All Forum Posts by: Eddie Ziv

Josh, here are my 2 cents which some of it you most likely already know.
The subject of rehab is one of the most risky one unless you do it for buy-n-hold. Rrehabbing is just part of a greater process of buying and selling and maybe it is harder to attract people who are just considering this area.
I would say that if you want to learn about short sale, double closing, subject to, etc, there are plenty resources including BP (I hate that acronym now... Damn you British Petroleum...) however, one of the most common question I've seen here is how to start buying real estate? How to find the right property? What to look for? Warning signs? Neighborhoods, etc. If I need a loan, what do I need to show? Where can I get it? What are the options I have? If I have $10K, can I buy real estate? This type of seminar newbies would love to have... I think.

The other issue is knowledge retention. From my short and unsatisfied experience with seminars and webinars is that you are bombarded with information there is simply no way to retain it unless there is supporting written material, forms, samples, check lists, etc.
If you decide to go that way, my suggestion would be to have all that available to download for those who sign up.

Good luck.

I had a very similar situation with WF couple of years ago. I was forced to request two extensions and in the end, I lost the property. (Which was sold two days later for a cash offer.. :cry: )
Sometimes the banks change underwriters after the loan has been approved by one and the new underwriter is more hard-**s.
However, if you are dealing with a mortgage broker as oppose to the bank directly, It could be some "rosy" info you are getting from the broker who's overly optimistic.

As Jon said. The first red light in this deal is the fact that the bank approved 100% loan. I think FHA require at least 5%, so let alone commercial bank.

Agents may not be a good source. In some part of the country (Mainly in the south east) REA are not allowed to recommend either to buy or not to buy in any given neighborhood because of anti discrimination laws.

Considering the fact that every market is different and what is regarded "expensive" in one part of the country, could be considered as "modest" in another, it all comes down to what you can or cannot afford.

First, ask your self what and where you can afford buying? Are you goals long or short term? i.e., are you willing to sacrifice short term lack of cash flow for longer term appreciation, (such as in investment for retirement) or you want to see results immediately and cash flow is paramount?

In general, your best bet is 3/2 1,300-1,800 sq/ft house in a desirable (good employment, good schools, good services, etc) middle class neighborhood with a price range where the mortgage (PITI) would not exceed 1/3 of the average family income. (You can find data at http://www.city-data.com)

Tata, first for definition. LLC is not considered a corporation from a pure legal perspective. It actually stands for "Limited Liability Company". Corporations have more ridged rules and some better benefits. You may want to consult with an entity forming lawyer as to what is better suit your situation, but it seems to me that a corporation may be better than LLC.

Just to add on what Jon just mentioned. I would be very reluctant to get a hard money loan on a rental unless you are absolutely sure you'll be able to refinance conventionally within reasonable time. Check you DTI (Debt to income) ratio, the ARV (After rehab value) along with other factors. If you get a hard money loan for purchase + rehab and you cannot refinance you'll get stuck with very expensive loan that can cause you to lose your property.

Hey Josh,
Here is something you may want to consider. Search engines. If I Google my name, my profile on BP comes right up, which has info of who I am, the name of my LLC or any info, I wouldn't mind to share with other REIs, but not necessarily with the world as a whole (separation of business type, litigations, etc.)

That was true until 2-3 years ago when most of the country was geared toward real estate ownership. However things are changing and ownership is no longer the only factor.

Although RE prices are more affordable, stringent lending practice, uncertain economy and RE ownership "trauma" will eventually broaden the rental market.

Another issue that many people learned is that rental provides flexibility.
If you bought your house 4-5 years ago and your PITI is $2,000 you are dead in the water should you loose your job or being transfer somewhere else. You cannot rent your property to cover your costs and you cannot sell it because you are under water. If you rent However, you can always downgrade. No ties.

People also find these days that centers of employment are shifting. Yesterday, it was California and Florida, today it is Texas and who knows what tomorrow holds.

Now, the reason it is easier to rent in low income neighborhoods is because higher income people always have choices and as the income goes higher, the market shrinks. It's like a pyramid - Less people make more money. In areas with high inventory of rental property, the problem is even more magnified.

In low income areas it is quite the opposite. The generational cycle of low income would keep the 2nd and 3rd generation in those neighborhoods (Most people who were born into low income are likely to stay in that socioeconomic class) therefore, you have higher rental demand there. Also, people of low income are less likely to afford buying their own house.

To me when it comes to low income rental, it is all about the ratio between the amount invested (Purchase + rehab), potential income, and risk of depreciation.

All the houses I bought in the past 2 years were foreclosures. All were sold prior for $55,000 to $67,000. Only two of them are in what you would call "Hood".
My "Hood" purchases were from $7,500 at the lowest to $10,500 at the highest. Rehab ran between $3,000 to $6,500
As to income, one is rented for $500 and the other one is about to be rented for $600.
The "Hood" areas where my houses are, are really desirable rental areas for low income because that where those people grew up, that is were their family live and they are comfortable there because of the support system.

Now, If I bought those properties 5-7 years ago and paid the prior sales price, I would face a terrible predicament. I would be working at 1% of purchase rent, nose-dive property value with very little chance to substantial recovery.

However, I'm actually doing very well. Even if property value continue to decline, they cannot go much lower than that. Eventually they will go up because they still be the cheapest in town. The rent to cost ratio is at 2-3% and the purchase and rehab cost are so low that you don't have to deal with loans. It is all cash deals.

My total investment amount for all my four low income properties combined (I have some others) - was $80,500. That is cost of purchase + rehab (average $20,125 per property)
Total monthly gross income: $2,435

Now, I don't even look at it as real estate income. I just divide it by 2 (50% rule) and look at it from a dividend perspective. Take $80,000 and put it money market account at annual rate of, lets say 3% (If you're lucky) and you'll get $2,400 annually.
With my investment, I get $14,604 conservatively ($2,435 x50%= $1,217x12= $14,604).