The posts in the above referneced thread have been fantastic, as are most. The sparring between ‘DAN’ and infowell was amusing, ( ENOUGH, though!) but also contained many salient points.
Evergreen, moneytalks, reo, to name just a few also contributed good posts.
Isn’t the real point being missed, however?
There is a discernable difference between INVESTORS and SPECULATORS, don’t you agree?
I’m scared to death of what some poeple I know are doing with these negative amortization loans, using most of their home eguity for down payments, etc on CONDOS!
It will be a good time to be a investor when all of these preconstruction units get built and there are a flood of them on the market and those payments start going up up up.
The same scenario exists in several parts of the country, where prices are exploding off the board.
The ‘risk’ doesn’t seem to be as great in SFH in this area, but the aforementioned ‘SPECULATORS’, using the inflated value of theur equity to finance these ‘spec’ purchases will put a bunch of nice homes in the distreseed seller catagory.
Me/? I’ll continue focusing on the solid deals I have in hand, look for more & wait on the sidelines to see what happens; I’ll NOT RISK our $$ as so many seem to be doing.
Good luck and fortune.
I finished my business degree in 1991 at the age of almost 18 my final was to write everything I knew about business while others twice my age were turning in 40 to 50 pages mine was simple
IT TAKES MONEY TO MAKE MONEY!!
AND
THERE IS NO SUCH THING AS A FREE LUNCH!
I GOT AN A+
This is simple yet in depth if you really think about it!
NAWKAW brings up a very valid point and I tell everybody that I have been a mentor to in the past NEVER EVER DO ANYTHING TO PUT YOUR PERSONAL PROPERTY IN JEPORDY!
that way if you loose everything you can still go home at the end of the day!
I have four properties that are FREE and Clear and of course my house is the first one I ever paid off!
I think our friend and mentor Robert Keyosaki put it best when he said
It is a lot like monopoly once you know the rules PLAY THE GAME!
and it is true sometimes you win and sometimes you loose just play!
I also liked it when he said
Four green houses and one red hotel you will win everytime!
This advice was great on the other hand just like any other mentor I do not take everything he says as gold!
I agree that a lot of people are going to get into trouble with the type of loans that they are doing.
Not any one group. I am really concerned for the new home buyer that really did not qualify without doing a
negative amortization loan or a 100% interest only in a flat market.
I buy far enough under value that a reset will not hurt me. I may not make what I thought I would, but I’ll be OK.
If I have my money in the property, it is me that has a problem. If it is the banks money, they have a problem. I take what I can and leverage heavily. In a steep downturn the bank may be getting a lot of properties back and I will be there to pick them up.
For properties that I hold, I will maintain, however
I will renegotiate the rate and terms.
Again the bank has the problem not me, I have the cash.
The difference is I do not spend leveraged money, I keep it for other real estate deals.
We are both buying and you have a financing contingency and I am offering cash / fast close
I get the deal and for less than you offered in many cases.
To each his own, some buy and hold forever, where I am about the money.
I don’t even care to own any houses, condos or the like, but I don’t get the money if I don’t play.
Residence gets sold every two years, most everything else goes in one year and some even sooner.
The game is monopoly and the properties are just red and green pieces.
http://www.theofficialjohncarpenter.com/data/movies/sounds/tlscgold.wav
CAUTION: YOU HAVE TO BE A GREAT MONEY MANAGER TO PLAY THE GAME THIS WAY.
WARNING, WARNING, WARNING, WARNING
I do wholesell a lot, I can buy and sell to the next guy for less than he would buy for, otherwise.
To each his own, some buy and hold forever, where I am about the money.
I don’t even care to own any houses, condos or the like, but I don’t get the money if I don’t play.
Residence gets sold every two years, most everything else goes in one year and some even sooner.
Aha, Moneytalks, you anticipated my next question.?
How long to hold? In my triplex scenario, the cash flow is what we are after; we bought it ‘right’. As profits come in, I will reinvest in the property to ‘dress it up for sale’.
Is there a tax ramification making it more favorable to seel within a 3 year period? My head spins with all the info I try to absorb; that one slipped by.
With the land, if I can get my price right away, why tie up that cash? I’ll dump it and hold the land we may build on for appreciation and possible sale later on.
One thing is certain; there ARE inherent headaches with being a landlord and if you can turn the properties quickly with decent profit, and avoid the headaches, well worth it!
THANKS!
I agree I wholesell more then I keep!
REOCONSULTANTS THEORY: Keep the best!! Wholesell the rest!!!
How long have you been playing this game MONEYTALKS!
You give great advice we seem to agree on all topics (so far)
To each his own.
Many of the investors that I know do not want to pay any taxes.
They also do not show much income and could not get the loans that I do.
I have to sell / pay some taxes and show lots of income, to be able to grow at the rate that I have chosen.
This is a great country and I am paying my rent to live here.
Besides there are millions on welfare that depend on me.
I also do not worry about the tax man.
May I also add that I am not a big fan of 1031’s. They have a place
but I do not use them much.
Tax deferred and tax exempttion are two different things.
I pay as I go.
The thought behind 1031’s is pay later while in a smaller tax bracket.
I am going to keep go up, doesn’t work for me.
Another great point!
The more taxes you pay the more money you made!
I do take advantage of full write offs including but not limited to gifts clause!
Here is a link to the gift laws
http://www.irs.gov/newsroom/article/0,,id=107815,00.html
you might have to open a new window and copy paste as this did ont go thru correct SORRY
Write off’s are good.
It is about the financial picture being drawn for the lenders.
Make more money each year, than the year before.
Make the lenders want you!
I have recently had a loan program written just for me and my people.
