I know this is a dumb question, but how is this possible? Why would anybody rent a a SFH that they could more easily own?

Bad credit and other stuff why they're unable to get a mortgage?

Spex. How come you post on a poker forum? Do you play poker? What limits? I'm sure you could get personal coaching from the best guys in exchange of private RE tutoring.

hey spex,

i have more of a macro type question (shocker)... where would you suggest i go to find solid historical and current housing data. i'd like things like "avg closing price" ; avg rental / month; avg bid/offer spread; # months avg home is on the market; # of unsold homes; total # of homes in an area.

anything you could provide would be appreciated.

thanks,
Barron

Well, for a while I was playing quite a bit. I got pretty decent for an amateur. AFter a couple years of playing $200-$1000 NL I got bored. Basically what happened is that the competition got tougher and the game got more boring for me. Once I got bored with the game I more or less gave it up. I do play with a group of retired guys from time to time, but they only play crazy home game style stuff. More pure gambling than real poker. Its fun though.

I went down to the casino a few times last month and sat in a $500NL game. I was happy with my play overall. What it comes down to though is that I just don't have much desire to beat the game anymore. I like to play, but now only at smaller stakes where the players don't take it so seriously.

Sorry Barron, but I don't really track this type of data. I invest in such a small area that such info doesn't really help me too much.

I think that Giddy's response is colored by the fact that he is a professional wholesaler. You can't find such properties on the MLS.

Can someone help me with the financial analysis of this deal?

Foreclosed house listed at $65,000. Let's use this as the PP for now.
Estimated appraisal is $125,000.
Similar houses in the same neighborhood rent from $975-$1050/mo.
Property taxes ~$2600/yr.
Estimated repairs ~$6500.
Operating cost ???? I have seen the 45% in this thread. What is that 45% of?

If anything else is needed please ask. I am sorry for asking what is probably a basic problem to many of you, but I have never even bought my own house much less an investment property.

Taxes, Insurance, heat, hot water, maintenance, repairs (ongoing), vacancy, landscaping... crap that costs you money you never thought of...

in accounting you use accruals for expenses. it's a basic concept but one lost on many beginners.

ex: Your roof will need to be replaced at some point. it costs a lot to do. let's say 8-10k. so every 20 years you need to put away 10k for the roof. that means THIS year you need to start accruing 500 bucks. that gets included in expenses even though chances are you won't have to pay it. same with windows, heating sytem, hot water tank, etc etc etc.

the 45% is usually applied to gross rents. Property tax seems really high for a house that price. Is you area a unusually high tax area? Could the tax be apprised down in the next county tax cycle?

Steve

No kidding - 2% tax rate. Ouch. I'd scream until I got a reassessment. Unless you live in a high tax area. In that case, you're out of luck.

Its, Tennessee. No income tax, so they make up for it in property taxes.

Well, that is probably better for you then overall.

I'm not following you here when you're talking about 'overvalued' and 'undervalued'. Under/over valued to who? I basically ignore all valuations other than the one that I make up myself sitting in my office. I get to determine the price I'll pay.

Basically, if you're buying a distressed propery you'd expect to get a high cap rate on current income. If the seller won't sell it do you for a price that makes sense ..... NEXT DEAL! Often enough the seller will call you back in 6 months. When you're the only buyer for a p.o.s. property, you get to set the price.

spex,

Yeah... That sounded dumb. Atleast I'm on the correct path wrt valuations. I also sit in my office look at stuff, write down a number and see if I can get it for less.

Spex,
I am a novice learning investor with no real experience. I was talking to a friend of mine about doing 7 day sales. The friend is a Realtor. He kind of turned his nose up at the idea and said. "You know stuff like that was really popular a couple years ago but no one does it anymore. All the guys who were making lots of money doing that are making money teaching other people how to do that now." Is this an accurate statement. I live in Grand Rapids, MI a fairly big city. I'm really interested in starting to 7 day sale some houses. As it sounds like a good way to build some capital fairly quickly. What do you think about this?

Don't use terminology like "7 day sale", the essence of it is the term "options".


I'll break it down for you into easy formulaic terminology:


You take an option on a property at a certain price and you sell that property for a higher price and pocket the difference.



