All Forum Posts by: Ryan Pyle

I am buying apartment buildings out of bank receivorship. In all the cases I've seen so far, the former owners paid way too much for the assets and got loans based on the LTV they could get at the time. Their financials were based on huge projected rent increases, ridiculously low vacancy rates and low expenses.

I own SFR rentals and apartments. My apartments cash flow way better than the SFR's. The main reason is repairs and maintenance. On average, over the laong haul, I have spent abut 21% of my gross SFR rents on repairs, maintenance and replacements. Over the same period I have spent 12% of gross rents on repairs, maintenance and replacements on my apartments. The main difference is turnover costs. You are renting out a lot more space in a SFR per dollar of rent than in an apartment. Therefore you have a lot more floors, walls, doors and windows to take care of per dollar of rent in a SFR than in an apartment.

So that is my argument for apartments. With that said, you can do pretty well renting out smaller SFR's. I would leave the larger SFR's for flipping.

You can sell within 90 days. You will need 2 appraisals and a home inspection (on top of the FHA appraisal/inspection). It's worth it if you can turn your money that much faster.

I will echo what has already been said. If your rehab is done well and you are priced better than competing properties of similar size, location and attributes, you should be under contract within a few weeks. As John T. Reed says in his "Fixers" book, successful flippers should be going for the fast buck, not the last buck. I often remind myself of that when pricing my properties.

Here is a breakdown of my current flips and DOM:

6113 Harvest Ln- list date 12/31/10 (bad timing)- under contract 3/6/11. This house is only 1,009 sq ft and on a slab. I wouldn't suggest trying one like this unless you know what you are doing because these smaller houses can be harder to sell, hence the 65 DOM.

3018 Algonquin- list date 3/7/11, under contract 3/15/11. Great house, easy to market.

5030 Rambo- list date 3/28/11, have interested buyer. Will know if they qualify today.

3342 Coral- list date 2/8/11- still for sale. May have it under contract by the end of the week. I have a buyer that I am trying to get qualified. Like 6113 Harvest, this is not a house for the inexperienced. It's a 3 bedroom, on a crawl, with NO garage. But I got a good deal on it and wanted to take the risk.

5730 Clover Ln.- list date 1/9/11- still for sale. This one baffles me. It's a brick ranch. Only drawback is that it's on a crawl, but that isn't unusual for the area it's in. I've had 3 "second showings" with no follow-up. For now I'm chalking this one up to bad luck, but time will tell. I may be slightly over-priced.

All of my houses are completely rehabbed and done by licensed, experienced contractors.

I hope this helps.

I've been full time for 6 years now. I went full time 11 months after doing my first deal.

We did not have to decrease our standard of living. It was fairly modest to begin with, partly because I always knew I wanted to be on my own and everyone I knew who was on their own told me to "keep the business and personal overhead low." That is some of the best advice I've ever received.

For me personally being full time IS all it's cracked up to be! I love it and am so happy every day to be living my dream. It can be stressful, especially when Murphy's Laws kick in and cash flows suffer. But for me it's truly not about the money (although the money is good). It's about freedom and knowing that I own my time. Every day I wake up and get to play this game....it's a lot of fun.

Finance- I have many small ARM's, about $40k each, totalling $1 million. I am taking extra cash flow from flipping and paying them off. In the meantime I would like to cushion the blow of any future rate increases.

The brain damage is definitely worth it to me. If rates go up 4% that's $40,000 a year on $1 million. If I can find a way to save $40,000 a year, I consider that time well spent. Also, I personally find it fun and interesting to think about things outside of my normal real estate world. That's part of the beauty of the freedom of this business.

@David- I have an appointment with Glamour Shots in the mall to get a better picture.

@Deuce- my local commercial bank said no dice with them and he warned me against doing such a transaction with big banks. He very eloquently said that a big bank would rake me over the coals in such a transaction.

@David- are swaps pegged to a notional value like eurodollars are? If so, then I will explore your idea too. One reason I chose eurodollar futures is the $1mm notional value.

@Deuce- you are correct. A monthly or quarterly eurodollar trade will not cover prior period rate increases. The way I see it, there are two ways to deal with that. First, I could go out farther on the curve. But then I would lose out more on the expectations that are already built into the market. Sept 2016 is already at 5.02%.

Second, I could increase my position as time goes on. But that means significantly more leverage, significantly more risk and significantly more collateral. Scary.

I just started doing some business with a local commercial bank. I am going to take your suggestion and see if they will create a swap for me. You never know...

@Deuce- great question. I will have to think about that. I'm headed out to show houses for the afternoon, so I will post back tonight or tomorrow morning. I've modeled this in Excel and it seems to work. But I am by no means a futures market guy...more of a real estate guy with enough knowledge of the financial markets to get myself in trouble. I have no doubt that I'm missing something.

@Bryan- I will read your post again and see if there isa better way.

I'd like to bring this post back to life. I think it is very relevant and it's something I've been exploring for a while myself. Here's my situation:

I have about $1 million in ARM's (about 25 loans), all are indexed to 1 year US Treasury notes. Right now things are great because my rates are all around 3%. I'd like to lock that in.

The OP stated that he wanted to sell Eurodollar futures as a hedge, which is exactly what I've been looking at. My thought is to sell 4 contracts of the nearest contract and then continuously roll that over until I no longer need the hedge (most likely when I think rates have peaked). I understand that ED futures prices are expectational, however in a hedge one is not looking to capture actual value. One is really looking to capture RELATIVE value. In other words, I am just looking to capture price movements over the total period of my hedge. In my case, I would be looking to lock in rates over the next 5 years, so I'm looking to hedge against big movements in rates over that period. So even if ED rates have a built in 50 bp upward move that I will miss out on, it's not the end of the world because I would capture the balance of the upward move over the next 5 years.

Incidentally, I just checked and the Mar 2011 ED is at .3125%. 3 mo LIBOR is at .30% and the 1 year note is at .23%. This is about as close to parity as I've seen in a while for my particular hedge.

I understand that there other risk involved. In this trade the biggest one I can think of is parity loss between LIBOR and UST's.

Thoughts?