you still need a broker to hang your license with. An agent reports to a broker.

I was under the impression this was only necessary if you intend to be a full-time agent with lots of clients. If the license is only for personal/investing then I don't think you need to report to a broker.

Also, I'm in Canada so maybe it's different where you are.

In the US you need to report to a broker.The broker usually takes a split of what the commissions the agent makes.

Also you guys and not accounting for the hours of work that the Realtor spends searching for property, marketing and the deals that fall through in which they never get paid.

Yes, some deals are very smooth and require little work, but for every one of those there are 5 deals that fall through in which hours are spent with no income to show for your efforts.

I do agree that some Realtor's are not worth what they make, but when you work with a Realtor it is your responsibility to interview them and make sure they have the qualities you are looking for just like a hiring manager looking to fill an important role.

Anyone can sell a desired house to a buyer looking for that specific type of property, but a good agent will put in the extra work and effort to get the highest price or the lowest price depending on who they are working for.

Quick question regarding rental documents:
If there are actually 4 different individuals that own a rental of mine (2 couples), do all 4 owners need to sign all leasing documents as landlord?

I absolutely agree that anyone who does more than a couple transactions per year should get their license. I do about 20-30 real estate transactions per year personally, and having my license saves/earns me an extra $50-70K per year in profit.

The poster below you mentioned the need to report to a broker if you have a real estate license. Can you elaborate a little on this?

Also, I remember reading that you are legally obligated to tell potential sellers that you have a license. Has this ever been a problem in REI for you?

The real estate laws are different in every state, but as far as I know, in EVERY state a licensed agent must "hang their license" with a qualified broker. The relationship can either be employer/employee or independent contractor, but in the vast majority of cases the agent is an independent contractor to the broker.

Yes, it does require some work to find and maintain your relationship with a broker, but there are LOTS of brokers out there who work with investors and are geared towards part-time real estate agents that don't do anything other than their own deals.

For example, the brokerage my wife and I are affiliated with is semi-large (about 3000 agents), but we're not required to do any deals, we never have to come into the office, and nobody cares if we drop off the face of the earth for months or years at a time. As long as we're maintaining our license (which requires continuing education classes) and as long as we're paying our monthly dues (about $65/month for the lowest tier), everyone is happy.

Along with the $65/month at the lowest tier, each transaction costs about $350/month at that tier (you get to keep the rest of your commission). So, if you do just one transaction per year, you'll pay $65 x 12 plus $350, you'll pay under $1200. And if that one transaction is for more than $40,000 and you get 3% commission, you've now pretty much paid your annual costs for being a licensed agent (there are some insurance and MLS fees too, but they are small).

So, while it's a good bit of work to get your license and take the continuing education requirements (average of 6 hours/year in my state), the actual cost the way we do it is essentially non-existent if you're doing even one or two deals per year.

And yes, you are legally obligated to disclose to your buyers and sellers that you're licensed. In my experience, this is a BENEFIT, not a hindrance, as it gives the person on other side of the table the reassurance that we're experienced and serious, and aren't just fly-by-night scammers looking to take advantage of them.

Of course, it means we always have to act ethically as well (you're held to a higher standard if you're licensed), but if you're not planning on acting ethically in everything you do, you have bigger problems than whether or not to get your license. I've heard many other investors talk about the drawbacks of having a license, but haven't found any that can give me a concrete example of how it hurt them in a situation where they were acting ethically.

Here's an article I wrote that goes into more detail on why you should (or shouldn't) get your license:

http://www.biggerpockets.com/renewsb...nse-investors/

WOW......I mean WOW!!!

This is the BEST thread on this website...gobs of good information here.

Taking into consideration the current housing trends, which are lots of people losing thier home to foreclousure, and many people with bad credit who can't qualify for a home, it seems the market is ripe for carrying the note and selling some property.

I'm not big into rentals, as an honest and fair appraisial of myself I just don't have the people skills to deal w/ rentals and people. Although I do have some rental units....

