All Forum Posts by: Ralph R.

@Scott Sewell

I dunno how far the trickle down will go but I bet its pretty deep before its over.  The oil patch is responsible for a lot here in the upper1.  Im thinking it might be a good time to buy in the next couple years.  Anch had some pretty high prices last time I looked.  hopefully they will soften up a bit.  I was just talking to a guy in Juneau  He said they were seeing some softing a bit as Juneau is heavily dependant on the state.

RR 

@Michael Dunn

Michael  the part about your strategy that really scares me is the big hurry you are in. Remember "Rome wasn't built  in a day"  you have just purchased a property, its only partly rented out, you haven't got 2 years land lording on your income taxes so you cant  use rental income as any basis for a conventional loan, and you are in a big rush to increase your debt.  You made no mention of cash flow from your current property, only that is break even.  whats the bank spose to do with that?  how does that effect your odds of getting a loan? 

 slow down a bit.  Those 2 properties aren't likely to be the last two deals to ever cross your path.  let your current property "soak" a bit, and get it to show cash flow not just break even.  wat if something happens to the current tenant?  Could you make the payments on all your loans?  build some cash reserves, save a down payment.  Leverage can be a good thing.  It can also put you in bankruptcy.  You are trying to purchase 3 properties with no skin in the game.  commendable maybe but also a good way to bump your head, HARD.  The faster you are running the more you can get hurt when you fall.  Look for a partner/ mentor, maybe  one of the targeted properties owners can help out?  Real estate takes patients and time.  you can't rush it. if you do your portfolio foundation will be narrow and weak, and likely crumble.  3 properties mortgaged to the hilt with no cash flow isn't something most investors would want.

RR             

Hey @Scott Sewell

I am an investor in Bethel AK.  My properties are all out of state.  When the areas I am investing in turned sour a couple years ago I didn't sell any properties, I bought more.  The rents in my area never really fell much, but they never went up either. Interest rates did fall though.  I was upside down on one property in particular.  I refinanced that loan, witch lowered my payments.  This not only increased cash flow but made the payment easier to swallow when that house was empty.  I had no alternative, being upside down made selling the property a non option.  I held on and weathered the storm.  I then used lower pricing to increase my portfolio.  If your buy and hold, you gotta remember you don't loose till you sell. 

 The trouble in AK is different than it was in the lower 48.  we are talking about a recession over the whole economy not just a real estate bubble bursting.  I work for the state, and as we both know they are in deep DOO DO. I am just an airport maintenance person but  I predict a big number of state funded projects that may not get funding.  This will lower the construction /Davis Bacon jobs in the state.  I think many state jobs will not be refilled as people retire, or leave.  The slope has already laid off a bunch of people.  In addition much of the money from the fishing industry leaves the state, never to be seen in AK again.  I believe also a factor is that the State (as well as most Alaskans) is used to spending money like they had an endless supply.  I believe its going to take a while for Alaska's government and population to learn "basic economics".  Might be some opportunity here. if you want to expand your portfolio.   

 In the bush the big employers are the Feds.  the Hospital here is totally funded with federal money.  ALL supplys come to Bethal  by a thing called Bypass mail.  This keeps the air freighters out here afloat.  These things may or may not help us in the bush, as they are federal not state supported.

If I were in your shoes in Anchorage or somewhere depending heavily on the slope, or construction workers for renters, I would try to asses how low of a rent base my properties could support, and look at WHO my tenants are. Then make a decision to sell now or try to ride the storm.  If the people renting from you are not in the costruction trades or oil trades you may be ok.  Most of my tenants are the people who work at Wal-Mart, or 7-11 or retired. IE- $500-$900 a month rent in the lower 48.  In my opinion these people tend to take a financial hit a little better.  The gas station still needs clerks, Wal-Mart still needs clerks, fred myers will  still need help ETC. ETC.  I target this class because they appear to me to be more resilient in times of financial hardship.  I don't always get the big profits, but its a bit safer during an economic downturn.  This caliber of tenant also seems to be more stable.  of 7 doors I have had 2 vacancys in the last 3 years. 3 vacancys in the last 7 years.  one renter moved for severe health problems, one cos I raised the rent too much. (I should have known better)  both filled quickly.  I evicted the 3rd renter, for not paying rent.

please be aware this is just my take on wats coming for Alaska in the near future.  I am just an old guy that likes to look down the road a ways. 

Hope this helps!!

RR                     

Great Job.  Look out world, here comes @Alex Applebee!!                             

@Asma A.   What a lot of people are missing here is that the more equity you have in the rental the less money you have working for you. It's the same thing as having a bunch of money saved up and no definite goal. Why would you want one paid for rental worth $100,000 when you could for the same $100,000 have 5 -$100,000 rentals with 30 year notes. What's going to be worth more in 15 years the 5 partially paid for properties or the one paid for property??  1 rental doesn't make you an investor. 5 is a start

@Asma A.

I bought 2 properties with 15 year loans, and LOW interest rates.  Don't do it.  The disadvantages are numerous, and the only fix is a refinance.  very costly.  I refinanced one, and it costs a bunch out of your increased equity, hits your credit again, and takes time.  Not to mention the refi will be at the higher interest.  The other I have opted to keep at 15 years hoping to get it paid off as I don't want to take the interest/finance charge/appraisal cost beating.  Also interest has gone up and I would not significantly lower my payment.   That's 15 years of less money in my pocket.  Oh yeah don't forget that the principle you pay the bank is counted as income so it increases your tax burden, while giving you less cash in hand.  Smart huh?  If you go to the BP calculators and run the numbers using the 2 loans you can really see the difference.  I get frustrated every time I look at the numbers for that duplex.  I still net over $100 dollars a door CF, but could have had a lot more.  These loans were one of my numerous "Newbie" mistakes.  The best bet is use a 30 year note, and make payments against the principal.  It makes little sense to lock yourself into a 15 year loss of cash flow. 

