All Forum Posts by: Scott Taylor

Hi @Lanice Miller - Thanks for that link. I actually hadn't seen that book. I took a good hard look at it last night.

It seems like the assumption in that book is that you can 1) buy a 4-plex for $100k (with a 20% discount at 80k) and b) you can generate $800/mo in cash flow. That means each unit = $600 a month. Note that yields $9,600 on 20k down - that's nearly a 50% cash-on-cash return!

Read the forums - most people are getting somewhere between 5-15%

So of course it won't take that long, even discounting appreciation - because there's a really high cash-on-cash return + compounding going on.

Notice that without appreciation / equity, that plays out like this:

year 0-2 - 20k => 40k

2-4 - 40k => 80k,

4-6: 80-160k,

6-8: 160->320k

So that's only buying 1 property! If I could get ~50% cash-on-cash return and after 5 years make ~ 100k with 20k down, then I could replace my salary - no need for appreciation.

But the bigger question - in what market can I:

1) buy a 4-plex for $100k

2) find one that rents each unit for $600?

I think it's hard to find a 4-plex anywhere for 100k asking that can rent each apartment out for $600.

Prove me wrong!

Haven't seen that calculator.  Googling returned me this:

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

But I doubt that's what you are referring to.  

In what market are you getting 30% returns?!  Sounds a little too good to be true.

I'm new to investing in real estate (and investing in general).

I've got a small amount of cash piled up, and right now looking to make moves into buying my first property for long term, buy and hold cash flow with leveraged property. This will have to be out of state as I'm in California which is out of my budget.

I've been poking around the forums, but haven't been able to find some spreadsheet / projection of how one can achieve financial independence via real-estate. I'm using financial independence to mean "making back my salary so that I don't have to work".

It looks like the conservative estimates right now are around 7-10% per year cash-on-cash return for a leveraged SFH. How am I going to achieve financial independence any time soon with those rates? I'm not looking for get-rich quick scheme - I know it will take time, but at this rate it looks like it will take over 15 years.

For simplicity's sake, let's say I have $100k to invest. I buy 5 leveraged properties, each for $100k with 20% down and 30 year fixed mortgages. After all is said and done, I make 8% per year, cash on cash return, even with leverage.

With the "rule of 72" it's going to take me about 9 years to double my money.

72 / 8.0 = 9.0.

So now in 9 years I have $200k (a 200% return). Assuming the same rates, it will take me another 9 after that to go from $200k to $400.

Most of the books out there seem to suggest that with leverage you could make about 12% per year, which cuts down the number of years substantially. But of most of the deals I've analyzed, (assuming I'm budgeting for safe 10% maintenance and "regular" rates of tenant vacancy - 5% or 1/20 months), there's no way to achieve those sorts of returns, even with a 80% LTV leveraged position.

So am I missing something? Are rates of return actually much higher? Am I looking in the wrong markets?

Hi @Ned - I've seen your posts on BPF and you definitely seem to be the expert on this corner of the market. Thanks for your quick and timely response!

I'm more interested in getting a high yield on my investment rather than obtaining the actual properties (although if they could be acquired this way that would also be great). 9-12% still seems good to me in comparison to other investments.

What % of your liens actually go into foreclosure?  I've heard that in other lien markets it's very, very rare to actually obtain property based on liens.

Is it important to have a lawyer before I bid or do I only need one once the land owner has defaulted on paying the back taxes?

I assume you invest in the baltimore lien market because you are from there + know the area / properties / neighborhoods. Are there other, better lien markets out there?

I took a look at the Florida lien market which seems to use the same software and it looks like things have been bid down to 0.25% for all non-vacant homes (mostly setup by a few LLCs by two of the big investment banks). Any idea why the same hasn't happened in Baltimore?

Have some crab dip with old bay on it for me (I miss it now that I'm not in Maryland!).

I've been looking at tax liens in Baltimore, but don't quite understand the "HBP" - the "High Bid Premium".  Here's a quote from the FAQ:

Questions:

1. Is the "date of the sale" the date of the tax lien sale or the sale of the property (if the property owner defaults in paying their payments)?  As a concrete example, if the property is assessed at $100,000, the lien is $1,000, and I bid $1,000 - and assuming I'm the only (and highest) bidder - what do I owe the city of baltimore when the auction closes?  $1,000, or (40% * 20% = 8%) of the cash value of the house ($100,000 * 0.08 = $8000)?  If the latter, am I only making 18% on the $1000 I've invested in the lein, and not the $8000 that I've paid the state?

2. What % of properties can be acquired in the auction (not OTC) by offering just the lien amount by bidding?  Looking at the CSV from a previous year it looks like many of the occupied houses were acquired by the city, meaning that no one bid on them (?!)