Is there a place where these things are sold? How does this work, if I wanted to buy these passively and avoid the hassle of dealing with MHPs and others?

What would be your risks? If the buyer defaults would you have to get involved at that point to resale the MH?

spex,
first some background
I'm in college right now in Miami, florida, and will be for at least two more years. My plan is to purchase a house which is a 3/2, but with a huge addition that i can see myself converting into two additional bedrooms. i went with my real estate agent and met the realtor representing the home-owners. the house had been recently dropped to 400,000 and the realtor told me the sellers were highly motivated. My plan is to negotiate the price of the house, then if i could get it, convert it into a 5 bedroom and rent out four of the bedrooms to my college friends to pay the mortgage, thus having me live for substantially cheaper and gaining equity in a home instead of wasting money on rent.

My questions are:
how much lower do you think the market will go, and will i be kicking myself if i could have gotten the house substantially cheaper next year at this time, therefore giving me a house with equity wayyy below my mortgage?
How much below the recently lowered asking price can i make an offer to a "highly motivated" home owner?
What reasoning would i have to be entertained at a substantially lower offer.
How many years (after the two i'll be living in it) would it take before i could reasonably sell the house and recoup a profit after closing costs and taxes.
I'd ask my real estate agent the same question, but it seems like he, and every other agent right now, is motivated to sell me on a house because there's not that many people buying.

Thanks,
Sea Side

PM me the details on the house. I have access to the MLS and other data in Miami and can give you my opinion on the house and the neighborhood values.

I am going to start doing 7 Day Sales. What should I consider about getting my RE License? Pros, Cons, Your opinion. Waste of time/hassle? worth it? What do you think.

Hope this is the right thread for this:

If i turn my back porch into a glassed-in sunroom with windows and patio doors, does that add square-footage to the home's living area? If so, how do i go about changing that information in public records? Do i even want to change the records, or will i get screwed in taxes? If not, what do i have to do to call it additional living area when i sell it (eventually)?

from some quick googling, it does add to your home's square footage. i believe you would change this information through the county clerk's office in their land books

I did google, and got conflicting information, which was why i posted here.

On one site, it says:

While, on another it says:

And yet another says:

None of them really clarify the rules. Thus, my confusion. I guess i'll just call the county clerk's office on Monday to find out.

Spex thank you for this wonderful thread its taking me two days to get through but it’s been worth it. I actually work for a commercial and residential land development company, albeit we generally try and sell product and rarely lease but on occasion we do lease retail space but I’ve learned a lot form this thread that I can potentially use especially as I hope to try and build my own portfolio and eventually branch off myself. I have a few questions for you if you don’t mind.

I’ll preface my first question saying that I’m not looking for a political view and hope no one takes it there. But with the upcoming elections and a potentially democrat ruled controlled congress, senate, and president which will likely mean a rate increase or potentially the elimination of capital gains and dividends. I know Stephen Moore has been on record saying he wants to see them raised from 15% to 31%. What impact if this were to occur do you feel it will have on the REI market? Would you be better off paying capital gains now if you are going to sell then trying to do a 1031 exchange and possibly being hit with a greater tax in the future?

Do you do very much marketing for your properties or do you have any creative marketing ideas? Also do you ever offer any incentive lease rates if you’re having trouble filling properties? Like maybe offering a discounted lease rate for a year or two if they sign a long term lease. Sorry I know that’s a bit more geared towards commercial which I know you said you don’t do but I’d love to hear your ideas for marketing and incentive offers for both residential and commercial.

I ordered “Wheels on Deals” and I’m sure it will go into this but have you personally ever had to foreclose on a note? How difficult is the process when are dealing with mobile homes and is there a high rate of foreclosure dealing with lower income individuals? I’m assuming it’s no different than foreclosing on a single family home where it is quite a lengthy and can be expensive process. Is that correct?

Last question, sorry, if you don’t mind sharing but what do you feel you biggest mistake you’ve make in REI has been?

Thanks again for the thread and all of the time you have spent answering questions.

Another quick question, does that ".45" factor include property taxes as well? I am working up a spreadsheet and wondering if I am "double counting" costs.

