All Forum Posts by: Tom Goans

I agree David. Many times I have read people stating in writing they borrow money with little intention of repayment or with the attitude of being very willing to walk away should it become challenging.

• How many times do you read of people wanting to use borrowed money "subject to" and not take the responsibility of repayment? So what is your real intention?

With that said, this also explains why my focus for security is the real estate. If I have done my homework, it is reliable security with good intentions.

@Andrew Vogt ,

You have omitted numerous very important items from your list of costs, both initial and holding. If you plan to rent to college kids, I would expect the repair and vacancy costs to be higher than you have allowed.

It is easy to make numbers look great, ask a politician.

I also see many mistakes with the suggestions.

@Michael Woodward ,

I have been actively investing, developing, managing, and financing real estate since the 1960s. I am following in the steps led by my grandfather and father before me. I have listened closely to what they have recommended and attentively observed their actions. After all, my grandparents survived the Great Depression, WWII, and the Dust Bowl - they were farmers and ranchers in the Texas Panhandle. My father also lived through the Great Depression, WWII, and the Dust Bowl. All survived and all thrived.

• I am only a long-term investor.

Primarily, I was taught debt could be very destructive and make achieving success much more challenging. If debt is part of the strategy, it should be well within reasonable limits, well managed, and very well respected. Debt can be the attractive shinny thing that brings down your world.

With the lessons learned and the philosophy understood and put into practice, it has made it much easier for me to survive the many regular ups and downs experienced in the real estate market.

• There is at least one down real estate market every 10 years since the 1970s. The volatility has become much more radical with each passing down period.

Yet, since I own all of my properties debt-free, depressed real estate markets are not a challenge. I have the flexibility to adapt, remain profitable, and live life stress-free.

Moreover, all my properties are what I refer to as Chevy properties. In ALL economical times, there are more buyers and renters for Chevys than Caddies. My target market has always been the Chevy buyers and renters.

I would not consider taking on the amount of debt or stretching my credit limit or buying power as much as many lesser experienced do. I enjoy living live stress-free.

@Andreas Riha ,

Without a consideration for the target market or designing to best communicate to the target market, free advertising is worth the cost.

@Matt Liu,

I have been a lender and involved in buying and selling loans since the 1960s - including from institutional lenders and insurance companies. I have always made loans without credit checks or down payments - and continue the practice to this very day. No big deal to me. The real estate will always come through for me. If you are wondering, my loans average less than .1 percent 5-day delinquency - always have.

In reality, for the most part, I agree with your thoughts Matt. I always considered my primary security for repayment of the loan is the real estate that collateralizes the loan. Thus explains why I put so much stress in knowing all there is to know about the property, neighborhood, the target market, and employers. All considerations are moving and always changing targets. The most unreliable security is generally the borrower. Too often, they borrow up to their credit limit and then become cash poor.

Nevertheless, it is important to have an understanding if the borrower has a plan and the capability to repay the loan in timely increments. Nevertheless, as for security, my focus is on the real estate.

• The borrower could become incapacitated tomorrow.

Matt, I caution you against taking on too large of a project. In effect, this is a positive side effect of the recourse requirement. Should the project fail, it can be very harmful to you financially for many years - if not the rest of your life - and extremely inhibits your ability to have future success in the real estate business, or even buying or renting your personal residence.

If I understand your post correctly, you can expect ever member of the LLC to be required to be personally liable and financially responsible for repayment of the debt.

I would imagine a non-recourse loan would probably have a much higher loan-to-value ration to ensure a safer loan and higher interest rate because of the higher risk factor.

Did anyone track how many financial institutions had liquidity problems, closed, or were sold the past 10 years? The total number to date is in the thousands.

@Khouri Rice,

Becoming a Successful Long-Term Real Estate Investor

Here is my conservative two cents.

Have a conversation with an experienced real estate investor or two whom have long successful investment histories that are similar to your goals.

It is critical to determine your present financial capabilities and needs. The experienced investors can help you realize what it will take and help you to realize the size of investments that may help you to achieve your goals. Then, develop a business plan that considers your present status and how you can achieve your goals within reasonable financial and skill limits.

• Do no underestimate the value of hiring professional contractors over doing it yourself. This may actually be much cheaper for numerous reasons.

Enduring success takes planning. It also requires one to assess their realistic present status - including skills and financial. Please do not make the same mistake that many do by stretching your credit limit or taking on more than you can realistically handle.

• Also keep in mind, you life changes on a daily basis. And so do your financial needs.

What if you need a newer auto, what if you need tires, what if the transmission goes out, what if there is a medical emergency, what if there is a hailstorm ...

