All Forum Posts by: Sam C.

Ok. Here's my 2-cents.

1. The best deals never make it to the Zillows, MLS, etc. I work very hard to "get lucky" once or twice a year. And if I'm looking for someone to "bring me a deal" I have to ask what's in it for them. Why should they offer me a great deal instead of the x number of investors they have been working with for years.

2. You're right about making sure the first one doesn't loose money and hopefully makes some with cash flow and on the resale.

3. I've done well enough over the last 25 years with putting my emphasis on cash flow (I wanted the income more than appreciation) and minimizing leverage ( bumps in income/corrections along the way have not harmed me with loss of properties or standard of living).

4. I was never a calculator of potential but more of a do the numbers work in worse case scenarios. 

5. I try to detach emotionally from a deal or least stay committed to my "do the numbers work" spreadsheet which gives me everything I need to know on one sheet of paper. No future appreciation enters my calculations with buy and hold.(That may or may not be a bonus)

6. I Don't get greedy unless the deal allows it. I don't make up "what if's" to "make" a deal work.

7. I don't follow the "stupid money" where things are bought and sold at non-sustainable values and manipulating the next person into paying more than it's worth before they catch on to the reality of what it's really worth. Corrections have periodically killed that group although there is money to be made if your timing is right. I'm not good at that and respect my weaknesses and focus on my strengths.

Best of luck.

Is there a percentage of total project cost that I could use as a guide to account for the cost for architectural work and blueprints for a small (8 unit) apartment building?

Do yourself a favor. Sell the lots (if you can) and take the money and put it in a utility/big cap fund that can bring in dividends of 4-6% while you wait to get that first property. Learn as much as you can about re investing and then look for a property that you can reach within a 1/2 hour drive and that can GUARANTEE a positive cash flow. I've seen too many new/first time investors screw up their first deal and either were scared out of the business or did not have the finances to try again. I sense you to have limited resources and be the scared out type if that first deal goes bad. And if you put 100,000's in a property on one of those lots, you may never recover financially when it doesn't sell or you have to sell it for less than you put into it. (If you were on Lake Wallenpaupack MAYBE it could work.) Or even worse, you may have to live in it because you're stuck with it. I've turned down lots/homes in those types of communities that were at auction for 20-30 cents on the dollar.

@Jon Q. Thanks again Jon. IRR (and CAGR) can be useful tools and good pointers with honest and realistic inputs. Congrats on meeting (and exceeding) your projections. Seems like you have been able to buy low and sell high consistently in your particular market with a decent cash flow return along the way.

@Jon Q. Thanks for charts, They are helpful in looking back to help determine future direction although in regards to financial assets. we are in some very unknown-consequences territory. How do you determine a IRR? I have always had problems with this one especially in this ultra low interest environment.

It was early in my real estate carer and I was investing in recovery group homes. I got ownership of a property (I got the deed and agreed to pay the seller a mortgage) and opened it to women with children in need of housing. It was a disaster. They fought like cats and dogs, did not maintain the home and most of the residents ended up relapsing drugging/drinking in the house. I got back an empty, nearly destroyed, home (it was in an older, fair to poor condition to start with) that really almost scared me out of real estate investing. I had the deed but wanted to give the house back to the seller. Turns out that the seller would not take it back because she had sold it after getting it in a divorce and she could care less because her ex was still on the mortgage and on the hook to the lender. I guess this was part of her "letting go and screw him" process. Anyway, soon after the ex came to me almost begging for me to sign the deed back over to him, which I did. I got out of it with a loss of only a few thousand dollars. But instead of getting out or investing, I got smarter (and better over time). I have done over 20 recovery houses since then and most of them have served a good purpose and made money. I still have a few but it is a much smaller part of my portfolio. 

I didn't see any responses to Mario's concerns about a coming "correction" and what that means for real estate. So I thought I'd add my two cents. AND THIS ONLY MY OPINION SO PLEASE BE NICE. An asset price correction is coming and actually long overdue. They should have allowed it to happen in 2007-08 but as is obvious today, the international financial cartel were not going to take the hit. Here's a great article on what's really going on with the economy and how it's a very manipulated marketplace: 

http://www.globalresearch.ca/the-biggest-heist-in-human-history-three-trillion-dollars-injected-by-the-fed-into-the-financial-system/5548910                                                                                                                                                                                                         Will real estate be a part of the asset price correction? Yes. Any upward change in interest rates will be a powerful negative on real estate prices (there are other factors but rates are the biggest concern since ultra low rates have destroyed the ability to effectively price many types of assets). High leverage and low cash flow will take out many investors as it has always done. How deep this one goes is an unknown; however, we have never seen this kind of monetary manipulation in history and monetary manipulations usually always end badly not because they cannot work but because the one's doing the manipulating are in it for themselves and could care less for the 99% of us that have to work hard making ends meet and trying to get ahead in a rigged game.  Please note investors working with cash or near total cash, will not be as affected since they should be able to hold out while the economy corrects as long as their cash flow can stay strong or they have other financial assets to cover the shortfalls.  As for me I'm still investing (cautiously) because in my opinion the rental market (residential and small commercial spaces for the self-employed small business person) and some flip deals will continue to  grow. I have placed some funds in contrarian type ETF's as insurance and have been thinking about some gold and silver. Though I haven't been sold on the value of having gold and silver if the economy goes into a full downward spiral. But I do believe that the real basis of the world economy is based on gold when you look at how the ownership positions of many of the major players such as China, Germany, Russia, USA, etc is being re-balanced. I just can't see how owning precious metals will help me in a economic meltdown. But I am still bullish on investment real estate and see it as the best way to reach some level of economic freedom. But and this is a big but; real estate investing is a delicate tightrope walk balancing human emotions and economic reality. Deals have to work on a cash flow basis and leverage has to be kept to the minimum (for real estate held long term). Flipping, which honestly, I've never really done often is like a game of musical chairs. With flipping, you can take on as much leverage as you can convince the marketplace you and the deal deserve, sell the property, pay everyone back and hope to make a profit. And going back to interest rates; the current insane low rates have convinced many investors that this a normal market condition. They are not. Any deal based on these very low rates to work financially and are not locked in for the duration of payback (right now I would think 3-year fixed minimum for short-term holdings and 5+ or longer on real estate held for income) turns a child's game of musical chairs into a deadly game of Russian roulette.

@Dylan Tettemer. Best of luck What part of Florida are you in? Do you have any specific properties that have been analyzed as a flip or buy and hold? What experience with rehabbing do you and your partner have?

Welcome Brian. I suggest you start with a single family or 2-3 unit first and see if being a landlord works for you. i would shy away from group homes/student houses. I've done a number of those and they are the most challenging on many levels. Our company Advanced Realty Services, Inc. specializes in investment properties and can help you find the property that's right for you. Shoot me an email or give me a call and we can go over your needs. 

Great job! That's a lot of real estate in 18 months. How much capital did you start with. Is there someone seeding your purchases? What is your total overall leverage position today? What is your net cash on cash with the rentals?