Anyway, I have been buying [under valued] properties, fixing them up, and then selling them AND carrying the note. I've been doing "flips" for years, before the now common term "flip" was a common term, but most of my previous real estate flips were sold w/ a bank mortgage.

How it started; about a year & half ago I had a lady who wanted to buy a house from me. The house was a modest single family home in the $135k price range. She has a credit score of 720, has $15,000+ in the bank, been at her job (part time) for 10+ years, and recently got divorced -then went full time at her job after the divorce. (nurse at our local hospital)
The bank / mortgage company wouldn't give her a loan because "she wasn't at her job [full time] for at least 3 years". Upon hearing this I went to the mortgage company and pleaded my case w/ them, which was basically "this lady has excellent credit, has $15,000 bucks in your bank, has worked at the same job for years and after she divorced went full time AND got a letter from her employer saying shes a great worker and they plan to keep her forever and bla, bla, bla, she makes about $35k per year clear, has no other obligations....it makes no since that you won't loan her money"
As we now know as the "banking crisis" was in full tilt mode, long story short is she can't get a loan.

I had bought this house -interesting story in itself, I bought this house while they were having a garage sale which I stoped in at, the garage sale folks were getting divorced, moving and wanted to sell the house NOW and if it wasn't sold next week they were "putting it on the market w/ a realtor"...I verbally agreed to buy the house within 10 minutes of meeting them and totally closed the deal in 4 days!
Anyway, back to the investment. I bought this house for just under $100k, had it about 2 weeks and had done very little to it, the house was in decent shape and w/ some fix up *could have sold retail for about $150k. The lady who bought it wanted it just the way it was without me fixing it up, I had explained to her that the house would be on the market in about a month and the price would be in the $150k range, but if she wanted it "as-is" I would sell it to her now for $135.
The magic....I bought this house for $100k total. Sold it 2 weeks later for $135 w/o doing a dam thing to it. Now I'm carrying the note, that is fully amortized over 30 years, @ 8%, and the deed remains exclusively recorded in my name until the place is paid for in full. Without getting to technical, I'm making money on the buy & sell, making money on the long term investment, not paying any taxes to speak of because it stays in my name, and recogniozing an overal rate of return thats wonderful for me, PLUS I still have the ability to barrow aginst the place!

This would be my biggest concern for your investment...

30 year term fixed at 8% sounds great for both of you today, when rates are the lowest they've been in modern history. But, in 5 or 10 years, when rates are significantly higher and while the buyer is still mostly paying interest, you'll wish you had the cash in-hand to invest in higher-yield deals.

Your investment is certainly not a bad one -- you have an internal rate of return (IRR) of about 12% over 30 years if you didn't collect a down-payment -- but, if interest rates average 10% over the next 30 years, you'll have a tremendous opportunity cost for this deal.

Some other things you potentially could have done to maximize your returns:

- Owner finance on 30 year amortization at 8% (just like you're doing), but have a balloon in 5 years. This would be great for this particular property, as the buyer is likely to qualify for a mortgage once she's been at her job for a few years;

- Season the note and then sell it for a discount. You'll lose some cash-flow long-term, as well as some equity by discounting the note, but you'll get your investment (and profit) back quickly, which will increase your IRR;

- Lease option or lease purchase with a decent sized option fee.

Again, owner financing is a great strategy...you need to be careful of the long-term fixed-rate notes and the opportunity cost you face when rates rise.

Well I don't know what's going on with my attempted 1st house purchase:

List price on house is $310k, which is like 165/sqft. Houses in the area (which I am quite familiar with) have been selling for 130/sqft. House is appraised on the tax roll for $278K This is the smallest house in the neighborhood. We originally offered $265k/seller pays $3k closing. They countered $305k/1500 closing. We upped it to $275k +3k closing. They said bottom line offer $303k/2k closing. 1) can't afford it 2) way overpriced imo, so we walked. Then out the blue 4 days later, they come back at 295k no closing. So 2 days ago we go to 280k/3k closing and have heard nothing since. Not sure if they are "seriously considering" or have blown us off. I'm not too worried about other offers b/c I don't think anyone is going to pay more than that and if they do, oh well.

