All Forum Posts by: Nick Eckemoff

I was looking into this and joann a call. She said her contact should be removed from here. They are a relationship bank and don't do commercial loans. She was friendly and gave me some advice however.

Mods - please remove contact info per request of the bank.

Yes thanks! I meant to post that they need to have good knowledge on preparing taxes for someone who invests in real estate. Fixed my first post.

You're right that I suppose they do not have to be local, but that would be preferred. 

Please let me know any recommendations of a CPA that specializes in real estate.

Certainly some metros are getting ridiculous, where junk properties are selling for 2-3 times their value from a few years ago. Seems to be a frenzy of buyers willing to pay too. Makes any sane man wonder if there is a bubble.

As some mentioned, bubbles are location based. Some locations have been through bubbles and the appreciation has remained steady. If you're buying a property that has supposedly appreciated 20-30% in the last few years, I'd really stop and think if that is realistic...I doubt it will continue and a reversal will be more impactful than other locations with 'normal' of 1-3%  (inflation rate). 

No one has a crystal ball to predict the future, but you are able to use simple statistical probability knowing that markets always have been going up and down. We are on the way up right now and it's not clear where to the top is. My guess is we're not there yet...2018 and 2019 will continue to be years of appreciation. Markets will see disruption by 2020 due to increased use and acceptance of automation technology, which will lead to recession. The lower class millennium generation will take the biggest hit, which could be good for landlords of affordable housing.

I'd be careful getting over leveraged and wouldn't bank on appreciation in this up market. Eventually it will reverse. The question is are you able to survive the down turn up till the next up upturn.

No I wouldn't buy in CA, where it's all about appreciation instead of cash flow right now.

Looks like a good deal to me...150k for something that cash flows 2.4k. Even if it's not in the best shape, you got lots of room to make repairs. Unless it's in the slums, let me know and I'll take it out of your hands. :)

The fee is new to me too, but the way I see it is if my offer is acceptable I'd follow though unless there is something horribly wrong. When making an offer, you need to be sincere, not fishing for a deal. This means the fee isn't lost if I end up buying unless there is some completely unexpected...or I just didn't do my homework. The tricky part is you won't know everything till the offer is accepted and you can look at it. 

Since you are out of state, you were not able to do a drive by or see it before making an offer. Based on the price to rent ratio, you might be dealing with one of those rough risky areas and extra investigation beforehand would be smart. Since you already made the decision to buy such a property, I'd go ahead any pay the fee. You probably wouldn't have the same reservations if it was a higher quality property. 

So in summary, I thinks it's is more a question do you really want the property and are willing to take the risk on it. The fee is making you realize that.

I did a search and found a few threads about this but they are pretty old.

I am having a hard time finding properties in cities and suburbs that are what I'd consider a deal due to the high demand and low supply. However if you look In rural areas, there does seem to be opportunity to snag some deals.

Does anyone buy rentals in rural areas and are willing to share their experience in today's sellers market? Perhaps the property isn't even a small town, but literally out in the country 15-30 minutes away from the nearest town.

What concerns me is I'd buy something and then it sits vacant for months, so I've been focusing on good locations...along with everyone else.

Older cheaper homes like the one you are looking at have a good cash flow and ROI, however I think most overlooked the additional capex expenses, which is a much higher percentage of the total expenses than newer more expensive homes.

Do an evaluation of potential big repairs in the next 30 years and add that as an average monthly expense. You might end up with an additional $150 per month. This would take your long term cash flow to nearly 0 or negative if the tenant leaves, where you'd have to fix up the place before placing it back on the rental market.

I'd recommend using that cash as a down payment for a  100-150k property instead. Mortgage debt for a rental property isn't bad debt. Paying all cash is far more risky, especially for a first property.

So I thought this through more.

Every year there have been doomsday prophecies and people absolutely convinced about something. Some even have lots of data to back up their theory. Fact is, most never come to pass.

What I definitely learned in dealing stocks that you simply can't predict the market...you can only adapt to it. Sometimes prices continue to rise and you stare thinking 'no way! they're going plummet any day now!' but they continue to rise for months or years. At times prices fall drastically and it feels like the trend has reversed, but sure enough they recover the next day or week. All the while some sit there and not act (even when prices fall). The same situation happens on a down trend, where some refuse to (short) sell hoping for recovery, but only losing even more, yet others panic at a normal blip or spike, selling or buying too soon.

I am a believer of 'past performance statistically increases the odds of similar future performance.' Yes past performance IS an indicator of future performance. I buy stocks trending up assuming they will continue to do so rather than stocks tending down hoping they'll recover. After time, the trend will reverse and there is time to sell before too late. Another words... when real estate prices are rising is a good time to buy - not when they start falling.

Real estate is very location oriented, but I'd say as a whole its trending up now today. I don't think there are signs of a reversal yet. Real estate is very slow moving compared to stocks. Of course there could be some kind of drastic turn of the real estate market, but I don't think that the likelihood is any more today than yesterday. There is always risk and it is always accompanied by opportunity.

You never know where the bottom or top is, so you can't rely on a bubble bursting as an indicator of when to buy. So my current theory is today is still a good day to buy real estate and waiting around is pointless. Nonetheless, I think people should be careful being over leveraged or too tight on what is break even or making a profit. Traditionally, rents don't really move up and down much and I really doubt this would be a drastic change.

I think the most critical situation today is that there is a lower supply and higher demand in the real estate market now that the economy is doing well. Many more people today would rather rent than buy (young people don't want to get starter homes, but rather save up for the big one while living cheap). This trend is very different than in the past where  unqualified people were handed mortgages with no down payment. So I don't see a crash or prices dropping in the near future, but rather it is a good opportunity to buy and in fact perhaps investors are the real winners in this situation.

I don't think any bank will loan you money with no income or collateral. You could ask your friends and family though. Maybe seek out private lenders too.

You can't really 'make money fast' with real estate unless you do flip (fixing or just passing deals along). That 40k would turn into a meager income that isn't going do much. ETFs are much better for rapid investment, but you could end up losing money (like I did last month) too.

Best to keep that money as an emergency fund or pay off bad debts. Once you get a decent paying job, work at for 1-2 years and then assuming your credit score is good, you'll qualify for a loan to buy real estate. 

Investing is what you do when are established and doing well (not the other way around).

I ran your numbers quickly and basically you are getting about the same ROI either way...maybe slightly more with cash.

I assume 25% is to include closing costs and other fees.

Not sure if its possible to get a mortgage for less than 80k (after down payment). Most banks have a minimum.

IMO, cash is best here.