way of going about it. Thing is that may still not be enough for them and they have not saved up money to get into a new place. You may end up dealing with an eviction process anyway but its worth a shot. Tell them its better for them to accept your cash for keys offer rather than being out of money and also have an eviction on their record. 

Best of luck !!

Well I will try. He goes. Thing is your property is surrounded by other properties which in all likelihood will be sold at a discount. You will have more houses purchased by investors rather than by owner/occupants and as we all know people will spend more money for a personal residence than they will pay for an investment property. So the valuation of your property will be more inline with investment properties , meaning people will generally pay less and also sell them at some kind of discount. 

Occupancy rates will be lower, care will be less, renters in the area more in number versus owner/occupants, just generally less of a demand for another property in that area which translates into less of a demand for your personal property as well. 

More foreclosures means a poorer performing economy. People living around you generally have a  poorer economic outlook and poorer economic strength. More foreclosures equates to more people wanting to move to more gentrified areas and take their money out of your area. Foreclosed homes start to get boarded up to protect them against damage, they are more unsightly.  A higher vacancy rate will start to make itself more evident which equates to a lesser desirability which equates to lower offers and a more depressed market. The good buyers will be looking elsewhere to buy and be less willing to pay a higher price for properties around you, including yours. 

Look at areas in Detroit. You can find 6000 sq. ft. mansions offered at $100K. Go to the heart of San Francisco and you will find studios priced at $500K.

Market price is a subjective thing, there is nothing saying anyone will be willing to pay a high price for your home simply because you want that. 

Many of us would think that a 6,000 sq. ft home will fetch something in the millions of dollars but if no one is living around you and no one is paying property taxes and there are less customers for businesses wishing to establish themselves around you then there is the perceived idea that your property is worth less to most buyers. Those that will want to buy your house will be those that can not afford to buy in a better area where prices are higher and a higher demand is evident.  

With more foreclosed properties around you people will perceive your property as being less desirable and therefor worth less. Remember the first rule of real estate. Location !, location! location !

There are abandoned apartment buildings all around being offered for less than $140K in depressed areas and then in areas where demand is very high you can find an apartment building that is 200 years old being sold for over $20M

If you do not mind driving for dollars Perry. I am sure you will find deals in the surrounding areas for around $200K. You can even cash flow buying some properties with no fixer uppers just turn key but don't expect to be buying any 3000 to 6000 homes. 

@Jamal Lee

I am glad someone has stepped up to exemplify that real estate investing is not or does not have to be all about the money and that we can establish ourselves as community leaders not just leaders in our industry. This is true professionalism at its best. 

Success in any business endeavor can and does provide us with opportunity to grow as people and not only to represent our industry as a way of building wealth and planning for the future but as a way of taking responsibility in fulfilling the needs of others and resolving financial issues within an organized society. 

Yes, real estate investing can be used to build personal wealth and income but it can also be used to address the problems of the less fortunate as well. Today I live in a very new, nice, ultra modern building with an entertainment area, nice landscaping, water fountains , lawn area, security etc. etc. However the first home of any kind I ever knew was constructed of bushes, dried tree branches, card board boxes, and everything tied together with shipping string, had dirt floors, no plumbing, no electricity, and not water. When we moved up we moved into an ex barn that had been used to house milk cows but had been converted to have a kitchen area and a toilet. The loft was full of bats, vampire bats at that. Still to me that was heaven compared to living inside a bush on a hill side and nothing but card board boxes for cover which all blew or fell apart at the first sign of rain. 

It irks me to read the post on hear by seasoned or otherwise financially well healed investors that criticize wholesalers for not having too much money to invest and ridicule first time investors for their questions or difficulties. How about contributing to creating and providing opportunity for others?

I commend the sponsors of Bigger Pockets for providing a place where one can obtain a great education and be exposed to so many problems and situations that are real estate related. It also provides a mean to network and get connected with so many like minded people who share a common interest. 

