Re: Have you ever heard of… - Posted by Gary (VA)
Posted by Gary (VA) on July 24, 2001 at 15:16:56:
JT, Could you source the following statistic?
“One more thing, there are more millionaires created by RE investing, than any other commodity, in the US”
Re: Why do you buy RealEstate? - Posted by Jeff Tunnell
Posted by Jeff Tunnell on July 25, 2001 at 01:32:58:
Let’s see. Eight SFH’s, all vacant with PITI payments of $1,200 each. OK, probably not likely, but it is VERY likely, and mostly probable to have at least 10% investment vacancy rate on income from deals like this. What happens when two of your “buyers” decide to bail. Can you afford the $2,400 per months PITI payments?
It may sound like I’m advocating staying away from RE investing because of this, but I am not. I’m just trying to point out the downside. Make sure you have enough reserves to feed negative cash flows.
And here are some suggested titles… - Posted by HR
Posted by HR on July 24, 2001 at 15:22:11:
I agree with Tim. Check out everything here and at your local reia group, and buy these books to get a better understanding of how great money is made in re:
Investing in Real Estate by McLean and Eldred, 4th Edition.
Creating Wealth & Multiple Streams of Income by Robert Allen.
the 5 Magic Paths to making a fortune in re by Lumley.
Each are about $15 each. Great reads.
Good luck,
HR
OTHER PEOPLE’S MONEY? - Posted by Melissa-So. Calif.
Posted by Melissa-So. Calif. on July 24, 2001 at 19:50:18:
I know I must sound like a broken record by now, but when you y’all talk about “other peoples money” or “buying a house with none of your own money” Are you referring to finding a seller who is willing to give you a lease option? Or doing one of those “deed contracts”?
Please be patient with me… I’m learning … just want to know which is the very best, easiest and cheapest way to make your very first or second deal…
Melissa So. Calif
Re: Why do you buy RealEstate? - Posted by Mike Schmidt (IL)
Posted by Mike Schmidt (IL) on July 24, 2001 at 14:29:23:
You forgot to mention the back end profits. If the average home you take say Subject To has a $30K back side profit and you plan to buy just one per month and hold for 2 years until the tenants exercise their option…well…then each month (theoretically) in 2 years you will be bringing in $30K PLUS your monthly cash flow. So if you own and replace when sold, you would have 24 homes on the books, even at the $200 per month profit figure this would equate to $200 X 24 = $4800 X 12 = $57K Now add in each monthly sold home with that $30K backend $30K X 12 months = $360K + $57K = $417K per year.
Now that CD might as well be a Bee Gee?s Greatest Hits CD. =)
Re: Why do you buy RealEstate? - Posted by Jay_TN
Posted by Jay_TN on July 25, 2001 at 15:56:20:
Jeff, we are closing on 2 houses in less than one month. First house is $91k, 6 years old, PITI is roughly $650. Rent will be $1125/month. Second house is $79k. 7 years old, PITI will be around $575. Rent at $825/month. Last year I bought two properties for just under $70k. Rent is $775 now, but I have room to go up to $825. On those four properties, rent-to-price is 1.12%. Those are prices paid. After appreciation, the percentage will go up.
I’m not a salesman or even a ‘people person,’ per se, but that doesn’t mean I can’t take advantage of the deals. I’m building contacts now with others now. They can quickly flip their rehab and quality rental candidates to me. They make money, and I get good buys. I’m better at landlording and rehabs. My real estate agent once told me, stick with what you know. I’m good at what I know, and when I get tired, I can learn more.
Regards,
jay
Well then… - Posted by David Alexander
Posted by David Alexander on July 25, 2001 at 15:14:45:
I guess the three house over the 150k range I bought, one in the 200k price range, the other two over a 350k, where I was deeded the properties and they paid me to save their credit just makes this all ludicrous…
Expand your thoughts, expand your life and the money will follow. Solve big problems and get paid big money.
David Alexander
Dang, You’ve Got It All Figured Out, Don’t You? - Posted by TRandle
Posted by TRandle on July 25, 2001 at 11:15:55:
Jeff,
I’ll keep the “flames” low, but your post sounds like a male attempting to describe what it’s like to give birth. We’ve never done that (I assume) so we aren’t really qualified to have an opinion on it, are we? And if we provide one anyway, it certainly shouldn’t be done in such absolute terms.
