All Forum Posts by: Stanley Denman

Interesting.  Thanks very much for your reply.

Trying to think through the business model for tax lien buying, and as is my cynical  nature, I see the opportunity as narrow and seek feedback from perhaps those less jaded.  It seems to me that in order to buy a tax lien you have to assure yourself that the property is one you would want to own, hence a property that will cash flow.  If a worthwhile, positive cash flow property, one has to wonder why in the world would the owner get in tax trouble.  I would think that at the minimum a fair number, perhaps the majority, of tax lien properties simply suck.  In which case the only other possibility is that the owner is just an idiot or is lazy.  In which case, would he/she not have had plenty of chances before getting to the tax sale stage to unload the property to a savvy investor.  In short, it seems to me that the number of worthwhile tax sale properties would be very very small.  And with the interest in tax sale properties, the multi-dollar tax deed purchase course and materials, you are going to have hoards of buyer chasing this small number of deals, pricing them up to the point they are no longer deals.  Do I paint an overly pessimistic picture?

Thanks to all 3 of you for your responses. It seem 2 (Stephen and Robert) think leverage is needed to make real money as a landlord. Definitely not interested in leverage, any more than I would take out a loan to invest money in the stock market.

Would be curious about your experiences Stephen, Robert and Eugene: has the 50% rule turned out to be accurate in your investments? Would all agree with Robert that 1% rents in this environment is the best one can do?  Thanks again.

I have come into a modest inheritance and I am considering how to invest the money.  These funds came primarily from the sale of my parent's house. Prior to the sale my brother and I considered renting as joint tenants, but we decided we might not be a good fit for owning property together.  As I consider investing the cash proceeds now, I am looking at the purchase of a rent house, but as I look at the numbers it does not seem like a very good deal at all.  Since many here swear by SFD landlording, I invite a critique of my analysis.

My numbers are based upon 2 assumptions I have picked up on here and elsewhere: (i) typical monthly rent should be from 1% to 2% of purchase price, and (ii) assume that repairs and insurance is about 50% of rent receipts.  Also an assumption is that the appreciate of the house value is not going to be real significant, which is I think a reasonable assumption in our post-housing bust world. I am looking at purely cash flow.

Let's say I have $100K to invest. If I do really well with my house buy and get 1.5%of  purchase price in rents, I will get $1500 a month in rent. With the "50% rule" I net $750 a month for an annual return of  9% annual return.  Sounds nice.  Certainly, however, if I compared that return with stock market returns via a dividend oriented ETF or quality mutual fund over the last few years, the house doesn't seem so great.  But OK, the stock market looks like it is going to suck for the foreseeable future.  Yet even in this environment I don't think a 4% return through stock and bond investing is unreasonable.

So in my example, buying and renting a house gives me a 5% better return, or $5K a year. Not bad.

BUT, we have all heard the negatives: tenants trashing the property, and periods where the property is unrented, it just does not seem the extra 5% rent is a good deal.  Please, oh wise ones, tell me what I am missing!

Thanks Dana, J. Beard and Robert for your responses. That helps!

I am looking at a SFD with existing renters of several years who want to stay. My prior limited experience with landlording is that securing and keeping stable tenants is the most important goal.  I was wondering if there is a rule of thumb, or metric as to what purchase price Y would be the most one should pay for a house given existing rent of X per month?

I have read up on strategies on dealing with the possible angry seller ("you made HOW MUCH??) and I don't like either of the two I have seen; double closing (with the high costs) or HUD-1s that don't reveal the purchase price to the seller. I can only imagine how tense such a closing would be.

What if you were up front with the seller; I'm going assign this contract and yes I'm going to make some money. But what about agreeing to give the seller a cut of your profit?

Good point Jeff. Wonder "how bad" a house has to be for a realtor to refuse to list. Certainly major structural like damage or foundation. But I am looking primarily at good sound homes about 30 -40years old that have simply never been updated. Do you think most real estate pass on listing such a house?

I am interested in wholesaling in my neck of the woods in Dallas where we are seeing a lot of flipping activity.  I am an attorney and am familiar with real estate but I am not a real estate agent or broker.  I have read much here and on the net about techniques, but I don't see discussion about the essential business model for wholesaling, and what is the specific appeal to the seller is.

First off, it seems patently obviously that the majority of folks sell their house in the typical way: hire a real estate agent and list the house. I realize the target seller for the home wholesaler is one who is in some immediate distress, but it seems to me you still have to address the common believe that a good real estate will maximize return, and who doesn't want that, even in a distress situation? 

Am I wrong in thinking that the vast majority of sellers would intend to list their property with a real estate agent, and therefore the business proposition is that I as a wholesaler can maximize return in minimal time and a real estate agency can't. Seems a very difficult sale to make.

I am new to real estate investing and am very interested in the answer to this thoughtful query. I have heard that 51% of Americans make $30000 a year or less. If we apply the stand 28% of income rule we find that the majority of Americans cannot pay more than $700 a month for rent/mortgage.  That's a very low number. So is the group saying that essentially there is no money in house investments that the majority of Americans could afford? So we are chasing the "49%"?