You have to find someone that is doing Lonnie deals and get them to sell you some notes for cash. Normally Lonnie dealers need cash to do more deals.

Your risk depends on how you structure the notes. What I'd do is buy half the cash flow of the notes and make the Lonnie dealer do all the grunt work. Thats a great deal for both of you.

I dunno. Personally, I'm not going to live my life in fear of what might happen. I think that if you're concerned about the tax implications of an investment the best thing to do is take to a qualified CPA.

To answer your question, I don't know of anyone that invests in RE primarily for the delayed exchange benefit. IMO, delayed exchanges make an already desireable investment type even more desireable. I don't think that a change of the capital gains tax rate will have a huge impact on RE as an investment. However, I'll also say that the tax implications of an RE investment are really important to understand. A LOT of RE investors went broke in the 80s when congress changed the tax implications of owning property. Could that happen again? Sure, of course. But that could happen in ANY investment.

Also, I don't believe that its a huge risk that cap gains will go from 15% to 30%.

Well, I have waiting lists for my properties. It is typical in my area for leases to automatically switch to month-to-month leases at the end of the 12 month term. So when I have a vacancy I just call my waiting list and get a new tenants.

I've found that the regular newspaper works the best for attracting tenants. When I started out I'd ask neighbors for referrals and give them $50 or so. That seems to work. But no, you don't need to do much creative.

You dont' foreclose on a MH, you repossess it. MHs are technically vehicles and are regulated by the DMV. Check with your state DMV to learn how to do it. It should be something like: send letter to buyer asking for payment; send letter of repo to DMV; DMV puts title back in your name; (if applicable) evict; clean/paint/rehab; resell.

I don't do a lot of these deals, but I've taken one home bakc. They called me and explained that they got moved (miliary couple) and asked if I'd take the home back. I said I would if they left it clean. They did. No problem.


I don't know. I've made lots of mistakes. By biggest mistakes have always been paying too much for property.

Consider a 9 unit property, where the heat is in the rent. What is the best way to move the cost of the heat (which can be significant up north) to the tenants rather than absorbing it myself? What kind of cost am I looking at to do this?

Is it better to just make better estimate of heating cost and pass it along in the rent? I have been burnt by this before when buying a house from an estate and didn't check heat usage. The place turned out to be very drafty and I ended up paying $800 / month heating bills for a two unit. I have since done a bit of weather proofing to knock down the heating cost but it still isn't cheap.

Also, can anybody direct me how to get a better price on those "hot water on demand" appliances -- especially if I was going to be buying 10 - 15 of them in a group? Or are these a waste? I have heard they are much more efficient that standard hot water heats and they use electricity so that moves it to the tenant to be responsible.

As always please correct my ignorance when it shows.

Ganja,

From my experience only heated/cooled space is included in square footage. A screened in patio, garage, unfinished basement, etc etc are all not included. But if you start to heat/cool them... then you can tack them on.

Spex, thanks for all the great info. I bought Lonnie's book and I'm really eager to do my first deal. I have a couple questions, probably not so much real estate specific, but if you're able to answer them I'd be much appreciative.

Let's say I find a MH and negotiate a cash price with the seller, who has the clean title in hand. Can we do this deal ourselves and the title is just signed over to me by the seller?

Along those same lines, when I sell the MH and take back the note, I keep the title untill the note is paid off. Is the lien info recorded on the title and the buyer's name put on the title? Or is the title unchanged until the note is paid off, then signed over to the buyer?

Thanks!

You probably would need to have an additional meter installed. You'll also need to have another furnace, hot water heater, etc. installed. IMO, it'd be expensive.

How close are your rents to market? You should definitely be charging more than market rents and advertising "utilities included". A lot of low income people would rather pay a premium to have the landlord take care of all the bills. Fixed costs are important to them.

Unfortunately, there is no cheap solution to this problem.

If the gas bill is the problem, why not just move everthing to electric? That won't be cheap either though. You could get a regular electric hot water heater for about $350/unit. If you buy 15 of them, I bet you could get them installed cheap or free.

