I fund everything now with my own cash. The egg I have built from literally nothing. I have 1/4 Million available to work with so I can do at least two houses with full renovations at a time.
Once you have amassed enough capital to do deals yourself borrowing is annoying…I know your ROI goes up with leverage,but I like making deals myself…There is nothing like telling someone you are paying cash…Your ability to slap the person around and chop down the number down goes up dramatically with paying cash…(NO BANK)…I read these posts and these fantastic returns you guys make from these flips and I have to say Im a little envious…But I can’t do what it takes with the managing,rehab,local market knowledge,marketing…Its great to read about the deals though…I have my niche and you guys have yours…
I love being the bank…Only issue for people that want to do the same thing you need heavy numbers to make size…It seems more rewarding to make the % returns you guys make flipping…I just like lower risk…But I still commend you guys for doing so well…Its great to read…
In relation to this thread,my portfolio (entire personal capital I manage) is up %21 for the year 2010…Thats not including income and other investments…Thats just cash on cash return of my personal portfolio…I have deviated from my comfort zone which many know is predominantly equities,straddles,options etc…I never thought I would enjoy something more than the equity markets but I do…I love deal making,its my passion…
21%!!! :beer
THAT is some serious appreciation. The BEST part about that 21% return???
It was done with SIZE MONEY…Believe it or not folks, getting that level of return on that amount of money Rookie is using here is HARDER than doing it with SMALLER AMOUNTS. This is what separates a PRO from an part timer.
One point on the lending topic.
Once you show a bank that you can CONTINUALLY create returns for your business, and thus…THEM…They will set up a line of credit for you that is as easy as using CASH.
You simply write a check…Once you have a Half a million or more in a LOC your rate of return SKYROCKETS because you can not only use YOUR CASH for deals, but the BANKS also. I just sold a property that I paid for 100% with my banks money…The property cost $120,000, I owned it for 18 days, sold it for $205,000, and paid my bank $302.47 for using THEIR MONEY to make me over $$80,000 in 18 days. Once the proceeds check was deposited I simply transferred the payoff amount into the LOC and was back to ZERO again.
For those that don’t know…BANKS TRACK THIS TURN OVER…The WATCH who “pulls and pays”. The FASTEST way to INCREASE your line is to pay it down because you DON’T NEED THEIR MONEY!!!
BANKS LOVE doing business with people that don’t NEED THEM…They actually COMPETE for your business!!!
It doesn’t matter which PILE of money you pull from when it comes to your sellers. Using a LOC is no different than using CASH…It still means a 5 day close either way.
The ADVANTAGE to investors is two fold…FIRST, your building a RELATIONSHIP with a LENDER…Second, you can use BOTH PILES of money to INCREASE the number of deals you do.
One thing I’ve learned in this business that NEVER CHANGES …DEALS COME IN GROUPS!!! it has NEVER changed and it never will…Some of my absolute all time WINNERS presented themselves when I had 7 other deals in the hopper (in other words PAID FOR). ACCESS to CREDIT and using it ONLY when to your ADVANTAGE has made me more money than I can account for.
RE-READ my earlier post on EXCHANGING some SUPER CHEAP, STOLEN properties for lines of credit worth 5 TIMES what you paid for the property. It’s called LEVERAGE…Using a LITTLE to obtain a LOT!!! For some reason people are SCARED of that term…DON’T BE!!! It’s very hard to get hurt buying an asset the bank says is worth $200,000 that YOU PAID $50K for!!!
But I can't do what it takes with the managing,rehab,local market knowledge,marketing...Its great to read about the deals though...I have my niche and you guys have yours..
Great observation…
While flipping isn’t aligned with my skill set…still some great principles that can be extracted:
RE-READ my earlier post on EXCHANGING some SUPER CHEAP, STOLEN properties for lines of credit worth 5 TIMES what you paid for the property. It's called LEVERAGE...Using a LITTLE to obtain a LOT!!! For some reason people are SCARED of that term......DON'T BE!!! It's very hard to get hurt buying an asset the bank says is worth $200,000 that YOU PAID $50K for!!!!!!!!
