All Forum Posts by: Steve Grace

I have been doing this stuff for over 45 years. Please let me give you a few tips to keep with you for the future. The first mistake you made was insulting both the seller and the listing agent, especially the agent. He is the one who helped them pick the price!! With your offer, you make him look stupid.

In CA, every listing agent with more than a year in the business has buyers for each property, at a given price. Do you really think that if the sellers were willing to drop their price $30K to $40K, that the listing agent would not be the first to know and that you would be close to the last to know!

The reason you have an agent is to help you make your way in this industry. Your agent should have contacted the listing agent and said he has a real buyer, not a lowballer. Then they talk about the seller's motivation. Maybe one of the heirs has a hair up the butt for a certain net price. That is what you need to know before you waste everybody's time. The listing agent cannot and will not tell you a price below asking, but he can advise your broker what not to do.

I have bought hundreds of properties over the years and never have I paid less than 90% of the asking price. My point of view is to find my value in that specific property. If I did not have a great upside, either this year or next, or a development deal to make it increase in value, I would not buy it. 

I once bought a parking lot for a Pick & Save store that was a separate parcel. I had it rezoned to R from C and built 30 condos. I paid the asking price of $100,000. It was a bit of a risk, but the per door price of $3300 in Los Angeles was a deal. You need to find you backside value before you make an offer. You have to decide how much profit you will accept on every deal before you buy it.

The other issue you have is to find a better team of remodelers. $40,000 is a hell of a lot of work on a single family. Go to Home Depot and take some classes on repairs and meet some of their contactors. They may not be the lowest priced, but at least you can get some real prices. You need to know in your head what a paint job will cost for a certain size home, what flooring is per square foot, what it will cost to replace a bath and a kitchen. Stop watching that flip crap on TV and get out into the street and find your own contractors and prices.

Sorry to be short and cranky, but I am old so it is OK.  Best of luck on your adventure.

There is a big problem with this line of discussion. You guys all appear from your photos to be young and full of life and see a future. I am now 69 and have been a RE broker-builder-investor since 1971.  I made a million net in 1979 and put it and everything else I could borrow into a no lose condo conversion. Then Regan got elected, home rates went to 20% and I lost all. That was not the exit strategy I had planned on. But at that age, you figure "what the hell, I will just do it again"  I did it again in the 1980's, eventually with similar results.

Life happens over 45 years of investing and belive it or not, some of it is really bad. In 2000, I was buying foreclosed residential units in Long Beach CA. from Freddie and Fannie. Totally vacant and very vandalized. We were buying at $5,000 a door. What happened to the dreams of the prior owners?

When you get over 60, your attitude does some adjusting and that light at the end of the tunnel is actually a train, this time. You will grow to hate tenants and their personal problems. The government and their taxes that never seem to go down. Repairs that now require a contractor because you can't paint a unit by yourself any more. You just want to cash out for a guaranteed cash flow for life. Cash will do you no good because it may be gone if just a few years. 

The good news is there is a way to convert your equity to a guaranteed cash flow for life, have all your back and current taxes forgiven, pay no commissions and get a tax deduction as well. It's called a Charitable Gift Exchange. 

I am actually happy and healthy and re-started in real estate in Phoenix at age 65. I work full time and like it. I just thought you should hear a reality check from the older group.

Good luck Travis. First thing is don't rely on a banker because if he had any good ideas, he would not be working in a bank. You need to find a mortgage broker who can deliver various loans for you. Have him set you up with maximum leverage so you know how much down you will need and what you monthly payment will be per $10K borrowed.

The most important thing you must do is find a location that has been showing upward movement in both prices and rents. Any agent can pull those for you off the MLS. Once you have the location, buy as much property with as much leverage as you can finance. Look for value added rentals and ones that have below market rents. You have the income to carry the repairs and the vacancy factor if needed. Stay away from section 8.

Every time you have capital to make a down payment, go for it as long as the current rental income covers you.

Do not invest in someone elses deals. You are way too young to risk your money and give up control. You wil also learn nothing but heartache from being a minority investor outside your area of influence.

Ten years seems an eternity to you now, but it will fly by and you will be very happy at 40.

Hi Lorraine, welcome to the industry. One piece of advice I can give you it to walk the walk. Get out one day a month and become a tenant. See what you are getting for the price they are asking. Pick your area you want to invest in and get to know what each level of rent will get you in a house or apt. That will make you very valuable to any investor you may team up with. You not only read the reports, but you walked into the actual rentals. Big difference!

Learn how to calculate property taxes in the area as well and talk to an insurance agent to find out the cost of investor property. Find out if you selected area requires flood insurance, as it is expensive. The requirement comes from the Fed gov, by the way.

Good luck

Tarik, do not, repeat, do not fake any info to any lender. Those days are way over. You need a cash out refi, but with poor credit that is an uphill battle. You need to contact some of the hard money lenders on this site for the cash you need. Just make sure that the rental income will cover the payments on a hard money loan. Also, take more cash out than you think you need, because you will run short of funds near the end. That is the nature of this beast.

Welcome to the site Nicholas, you have to remember one main item: real estate is a people to people business. You will actually have to talk with strangers in order to find out info. That is a very hard thing for a lot of people to do! I have trained several hundred new agents in my career and the hardest this is to get them out of the book and meeting someone face to face.

What I told my people was to call ads on Craig's list of homes for sale and just talk to them about what they want. Listen!

Secondly, make up a business card and walk through a small retail center, stopping in each small business and introducing yourself to the people in the store. Tell them you are a new agent and ask them if they have any needs in real estate. Then Listen to them.

If nothing else, it should be a fun day meeting all kinds of new people.

Welcome Drew, it sounds like you have all the experience and contacts you need to be successful.

Good Luck

Hello Kyle, I have to question Bill's remark about using VA loans. It is my understanding that VA loans are for Owner Occ only. I used mine for less than the full amount allowed, because I didn't qualify for the full loan amount. It is similar to an FHA loan in that you can move out and keep it intact, but you cannot reuse the loan until the first one is paid off. I sold my home and let the VA loan be assumed. I could not use my entitlement again until that original loan was paid in full.

I may be wrong and things may have changed, and if Bill is correct, I am going to start buying all kinds of homes.

Good Luck

Welcome Scott. It should be an exciting year for you in 2014.

A tax question for you. Is the income from a Charitable Gift Annuity exempt from income calculations for Medicaid long term care payments?

Welcome Jonathan, Matthew is correct about the disclosure situation. Having the license also puts a lot of pressure on you as the buyer. If you want to throw low balls at the wall, having a license will be a hindrance. Find yourself a new agent who wants to write a lot of offers, many of which will offend the seller. You would be well served to have this agent's broker fully aware of what you are doing as well. He is the one who faces the liability, not the agent.

When sellers accept low balls, they and their families sometimes get very resentful during and especially after the close of escrow. That is when an attorney is called.

One piece of advice from an old guy in this business. I have always paid full price for property that I have purchased. The reason is that I saw my value in the future and did not want to risk losing the deal for a few thousand dollars at the beginning, when I saw making 10's of thousands in a year. If you don't see your future value in what you are buying, you had better look at it again.

Happy Thanksgiving