All Forum Posts by: Account Closed

Will is right. The owners of this website give us the luxiry of connecting with fellow investors for FREE. Lots of knowledge on these forums. Have you tried Lifestyles Unlimited? There is a rather large following in the Houston, TX area.

Once you sign that lease you that is a binding document and you are legally responsible for the months of rent you signed off on. You should have inspected the property right before signing. Your wife's colleague is not responsible for seeing how clean the property is. He ain't signing the lease.

Here is another option. Ask the owner if you can sub-let the unit. Maybe there is a way for you to lease it out to someone else and you live elsewhere. It is risky because if your tenant moves out then you are stuck paying double rent. Good luck.

Damon,

Here is additional clarification. The "Economies of Scale" is defined as reductions in unit cost as the size of a facility and the usage levels of other inputs increase. So what the heck does this mean? Easy. Take for example that you own 2 houses and one duplex. Your duplex needs a new roof along with the two houses. Which project will cost you less? The duplex of course. Now think bigger. What if you owned a 144 unit apartment complex and you owned 144 houses. Everything needed new roofs. Which would cost more? Quite simply, it costs contractors more to drive from house to house so the cost of the roofs are much higher than just one 144 unit apartment complex. This is economies of scale. This is why I like apartments over SFR's but this is my personal opinion.

Just a disclaimer here. This may not work for every deal but generally speaking it holds true. Just my experience.

Again it just depends Damon. You can always ask the seller for an income and expense statement. Or if the property is personally owned just ask for the Sch E on his/her tax return. There is no personal information on there and the seller doesn't have to try and put numbers together for you. If you go with the Sch. E, be sure and back mortgage interest expense and depreciation expenses out of Net Income to arrive at Net Operating Income. The 50% rule generally applies to SFR's as stated above.

It really depends on your investment strategy...Are you a buy and hold kind of guy? Sell in 5-10 years? Flip within a year?

If you want to rent and hold for 5-10 I would suggest not so much focusing on the FMV. It matters, yes, when you are pulling comparables in the neighborhood but if you plan to sell in 5-10 years than why lose sleep at night? So do your comparable sales analysis before you go into it but once you've purchased the property forget about FMV. Focus more on income and expense as Will said. How are you going to maximize rents while minimizing expenses? How are you going to fill up vacant units/houses? Is it in a good location? What is the unemployment rate in that area? Were there a lot of sub-prime mortgage in your city? What are the going rates for rent in your area? Is there a demand for renters?

Then consider the integrity of the property itself. How much work does the property need? Is it an A, B, C, or D property? It's rare that you find A & B properties fully occupied spinning off good cash flow that you get an extremely good deal on.

Then once you've figured all of that out you are ready to make an offer. Generally speaking in terms of ROI, anything better than 8% is good enough for me. Because I can't get that in a CD or bond right now and stocks are too risky of a game for me to play. I would purchase a B, C, or D for 60-70% of ARV or after-repair value. You won't find too many B's at that price. Here are some rules of thumb I try to go by:

1. Put an offer on a property faster than the other guy. It's not hard to pull comps. Find a realtor. They are hurting for business and will gladly pull comps. That's why you put an option clause in your contract so you can inspect the property for 8-14 days. If you don't like the property then the owner keeps the $50 option fee and you get your earnest money back. So you've lost $50. Not too shabby.

2. Have a good relationship with a bank. You never know what foreclosures they might have. Some banks do not like people to know how much they in Other Real Estate Owned or OREO. Go to this link https://cdr.ffiec.gov/public/ManageFacsimiles.aspx and select UBPR. Type in any institution you want. Go to the balance sheet and look at how much OREO the bank has. generally anything over $1MM and the bank has lots of OREO. Unless it just one piece that's booked at $1MM. Lots of deals to be had in foreclosures but be careful when investing in these things.

3. Network. Send out mailers to brokers and realtors. Take them out to lunch every now and then. Don't just have one realtor that you've been buddy buddies with since 2nd grade. You need to know at least 20 realtors and they need to know you.

4. Drive around and find distressed properties in good neighborhoods. Sometimes just putting a friendly note saying I will buy your house please contact me can do a lot of damage.

5. Don't over analyze the numbers, then post up here to see what we think. That wastes time. Find someone on here to share the info of the deal on here or elsewhere. Then make a decision. If the numbers work they work, if they don't then move on. Time is money in this game. Escpecially in a down economy.

6. Stay emotionally unattached. Never make a decision based on emotions. For example, if your wife thinks the property is pretty or it belonged to one of your relatives and he/she is selling it. If you have a friend that is trying to talk you into buying his/her property. Treat each property the same. It's only your hard earned money at risk.

7. Already mentioned this one but I would like to get in a property at 60-70% of ARV. Your equity is already worked in the property so if you get a hard money loan you generally do not have to put any down or much down for that matter.

8. Negotiation skills are critical. Learn how to negotiate. Be nice. Be respectful. LISTEN TO THE SELLER. He may be sitting on a gold mine and he doesn't realize it. Determine what you would offer and don't budge. You are looking for the kind of seller that is getting old and cannot manage/maintain the property, a seller that is in a divorce, had a death in the family, loss of employment, or someone that is getting sued. It sounds horrible, I know, but these people may need cash/liquidity for these very reasons. And as investors that is what we can provide.

Just remember regardless of anyones perception of what I stated in rule #8, the definition of Fair Market Value is you need a motivated seller and a motivated buyer. You aren't screwing anyone. You are just trying to protect your cash and at the same time find a darn good deal. Hope this helps.

If the judge approved the judgment and it has been filed in smalls claims court than it should be on the bureaus I believe. May want to call Experian or Transunion and find out. I think it will be on there 7 years if I remember correctly.

What are expenses? You planning on financing? I would double check on the flat roof. Why is the guy selling the property? Unless the property has had some major work on it, beware of properties that are more than 30 years old. I would find out the structural integrity of 4-plex and have someone reputable inspect the property before you go through with it.

Another thing to think about. Statistically speaking how many of us hold a property for 30 years and pay the minimum payment for all thirty years? I don't think a lot of us on here. Personally, my investment strategy is to get in and out in less than 7 years per property. If the property is yielding a good cap and cash flow I may hold on to it longer. But the point is whether you have a 15 or 30 year the goal is too own as many properties FREE AND CLEAR in the shortest amount of time. You still pay a lot of interest @3.75% over 15 years believe it or not. Leverage is your friend if used properly.

Chris,

I think everyone here would agree that an MMA would not yield very much in this economy. Mortgage rates are at an all time and banks are trying to manage their overhead and cost of funds. However, the whole reason behind putting it an MMA if you are an active real estate investor is to have the liquidity available if need be to jump on a deal. You can't do that without penalties if the money is tied up in a CD or bond. We are in a buyer's market and cash is king. Financeexaminer is right. It's better to throw it at principal or re-capitalize and go after another property.