All Forum Posts by: Bill B.

@Lorna C Daley I'm a newbie, too. I want a deal, too. But, as green as I am, I know that Zillow is notoriously INaccurate. DON'T rely on Zillow for comps. Call a realtor and ask for comps. There are a LOT of BP members in TX. I would STRONGLY suggest that you contact one in the area to help walk you through the possible pitfalls. If these are such GREAT deals, I bet that you can offer a couple thousand to the BP member for their time and effort to teach you the ropes.

I learned the hard way on my first deal. Don't repeat my mistake. To be frank, you don't know all the things that you don't know right now. You are about to learn SOME of the things you don't know, but the lesson is going to cost you a LOT.

I didn't see anyone mention that the economics of the area are paramount. While it may sound like it is in the middle of nowhere, if it is a town that services all the farmers in a hundred mile radius, it could be very stable and vibrant. Also, I know of places "in the middle of nowhere" that are within thirty miles (long commute, but commutable) from a major city. If that city is healthy, and the property survives your thorough due diligence, you may have a solid property.

Mark Ferguson with all respect, did you read Tom's last post? TOM said,

Tyco Bronye based on the info you included in your post, I agree with your assessment and not your friends. If he had a positive cash flow, there was NO reason to sell. Even if he could not leverage it for the second purchase, he still had tax benefits and positive cash flow on at least ONE property.

But, if he had a short term loan with a balloon and/or a vary rate loan, he may have seen the writing on the wall and bailed sooner rather than later. He may have known that he had to refinance soon and that he would not quality. If that is true, he made a good call to cut the losses instead of letting them build up.

Mark Ferguson I think that Tom Goans is saying that the entire northern hemisphere is unstable. China is cooking their books big time, the Eurozone is still in crisis (it has just dropped out of our headlines for a while) the whole middle east thing can precipitate something very nasty in hours, and we have NO coverage in this country about 100 TRILLION in unfunded mandates at the federal level alone. Add several trillions more for federal state and local "promises" to retirees, the poor, the aged, etc.

To state it most succinctly, the United States is bankrupt by any objective evaluation. Just as families who are bankrupt keep pushing off the inevitable, the US is also. When will it all collapse? THAT is the question.

Tom (and I) believe it is soon; well under ten years, probably five or less....but that is NOT certain....we've become experts in kicking the can down the road. QE by the FED has prolonged the agony and seems poised to continue. But, end it must. There are ways to mitigate this: cutting benefits, ending programs, and MASSIVE increases in taxes. (not an either or, it will be some amalgam of the above) When the proverbial poop hits the fan there will be turmoil and riots just as we've seen in the Eurozone.

Tom, please correct me if I'm wrong, but Mark, Tom is NOT saying to stop investing. He is NOT saying to eschew ALL debt. Tom is merely cautioning that debt must be used with EXTREME caution and prudence in this environment.

We're talking about an adjustment to the entire economy that will make the mid 2000s look like nap time in kindergarten. That is why Tom mentioned the two states where the RE bubble is re-inflating. Those two states CAN pull the rest down if the general economy has a severe recession.

So, KNOW your market and evaluate it with a very critical eye. Is the area's major employer supplying a market with inelastic demand (healthcare, to a large degree) or goods that will be unaffordable after the fall? (RV construction comes to mind) AND, after that type of analysis is complete, buy VERY right. BP has thread after thread about buying at discounts. I believe that Tom is merely suggesting that newbies hold out for even deeper discounts to market as that added cushion may be what stands between them and losing the property after the downturn.

And, finally, debt. If you are fortunate enough to purchase at a 40% discount, maybe 50% down is a bit more prudent in this environment. Those numbers provide some leverage, but also provide 70% equity. I'm a newbie, I'm NOT advocating those percentages. I'm merely providing an example. Is 70% too much equity? Not enough? Everyone must evaluate those questions in light of their personal circumstances, tolerance for risk, available capital, etc.

Personally, I wish Bernanke would stop QE in full very quickly, up the FED Funds rate by fifty basis points and let the market clear. There will be howling and unrest. Then it will pass. The dust will clear. The truth will be out. And we can all carry on with a clear picture of what things (in RE and outside of RE) are worth.

Again, Tom, please understand that I am not trying to speak for you. I hope that I've presented your position fairly. Please forgive me and school me if I am out of bounds. Mark, I think Tom would encourage you to continue, with caution, prudence and a profound respect to the other edge of that double edge sword called "debt".

With utmost respect to ALL on this post and throughout BP, a great, GREAT community.

Bill

Ned Carey DANG!! That is a VERY ambitious goal!!! Shouldn't you lower your sights and just aim to be a multi-Billionaire?

Sorry, for the double post. I forgot a good resource. This link is to case studies regarding farming that were prepared by UC Davis. They cover a LOT of different farming operations from inception to full production.

http://coststudies.ucdavis.edu/

The studies will give you a decent idea on returns on investment from many different crops and types of farms.

I hope this is helpful.

Good luck.

I'm in SoCal. We have a small avocado operation managed professionally. Think PM but for trees instead of doors. You make the big calls, they do the labor. We have our place leased to the management company. They cover ALL costs of the operation outside of mortgage and property taxes and we split profit.

NorCal is a completely different animal. Different crops and WATER is HUGELY different. Water availability is the number one issue in SoCal. Some operations in San Diego county have closed down due to lack of reliable access to water. Land pricing is HUGELY different as well, with land being much less expensive in NorCal.

All that said, the things that are similar for both NorCal and SoCal include a very VERY highly regulated environment that is getting worse ALL the time. Also, there are new and destructive pests that are being introduced with alarming frequency from all around the world.

