All Forum Posts by: Peter Sanchez

This is like a baseball game where you get an infinite number of pitches.  You don't have to swing unless it's the right pitch.  You are much better off waiting and holding onto your cash until you see a profitable deal than to close on something you didn't really want and not being able to buy the better deal when it comes along because all your cash is tied up. 

Thanks for the comments.  I think this was in the back of my mind because when I was 21 I bought a Carlton Sheets No Money Down Course (stupid, I know) and he mentioned that if you can afford to pay a lot more for the property if you get favorable terms (owner financing). It never sat well with me because of the risk involved in overpaying for something. (If I buy something well below retail value and something bad happens, I can sell it and get out, if I overpay to get it "no money down", I'm stuck with it). 

@Account Closed yes, I think so too.  by using the drawbacks of real estate (hyper local, not fungible, not liquid, opaque pricing) to your advantage in looking for great deals, you can make a good living.

According to this article,

http://www.cbsnews.com/news/history-says-home-real-estate-is-a-bad-investment/

if you take out the recent housing bubble and just look at returns on real estate for the past 100 years, you will see that it returns a measly 1% average return.

And it suffers from a lot of other drawbacks (high transaction costs to buy/sell, low liquidity compared to stocks etc). 

But you can still make money on it because of how it's purchased--with a mortgage (i.e. other people's money) so that you use leverage to goose your return. But this, IMHO, is not a great reason to invest in something. I can borrow money (from a HELOC?) to invest in stocks too and go from a 7% average return to something much bigger. But that second one sounds terrible, doesn't it? So why do we tolerate it in real estate?

Borrowing money to invest in a business with terrible returns is just as bad as using all cash to invest in a terrible business. 

There's an old saying that you make money when you buy real estate, not when you sell it.  If you can get something at a discount to the price you should be paying (because the economy sux, because you bought it as a fixer upper, because it's a foreclosure etc) then you are making money on the transaction irrespective of the method of financing. 

So maybe the question you should ask before buying a property (to live in, to flip, or to rent out) is whether you would still think of the property as a good deal if you had to pay cash for it? 

I read Benjamin Graham' (Warren Buffet's mentor) book, The Intelligent Investor, and it's amazing how the principles are applicable to anything including real estate.  If you buy something cheap enough that there is a big margin of safety, you might not hit homeruns, but you will consistently hit singles and not endanger your capital.  Just a random thought...

I paid off my student loans...even though the interest rate wasn't very high. I paid them off even though I probably could've used the money to invest in a bigger house right away.  Why?  I'll explain.

I bought a tiny studio apartment in DC when I graduated law school and got my first big boy job.  I sold it 3 years later and got a nice check (paid $70k in 2000, sold it for $210k in 2003).  It was the start of the real estate bubble and I got lucky.

I paid down my student loan as quickly as I could because student loans aren't dischargeable in bankruptcy.  If, god forbid, I ever get into trouble and my back is against a wall, I can file for bankruptcy and get out of bad credit card debt, bad business debt, bad mortgage debt etc, but not bad student loan debt.  It will follow you around FOREVER, so it pays to get rid of it ASAP.  Don't walk around with a stick of dynamite.  Pay off your student loans; make it a priority.

sweet!

are you sure that's a finish?  It looks like someone covered up the plaster with wallpaper, then removed it later on.  that "pattern" looks like old glue

I think this is worth paying a TX divorce attorney for an hour of their time to run this past them.  TX is a community property state, so how do you know that the spouse isn't entitled to some interest in the property?  Can you offer her cash for keys and a quitclaim? 

@Jarrett Schaef there is no "normal" way to set up a partnership, it will be based on whatever you agree to.  Something where you will both be doing the work on the house, for instance, will look a lot differently from something where one person is the money person and the other one does all the work (different in terms of work involved, risk, and payout percentages).  Start with talking with your potential partner and putting together a one page "term sheet" with what you envision the partnership will look like in terms of duties and share of profits/losses. Do this waaaaaay before you start bidding on properties.  Then you can draft a contract IF you agree everything.  If you can't get past the one page term sheet, there is no need for a contract.  And what other people do in their agreements is irellevant to your deal if your partner is not okay with it. 

For instance, I wouldn't allow my name on the loan and it wouldn't matter to me that other people do it that way.  

welcome @Junise Fertil , having construction know-how always helps in RE (even if you don't want to do the work yourselves, it's good to know what is involved in fixing a place). 

be sure to read the posts on screening a tenant.  although in florida it is, thankfully, a lot easier to evict someone, having a nightmare tenant when you live next door would be horrible.

hopefully you'll be able to buy something good and build up equity quickly.  getting a quick win is very motivating.  good luck!

This is a great story because it's in Maryland.  If it was in DC, the tenants would be posting about their great story in the deadbeat tenant's forum.  

Congrats, though. Epic!