RR              

@Jay Hinrichs 

Actually Kris not sure hater is appropriate .. I have my fan club and I have those that probably don't care for my brand of frankness. But you will have to get up pretty early in the day to come up with a scheme that I have not seen or know of..

And your Sub too with land trust is so old and tired I just wanted to let the others know that this is not some super sophisticated transaction and wanted to point out that of all transactions this one is SUPER risky to a seller.. but hey half of BP is about ripping equity from sellers. we all know that.. just look at anyone who post how they made 50 to 100k on deal.. they did that buy ripping equity.. I get that... but those are cash transactions. sub too leave a seller totally at your mercy credit wise. .and others who may not have your work ethic and desire to the do the right thing will just rip these folks Off I have seen it more times than I can count sub too .. Never make a payment rip the rents for 24 months credit is not in their name . its a mortgage state Seller is total screwed and flustered and you just keep collecting that rent why they flounder..

So I think Sub too like wholesaling should be banned from a subject on BP.. Now that one will really get people riled.. LOL..

As to your question how do others do it .. well they do it by value add.. brokering with licenses and saving money and building up their investments.. that's basically how I have seen it done.

The last paragraph says it all!  Hard work, intelligent decisions, perseverance patience

RR

@Jay Hinrichs @Ian Davis

Jay

I'm not familiar with a subject too deal, but I gotta agree with you. I don't see how the Seller gains anything here. He still has a loan in his name, so he may or may not be able to get another loan depending on his DTI, he wont have a down payment from the sale of the property as $500 dollars isn't much for a down payment on another property, (wont even put gas in my boat) and when if or how does he ever get any equity he may have in the property? Plus somebody else is getting rent on a property the seller is paying for. I'm thinking if the seller is in that bad a shape financially he would be better off to bite the bullet and give the house back to the bank. Awful poor deal for the seller me thinks.

RR    

@Michael Finkelshteyn

Don't misunderstand Michael. The property we were/ my sister is dealing with had NO adverse possession.  I mentioned that as a way to CLEAR the tittle.  YOUR property could have an adverse possession issue as you mentioned a tenant.  That tenant could have some legal claim.  Our tittle was clouded by many heirs, most of whom did not follow through with wills being probated, deeds being recorded, or worse no will at all.  If there is no will then a deceased persons partial interest in the property gets divided again by the number of heirs that person has.  This creates more owners with even smaller interests in the property.  These people ALL need to be found, and it needs to be determined if they have ownership or not.  In our case  a county court house  burned down.  This really throws a wrench in the spokes for our property as many records were burned.  My dad and Grandfather paid the taxes for many years and could prove it but even that was to no use.  Dad even resorted to buying shares of the property from the heirs he could find.  That is how we could prove 5/8th interest in the property. @WAYNE G. may be correct try to use the tax sale/foreclosure process.  again: get an attorney and be prepared for a long wait. (some places it requires you to pay the taxes 3 years in a row.  I DON'T know about Texas though) - OR- find a way to spend 20-25k to be making you some kind of return in the short term.  Then you can make money in both places.     

@Michael Finkelshteyn

Michael  my family has a property in Texas with a story similar to the one you are looking at.  It sets in the middle of a small town.  My great grand father left it to his 8 children in 1926.  Both my father and grand father were real estate brokers in Colorado.  Both men spent many years trying to clear this properties tittle to no avail.  Again in recent years I looked into clearing the tittle using an attorney.  The cost far outweighed the property value.  One interesting thing that an attorney mentioned was to "Squat" the property.  In Texas if you use a property unchallenged for a period of time it is possible to gain clear tittle.  You cannot be an heir to the property to gain tittle this way.  If you proceed I would want to be pretty sure the occupant you mentioned has no legal claim on the property.  if he's lived there long enough, he might trump everybody's hand.

We could prove 5/8s ownership in the property we had.  We had no idea who (if anybody) owned the remaining  3/8 interest in the property.  My thought was to sign a quit claim  deed for our 5/8 interest over to a "buyer" for a reduced price, then the buyer Squats the property for the required time to gain tittle to any remaining interest in the property. In any event it was pretty much a total loss for us as the sellers, and a pretty big risk to any potential buyer. (I did find one though)  I also am pretty sure in Texas you don't have ownership of any inherited property if the will is not probated.  That's part of what complicated our issue.  From your post I would question if your seller even has ownership.  In our case I could prove 5/8ths ownership.  It may take a full on investigation to determine ownership, as many counties in Texas have  land records that are not on a computer.  It could involve some body going through boxes of records.  The taxes in our case were paid up so I'm not aware of how this will affect your particular situation. 

 I wouldn't proceed any farther without legal counsel.  Your seller is going to have to take a big loss here, you are probably going to have to take a big risk here, and its going to take pretty big money to clean this up, as well as a long time.  I don't see the gain (at least in dollars)?!! 

 I am not an attorney, this is not legal advice.

Ralph Ramey