Posted by Robert Rainey on September 17, 2005 at 01:11:05:
It’s not listed. Present owner is a lawyer. If my memory is correct, she purchased the entire package across from me which included a 4,000 sq ft office building and the lot I am talking about for $299,000 a couple of years ago. I am basing the value of the lot on the fact that a smaller lot with a 1,200 sq ft house used as a plumbing business two doors down from me sold for $125,000 three weeks ago. I will research and find out the lawyer’s name and email it to you if you want me to.
Someone posted a thread below about life after rehabbing. I’d say I’m somewhat in the same boat. I don’t see myself discontinuing the rehab game. I think it’s a great income producer, but lot’s of stress to go along with it.
I really want to start generating a positive monthly cash flow to start replacing my existing income. Does anyone have some suggestions? I guess I’m looking for alternative ways to produce 20%+ yearly returns. Not something management intensive like multi’s. Maybe I’m looking for a holy grail that just doesn’t exist, but any thoughts would be helpful.
Re: Ideas on generating monthly cash flow - Posted by TaMo-Atlanta
Posted by TaMo-Atlanta on September 17, 2005 at 07:38:14:
Holding paper is a great passive strategy, but you usually don’t see 20%. For example, we pay our lenders in the 10-15% range depending on the structure. If you buy discounted paper you can get higher returns, but that’s a much more active process.
If you are looking for 20% in a fairly passive capacity, you’ll have to look at businesses and commercial deals. Let’s say you buy a gas station (ignore all the EPA hassles for the sake of example) that has NNN income of $50,000 to the owner per year. If your financing requires anything less than $250,000 cash put into the deal, you’re making 20+%. This isn’t an entirely realistic example for gas stations, but the principle is the same for buying any kind of business or commercial deal.
Re: Ideas on generating monthly cash flow - Posted by Robert Rainey
Posted by Robert Rainey on September 15, 2005 at 02:47:06:
How about some really specific advice? Buy the lot across from my commercial building on Confederate Dr. in Franklin, TN for about $100,000. Construct two metal shop buildings with brick siding (to satisfy the city fathers) of about 3,000 sq ft each at a cost of $50 per sq ft if you do the contracting yourself. Lease the buildings to plumbing, painting, welding, or similar businesses. Repeat the process at other locations on this end of town and you are all set. I really think I know this area and am sharing my knowledge for anyone interested. There is a real market here for these properties. I don’t own any vacant land here and have no vested interest and in fact am probably hurting my own future plans, but I would enjoy seeing what happens. If you research this area, you will see the potential. Wealthiest, fastest growing area in the state, likewise one of the hottest areas in the country with a huge demand for service oriented businesses. I have discovered a huge demand for light industrial shop type floor space in this area . These businesses are fighting to establish here and many can’t afford to build but are eager to lease. If you find a good tenant you will have minimal headaches, low maintenance costs, high returns and great appreciation. I am in the city limits of Franklin and 12 miles from Spring Hill on the main highway between the two towns. Other posts here have expressed an interest in moving from residential to commercial so I thought I would share what has worked for a small-fry full time commercial investor like me.
Hard money is 12% to 18% with 15% being around par.
If you can buy paper at a discount the yield can be higher. Some times this is because the seller of the paper is motivated. Some of the time paper is high risk.
Discount MH paper can be good. Lonnie deals create paper that is similar to discounted in that you are doing deals where your profits come from the mark up. Mike suggested this.
Lets be honest.
If you are going to put your feet up and do nothing then assume that 15% is pushing it a bit. If you are going to hunt for deals and be willing to take calls when they happen you can get paper that will pay a good deal more than 15%. You are putting in time to find the higher yields.
There certainly is a trade-off between how passive you want to be and you yield/income.
In my experience, duplexes require more time and effort. I have had few tenants that stay in my duplex for more than 24 months. However, the duplex has been more lucrative than the single-family houses, with better cash flow (which is what you seem to be looking for).
Most of my tenants in my single-family houses have stayed five years or more. The profits are lower, but the amount of work and hassle is much less.