However the hell you sell that property doesn't matter, it just so happens that Auctions "7 day sales" gets the property sold in the quickest possible way.



Don't listen to that realtor. And don't ask advice from people that won't know the answer. You ask a realtor to list your house, everything else about real estate go to someone else because realtor's won't know.



And yes it works. It works everywhere. If I can make it work in Canada, I don't want to hear any excuses about it not working in Michigan. What the hell is the difference anyways?


And last thing, don't listen to people that try to bring you down or discourage you. You won't survive in the business believing in the negativity that people will often spew around everywhere.

<-- would kinda prefer that a mod come in here and axe anything on farmland. Def deserves its own thread, def can be redone instead of just moved.

I'm not even familiar with the term '7 day sale' to be completely honest. I had to google it. So I don't know. It sounds like Tien knows about it, so ask him. He is perfectly competent.

Anyways, I'll make some general comments. I agree completely with Tien about the realtor. In 15 years as an RE investor I've met less than 10 non-CCIM realtors that know anything about RE investing. I'm talking about regular single family home realtors. They just don't know what they're talking about. To be a realtor you need to know about marketing and sales. Thats it. You don't have to know anything about RE investing to be a good RE.

Realtors, as a group are completely incompetent regarding REI. So I wouldn't be inclined to listen to a realtor about much of anything having to do with REI. Ask your realtor friend how many RE investments he has made. I bet its less than 5. Ask him to describe those deals. Dollars to donuts says that IF he even owns any investment property he bought a $0 cash flow property off the MLS at a retail price hoping for appreciation. Realtors are as incompetent as any other average joe when it comes to REI.

Now, if your man is more than the average realtor, then thats a different story. But still, if I were in your shoes I'd be hestiant to listen to anyone that can't tell me why a specific REI strategy won't work. If he is a 7 day sale guy that knows what he's talking about, then there is your answer. But my guess is that he is trying to impress you with his knowleged, but he really doesn't know WTF he's talking about. If he says that he knows people that do 7 day sale stuff and they're not making the money anymore, ask for their names and call them up. In the absense of a great reason why it won't work, I'd say that you should disregard his opinion.

Look, realtors have a very specific way of looking at buying and selling RE. They are arrogant because they have a virtual monopoly for RE transactions. Like I've had realtors literally laugh out loud when I tell them my investing criteria. They think that the deals I do are not possible. 90% of realtors have never done anything besides run-of-the-mill bank-financed residential property sales. These people are not a good source of information about REI.

I'd recommend that if you want to learn about a specific strategy for REI that you find someone local that is using that strategy and try to get them to point you in the right direction.

I don't see how that realtor can possibly be correct about how that strategy "used to work".


The strategy is very very simple when you uncomplicate it:


You take an option on a property at price X, and you find someone that wants to pay more than X.

That's it. It's that simple.


Now how does a strategy like that "used to work"?


In a normal market like mine, I am pretty sure I will profit if I take an option on a property at 85% of its value and find someone willing to pay 90-95% of the value.


In a down market, I'd take it at 75-82~% of market value.

In a depressed market, I'd option it even lower!


The business model stays the same in any market, anywhere. The only thing that changes is the strategies behind it.

I wouldn't laugh at ya spex. i'd just simply say if i do find a deal with your criteria I"M BUYING IT!

Fair enough. Can't say I blame you.

he/she probably meant there use to be a lot more willing and able buyers to use that strategy. i have used assignments of my purchase agreements in the past with great success but am now finding many less investors/buyers to buy my deals.

however i would like to read more the option strategy, can you direct me to a link or something.

Its funny. I know a very good realtor that just brought me a deal that I've got under contract right now. Its a very good deal - 10.69% Cap rate, about 40% COCR w/ the seller carrying 15%. I asked her point blank why she is not buying the property herself. She is an investor with 29 properties - mostly SFH and duplexes. She said that she's working 4 flips (!) right now besides her rentals. She bought 12 properties and sold $8M since Jan.1. In my area, EITHER buying 12 properties in 4 months OR selling $8M in 4 months is an enormous accomplishment. Do do both is astounding. Basically she just doesnt' have time. This lady leverages her advantages as a realtor to do her own investing. But she is by far the exception.

Tien,

where can i get more info on this strategy. it sounds interesting. it'd be something new for my area and may work?