The main assertion in your post with which I agree is that you are correct; it?s not easy. However, getting my butt out of bed to go to a job I hated wasn?t easy either.
To address some of your points:
I get calls all the time from two mortgage folks.
True, people who own 150k houses are not dumb, but they don’t want to be landlords, and putting a tenant in the house seriously hurts marketability. Most of the houses I buy are done Sub2 and are in that price range. I don’t spend time “convincing” anyone - that’s how I do business. You, as the seller, have the problem, not me.
The entire Austin, Texas metro area rents for 80 to 90 cents a foot. 1% is not hard if you offer terms.
Do you have any idea how many folks have bad credit? Run an ad that says you’ll offer owner financing or a lease purchase AND that you’ll accept bad credit. The phone will ring off the hook.
No, the buyers aren?t dumb either. They want a piece of the American dream and can’t get it through conventional means. Surely, all these rent-to-own furniture stores and “we finance” used car lots have gone out of business, haven’t they? I mean, why would anyway pay quadruple the cost of a television, just so they can pay it out over time?
When I hear the ?impossible rent-to-value ratios? argument, it sounds like a disgruntled California newbie. We all have our little market idiosyncrasies within which we must work. There are literally hundreds of ways to make money in real estate. Does every single strategy work exactly the same way in every location? No, but many strategies will.
In May I purchased a 185k home OWNED by a REALTOR subject to with initial payments of $1,650. I received 5k up front from my buyer with payments set initially at $1,900 per month, increasing $100 per month in each of the next Octobers. The agreed upon purchase price for my buyer was 210k.
No, he wasn?t ?dumb? as you put it, and yes, I gave him 6k for his deed and for leaving his 170k loan in place. What? Someone who not only must be educated because they live in a house that costs 150k+, plus someone specifically licensed in the field of real estate? A buyer that agreed to pay me up front money for the option to pay 25k more than the house is currently worth? And the buyer agreed to pay $1,900 per month for a house worth 185k?
By the way, the seller thanked me (http://quickoffers.com/testimonials.htm#Realtors).
Just my lucky day, I guess?
Since that was at least four of those type deals this year, I guess I?m on vacation.
Enough of the sarcasm, and my sort-of sincere apologies, but this business can be done. Yes, it?s hard work. Yes, there are many things about which the gurus don?t warn you. Yes, we make mistakes and constantly learn how ?not to do that again?. Are you going to rush out and do 4 deals a month as some have done (if that?s what you wanted)? Probably not.
And yes, we make the kind of money on one deal that some folks work 2000 plus hours in a year to make. A healthy skepticism is beneficial in this business to assist us in mitigating risk. Cynicism is not helpful. But this is more fun and a quicker way to financial independence for the average individual than most anything out there.
Re: Why do you buy RealEstate? - Posted by Mike Schmidt (IL)
Posted by Mike Schmidt (IL) on July 25, 2001 at 11:15:21:
Hmmm, most of the calls I get and the last 2 deals all were from “2 mortgage people” that either just built a new home, are living in a different home and rented out the one they want to get rid of. THEY ARE EVERYWHERE!
I don?t know where you live, but I can tell you your rental numbers on a SFH do not apply in and or around the Chicago area. I am 45 miles NW of the city, homes worth $150K rent for $1300 - $1500 per month MINIMUM here and I L/O those same homes for $1800 + a month. So don?t tell me you cant get 1% or BETTER.
As for the cash both deals equaled $15K in consideration money…NON REFUNDABLE. There are a lot of people in this area with $5K to $10K to put down but cant get financed with a bank or don?t have enough funds for 10% - 20% down. Perhaps the taxes in your area are low and I can see how this would effect what you can get for rents. Around here your paying $300 a month in property taxes, add that to a 9% mortgage on a $150K home, plus insurance and even if you went to a bank you could not OWN this home for less than $1600 per month! Even with great credit and a loan at 7%, you would STILL be spending close to $1400 per month and would have had to put a lot more money down than if you did a L/O with me.
In my opinion, I don?t care where you live. If you figure out what the monthly cost would be to finance ANY home, add in the taxes and insurance and get a monthly number, why would it be hard to sell this to someone that wants to own a home but cant use a bank? What other options outside of renting do they have? Even if that same house rents for $800 per month why cant you charge $1500 on a option offering rent credits even? The only real variable you have is property taxes, I just don?t see what something rents for has to do with what it would cost you to OWN the same house, assuming you are offering the home with a option to buy.
