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Old 02-26-2008, 01:55 PM   #251
spex x
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Re: Ask me about real estate investing

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Sounds reasonable. And so you have a balloon payment planned on the end of the term (lets say 5 years)? Someone who couldn't afford the thing in the first place isn't going to be able to pay the balloon payment now. How do you work that out? Ofcourse you like the person to stay on your lot. Do you offer him another loan, making even more money, or do you hope he gets the money from somewhere else? Trying to keep him in debt to you seems like a great strategy because you're pinning him down to your lot.
Nah, no balloon payment is necessary. Just a regular amortization over 3 or 4 or 5 or whatever years will do. If you've got a good payor that is about to pay off...find him a nicer home to move to. Notes paying off is the biggest downside to the MH retailing business that I've discussed here.
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Old 02-26-2008, 02:02 PM   #252
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Re: Ask me about real estate investing

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Nah, no balloon payment is necessary. Just a regular amortization over 3 or 4 or 5 or whatever years will do. If you've got a good payor that is about to pay off...find him a nicer home to move to. Notes paying off is the biggest downside to the MH retailing business that I've discussed here.
Right, again. Sounds pretty good. Wouldn't it be better tho to keep him in debt? Makes you more money. I know it's a bit immoral. I guess it has something to do with keeping friends with the community...

I'm sorry for all these questions. I''m fascinated by the whole thing, while I will most likely never be able to do something like this . EDIT: not because of financial reason but because I will most likely never have the opportunity to find me a nice MHP in this area that'll accept these kinds of rates.
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Old 02-26-2008, 02:59 PM   #253
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Re: Ask me about real estate investing

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Right, again. Sounds pretty good. Wouldn't it be better tho to keep him in debt? Makes you more money. I know it's a bit immoral. I guess it has something to do with keeping friends with the community...
Personally, I'd rather help people than hurt them. 12% interest is not too much to charge considering the risk. Its fair - not too high and not too low. Well, it might be too low for some people. But generally, IMO, 12% is fair.

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I'm sorry for all these questions. I''m fascinated by the whole thing, while I will most likely never be able to do something like this . EDIT: not because of financial reason but because I will most likely never have the opportunity to find me a nice MHP in this area that'll accept these kinds of rates.
Give it a shot. Maybe you'll be surprised.
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Old 02-26-2008, 04:52 PM   #254
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Re: Ask me about real estate investing

Hey spex, I haven't read all this thread yet so I hope you're not answering this question for the 15th time, but what are your views on commercial real estate right now and its future?
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Old 02-26-2008, 05:02 PM   #255
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Re: Ask me about real estate investing

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The guy that works my parks - I give him one month of free lot rent to get his places sold. I do that because I know that he's making the homes nicer and bringing good people into the park. Plus he gives me another layer of control over the tenants. After one month he pays lot rent to me.



It seems steep to you, sure. But you're not the one that a) wants to live in an old mobile home in a MH park, and b) has crappy credit and can't get a loan from anyone else, and c) whose other option is to keep renting which gets you nowhere.

Try to put yourself in the buyer's shoes. You grew up in a trailer park. You have no education or real job skills. Your total annual household income is around $25k. You've got 2 kids. You've got bad credit from medical bills b/c you've never had health insurance. You've rented every place you've ever lived in. NOBODY has EVER offered you any credit to buy anything. Now comes along a guy that will extend you credit for a mobile home that you can own free and clear in 3 or 4 years.

In that position, how hard would it be for you to pay 12% interest? Not too hard. Plus, if someone thinks the interest is too high, I'm sure that there are 10 or 20 people that would snatch up that deal.

What I'm saying is that these people don't take a lot of convincing. They intuitively know that you're offering them the best deal they can hope for. And you can rest assured that you are providing a much needed service by giving people a chance to own their own home. Even if its not the home or the deal that YOU would take.
Also, if you are creative, you can structure the deal a lot of different ways. If you start with a monthly pmt and a term rather than a sale price of the home, well, now it doesn't matter what you charge in interest. 6k over 3 years at 12% works out to almost exactly $200/mo. And $7200 at 0% over 3 years is exactly $200/mo.

And some people will jump because zomg 0%!

