All Forum Posts by: Leonard L.

I agree with @Jesus Lara . I only participate in Riverside County, and have done so pretty consistently for past 10 years. I usually still find one deal where I see values that others don't, usually in raw land. BUT, I starting two years ago, I began to see manyj, possibly even most, "successful" bidders paying more than they would have paid if the thing were listed on MLS. So be careful. One bidder paid $30k for a lot in an area I have been collecting lots for an average of $5k. Needless to say, 9 years later she has been unable to sell for anything close to break even, even though she was marketing it during the greatest boom some of us may ever see (2005-2007).

Think that is bad?  I have "won" an auction, after the bidding exceeded reserve, only to be told days later that they were exercising their unilateral right to cancel the bidding and void the deal, found in mountain of documents I was required to sign to participate, unless I agreed to a significant price increase.

First, contracts differ hugely by state, so I would have no idea in Texas.  Second, this is a highly specialized thing regarding closing conditions for a property not in the seller's name, possible probate complexities in the future, and /or succession issues, and the fall back of buying his interests if it turns out he doesn't have the power to sell.  There will be no form for this.  As suggested above, you should get a lawyer to do it if you want it to stick.  You can use a form and try and draft for all the contingencies yourself, but don't be surprised if there is a contract dispute later.  I usually say use of forms is sufficient for most deals, but this is not most deals.

If this is a great deal or important to you, I would get him to agree on gross price, you will subtract back taxes and any monetary liens discovered later from this price.  Then ASAP tie him up with a written contract that says, essentially, he is the only heir (if this is true) and has the power to agree to sell it to you.  No close until title insurance is issued, which means the title company deals with making sure he has legal right to sell, whether that means a final probate order or whatever.  Key is he does not have the right to change mind or sell to others, but you don't have to close until title is clear.  Put a clause in contract that if for any reason he does not have the right to sell the property, he agrees to transfer his INTEREST in the property (say it turns out he only owns 1/3 with two other siblings) for the pro-rata share of the agreed price.

Basically, if it is important, talk to a lawyer so that your contract actually works, no matter what comes.

Ben:

Anyone can run the numbers of Fontana vs different market cash flow.  To me, this is a question for which the answer depends on risk profile.  If you want steady return over many years, it is obvious that investing in a cash flowing market will be better than CA/Inland Empire.  If you are willing to take more risk in exchange for greater appreciation POTENTIAL, then stay in CA.  I capitalize the word potential because it is great when it happens, but it is far from a sure thing from current values.   A few smart guys out there (eg, Norris) are starting to talk about taking some of their chips off the table, so while I agree with the consensus that we have at least a few more years of appreciation ahead of us, the consensus often turns out to be wrong.

I can share my own thinking.  I bought largely in 2010/2011 and add a few houses a year when I find screaming deals.  I am keeping all of my money in CA for now precisely because I think we have more appreciation ahead.  But my plan is to sell everything in a few years and invest all of the proceeds in cash flowing markets.  I will then live comfortably into my golden years on this income, giving up most potential further capital appreciation but more comfortable in event of market downturn.  That is because of my personal circumstances (age, investment outlook, retirement planning, etc).

So in the words of Clint Eastwood - are you feeling lucky, punk?  Can you weather a downturn in CA values, eg, your Fontana house going down to $300k value and rental market softening in event of downturn?  Or if you cash out of CA now, are you going to look back and think this first deal you were still young and should have taken more risk?      

So I have my lender license app done.  Thought I would  have time to network to find a document solution, either real estate attorney or software or both, but a deal landed on my desk yesterday that I really want to do, but must be able to close in two weeks.  It is only $300k so I gotta keep doc prep costs down.  I have heard all the big players use LaserPro but I am not ready to make that license investment, which I have heard is expensive ($15k+?)  

Is there a cheaper but widely recognized document prep solution?  Or do you have an atty in SoCal that will do these fairly simple loans on reasonable fixed fee basis?

Backstory - real estate attorney and investor.   Some of my investors like to go long for home runs returns with comensurate risk, but some want much safer deals, so I started this hard money lending business as an avenue to place this safer money.

Don't panic folks.  There is no reason to conclude that a flat market over two months presages years of stagnation.  More likely, this is a breather in the market to allow wages and employment to catch up with the breathtaking price increases in 2013.  My crystal ball says there will be more increases ahead.  

As you recognize, there is income property section on MLS too but you need access to MLS to do that. I could have done so for industrial property but did not bother because response rate from CL was so good. I also walked brochure around to potential users in area of property and I had a good response rate from that too.

Loopnet is most common place, but you have tried that.  Costar is owned by same company as loopnet.  Slightly better exposure but even more expensive.  

Have you tried Craigslist?  I am mostly a residential guy but ended up with small industrial building in Inland Empire as part of portfolio and I am using Craigslist to advertise.  Great response rate.  Although that is small and industrial, perhaps you might have some luck on CL too.  

Valuations are something to take seriously.  This Trulia economist does say what he is basing his conclusions on (price versus fundamentals such as income, income growth, household formation and rents).  Another, and to me more credible analyst, John Burns Consulting, which provides housing data to hedge funds and home builders, also concluded that Orange County/LA/Inland Empire are over-valued (don't recall his view of Austin).  

But remember that although the blaring headline of "x market is overvalued" gets attention, to me, it is only first step.   Real estate values are cyclical, always have been and always will be.  The second step is, OK, overvalued means we have got to pay closer attention to where we are in the cycle than when prices in our market were undervalued.  In Orange County, the Trulia economist points out that Orange County is 15% overvalued, but at the last peak, they were a whopping 66% overvalued.  Obviously, that was not sustainable; 15% probably is sustainable.  Indeed, except in times of down cycles, the very attractive markets are historically somewhat over-valued under these fundamental analyses.

I think we have room to run before I hit the sell button.