If you think a What If will not happen to you, ask anyone who has gone through a real estate foreclosure or a bankruptcy if they planned the event and they wanted to turn their life upside down for years.

• Have you planned your business structure that accounts for present financial needs and long-term planning? A conversation with a licensed professional financial planner and attorney may be very wise.

The highly regarded book "Think and Grow Rich" points out the necessity and rewards of planning.

I hope that my two cents may help you to have a less challenging and stressful real estate career.

@Gabriel Caron,

In my opinion, I see several problems.

1. To begin with, far too narrow of a target market.
2. You have not mentioned investment costs, but it would probably be very challenging to recover your investment, much less make an acceptable return vs the huge risk.
3. Experience
4. Cash-on-Hand - You will probably need a lot of available cash to get the operation up and running and then to keep it afloat.
5. Do you know anyone anywhere that has done exactly what you envision?
6. Have you taken the time to compile a thorough business plan?
7. I must be misunderstanding your term of built-to-suit used with the term rentals. Once built, it is no longer built-to-suit.
8. In Aspen, Colorado, most high-end rentals are handled by a small number of property management companies. Have you had conversations with similiar property management companies to get their viewpoint?

@Tim Pommett,

If memory serves me correctly, XTO is a pretty big outfit. Best of luck to you. It is my understanding Texas has been enjoying another great oil and gas boom for a number of years. Money is once again flowing freely. I have some oil and gas mineral rights I would like to sell in the Lubbock, Texas area some day.

I never was much of a borrower - not because I did not have the available funds, but because I always found ways to invest without having to borrow money. The beauty of the real estate business is it embraces and rewards those are best at structuring deals. The number of ways to structure and finance a real estate opportunity is almost limitless. Each opportunity is unique and requires unique and creative thinking.

I will give you a couple of examples:

1.1,200 acres were for sale. Here is where it is critical to know the history of the seller extremely well prior to beginning any negotiations. In this case, the seller was a successful gambler. He did not need cash, especially all in one year.

·The land was purchased without a down payment.

·The owner provided the financing - terms were no payments for 2 years.

·In about 30 days, I began selling the now subdivided land in 40-acre tracts.

·In about 18 months, all 30 tracts were sold.

·The purchase money was already in the bank before the first payment was due to the seller.

2.This is one a mentor did - his very first real estate venture. The mentor located a large cattle ranch that had great development potential. He did not have any money. He struck a deal with the seller and several investors where they provided the funds to buy and develop the ranch. His only compensation was the profit from running cattle on the ranch during the process. He made thousands and the project was a terrific success.

3.Developers will sometimes sell “orphans” to investors. Orphans are the few remaining lots in a subdivision the developer is completing. Many times, the developer wants to turn his/her attention to new projects and stop fiddling around with the remaining few lots at the old subdivision. An investor can negotiate to buy the lots with no money down and at a discount. The reason for working with an investor vs. a real estate agent is the investor is generally more motivated. Everyone wins.

Something to consider, let’s say the seller is firm on the asking price. With good terms, you can afford to pay the higher price. Let the seller be a part of the deal and share in the profits. As I mentioned, the ways to invest in real estate are limitless. Each situation offers new opportunities for the creative thinkers.

I highly recommend acquiring material from Jimmy Napier in Chipley, Florida - www.jimmynapier.com. The “70 Cash Flow Ideas by Jimmy Napier” is an excellent investment that can make you thousands - if not millions. His specific ideas may not work for you, but they will help you with the creative thinking process.

Best of luck.

@Winston Spence,

I think you have a terrific idea for a new post subject. Renting vs. Buying

The conversation can expand upon the advantages of renting a personal residence vs. owning and using the money saved and tax advantages to further the investment portfolio.

Just a thought.

@J Scott

• If you do not like my posts, then please do not bother reading them.
• If my subject matters are too simple or beneath your intellect, then ignore my posts.
• If your only intent is a personal attack on me, then please do not respond to my posts.
• Is this helping your creditability or to sell your books?

It is all right to have opposing viewpoints. In fact, that is what my posts encourage - conversations and various viewpoints. However, many times, it seems you only want to be argumentative for argumentative sake. Not just with me, but others as well that have an opinion that differs from yours.

The personal attacks are not a contribution - simply unnecessary.

When you make major errors expressing your opinions, I do not bring them to light - it is not my place or duty. Please extend the same courtesy by avoiding personal attacks or being argumentative just to be so.

Have you ever wondered why you had difficulty with the mentors you approached in the past?