That’s what I said it would take to shift my business in the lenders direction.
NAWKAW
Most of you should be factoring in cashflow.
Typical cashflow on a rental would not pay my San Pellegrino bill.
I need real money.
I look for $100,000 equity in each deal, on the way in.
A couple hundred a month does not interest me.
Different strokes for different fokes.
REO
I have been following you, evergreen and Infowell for a week now.
I agree with most of what you guys have said and why shouldn’t I.
It is what it is.
I am new to this forum business and I am not sure if I am responding to all that I need to be.
So many threads and topics.
I had started a thread called “what do the experienced have to say”
hoping to get to the heart of your thoughts.
A find a lot of questions and discussions unnecessary, if the party would just watch and listen it will start making sense.
I will also ask that the new one’s not email me with questions like what is bird dogging or whole selling.
Buy a book or keep reading here.
I was asked by a friend to come here and share my thoughts and insights, but basic questions, I do not have time for.
You folks sound like you are on the right track.
You can make a whole lotta money doing flips, wholesale deals and quick turn rehabs. Even subject-to’s and lease options can put some fast cash in your pocket.
But don’t forget about long-term wealth building. Keeping some of your deals for the long haul will make you wealthy.
“Keep the best!! Wholesell the rest!!!” Good advice!
While the quick cash is nice, the passive income that goes on forever is fine too.
The trouble with the buy/sell strategy is the income stops if you stop working. If something happens to you, like an auto accident, you might have to take a cut in your standard of living. It’s nice to have an income stream that does not depend upon you showing up every day. I like the idea that I can do a little work that will continue to pay me for many years into the future, and even take care of my family if something should happen to me.
You can learn the skills necessary to handle the keeper stuff, or you can contract it out. But please consider having some of these type of properties in addition to your buy/sell business.
They have been great for me!
valgolas,
I just turned 30 and own over 80 rentals I hit that point of NO MORE! But I could not agree more keep the ones that will cash flow!
Robb
Ahem…I guess I was preaching to the choir, so to speak.
It sounds like you already got the point long ago that I was trying to make.
Good for you!
As an aside:
Robb, I have been doing this business longer than you have been alive, and I hit the point of enough is enough at a lower number than you did. Or rather, my wife let me know that I had more than enough at around fifty houses. That number hasn't changed much over the years, (but occasionally I upgrade my portfolio of properties by replacing one with another that I like better.)As moneymaker said’ differnt strokes’, etc.
For us, on our first deal, to make 10k on a land lot turnaround and have cash flow of appx $300- 400 per month plus appreciaition is a good solid start. For sure, we’d expect to multiply those figure 10 fold within the next 4-5 years… Turn 5 or 6 props at least per year at 10 -20 k each and have 3k- 4k per month passive income is suitable for our needs. The 3k per month pension all but covers the basics, so the rest is mostly ‘party money’
LOL
Good fortune to all.
That is where I outsourced everything to property manager! My wife told me the same at 60 now we have 80 and don’t do anything!LOL
Question for some of you…as far as deciding which are the good keepers, what numbers determine this…as far as cash flow, under market value (if it applies), payoff time, etc? I hope this isn’t too vague of a question. I guess I am basically asking is what determines whether you keep one or get rid of it. Thanks in advance for any responses.
This might be oversimplified, but if the property will pay for itself, then it is a possible keeper.
I do a Net Operating Income approach to see if the property will generate enough revenue above the operating expenses to have enough left over to service the debt. If I can get into the property without a large down payment, and the financing terms are good enough so that the net rents will cover the payments, then it might be a good deal for a long-term keeper.
I also look for a property - say, a single family house - that’s well constructed and located in a good neighborhood where people want to live. I want to have the only rental house in an owner-occupied neighborhood. This makes the management a lot easier, and increases the odds in my favor on several fronts. I avoid war-zones, although some people can make them cash-flow.
If I am not going to sell the house any time soon, then the financing terms and the market rents are more important to me than the purchase price. Sure, I want to buy it as far below market as possible, but I am willing to go up on the price if I can get better terms from the seller. You should avoid negative cash flow, for the most part.
Price appreciation is never guaranteed, but it often happens, especially if you hold the property long enough. But the equity build-up from the mortgage amortization is certain, even if it is slow at first. Don’t discount this benefit too much. Cash flow generally increases with the years because the rents tend to go up with inflation. If you avoid borrowing out your equity, you eventually get the property free and clear.
Either learn good property management skills, or hire a good manager. Be sure to factor in this cost as part of your NOI. Even if you manage them yourself, you should get paid for your work, so factor it in in every case.
Jack Miller says that the easiest way to become a millionaire is to buy a million dollars worth of real estate and let someone else (the tenants) go to work to pay it off for you. I like his plan. It’s not rocket science, and it doesn’t take a lot of luck to make it work. But it does take some effort on your part.
If you only buy one well-selected house in a year, and you repeat this for ten years, then you have your million dollars worth of real estate like Jack says. (Ten $100 thousand dollar houses equals $1 million dollars worth of real estate.) This is not a bad retirement plan. Get them free and clear by the time you retire, and you get to keep most of the cash flow from your portfolio, which should be worth considerably more than what you paid for them. And the income is indexed to inflation.
Does this sound like more than your social security check?
Can you do this? Can’t everyone?
All the rest are wholesale deals, rehabs, or similar, assuming that they are a bargain purchase and you can make a profit on a quick turnaround.
good point valgolas.
for me the point of enlightenment was hearing some overpaid seminar salesman say that if you do nothing else, buy 2 homes and make sure they’re paid off by the time you retire. atleast you wont starve in your old age.
something so obviously simple and a majority of the population misses it!