It depends how much you want the thing and what your private value is. If you are not hot on the idea of paying more than 280 (which it sounds like) then there's no need to bump up the price. If you would feel a lot of regret if someone else bought it tomorrow for 285 then consider making a final offer of 285 and call it a day if they don't bite.

Anyways it looks like you are doing fine. Sometimes there is no ZOPA for a deal.

Appraisal value means nothing by the way.

This is really one of the best/informative threads on any subject I have ever read in an online forum. Obviously I did not read all of it but I intend to.

Would really like to start investing in properties in the future.

Wow... this thread is just.... wow.

Hopefully someone can help me out with some general advice. I'd be most appreciative.

I'm a Canadian currently living in Mexico. I have one house I rent and have done very well on already, but that was more good luck than good management.

I have about 50k extra that I would get deployed into REI.

Problem is, moving back to Canada is, well, highly undesireable. The way I make my extra investment $$ is by making USD/CAD and living in pesos. T'were I to return home, I would lose this advantage, and thus any further $$ to invest.

And investing locally in Mexico just seems ridiculous.
When America sneezes, Mexico catches pnumonia. The gringos (ie. $$$) are leaving this town in droves.

What would be the best solution for me to get into REI without actually being the stereotypical absentee landlord? Property management would eat up most of the ROI on a small 4 uniter, and I'd be left relying on capital appreciation, which... well, there's worse things in the world than relying on growth in a place so resource-heavy (and thus growing) place like Saskatchewan, but that's still relying on luck....

Thanks so much Spex for starting this thread, and everyone else for contributing!

You make some excellent point, ty. Obviously there are some really smart people posting here. Which I find very refreshing!
Nothing worse than some chump know-it-all posting on an interenet site -that has no money, has never made any money, doesn't understand the disipline it takes to make it or keep it. I'm seeing some real-life solid comment here from people making prudent investments. Very nice. Hell, I enjoy poker for the same reason I enjoy investing....its all about making good choices.

A few points not mentioned in my post, in my region statistically people do something different every 7 years. Which means for whatever reason they move, sell the house, get different financing, or forwhatever reason the house is sold/re-financed. Truly, no one knows for sure what the future will bring, it is a very good assumption that interest rates will go up in the future -no doubt. However as a conservative calculated risk I'm sure I can make enough money on this deal bewteen now and then to more than justify that perceived risk. Investing is dynamic, I change with the times also. As new market conditons evolve I would hope that I'm smart enough to figure out the next strategic move.
The housing market here is moving, but sluggish. I had an opporunity to sell the house within 2 weeks and make good money on the buy & sell.
And finally, by keeping the property exculsively recorded in my name I can leverage the place in the form of a LOC, for very low interest rates right now, which means I still have the same amount of capital as I did before this deal began...plus I'm actually making a little bit by barrowing money on the line of credit at 5% while I'm getting paid 8% on the note. So if you fully take in the totality of the deal, and are sophisicated enough to compartmentalize the posibility of a very small & managable risk that interest rates will sky rocket in the next couple of years, several un-related things would all have to go *wrong* at the same time for this deal NOT to make good money now and in the future. Of course selling the note is also a posibility...this deal, as all of them, have flexiblity to change with the times.

Svj888,

I would jus skip on investing in real estate unless u move back


Your a black Friday refugee I take it ?

You will get rinsed if you are not mostly present in the location of your investment. Property managers are notorious for soaking the uninvolved and ignorant landlord by at best hiring tradespeople at top dollar and passing the cost on to you and at worst getting kickbacks from said tradespeople as they overcharge you. And god help you if you don't get a property manager.

You will also not have an edge. Why would you be able to pick a good investment that other local real estate investors have missed, when you are not attuned to property values and local market dynamics? As someone with no experience you would almost certainly buy a worse-than-average investment property.

