All Forum Posts by: N/A N/A

Mike, I respect your superior knowledge but I must state that I haven't enjoyed the tone you've used with me through this thread.

I'm not a stupid person and I'm also not naive.

But, I'll just say you're right and I'm wrong.

Thanks for your time and energy!

Well, I am learning a lot! I know what you'll say, but I can't imagine how a seller will respond to a 65% offer "in this area."

One thing I just want you to consider when talking about the yearly costs, because we were conservative and it still worked out to about 30%. Let me propose this:

Your 40%-50% costs are probably based on the fact that your 1.4M properties are 30-unit apt buildings with 30 bathrooms to remodel and an acre of grounds to maintain, etc. Proportionally, our costs here are less because it is a lousy 2-unit deal with a tiny patch of grass to mow.

Can you give me that? :wink:

You've got me just about convinced.

And that was my next question. We want to leverage the equity on the properties we do have. But I'm not convinced I want to sell them outright! So, obviously, the prices here are so overpriced that no-one should buy them. (Sorry, I still can't get my head around that.....no one sells at 70% of market value....they sell at what the market will bear. This 70% below market value sounds like get-rick quick schemes.) This market is pricey, yes. (And, no we're not in LA-LA land, thank Gawd.).....so, we must buy out of the area.

And that is my next question. Where shall we look?

(btw, what is the etiquette of the board? Should I start a new topic for a new question?)

I used that analysis tool. It is really great.

OK, maybe this is a really stupid question.

What is wrong with putting 200K in cash down so that it does cash flow?

It always was in my head (and of course, with two residence purchases, I have a tiny experience) that to buy property, you need to put money down. And I think that is the answer to why every Tom and Dick don't buy real estate, and it is because they don't have 200K in cash to buy a 1.4M property.

Please, explain again for the uninformed....!

Thanks,
littleivy

OK. So, this is a typical property in our area. This is not outrageously priced (FOR THE AREA!). And the rents are somewhat better than most (FOR THE AREA!). We looked at a 2M property with rents of 12,300, and some others with worse cap rates.

Of all the properties we looked at, this one has the best cap rate. Our agent said this is the best deal she's seen in this neighborhood in the last four years.

So, are all the buyers here suckers? Are they all making terrible mistakes buying the properties in this area? The house next door was bought sight-unseen last month by some out-of-staters for nearly 1M.

We kicked ourselves becuase a few years ago we didn't buy a 400K house down the street as an investment. We thought that the area was too overpriced and couldn't go up anymore. Well, guess what? In the five or six years since we passed up that one, the value has more than doubled to 1M. I know it will slow down, but forecasters are saying values will continue to rise here.

As for the calculators, why point me to them, if you tell me they won't give me the results you are expecting? "GIGO"!! ....I plug in the numbers that are available to me. Then, I say it isn't as bad as it seems. Then you say GIGO.

Well, right now I feel I'm talking in circles. I'm going to go look at the seller's disclosures again and look at the numbers.

People, I'm listening! I even listen to your sarcasm and try to see the nuggets of truth underneath! If it is any consolation, you've succeeded in scaring me. I'm not trying to justify...I am learning.

I'm trying to be factual. If I did the calculator correctly that you pointed me to, there is indeed a loss the first year and then with modest rent increases there is positive cash flow.

I wonder why the professional real estate investor bought this property 3 years ago, and 20 more like it in this student community (and no, he is not 80 years old who has held these properties for 50 years; he is a 50 year old man who has numerous properties here).

When the seller prepares the Investment Property Analysis, are they lying? When they disclose their expense sheets, are they lying? Are they pulling the wool over everyone's eyes, including experienced investors (or do they somehow know who is a "newbie" and who is a "veteran" when they send their disclosures?

Littleivy is going to dash off an email to her RE broker and ask some questions now.

Also, another question.

You say that properties should be considered as 0 down and mortgaged to the hilt....and that there should be amazing income.

So, where does "investment" come in? Why doesn't every Tom, Dick and Harry in your communities buy (or, it seems, be gifted) investment property?

Truly....I'm interested in how this works in your communities.

Interesting graph. Point taken.

I do know this about our area: it is highly desirable and there is no new building going on (or very little) due to geographical and political restrictions....as I outlined above, this student community is also unique.....I do think there are unique economics at work here.

Before we do purchase this property, we'll consider all of your comments. We've thought about investing in another area of the country, and we still have some trepidations about this. I'm not fighting you tooth and nail....I don't even know you; I certainly don't have to justify anything to you. I've been trying to present the facts as factually as I can.

Does every seller lie? Do you? Other sellers have given similar estimates of their expenses....should I disbelieve all of them?

Can I hear from a few others about Cap rates and GRMs in your areas?

Thank you all!

Actually, the leases have been signed for the next year (begninning July 1), and were signed last January for the coming year. There are, I believe, 6 people signed in each unit (2 in each bedroom). Very typical for this community. They are year leases, which is typical for all the rentals in this unique community. There are usually no vacancies. I expect rents to continue to rise, and when my kids go to college in 2-4 years, they will be able to live there if they wish (and yes, they'll pay rent!)

Actually, the seller has disclosed that expenses are about 29% of GOI (about the same as other properties we've looked at in the area). This includes taxes and management fees. There are no advertising costs because this area is in extremely high demand (rentals are filled by February for the following July-July leases).

In addition, values our area is expected to appreciate. This property was bought for 1.2M about 3 years ago (the beginning of the buyer's market). It appreciated 200K in those years. ...I know, I know, not great.

I haven't fallen in love with the property. ....I've fallen in love with the RE market here. I have lived here a long time and have seen my home increase in value from 275K to 1M in the 13 years since we bought it....and our first home, which we kept as a rental, has increased from the 195K that we bought it to being worth about 850K+.

There won't be. Our tenants will be paying off the mortgage on the property plus the mortgage on our home and all the expenses associated. We may break even or take a tiny profit to begin, but rents will go up. Luckily, there are some wonderful management companies....and parent co-signers...and we won't have to deal with the day-to-day headaches. And, yes, we've considered investing some of our equity, which we will also do! :D

I don't want to seem argumentative...I certainly agree with all of you that real estate is a great investment. This may seem marginal at the moment, but I really believe that it will be a wonderful long-term investment. We aren't "flippers" for sure. We buy and hold. I believe our children will be very glad that we bought this property when they inherit it.

You all have made very good points, and we have looked and looked and thought and thought about it.

By the way, where do you all live, and what kinds of rents can you get on a $1.4M property? I'm interested!

Thanks again!

Thank you for your concern!

I am listening, and we're crunching numbers.

I don't know where you live, but we can't buy a property with 0 down.

We'll be taking some equity out of our home, using some cash getting the mortgage down. After taxes, we're looking at positive cash flow.

Rents will be going up, and this community's property values are expected to keep rising, albeit slower than they have in the last few years.

We're thinking hard about this investment. I do appreciate your concerns.