justin0419: (sorry this got a lot longer than I thought)
The Dallas area is significantly larger than the KC area. About two years ago I did a real estate market study in a subburb town called Grandview (south side of KC). There were 65 homes that had gone unsold for more than 1 year. All were rehabs. Some had some real nice work done. Problem was the entire real estate market in KC was already tanking. This town was once a cow town until in the late 70’s to mid 80’s. The feds did block busting. Real low interest rate mortgages to minorities. The town is now a subburban getto with high crime and bad schools. There just wasn’t any buyers. At the time I was working for a builder. My business assessment for him showed that if the job market didn’t improve to also include greater job security then not much was going to sell especially a new homes.
So rehabbing in KC is not a very good venture.
It will be another 3 to 4 years before KC’s real estate market will return. Most of the Rehabers I know have quit. Over the past 9 months homes under $100K have begun selling but nothing near what it would take to create a good income for a rehabber.
I’ve studied the R/E mkt for a couple of years now. I’m definitely not an expert but I have found SFH are very high risk. Apartment complexes are the safest in the R/E industry. The risk is spread amoung a large number of renters significantly reducing the risk.
I found an apartment complex in southern FL that appraised in 2007 for just under $12MM ($11.8 I think). The owner dropped the price last year to just under $7MM. I read some bloggs on the complex and it looks like the current owner has turned it around and the current renters are mostly happy.
I did a quick look at the Florida R/E mkt and have come to the conclusion it will rebound in another 2 1/2 to 3 years if our gov’t continues to correct itself (reference 2 Nov 10’s elections). My brother lives near the complex and he said the oil spill didn’t reach them so the beaches are in good condition. Included in my plan was for me to reside on complex for 6 to 9 months and put in place some special programs that will attract prospects and tenants from competitors to fill the complex.
I have a pretty good sales and marketing background I feel I can significanlty reduce the vacancy rate.
I was going to try to find investors and buy the complex. I have my project plan about 80% completed. I’ve set it aside while I research the MH industry. I read several years ago where MH Park/land leasing is in the top 5 ways to become a millionaire. Lower maintenance expenses with land. (just landscape care, snow removal)
I am impressed with your methods. Taking and tweaking a plan that works to form your own system is great.
My past experience is in product development, retail mgmt & sales team development, executive mgmt and project mgmt in the area of retail and government supply center development.
Commercial R/E in KC has tanked as well. What’s strange is that some of the bigger commercial developers and big box retailers are still building new commercial malls. This has added to the millions of square feet of retail and office space sitting empty. A lot of that space is brand new never been rented yet these guys are building new sites.
In reference to you using cash to buy below mkt. I’ve got the same idea, if I can. That is why I refocused on MH Parks and Apartment complexes. I thought if I could pick up some MH’s to generate cash flow I could turn the little bit of cash I can get from a relative into income so I could leave my current job and grow that cash so I could stair step up to MH parks then apartments.
It just seems with SFH’s it will still take a lot of money to get a couple of hundred dollars per home. Equity building would be the offset however, with the market so bad I think equity building could take a lot of years. Now, Dallas being so large maybe they will recover faster. I have seen reports where in south Texas the bad R/E mkt has not hit them as hard. Dallas may be the same, I don’t know.
But, if you can take the risk and have enough cash flow to cover the vacancies and you’re willing to wait I can see how it will pay off when you sell 20 or 30 homes to buy a $1/2MM to $1MM Repo and turn it.
Keep in mind though something I came across the other day. Buyers at all levels are asking for home plans with smaller floor plans (around 1700sf). Higher SF could take longer to sell. Higher SF means higher utilities and up keep.
Another thing that might help sell or even attract renters. Up grade a few things that will save the renters/buyers money. Put in tankless water heaters or a 95% efficient heaters. I thought about doing it in MH’s. It could attract prospects away from the rehabbers who use cheap water heaters and furnances. Since I plan to resell the MH’s I wanted to go direct to the manufacture and buy a few in bulk and get them at a good price saving rehab dollars.
A good thing I learned in college was to differenciate my product as a selling point and upgrading with tankless water heaters and a 95% efficient furnace can help do that. Energy star dish washers and other appliances help as well but tankless water heaters and 95% furnace is something the other R/E investors won’t do.
Talk with you later.
Frank Van Dyne
Grain Valley, MO