Posted by Chris Geniec on May 23, 2005 at 22:03:32:
Do what i do…buy the rehab…rehab it…refinance with cash out…and rent it out…its a three way win cause you get the property…pull all your profits out of the rehab…and you still get to keep the property…its like selling the home to yourself and keeping the profits and the home…when you rent it out for 10 years you still build equity in your own home. Get it?
What would you do in this situation - Posted by Reggie
Posted by Reggie on May 22, 2005 at 20:43:35:
My family and I are new real estate investors. Other than our primary homes, we own a townhome in Orlando and residential land in Nevada and Arizona. My fiance and I are debating what would be the best course of action to take with $100,000+ cash.
I believe the real estate market will soften later this year and actually go into a slight to moderate downturn beginning next year. I want to be cash rich and am proposing doing rehabs, pre-foreclosures and foreclosures. After fixing them up, we would resell them for less than market value, but for more than what it cost us to acquire and fix up the property. My thinking is that it would be better to make $10-$40,000 per home in a short time and be cash rich. My reasoning is that beginning investors should be cash heavy to react to opportunities/emergencies rather than be caught up in the landlord trap.
My fiance also believes in doing rehabs, pre-foreclosures and foreclosures, but believes in keeping the properties and renting them out. My problem with this is the fact that our cash would be tied up, our credit would show all the mortgages and, I believe, we are entering into landlording at a vulnerable time.
All opinions and suggestions are greatly appreciated! Thank you!
Reggie
Re: What would you do in this situation - Posted by dealmaker
Posted by dealmaker on May 22, 2005 at 21:29:39:
I’m with you, I don’t like holding rentals, of course I’n in TX, a bad state for rentals. That said, what are you doing holding alligators in the form of raw land. I’d get rid of that now.
I like holding cash in order to take advantages of all buying opportunities. If you can keep some rentals that you own free and clear, and still have sufficent cash I’d do that.
BTW, why would you ever want to sell BELOW MARKET. I prefer to sell above market.
dealmaker
Re: What would you do in this situation - Posted by Reggie
Posted by Reggie on May 22, 2005 at 22:15:54:
Dealmaker
Thanks for your reply.
Here is an example of what I meant by selling below market. If we obtain a property at $200,000 and we put in $20,000 in upgrades, we would be willing to sell it at $250-$275,000 if the comps are coming in at or close to $300,000. My reasoning is that in a soft market or down market, it would be very difficult to get a full market offer it everyone else is discounting their similar properties down to, say, $280,000. Our property would be more attractive and sell quicker because it would be going for less and have built in equity for the new buyer. Yes, we lose out on that part, but we would still make $30-$50,000+ in a short time frame.
BTW, the land is paid off. We’re thinking of building our retirement home in Nevada. The 5 acres in Arizona we’re planning on building homes and selling them to snowbirds from the North looking to retire soon.