It is sobering to hear once in a while people like Jamal Lee talk about the human aspects of doing financial transactions through real estate.

Jamal Lee, I hope you never lose that tough for people throughout your real estate career. 

@Matt Mimnagh,

First of all capital gains will be triggered when and on when you sell a property and get the gains in your hand so if you do not sell your house and rent it out then not until you actually sell the house for a gain will the capital gains tax be triggered on your primary residence. 

Next you did not get the lot for free and should be able to allocate a portion of the purchase price to the lot to offset your gains on the lot. You may need to consult with a real estate attorney and/or a tax expert. 

However in either case unless you have owned the properties for over 2 years you will have to pay the tax on the portion you receive as a gain. Start to think how you can use the money to earn more money and compound the gains regardless of taxes you will be paying on those ongoing gains. 

Now the money you will net from the sale of the lot at this time may not seem like much and depending on the real estate market you are in and assuming you want to keep on investing that money into real estate you may not find anything you can buy for that small amount of money unless there is an opportunity for you to use it as a down payment and will qualify for a loan. 

However how about you consider investing that money into a real estate Syndication which will find a property to invest your money in, produce and collect rents for you and give you the benefit of any appreciation of the property(ies) your money was used to purchase and also provide you with property management all in one package. You could always sell your shares in the Syndication at a later date or of course keep your investment rolling. You would expect to receive compensation in accordance with your percentage contribution of the total fund. 

I always look at any present dollar as representing $1,000.00 in the future so your $20,000.00 in my mind would be viewed as $20M. Of course reality might produce 10% of that but $20K turned into $200K over time would still be quite worth it. I would not worry about the tax consequence of that small amount of money but as we have suggested take this matter to a real estate attorney or professional and licensed tax consultant so you know where you stand and what your legal options are for optimizing your situation. 

If I was a HML which I am not but if I was first of course I would want to lend to whoever shows the ability to pay and is the lesser credit risk. However I would be in business to make money period. I would not care how great you are with credit or assets. I would still be looking to make X dollars on my money.

Conventional lenders have guidelines that play the credit worthiness game and reward those with good credit and high net worth. As a HML I would still be looking for the best deal but not less of a return on my money. If a person earning $30K a year earns me 12% on my money why would I care if a person earns $1M a year? I still want to earn 12% on my money.

I am not saying HML think like this but if I was a HML I might think of using HML as a way to pick up properties on the cheap with equity in them by foreclosing on those that failed to pay. If you show to be very strong financially then chance of me foreclosing on you are slim and I would at least want to earn my 12% or whatever interest I would be charging.

If the water lines still have some water in them clear them out. Then buy a test water pressure gauge with an air valve on it. Get a compressor nozzle and pressure air into the line up to 40 lbs Psi. The lines should hole pressure for about 2 hours without leaks. If you have air leaks then you may have water leaks as well. 

Lets check our history a little bit. It was not that many years ago we started to here about this concept called a TIC(Tenants in common), remember folks?

Now we may need to look around for a building a little on the rough side but there are plenty in the San Francisco Bay Area. Our fellow Bay Area Residents or our fellow BP out of town investors can find their, " House Hack", Opportunity in a TIC 4 plex that one might be able to buy for $750K with 20% down cumulative between all TIC buyers.

A $600K first 30 year mortgage at today's 3.92% would have a payment of $2,837.00. If two TIC buyers got together and had two units to rent at $2.4K/Mo that would give them a month rental gross income of $4.8K less a mortgage payment of $2,837.00

$4.8K -$2837.00 = $1,963.00 viola !! our out of town fellow investors or our new first time investors right here in the Bay Area just got a residence and will be earning a positive cash flow of $1,963.00 less monthly expenses, maybe yes or maybe still no but its looks like there may be away to break into the San Francisco Bay Area real estate market after all. 

Thanks @Jeff Pollack, 

You are our hero for the day !!!!!