Forgetting about comps and ARV, what is the best mathmatical equation one can use to determine if a home is a good deal worth pursuing?
You certainly can NOT forget about comps or ARV and still decide if a property is a deal.
Good Luck,
Mike
I understand that, but how much equity do most investors look to have to be sure they have a safety net. How do they determine this figure?
I must have AT LEAST 30% equity at closing. Since the real estate bubble burst, I have been getting 50% or more equitey at closing.
Mike
I agree with Mike. 30% minimum equity (and be very conservative on comps). In this market, you are only really safe with 50%.
This market has just begun to fall! I believe that we have another 30% to go!
This is The Big One as Redd Foxx used to say on Sanford and Sons!
I got burned in the last real estate collapse in the 80’s-90’s. I would not have my name on any mortgages in this market, no matter how much “Equity” there was in the deal. Everything is subject to in a land trust!
In this market equity is like talcum powder in a tornado, Poof!
Just my .02, good luck!
Bill
Kemet,
I hope there are many other investors out there like you who have pulled back from this market. That way I can continue getting the best deals.
Brokovich, you sound like the type of guy who is smart enought to try to catch a falling knife!
Be my guest. Keep my number handy, you will want to look me up when you are going down! Maybe I will let you Give me your properties when you go bust.
Bill
I would not have my name on any mortgages in this market, no matter how much "Equity" there was in the deal. Everything is subject to in a land trust!
Bill,
Land trusts do NOT provide any asset protection, other than providing some privacy. Likewise, buying subject-to is no panacea. If you don’t pay that mortgage, you’re going to get sued and you will probably lose (especially as the government is starting to concentrate on predators). I’m not saying that sub-2’s are bad - I’ve done sub-2 deals, but I am saying that they do NOT remove risk.
I would not have my name on any mortgages in this market, no matter how much "Equity" there was in the deal.
That doesn’t make much sense. There is no real difference between having a mortgage or buying sub-2. In either case, you still have an obligation to pay the mortgage. If things go bad in with a mortgage, you’re going to be foreclosed on. If things go bad with a sub-2, you’re going to be sued. In addition, how you buy the property is not nearly as important and the numbers. If you buy at a big enough discount, you will always be able to sell at a profit and you should have positive cash flow even if the market price of houses drop 30%. If you pay too much with a sub-2 deal (or any other kind of deal), you’re destined to fail.
Good Luck,
Mike
Kemet,
I’m in the Ohio market which was never caught up in the obscene run-ups that many other markets had. I buy all my properties for less than 50K. My last 4buyt transactions have been.
SFH $17, 500 under contract for 87K
SFH $29,000 on market for $83,500
SFH $15,000 will be on the market by March 1 at 95K
Mixed Usage six Unit, $22,000 keeping as a long term hold since last schedule E produced $2700 a month of rental income. Not a bad return.
So yes I have gotten very good at catching falling knives. There are always people in the maket at sub 100K purchase prices, especially with the value I am offering. I have several exit strategies as I can always lease option, rent, land contract or sell in this market and still produce cash flow. I’ve been doing this for 10 years and I am very conservative. I don’t buy ANYTHING unless it is a steal because I don’t have to. I already have a robust real estate portfolio. I don’t pull equity out, EVER. I refinance only when I can save more money because of interest rate savings and my houses have still been avergaing only 90 days in this market. My tenants or tenant buyers pay the bills and I still stash cash for future purchases.
I won’t be calling you anytime soon, but if you want to sit down and learn something come to Ohio and sit down with Mike(Property Manager) and I, you might just learn something.
Hi Brokovich!
Sounds like you are a real professional and know what you are doing. From what I see, consulting with “Investors” all over the country, you are definitely in the minority.
I would advise anyone who wants to learn from you to contact you, if that offer is made to others. I am afraid that I will not be calling you because I do not do deals in the price ranges you indicated.
Keep up the good work and best of luck.
Bill
Kemet,
It comes down to the market you are in and this strategy works in the Ohio market. It may not produce the 100K per property returns of other markets but if you are sensible it can provide a very good return working at it part time. I still have a full time job that I’ve never given up and my wife manages some of the day to day opps for me. I do wish you luck with your future investment strategies since you are taking a breather from the current market conditions.
I will make it simple. Could you take a car away from me if I did not own it?
Kenmet,
No, I couldn’t take a car away from you if you didn’t own it, but I COULD take a house away from you if your were the beneficial interest in a land trust that owned it! Either you don’t know anything about land trusts or you’re trying to convince unsuspecting newbies that land trusts provide asset protection - which they do not.
I see that you have started claiming that everyone on the forum is an idiot (except you, of course). It also looks like you can’t follow the simple forum rules and that you’re posts are being edited by the moderators.
Finally, I did not use “all caps”. I’m not the one that can’t properly make a post. Did you notice that your entire post is a quote?
You’re off to a very bad start here.
Mike
Propertymanager, you are right. I do not know much about working your fancy board, excuse me for “making my entire post a quote!” How sinful!
I was referring to the fact that you wrote the word “not” in all caps when you said that land trusts do “not” provide asset protection. You were just emphasizing how smart you thought you were.
In fact, you sound like you know everything there is to know about land trusts, Propertymanager. Myself, I have only been using and setting land trusts up for 5 years, in many different states across the country.
Propertymanager, you are the land trust expert and I “don’t know anything about land trusts,” I am going to ask you to show me a case where a property was taken from a beneficiary in a properly constructed land trust which would include an unrelated seller remaining a beneficiary. I will wait.
Bill
Hey Mike (propertymanager),
I love this guys posts!!! He admits he got his @ss handed to him “in the last real estate collapse” but now he’s got “a program.” to make everyone money!!!
He’s right Mike you don’t know anything.
I guess the fact that he’s got all of 14 posts here doesn’t mean anything either. He’s got your number buddy. Forget all the people here who you’ve helped AT NO CHARGE TO THEM!! We’re all morons with no idea what we’re doing. I caught about 8 falling knives myself last year. Being the idiot that I am it only added well over 6 figures to my net worth, and I just sold these homes like a complete loser. I guess I should have tied them up in a land trust instead of making a quarter of a million dollars on them.
I guess I have a lot to learn. I gotta go. Meeting a steel guy out at my self storage warehouse to add 3 more buildings. Ya , know…someday I’m gonna figure this real estate thing out.
He admits he got his @ss handed to him "in the last real estate collapse" but now he's got "a program." to make everyone money!!!!
I agree. The poor guy has got to make a living somehow. :rolleyes
It’s a Cinderella story…