The best advice I could give is very similar to REI in general. KNOW the market. Are you going into row crops or orchards? HIGH cost for labor and HIGH risk as the market can turn against you and leave you with all the costs of growing a crop and NO revenue. Orchards have "less" risk....but this is like saying row crops are like craps tables and orchards are like blackjack.....the odds can be against you from the get-go.

The old adage is "Legalize gambling!! Why should Farmers have all the fun?"

I don't know the first thing about raising meat or dairy, or vineyards so I won't speak to them at all.

Another REI parallel is to vet the numbers from the seller (expenses and revenues) thoroughly.

Also like REI get a mentor. To do that, you can contact farm management companies in your area. Like other REI, they not only can mentor you in the business, they can also look for properties that may interest you. The other first stop is the County Farm Advisors office. AND the local Farm Bureau. The California Farm Bureau publishes a weekly newspaper named AgAlert.

Also keep in mind that the cost to entry is VERY high in farming (at least in SoCal) the ONLY reason that we have our place is that we got it when the dotcom bubble burst and the general recession around that time. We were just plain lucky that we got it before the general run up in RE that began in the early 2000s. Also, if we could not have arranged the lease I described above, we would have NEVER purchased the property. That lease protects us against any operating loss. We don't have the resources to withstand a crop failure.

Do NOT expect to get the same type of COC returns that you see in MFH or SFH. But, similar to MFH and SFH the returns are much better if you can scale up and payoff the properties.

There are many other issues, labor shortages due to the immigration reform debate, hydroponics, etc.

With all the risks, it is GREAT to take a walk through the orchard on an afternoon. It is quiet, peaceful, relaxing. We hope to build out there someday.

Finally, with all that said, I'd recommend you stick with REI investing in MFH in other areas. Central Valley? Out of state? You KNOW the basics of that. You just have to find another "farm" for MFH where the pricing is rational and learn that market. The learning curve will bend MUCH faster if you do MFH out of state than learning farming and my guess is that your COC returns will grow faster, MUCH faster in MFH out of your current market than in farming/ag.

I hope this is helpful.

One investor in SoCal would do minor but very tasteful landscaping in the front yard to really WOW the curb appeal. He got about ten thousand more than other comps in the area at the time. The cost was well under two - three thousand and included one fifteen gallon tree, (judging by size), some outdoor tile that both edged the grass, and created planting beds outside the grass area, bedding plants, and sod.

It REALLY set the property apart from the competition.

THIS is the subject that has me hesitating to pull the trigger of REI. This is also something that I've studied a LOT.

National debt as a percent of GDP is NOT the issue. The unfunded mandates at the local, county, state and federal levels are staggering and the real issue. Social Security and Medicare at the federal level represent something like 1 1/2 to 2 times of GDP.....that is GDP of the GLOBE, not just the US. To be clear, those unfunded mandates can only be paid by raising taxes or by growth. To fund them as promised would require raising taxes by (on average) at LEAST an additional trillion (with a T) dollars each and every year for the next 50 years. "Growth" can mitigate that in whole or in part, but does anyone expect the US economy to grow in terms that would generate a trillion in additional tax revenue each year? Not rationally. Now, keep in mind that was just two programs at the federal level. Now add the unfunded mandates at the state, county and local levels. Ya........

Military spending is 1/6 of spending, but there are large swaths of that budget that are NOT "military" in nature, including (of all things) research into treatments for autism, lawyers to provide guidance regarding 'equal opportunity employment' and I could go on, and on and on...... That all said, military spending is one of the FEW areas that is actually authorized in Article 1, Section 8 of the United States Constitution and has historically been about 1/5 of GDP.

The vast, VAST majority of the other 5/6 is NOT authorized in Article 1 Section 8. That is to say, we must shrink the trough.

I live in the People's Democratic Socialist Republic of California. (Too much family and history here to leave.) But, I'm contemplating starting a ballot initiative to rename Sacramento to "Home For The Criminally Insane". The state budget has grown in each and every step of the state budget process each and every year that Brown has held office. (AND by amounts that are MULTIPLES of inflation plus population growth) It is now the largest it has ever been in state history. Yet, Brown and his buds scared the citizenry into raising their own taxes so that he can build his toy train to nowhere.

In the county where I live, the population is 800,000 and the budget is 1.6 billion. Two thousand for every man, woman and child in the county, every year. The cities have budgets over and above that. There is NO shortage of funds. The funds are being wasted at every level.

This point must be prefaced. My roommate in college was named Rene Hernandez, I was his best man at his wedding and I sadly attended his funeral. When I managed people I hired every race, every "orientation", every gender....you get the idea. That said, can ANYONE please explain why we need "immigration reform" so that ten million people can stay here to do "jobs Americans won't do" while we simultaneously have ten million people receiving welfare? i.e. being paid for not working? Isn't self deportation a win, win, win? Rule of law, less welfare spending at EVERY level, and several countries get their most ambitious citizens back.

Also, can anyone explain to me how a single mother can hope to make ends meet when her first dollar earned is taxed at 15.3% (7.65% matched by the employer) which excludes income taxes, sales taxes, gas taxes, the hidden taxes included in the price of every good or service, etc, etc, etc.......

Finally (stop cheering) why are seven of the ten wealthiest counties in the United States clustered around Washington DC?
http://www.bing.com/search?q=seven+wealthiest+counties&qs=n&form=QBLH&pq=seven+wealthiest+counties&sc=1-25&sp=-1&sk=

All to say that we have a MAJOR house of cards in the US and in the entire northern hemisphere. And that house is beginning to tremble and shake. It must collapse. The only question is when (1 year, 5 years, 10 years?) and how bad will it be. Cash maybe king (serious deflation) OR inflation is going to blow the lid off. Either is very possible. It makes it very VERY difficult to pull the trigger as a newbie.

Thoughts?