Just like the stock market, in real estate you can try to beat the market, or you can just buy the market (i.e. investing in an S&P etf). So the answer to your question is to buy shares in REITs. Otherwise you'll have to invest locally in Mexico.

Nah, Canadian. Minus 40 refugee.
I pay rent and beer with poker, but my main income is somewhat more nefarious.


Thing is, I don't really plan on moving back.

Problem is, my extra income comes from savings from living down here instead of Canada, (San Miguel costs about 1/3 as much) and thus if I went back north to babysit my investment, (aside from being cold and miserable) I would be losing much more future $$$ through higher cost of living, so even if I could coax good cash flow from said investment, I'd still be losing $$ off my bottom line.


I was unaware of the plays you mentioned. Thanks muchly.

I guess I just have to accept that it's more profitable to sit on my ass down here. Oh well, there's a lot worse problems to have. Thanks!

Svj888,

If u don't plan on moving back then definitely don't buy Canadian real estate

There are plenty of other ways to invest your money

How picky are lenders over inspections? I'm looking at a REO fixer-upper that needs carpeting and toilets but other wise looks fine. I have good credit, 25% down and can still easily pay for repairs out of pocket.

I can't do a 203(k) since it's a condo with more than 4 units in a building.

Thanks!

Conventional lenders are going to require properties to essentially be in move-in condition, even for investment loans. While you may be able to get away with a broken toilet or dirty carpet, you should ensure that there is a working stove, a working hot-water heater, working HVAC system and operational exterior doors and windows. Plus, anything else that presents a safety concern needs to be remedied prior to a conventional lender's inspection.

Personally, unless the property is pretty much ready to move in (i.e., you could live there without doing any repairs), I would stay away from conventional lenders. Try visiting small, local banks (1-3 branches) that specialize in commercial/investment lending -- they lend their own funds (called "portfolio loans") and therefore they aren't subject to the rules of lenders on the secondary market (Fannie Mae, Freddie Mac, etc).

Rates will be a bit higher (6-8%) and terms may be shorter, but the process of getting funded will be MUCH simpler.

Got involved with a new property.
There were already tenants living there but the lady was disgruntled with something previous and quickly moved out.

I would like to know what the standard fee is for an agent to help you find good tenants to sign a 2 year lease.

Is one month's rent a reasonable/standard cost?

Thanks

Our company usually pays locators around that for a 1 year lease. Might be more with a 2 year.

craigslist.org

Don't bother with realtors for rentals when you're starting off. Do it yourself.

I'm still working on getting my business setup and team put together, and my plan is still to acquire 2 fourplexes, but I was thinking:

What about getting a 3 bedroom, 2 Bathroom SFH, and renting out two of the rooms? If I do it right, I should at least be able to reduce my monthly "rent", and whatever I do pay will be building me equity( ideally the place would break even or make a little money, but I don't know how viable that is). For sure I'd only get a place that would be a decent cash flow investment if, for any reason, I didn't live their myself. All that plus getting a better place to live than a small apartment seems like something to really aim for, imo. Does this seem viable?

Since I'd be living directly with the 2 other people, I'd want to probably have them be friends, but I've read renting to friends can be a very bad idea. So, thoughts on that? I figured so long as I was upfront with them before they ever moved in that they wouldn't be getting any special treatment because that opens me up to legal issues, and they were people I know I get a long with and trust, etc, it should be fine....no?

Would it be better to have the house as a company asset, or a personal one?( I'll be asking my attorney/cpa about this too of course).

Thanks in advance!

A question to those who own multiple properties:

1.) Is it possible to succeed in REI if you are only using it as a supplemental income aside from your main line of work?

2.) Is it possible to become an "absentee landlord" without being ripped off by property managers that you need to hire?

3.) Basically, can you just become a real estate investor without dealing with the ground level issues of maintenance, collecting rent, etc? Obviously, you would still perform the necessary due diligence when looking for investments.

If someone has any experience with this, I would greatly appreciate your input.

Thanks in advance.