Anyway, the point is that interest is good, but (money in - money out) is the quantity that matters. /hijack
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Old 02-26-2008, 07:43 PM   #256
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Re: Ask me about real estate investing

wyman, that's a solid strategy/idea

thanks for sharing
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Old 02-26-2008, 08:54 PM   #257
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Re: Ask me about real estate investing

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Hey spex, I haven't read all this thread yet so I hope you're not answering this question for the 15th time, but what are your views on commercial real estate right now and its future?
It depends on where you live. RE markets are highly localized. I know that this thread has become rather daunting. But spend a little time reading through and my philosophy should become apparent.
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Old 02-26-2008, 09:26 PM   #258
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Re: Ask me about real estate investing

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spex,

I mentioned something earlier to you in this thread about a condo and you told me it was a bad investment due to the condo fees. I'm young and not sure what i will be doing with my life in 3 years, I figured a condo would be a great first investment because it will be much less of a headache, even tho the lack of a headache will eat into my profits... I just don't want the added responsibility of renting out a home as opposed to a condo, especially for my first property

Is this just a bunch of loser talk by me? is renting out a condo a waste of time/money?

i would find this hard to believe, but then again, what do i know

thnx in advance for your response
hey hopefully this doesn't come off as rude, but I just wanted to bump this because i think you might have overlooked it, if not my bad don't mean to bug you/clog this great thread
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Old 02-26-2008, 09:31 PM   #259
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Re: Ask me about real estate investing

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What kind of properties are you thinking about buying?
8 -20 unit properties.
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Old 02-26-2008, 10:10 PM   #260
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Re: Ask me about real estate investing

what are reasonable MH lot prices (obv will depend on location) and how could i find this out for myself?
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Old 02-26-2008, 10:56 PM   #261
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Re: Ask me about real estate investing

A few more MH questions:

How do you break into a MH community, exactly? How do you advertise, etc?

I'm currently waiting on Lonnie Scrugg's Deals on Wheels, but incredibly curious and trying to soak up all the information I can
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Old 02-27-2008, 11:20 AM   #262
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Re: Ask me about real estate investing

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I mentioned something earlier to you in this thread about a condo and you told me it was a bad investment due to the condo fees. I'm young and not sure what i will be doing with my life in 3 years, I figured a condo would be a great first investment because it will be much less of a headache, even tho the lack of a headache will eat into my profits... I just don't want the added responsibility of renting out a home as opposed to a condo, especially for my first property

Is this just a bunch of loser talk by me? is renting out a condo a waste of time/money?

i would find this hard to believe, but then again, what do i know
My opinions are just that - opinions. I believe that there are circumstances where you can profitably rent out a condo. The problem with condos is that you just don't have the ability to control you expenses. The condo board gets to decide when and how much to spend, and who to hire to do the work. There are situations where a bad condo board can defer 20+ years of maintenance. When that stuff comes to a head, guess what is going to happen to your condo fees.

So long as you understand the downside to owning the condo, there is nothing stopping you from investing in condos. Personally, I think that its too risky. But if the right deal comes along, its certainly not impossible to make money renting condos.

One last thing. It doesn't sound to me like you have a very good plan. Buying RE when you're not sure where you'll be and what you're doing is probably not a good idea. Rentals are a longer term investment. I think that you should not buy property until you are somewhat settled. Don't worry, the deal of a lifetime comes around more often that you expect.
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Old 02-27-2008, 11:21 AM   #263
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Re: Ask me about real estate investing

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hey hopefully this doesn't come off as rude, but I just wanted to bump this because i think you might have overlooked it, if not my bad don't mean to bug you/clog this great thread
Quote:
Originally Posted by PartysOver View Post
A few more MH questions:

How do you break into a MH community, exactly? How do you advertise, etc?

I'm currently waiting on Lonnie Scrugg's Deals on Wheels, but incredibly curious and trying to soak up all the information I can
Lonnie will answer all those questions in his book. No use reinventing the wheel. After you read it, if you have questions, I'll try my best.
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Old 02-27-2008, 03:30 PM   #264
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Re: Ask me about real estate investing

spex,

FWIW from my experience with my own condo. Stupidity with management is the norm rather than the exception. Everyone is retarded. No one follows the rules and there is a ton of politics and agendas. Larger complexes (few hundred units) with more professional management are likely a much better bet for having competent management.

I'm about to speak to a CPA about tax implications etc. and may have a trip report of looking at some properties something soon
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Old 02-28-2008, 10:19 AM   #265
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Re: Ask me about real estate investing

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I am beginning to think about expanding into the buy-hold area of real estate. I wanted to know, is buying in today's post hot market at 70% LTV as well as positive cashflowing 50-100$ / unit enough to waddle through the real estate slump?

The last thing I want to do is start buying a bunch of "steals" today and then find out my bargains that I invested money to buy today end up becoming break even properties 2-4 years from now.

The last thing I want to do is buy something at 70% of market value today, and 3-4 years from now see the markets depreciate 15-20% over that time span and I'm in my properties for 85-95% LTV.