Some spectacular market action this week.
Yeah, baby… :bobble
-Mike
Hoosier,
I am going to take you a bit off the RE track. You say that you have a good job, making good money. Does your employer offer a 401k plan with matching? If so, then make sure that you contribute to the 401k UP TO the limit of the employer match. 100% return on your investment and tax deferred. A Roth 401k is even better than the traditional 401k if your employer offers it.
You will have lots of choices on where to put your other savings until you are ready to begin investing in RE. The safest is probably the short term bank CD offered by your small local bank or credit union. These institutions often have promotional rates that are higher than Treasury rates. i would not buy a CD with a term longer than one year until inflation raises rates considerably higher.
If you are really worried about inflation and honestly believe that the US currency devaluation, the Fed’s QE policy, and the federal government’s exorbitant budget deficit and unconstrained spending will fuel a rapid rise in the rate of inflation in the next year or two, then gold (or a gold ETF) is ideal for your risk capital (risk capital is money you can lose without losing any sleep). In periods of high inflation, hard currency assets like gold and silver will help you maintain your purchasing power better than a bank CD and is more liquid than real estate. If you do venture into gold or a gold ETF, then suggest you limit your position to no more than 5% of your investment portfolio.
Lastly, make sure you pay yourself first. Every time you get a raise, put half that raise into your investment accounts, otherwise the tendency is to let increased discretionary spending absorb all your extra income.
Just want to throw caution in the wind on the stock market and weigh in the discussion concerning retirement money.
Federal gov’t has been propping the market up since the spring of 2009 with even more infusion into the market this past year. When that comes to an end the market will once again tank. Knowing the federal gov’t you’ll find out after the fact. If you’re not watching it daily or hourly you could find yourself with a large loss. But we all know the stock market is a risk. I see current market earnings as false earnings.
There are market indicators since July showing the market is actually beginning to fall apart. This past week bonds are showing a trend of slipping. At the end of November you may find the GDP near the negative mark. Should the report come in under adjusted figures, 2011 will be a tough year. The National Health Care will fuel the decline and that begins in January. Health benefit plans have already begun to increase by 20% to 50%. Mine jsut jumped 30% this week with new premiums staring January 1.
Investing in the stock market over the past 20 years I’ve learned when all the fund managers say buy, buy, buy I now sell, sell, sell. I’ve lost a fortune listening to fund managers. The Mutual Fund Store (MFS) advocates that Adam has personal relationships with many of the fund managers and gets a great feel whether they are on the right track. The MFS lost 20% of my IRA the first 3 months they had my IRA. And, that was when the market was still doing OK. I never lost that much when I was handling my own IRA watching it part time. I transferred my IRA after I found myself to busy to watch it daily. The 1st of October I moved all my investment funds into money markets for the next 18 to 24 months. I’ll be finishing a couple of project plans in the 18 months and move the money into better yeilding real estate projects where I have 100% control.
I too live in the midwest. In our area homes around $100K and under are selling but not real well. Unemployment is still around 9.6% to 10.25%. Most are under employed, unemployed or still facing lay offs. Until a measure of job security returns most of the people I talked to are staying put and/or trying to sell their homes to downsize.
Investing expendable income or extra money in a retirement account or stock market today is extremely risky for my money. But, for me I see that placing that money in real estate is where I at least have some control over the money and relatively some control over the return. We usually listen to fund managers, Financial Planners and reps when investing.
My take on fund managers. They have to say, buy this stock and this is why. Their companies buy blocks of funds (product). The managers have to sell those funds (the products). Now, if you owned a company with a large quantity of products and you had a manager that said, oh you don’t want to buy this product…, wouldn’t you fire that manager. So no matter how good or bad their products are the managers are going to say buy, buy, buy.
My take is, in the future my investments and money for retirement will be focused in real estate.
Interesting read on the collapse, (both Buffett’s and Ritholtz’s):
http://www.cnbc.com/id/40255045
and another good read:
-Mike
http://stockcharts.com/h-sc/ui?s=DBB&p=D&b=5&g=0&id=p14482512048