Trapped in a world of negative thinking! - Posted by JohnBoy
Posted by JohnBoy on July 25, 2001 at 07:55:11:
You obviously haven’t been around trying to use these techniques long enough to know that you do not know what you do not know.
First of all, in my area homes in the $150k range DO rent between $1250 - $1600 per month. This isn’t the uncommon, it’s very common.
Now try and get $3k - $4k per month rent on the $300k - $400k homes and you’re going to have problems. Those homes rent from $1800 - $2400 and very hard to find tenants that are willing to pay that for just renting a place.
Then there is the home buyer moving up, or getting transfered from their job, getting divorced, lost a job, facing foreclosure, a death in the family, illness in the family where someone can’t work any longer, and on and on and on. ALL of these types of situations create MOTIVATED sellers that NEED to get out from under those mortgage payments.
There are people that buy another home. They have a buyer under contract, there financing is approved wit a lender knowing they are selling there current home, they close on the loan for the new home thinking they have the current home sold and end up with a buyer in the end that backs out or their financing falls through leaving the seller stuck with two mortgage payments.
There are sellers that have been transfered from their job and they NEED to move. They NEED to get another home when they do move. They NEED to get their current home sold. They become MOTIVATED when their current home doesn’t sell and if SOMEONE can just come in and take over their payments then can use that to get qualified to get financing to buy their new home where they are relocating to. This isn’t an uncommon thing that happens with few sellers out there unless you live in an area that has a very small population. Areas with large populations present these opportuntities every day.
You’re right about one thing though. It’s time consuming and hard to go out and just find these deals on your own by you going out and looking for them. That is WHY, you market yourself so these MOTIVATED sellers can find YOU instead of you running around looking for them!
As for being able to get a decent cash flow from these homes in the higher price bracket of $150k by just renting them, you’re right there. That’s NOT the way you do it nor is it the way I suggested to do it.
The way you get these to cash flow is by selling these homes on TERMS either by offering them on a L/O or selling them on a contract for deed. Selling this way will generate a much larger monthly payment from your buyers. Just “renting” a property won’t.
As far as people that have the $5k to put down can run out and get a 7% interest loan, think again! That is true for the average home buyer that has good credit and the income to qualify for the loan. It’s NOT true for the buyers that have credit problems. Some of them with credit problems could still get a loan, but it ain’t going to be at no 7%. It’s going to be more in the 10% - 14% bracket because of their credit problems.
Then there’s the typical wannabe homebuyer that probably could get a loan, but for some reason or other they just THINK they can’t get a loan. Some think $5k isn’t enough to have for a down payment. Some think because they have some minor credit issue they won’t get approved. Some have even applied at some local bank where live and they were denied a loan because that bank didn’t have a loan program that would fit that buyers need to get them approved. Some banks just feed off of the people that are easy to get approved. Those people that get turned down from that bank walk away THINKING that since one bank denied them that ALL banks will and they give up thinking they will never be able to get a loan! They don’t know to go find a mortgage broker that has many loan programs that could get them approved. When any of these people see an ad in the paper that offers a NICE home in a NICE area on a rent to own, lease with option or seller financing, the phone rings off the hook from these people that WANT to just be able to buy a home!
This isn’t about having the stars align correctly once in your carreer. If that was the case then don’t tell every investor here that visits this board that. They might start thinking that they are going to have to give all those properties they purchased this way, back to the sellers or something.
Four per year??? There are many investors that visit this site that doing deals this way and buying 4 or more per MONTH! So it has NOTHING to do with aligning any stars. It has to do with having the KNOWLEDGE how to get these deals coming to you instead of you running around beating a lot of bushes to find that one out of a hundred sellers that is MOTIVATED! Get the MOTIVATED sellers calling YOU instead and these deals will fall in your lap! You just need to know how to get them closed once they fall in your lap!
You argue this all you want with being one of those nay sayers on how this doesn’t work or how sellers in these price brackets are to smart or how people with $5k can get 7% loans. If that is something you choose to believe then that just leaves more deals for those that know better! I suppose the next thing you’re going to tell us is that since you find this to hard to believe then we’re all going to have to give all those down payments we got back to our buyers because they should have went out got a loan at 7% instead? Or that we’re going to have to give back the houses we purchased this way because those sellers should have been to smart to sell to us this way, even if that meant losing the home to foreclosure or falling behind on payments and ruining their credit???