I don't understand this question. Normally you pay the seller and the seller signs the title over to you. You then have to go get the changes to the title recorded at the county courthouse. I don't understand your question.

Yes, keep the title. In my state, the Secretary of State holds the title until they get a letter from the lien holder releasing the lien. But if they don't do that in your state, just hold the title until the debt is paid. Under no circumstance should you give the buyer the title.

Do tenants actually properly compare a unit that has a $300 rent but they have to pay utilities vs. a unit that is $600 but utilities are included? I gather you are advising that just passing along the utilities cost can be a good thing for me as long as I can increase the rents to cover -- correct?

The "gas problem" is more related to the overall heating of the building than the hot water -- that hot water was a related discussion that I tacked on. Converting an entire 7000 sq ft building to electric from gas heat would be a huge expense yes?

More information: this place has been listed for a while at 159k and is an acknowledged fixer-upper, so I am expecting quite a bit in repairs will be needed. Once completed the building has 9 units that should average $350 a month (before utilities). Without utilities it seems like this deal can be made to work (obviously for much less than the 159k asking price), but with utilities I am figuring I would need to raise rents to around $550-$600 on average in order to make up the charges; remember, this is in the north-east and it gets cold in the winter.

How do you account for non-linear expenses/etc?

Obv a cashflow of 1k per month is superior to alternating months of -1k and 3k. But do you do this as a basis of your current cashflow or how/if do you worry about it?

Im assuming your talking about vacancy rates and possibly repairs. Vacancy rates are localized and depend on local supply/demand as well as the condition /asking rent of your particular piece of property.

Big repairs that come up in one particular month can be estimated on a yearly basis and money can be put aside for these unexpected repairs.

For example: A water heater breaks and costs 1k one month.

Just put aside x dollars /yr for unexpected repairs into a maintenance fund.

This is not a science. There is no model that works for every property. Every property is unique.
Experience is really the only tested model that has a proven track record.

Gitty,

I wasn't.

[QUOTE=spex x;3307503]I don't understand this question. Normally you pay the seller and the seller signs the title over to you. You then have to go get the changes to the title recorded at the county courthouse. I don't understand your question.

You answered the question I was curious if the seller signing the title over was all it took to get ownership transfered or if there had to be a notary involved or something like that. Knowing that the changes have to be recorded with the county will be helpful

Thanks!

in Virginia, you have to go to the DMV to get the title of the manufactured home transfered. this costs $10 + sales tax (3.5%)

Great thread spex. Learning a lot.

Can you please tell me the best resource to learn how to get into hard money lending?

Thanks.

Spex,

Much respect for taking your valuable time to answer questions in this thread. I've read it in its entirety and check it routinely.

I am in the process of starting a real estate investment concern with my father, who has 35 years of experience as a realtor, broker and real estate executive in various realty companies. We live in Ontario, which I feel is similar to the Montreal Tien described as "post-hot". The real estate market hasn't tanked as much as just slowed down a bit, and it seems quality investments are perhaps not as readily available as in the US. Having said that, Detroit, Port Huron and Buffalo are all 2-3 hours away and Ohio (Toledo, Cleveland) a bit farther than that. I read this article today which discussed some of these areas:

http://news.yahoo.com/s/nm/20080325/...sing_vacant_dc

Some excerpts from it:

Some cities such as Cleveland are developing land banks to buy and either demolish or repair distressed properties.

"Because of the foreclosure crisis we are seeing this incredible glut of inexpensive distressed houses being sold at pennies on the dollar," Cleveland city councilman Tony Brancatelli said in a telephone interview.

"The mortgage companies don't want to hold onto them so they are dumping them on the Internet at a rapid rate. People are buying them 15 to a 100 at a time," he added. "One of the most significant parts of the land bank is stopping this cycle of abandonment."

The article also mentions that Buffalo has 10,000 vacant homes and commercial buildings. These areas are clearly troubled economically. Are they suffering too much for investing to be advisable? Or is the opposite true, that the huge supply of available properties for dirt cheap means if you look at buildings of a higher quality you can get some great value?

Thanks for your comments, I look forward to reading them.

Average it.