What do you suggest I should do in a post hot market in terms of buy and hold?
Man, that is a really hard question to answer. You are looking for 8+ unit properties. So my first point is that, as you know, commercial property swings to a tune that is unrelated to residential property. What will have the largest impact on our property values in commercial is the ability to find financing. The financing portion is the wild card. When financing is expensive, we get less for our properties. When financing is hard to get, we have a smaller pool of buyers. If there is any collapse in commerical RE prices in the next several years it will, IMO, be caused by the financing side.

IMO an 8 unit property that is cash flowing only $100 per month is pretty slim. I mean, I don't know your market. But if you have to buy 30% under market to get $100 per month, then maybe you should try to buy out of area or find a different investment strategy in REI. Those prices are just plain crazy. My guess is that a lot of these properties are being bought by developers or would-be developers that want to try for a condo conversion in the hot market. Thats just a guess. But obv something is going on because these properties just can't work as a rental at the kind of prices you're talking about.

Sorry man, but I gotta say that in your shoes I'd maybe hold off buying until things cool down a little. To me those numbers just don't work. Not unless there is a significant upside potential to the deal anyway.
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Old 02-28-2008, 05:22 PM   #266
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Re: Ask me about real estate investing

Spex. After your very first deal, which I can understand learned you a lot, how did you proceed? I've found everything you said so far in this thread to be of great inspiration, and I would really like to hear how long it took for you to manage your second deal etc., basicly how you continued once you got started!.

I also wonder if you only have done "cash flow deals". In case you sometime did something that wasn't a cash flow deal, please tell me in what way you convinced yourself to do a deal outside your main circle of competence.
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Old 02-29-2008, 11:32 AM   #267
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Re: Ask me about real estate investing

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Spex. After your very first deal, which I can understand learned you a lot, how did you proceed? I've found everything you said so far in this thread to be of great inspiration, and I would really like to hear how long it took for you to manage your second deal etc., basicly how you continued once you got started!.
My first year as an investor I bought two properties. The second year I bought 3 properties. The problem was that after that first deal I was basically out of money. So I was forced to get more creative. I looked for properties where I could get in with little or no money down.

I'd go out find and old landlord that is selling off his stuff and doesn't really manage the properties anymore. I'd look for properties that were very distressed but structurally sound. I'd make seller financed offers on those properties putting like 10% or so down. I borrowed the 10% to put down from private investors and sometimes from credit cards. When I bought something I'd go in and clean and paint. I'd go buy carpet remnants and try to recarpet. Then I'd rent and repeat.

Each property I did would make me more cash flow each month to reinvest. Pretty soon I didn't need to go borrow private money any more. After several years I had some equity from paying down mortgages and increasing cash flow, so I pulled some of that and bought an 8plex that was pretty rough. I renovated that and rented. Then I started to sell of a lot of my smaller properties - duplexes and single family homes.

Quote:
I also wonder if you only have done "cash flow deals". In case you sometime did something that wasn't a cash flow deal, please tell me in what way you convinced yourself to do a deal outside your main circle of competence.
Oh sure, I've done several deals that didn't cash flow. Once a banker asked me to buy a warehouse from his bank. I explained that I've never owned any warehouses and its not really my business. He told me that FVM is $140k and they just wanted the balance of the loan - $70k. I did a little DD and bought that thing even though it didn't cash flow. I didn't even know if there was a market for renting such a property. I tried to rent it but ended up selling it instead. I think that I got about $130 or something for it. But it took like 8 months to sell it and I had to float it until then. Plus I had to pay all the closing costs and everything.

I've bought a few small apartment buildings that were so filthy, run down, and infested that nobody would live there. And that is saying a lot considering that you can just about always find someone to live in a rental. But I had experience turning around poorly managed properties so I knew that I could fill the place and how long it would take. I also had capital to invest in the project.

Sometimes you find no-brainer type of deals - like that warehouse. Sometimes you have to use your experience to judge whether a project can be profitable. As you get more experience your judgement will get better and you'll know how feasible a project is and how much it will cost.

negative cash flow properties are inherently high risk. Its not that they can never be done. Its just that to do them safely you have to have some realistic expectation of how the project will go. That is why I don't recommend negative cash flow deals to beginners. Just stick to the positive cash flow deals and you'll be fine.
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Old 02-29-2008, 11:45 AM   #268
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Re: Ask me about real estate investing

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Just stick to the positive cash flow deals and you'll be fine.
This is about the best advice I've heard so far. You cannot go wrong with positive cash flow deals. A property will not sell for less then you bought it for if is positive cash flows, you are making a decent ROI, and you most likely have some equity.

I try and preach this to my investors but people are greedy. They all want to flip a house and make a quick 60k. Its possible but risky. I try and explain to them that if they bought 10-20 good deal rentals in the next five years they can basically retire but "NO" they say. Greed gets the best of them.