If you think YOU can’t, or if think YOU can…you’re right!
Re: Have you ever heard of… - Posted by JT - IN (St. Barth, FWI)
Posted by JT - IN (St. Barth, FWI) on July 26, 2001 at 14:15:41:
Gary:
I am currently traveling on vacation, and have no reference books at hand, however, I have read this many times. I will attempt to find this reference upon my return home, in posdsibly another week, or so.
Do you disagree ? Or just looking for a reference ?
JT - IN (from St. Barth, FWI)
Re: Why do you buy RealEstate? - Posted by DanT
Posted by DanT on July 25, 2001 at 20:49:09:
Jeff,
Your point of adequate reserves is well taken. I am a landlord. I buy, rehab and rent property selling only occasionally. Over the last 16 years we have averaged a 2% vacancy rate. Half I am sure is do to maintenance downtime. The longest I have had a property off line is 5 weeks when we recarpeted and then decided to gut and remodel the bathroom. (late decision, I’ll blame the wife) DanT
Re: Why do you buy RealEstate? - Posted by JohnBoy
Posted by JohnBoy on July 24, 2001 at 23:40:22:
Hey, hey, hey! Now don’t be making no fun of my Bee Gee’s Greatest Hits CD! They’re much better than any little old bank CD any day! 
Re: Why do you buy RealEstate? - Posted by Tom – IN
Posted by Tom – IN on July 24, 2001 at 19:28:34:
Yeah, Mike. I understand your math, and it’s clearly not worth it. What about opening a hot dog stand?
Re: Why do you buy RealEstate? - Posted by Mike Schmidt (IL)
Posted by Mike Schmidt (IL) on July 24, 2001 at 14:34:56:
Oh yeah I forgot. I also had to take out NO investor loans since all these deals would have been done using other peoples money…ya just got to love this country! =)
My beef with you, Tim… - Posted by HR
Posted by HR on July 26, 2001 at 08:37:43:
Is you’re too nice (smile). I’d have taken out the bazooka. Nice post.
HR
ps. Just don’t flame me for the stuff due to you. I PROMISE I’ll send it this week!
Re: Have you ever heard of… - Posted by Gary (VA)
Posted by Gary (VA) on July 26, 2001 at 16:40:17:
Nope, don’t disagree. I often find myself in verbal sparring matches regarding the relative advantages/disadvantages of real estate vs. equities investing. My personal opinion is that the long term returns of each are comparable. That doesn’t mean that most people do equally well regardless of the vehicle. If in fact a much higher percentage of millionaires got that way through investing in real estate and it can be documented, that would be a very powerful argument in favor of real estate investing.
Re: Why do you buy RealEstate? - Posted by Mike Schmidt (IL)
Posted by Mike Schmidt (IL) on July 25, 2001 at 24:28:10:
LOL
For some reason I dont see you as a Bee Gee’s kind of guy =)
Re: Why do you buy RealEstate? - Posted by JohnBoy
Posted by JohnBoy on July 24, 2001 at 23:38:31:
Yeah, that’s the ticket! Open a hotdog stand!
Hmmmmm??? Lets see now???
12 houses per year for two years to get up to $417k PROFIT per year on average just by maintaining 24 houses on the books, replacing each one as it cashes out.
The hotdog stand:
Since were talking PROFITS before taxes, of course, figure about 30% profit margin of gross sales, which means we will need to gross $1,390,000.00 in hotdog sales to make a profit of $417k per year.
$1,390,000.00 / $1.65 per hotdog = 842,000 hotdogs to sell each year / 12 months = 70,167 hotdogs per month / 30 days = 2,339 hotdogs per day / 12 business hours per day = 195 hotdogs per hour!
Yep, sure sounds like a winner to me! All I would have to do is sell an average of 195 hotdogs per hour, 12 hours per day, 7 days per week and I’m in the chips for $417k PROFIT!!!
Why, good God ole mighty, that’s a whole heck of lot better than having to get up to buying 12 houses per year and after two years only having to maintain 24 houses on the books by averaging one house sold per month and another purchased to replace it!
So how much does it cost to get one of these there hotdog stands set up? I wanna sign myself up for TWO hotdog stands! Heck, I’s gots me a wife that cans runs one while I’s runs the other one!!! We can make $834k per year at that rate!!!
LOL