All Forum Posts by: Jeff Tumbarello

I heard from someone at Countrywide that the REOs are distributed by local offices to local real estate agents who have given the company business over the years. After I heard this, I threw some business to one of my local Countrywide lender guys but so far no listings.

Sharon...I know how you feel and your sense of frustration. It boggles my mind why the banks give so many listings to the same agents. Some of them are excellent agents but some are losers who never return calls, don't put correct info in the MLS, have wrong combo codes, etc, yet they keep getting listings. I spent most of last year trying to break the code and attending conferences to smooze some asset managers with very little luck. I got 2 listings emailed to me (truthfully I don't even know how I got them), one of which I sold in 30 days but then never got any additional business.

Mark...I can't tell if your wining & dining advice was in jest or for real. I've heard tickets to the Lakers may work, too. Of course, you've got to find the actual asset manager to extent the invitation. However, I had a friend propose some sport tickets to one AM and he said he was offended by the "bribe."

I realize that agents in the same area are never going to share contacts or information but I don't really understand why the whole REO club is so tight to not share info. with agents from other areas. I would be more than willing to give 25% of my commission to an agent whose AM contact is giving me listings. Anyone want to take me up on my offer???

Not to worry Josh, I can not speak for everyone, but no heat or drama here. I do not believe anyone is getting heated over this. It is a great discussion and multiple points of view.
Again, I do not see how a comment of 25% vacancy factor is applicable on any residential investment, but everyone is entitled to their opinions.

Thanks for keeping an EYE or two on us Josh! :lol:

the vacancy comment was no joke
25 percent is a good number to use.
New Construction units for investors did well in the mania. Not so well now. I am now going to due some DD into this. Are you assigning a interest in these propertys?

Jeff,
Florida is an entirely different market than Texas, Fort Worth in particular. These units will not be REO's, as they will only be sold to qualified buyers who have the financial backing/reserves to avoid such an occurance. If that comment was your attempt to be funny, it was not and has no place here. Perhaps we can start a comic thread if you are so inclined.

If new construction units are not profitable over time, how can anyone explain why they sell at all? The bottome line is that these are for the passive investor, (the same investors who buy stocks and hold them) who hold full time jobs, may not be full time investors, and are looking for the tax advantages, cash flow, and the future upside of appreciation which is not guaranteed, but history has proven over time has gone up each and every decade.

I do agree with Jon, that an expense ratio of 40% on AVERAGE, is a suitable screening tool. Remember that capital expenses and other operating expenses that occur over time can come from reserves or saved up cash flow. There are many successful and famous RE investors who say that cash flow is in commercial properties and residential is purchased for appreciation. That said, I like to combine the two whenever possible, both for my portfolio, and those of my investors.

I believe you are correct that it is impossible to buy new construction, rent it, pay out 50% of the rent for expenses and turn a profit. That's why I can't see buying new construction for a rental.

Capital expenses may be different from an IRS point of view but they're still money out of your pocket as an investor. They're worse than expenses because you pay them all at once but can only deduct them based on their depreciation schedule. If you do your projections and neglect these expenses, you'll have a very unpleasant surprise when they do eventually come due.

Most expenses, like property management, vacancy, legal expenses, evictions, tenant damage, taxes, and insurance have little or nothing to do with new construction vs. existing houses.

I'm new to the rental game, and don't have enough data to really know. I've spoken to a number of experienced landlords, including one who has about 30 rentals and has had them for a number of years. Consistently, they say expenses are not as high as 50% of rent. I've never actually gotten a specific number. But, I do get more of a "yeah, maybe" for 40%.

I've also been led to believe that southern climates have a lower expense ratio than northern climates.

James,
Here is the current listed proforma:
$3,600 - $3,700 Rental Income
80% P&I Mortgage @ 7% = 1810
10% Credit Line @ 6% = 170 (To avoid PMI of 90% financing)
Taxes = $535
Insurance = $160
Management 8% = $288
Cash Flow = $637-$737
Vacancy factor is less than 5% but using that would be more than safe on this investment. Repairs are $0 first year & very small years 2-4 (makereadies, etc.) By no means will the 50% rule be applicable on this investment. By the definaition/explanation, it is an average and some are higher and some are lower.
Each investor should plug in their own numbers as the porforma does not list All expenses.