All Forum Posts by: Joshua Woolls

Lending on real property is quite a bit different than lending on stocks. The value of a stock is backed up with figures and numbers(which may or may not be real, ask Enron investors) whereas the value of real estate lies in Real property. If you are lending to a stock investor and the company goes bankrupt, you are left holding paper. If you are lending to a real estate investor and they go bankrupt you have property.

Maybe I am just biased towards real estate...

 Forget the national banks. Look for one of the smaller regional guys. They tend to resell their loans. Because of the unique nature of the type of loan you are looking for, you are going to need a bank that keeps things in house. Credit unions may be a consideration as well.

Despite what Johnathan and Alex said, I don't think it is quite as easy as just going to any local bank. I just went through something similar. I have 300k worth of rentals that I own free and clear. I went to about 20-25 banks (the majority local) before I found one that would lend on my properties. I had a few that would lend, but they would only give 50-80k and I was looking for 150-180k. I kept plugging though and finally, one of the banks that I reached out to referred me to another bank where a friend worked. Once I got in touch with this bank it only took about 2 weeks and everything was extremely easy. They also gave me a really solid rate.

I have quite a bit of equity. I have relatively little debt compared to my income. And I have a pretty fair credit score. A couple of times I laughed out loud when I got answers back from banks and they told me their reasons for not being able to make something work... I get it though. Real estate has burned them in the past and they want to make sure they protect their money.

Keep plugging. you will find something. I would literally stop in every local bank I passed for a couple of weeks(I am on the road for my day job).

Awesome. This is a great community. Don't hesitate to post here if you have any questions. There are many here who love to help.

Good luck!

 My biggest issue is that people who would normally be more conservative may be convinced that they are doing it wrong and change the way they invest because of the articles. Haha, that's why conversations like the ones here are awesome. 

I agree with you entirely. I wish that I was in a position 4-5 years ago to load up. I knew it was the time to do so, I just was not in a position to invest at the time. We are currently acquiring properties (Cash flows are too good not to in my market) but I am keenly aware of where we are right now with regards to the market right now as well and I try to invest accordingly.

1.) My guesstimated expenses are based on other properties in the area. It's not hard and it's pretty damn accurate. 

2.) Of course I use the asking price. If you assessing properties to buy, you always start with asking price. If the numbers don't work at the asking price, you determine if you can get to a price where they do work. I assure you that if the expected CAP rate in your area is 6% not every property sells for NOI/6%. It just does not work like that.

3.)It's very, very easy to see what properties rent for in an area. A little research on Zillow, Craigslist and Rent-o-meter will give you a pretty damn good idea. A couple of phone calls works too. It's also pretty damn easy to see what properties sell for. The MLS, Zillow, Tax records all have this info.

I'm pretty tired of this discussion. If you are using CAP rate in a different way, more power to you. That does not mean I am wrong. It's a valuation formula that helps you make educated decisions. It can be used to determine if an investment is a good one, or it can be used to properly value a property for sale. I am really sorry if you disagree.

1.) I know the rents in the area. I know the expenses of these homes. It is pretty damn easy to guesstimate an NOI, when it is the same damn 1100 Sq ft brick ranch, over and over and over. Are my numbers exact? No. Do they need to be? No.

2.) I am using cost of the home!!! It's market value is literally what it sells for on the open market!!! 

again:

Capitalization rate (or “Cap Rate”) is a real estate valuation measure used to compare different real estate investments. Although there are many variations, a cap rate is often calculated as the ratio between the net operating income produced by an asset and the "original capital cost (the price paid to buy the asset)" or alternatively its current market value.

3.) In my area I shoot for a CAP rate over 14-15% on SFR. I suppose what is considered a high CAP depends on the area.

I assure you my spreadsheets calculations aren't useless. I "use" them daily and they help me make informed decisions on what a good investment is. If that's useless to you, so be it. I am not investing for your benefit.

It seems to me that you are using CAP rates to value properties. By calculating the NOI and dividing it by the expected CAP rate for the area, you can determine the value of the property. This is absolutely one way to value a property. But, you can also take NOI and divide it by the Cost of the property to determine the CAP rate. It's the same frickin' formula and it's a very valuable tool to determine if a property is over, under or appropriately priced. In single family homes, it is especially useful "for me" as the market is full of two different types of buyers. Investors and homeowners. A property that is appropriately priced for a homeowner is not necessarily appropriately priced for me as an investor.

 I never said this was typical. For purposes of showing the numbers I used 5% & 10%. I was using hypotheticals. It doesn't change the fact that 5.5% is better than 5%

From an investment standpoint, I agree with you. I believe in quality over quantity and building up my investments over time. Especially with the market where it is right now(In my market we are nearing the 2006-2007 highs). 

I disagree though that people who have the more, more, more mentality are wrong. If they have different risk tolerances, that is their business, and 30 years from now they may have a lot more wealth than me...or they may have a lot less.  I imagine there will be some of both. When the market takes a hit(not if, when - It always does) I will be there to pick up some of the pieces 

I can honestly say that in today's market I feel that over-leveraging is fairly risky. There are some areas of the country where the only way I can make the numbers work is if I count on appreciation. I am not a professional investor, maybe there are factors that I don't understand in these markets though.

I agree that you have more situational risk when you are smaller, but you have more market risk when you are bigger. What determines our investment strategies has a lot to do with how we feel abut different types of risk.