There is a lot of opportunities in RE but also a lot of risk in a lot of deals. Positive cash flow deals have very little risk as long as you do your homework.
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Old 02-29-2008, 01:10 PM   #269
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Re: Ask me about real estate investing

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Man, that is a really hard question to answer. You are looking for 8+ unit properties. So my first point is that, as you know, commercial property swings to a tune that is unrelated to residential property. What will have the largest impact on our property values in commercial is the ability to find financing. The financing portion is the wild card. When financing is expensive, we get less for our properties. When financing is hard to get, we have a smaller pool of buyers. If there is any collapse in commerical RE prices in the next several years it will, IMO, be caused by the financing side.

IMO an 8 unit property that is cash flowing only $100 per month is pretty slim. I mean, I don't know your market. But if you have to buy 30% under market to get $100 per month, then maybe you should try to buy out of area or find a different investment strategy in REI. Those prices are just plain crazy. My guess is that a lot of these properties are being bought by developers or would-be developers that want to try for a condo conversion in the hot market. Thats just a guess. But obv something is going on because these properties just can't work as a rental at the kind of prices you're talking about.

Sorry man, but I gotta say that in your shoes I'd maybe hold off buying until things cool down a little. To me those numbers just don't work. Not unless there is a significant upside potential to the deal anyway.


I live in a majorish metropolitan. Not quite New york city / San diego / San Fran / Toronto but revenue properties here in Montreal are consistantly bought at a 4-5% cap rate. There are also A LOT of condo conversions everywhere in Montreal because that is essentially the craze right now.

I'd need to buy most properties at 50% LTV to achieve substantial cashflows at over 100$ / unit for large multi - units. Another thing that hurts the cashflow a lot is the heating cost. With the winters, the heating costs are just enormous.


But I guess you are right about holding off until the market simmer downs.

I like flipping properties like I do.... but I want to start getting into the buying and holding so I can build substantial leverage and leverage my way into commercial real estate.
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Old 02-29-2008, 03:31 PM   #270
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Re: Ask me about real estate investing

I am under the impression that you in addition to being a really successfull businessman, also is quite the man with a hammer. I know for a fact that I wouldn't be able to do the work myself, and would have to hire people. Since I have no experience, this seems like sort of a risky way to go, since I wouldn't have the experience to know what to expect from a new real estate investment on beforehand. Do you have any special tips for me in my type of situation? (I am a poker player beating mid limits with a v good winrate since quite long, and can easily grind out 200$/h)

Another question I have is: what are you looking for that is not included in the property? Do you pay much attention to whether the area has jobs/schools, vacancy rates in the area and so on - or do you simply trust in your own ability to offer attractive rentals to your tenants?

Another question of personal nature.. You said you didn't quite wanted to expand any further. So what do you do with all your net income now? (Paying back loans, charity?)

And lastly.. What does FVM and LTV mean? (sorry for being a complete noob)
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Old 02-29-2008, 04:12 PM   #271
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Re: Ask me about real estate investing

FMV = fair market value, the price you could likely sell for
LTV = loan to value (i think), if the FVM = 100k and you borrow 80k, you are at 80% LTV

I also saw COCR = cash on cash return, the return you make on the money you invested
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Old 02-29-2008, 05:32 PM   #272
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Re: Ask me about real estate investing

Thanks, FMV makes a lot more sense than FVM. I think I got the rest since they are quite the same from stock market investing.
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Old 02-29-2008, 05:33 PM   #273
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Re: Ask me about real estate investing

So you may laugh at my total inexperience with REI, but I was hoping for some insight.

I realize that the best time to buy a house would probably be now. With that said, I had an idea that I thought might work.

I'm an 18 yo college student at UNLV. As a local who got the Millenium Scholarship (given to all local high schoolers with higher than a 3.2 or something), school is dirt cheap.

Also, living in Las Vegas, there is a massive surplus of houses.

I was thinking about making a jump into the world of business, getting a pretty massive student loan (subsidized Stafford one) and putting a pretty thick down payment on a house. Between the job I work and renting the house out, I should have no problems making payments and I can resell in probably 5 to 10 years.

Stupid idea or not?
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Old 02-29-2008, 05:48 PM   #274
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Re: Ask me about real estate investing

proboy, have you read this thread yet?
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Old 02-29-2008, 06:00 PM   #275
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Re: Ask me about real estate investing

Read the first 7 or so pages.
If this has already been addressed, I apologize.
I posted this here because I felt if OP couldn't help me, at least someone else could. Seems like this thread fits the knowledge I'm looking for.
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