Ask me about real estate investing - Page 48 - Business, Finances and Investing Forum

There's a property in my neck of the woods - 2 bedroom condo. Asking is $112.000, however I would not pay more than $80K for it and I think in the current market it is possible to get this offer accepted. As per the ad, units in the area are going for $875 per month, but this is not the best area of the city I live in, so I think it's optimistic so let's assume a $800 rental. The agent is going to get back to me about condo fees, but let's assume $200 a month and property taxes of $100 a month for a net profit of $500. It would be paid for in cash so no carrying costs to factor in. Is this a reasonable deal? It would be a 7.5% return on capital assuming the above numbers are correct.

Here is the property....

http://www.realtor.ca/propertyDetail...ertyId=7795677

How to analyze properties has been discussed at length in this thread already. I'd suggest you read the thread before asking question. Unless, of course, you just don't respect my time.

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03-04-2009 , 12:53 AM

#1177

pokerplaya5

journeyman

Join Date: Oct 2007 Posts: 346

Could you explain the late night infomercial (can't remember the exact name) that is declaring that they can show you how to find a 100k house for $500 because it is a government tax foreclosure? Do these really exist and if so is there a free listing anywhere for these? I am obviously a real estate noob and this caught my interest.

Thanks

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03-04-2009 , 03:53 PM

#1178

onlinebeginner

Pooh-Bah

Join Date: Dec 2006 Posts: 4,892

I'm no genious but thats gotta just be the really cheap down payment

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03-04-2009 , 07:03 PM

#1179

pokerplaya5

journeyman

Join Date: Oct 2007 Posts: 346

Quote:

Originally Posted by onlinebeginner

I'm no genious but thats gotta just be the really cheap down payment

It claims that there are no monthly payments and that is all that the houses cost because all you have to do is pay the taxes back to the government that weren't paid by the owners, but idk how it works exactly (or if these properties even exist).

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03-04-2009 , 10:17 PM

#1180

spex x

Real Estate Mogul

Join Date: Jun 2005 Posts: 1,828

Quote:

Originally Posted by pokerplaya5

These are actually courses on how to buy tax liens. A tax lien is government imposed for back taxes. The rules are different in each state, but the gist is pretty much the same. The investor bids will purchase the government's tax lien at auction. The government just wants the cash. The investor is bidding on the interest rate that the home owner will have to pay to clear the title of the lien. So, for instance, on a $4500 lien, the investor will have to pay out the $4500 to the gov. at the auction. The investor takes back the lien as collateral. The home owner must pay the investor the interest rate he got at auction. The home owner has X amount of time (1-2 years normally depending on the state) to redeem the property by paying the investor the $4500 plus interest. If the home owner does not redeem the property clear title is transferred to the investor.

Is it possible to get a house for $500? Yup. Is it likely? Nope. the money in tax liens is made by getting good interest rates on secured investments. The VAST majority of the time the home owner will redeem. Personally I don't invest in tax liens because I don't live in a tax lien state. as a passive investment it has always seemed like a good deal to me though.

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03-04-2009 , 11:37 PM

#1181

Wyman

Carpal \'Tunnel

Join Date: Mar 2007 Posts: 13,011

Quote:

Originally Posted by onlinebeginner

I'm no genious

Too easy, imo.

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03-05-2009 , 05:35 PM

#1182

PartysOver

Pooh-Bah

Join Date: Oct 2006 Posts: 5,970

Here's an explanation so you can google some terms and find out your state laws:

(Default)---Equity of Redemption Period ----(Foreclosure)---Statutory Redemption Period ---(Debtor's Rights End)

So you have 3 "milestones" in the process, the default, foreclosure and the ending of debtor's rights. After you default, you get a period of time by law before you're foreclosed on. That's called the Equity of Redemption Period. If you let the time pass, you get foreclosed on (which is where people get "$300" houses). At that point, you have a second period, the Statutory Redemption Period, to payback whoever bought your house (like spex is talking about). Each state has different lengths for those two periods. After the Statutory Redemption Period ends, the person who bought the $300 house would own it.

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03-05-2009 , 10:51 PM

#1183

Dustin D

grinder

Join Date: Sep 2006 Posts: 592

Bought 3 houses yesterday for a total of 55k. One needs new carpet and they need some paint. All will rent for 550 to 600 a month. My friend who owns 81 units in the area is managing them for me for 10% of rents.

So many deals out there I'm condsidering buying about 50 of these.

Thanks for all the great advice Spex was tempted to name an LLC after you.

Last edited by Dustin D; 03-05-2009 at 11:16 PM.

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03-05-2009 , 11:15 PM

#1184

paratacus

Pooh-Bah

Join Date: Oct 2006 Posts: 4,789

I'm 23 from New Zealand and starting to looking at property. I'm looking for good books on real estate, preferably on how to find cashflow positive property/ways to turn negative geared properties to positive. Or just general ideas about how to go about getting real estate that puts money in your pocket rather then taking it out. Thanks.

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03-06-2009 , 07:03 AM

#1185

paratacus

Pooh-Bah

Join Date: Oct 2006 Posts: 4,789

I mine as well ask where would you recommend someone young begin there real estate journey? What 'education' is needed, what do you think is the important assets to succeed?

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03-06-2009 , 12:32 PM

#1186

Dustin D

grinder

Join Date: Sep 2006 Posts: 592

paratacus, read this thread first thats a good start

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03-06-2009 , 12:35 PM

#1187

Tehan55

adept

Join Date: Sep 2008 Posts: 839

Quote:

Originally Posted by Dustin D

lol at naming an LLC after Spex, that would be funny.

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03-06-2009 , 01:06 PM

#1188

Life

grinder

Join Date: Apr 2006 Posts: 641

Quote:

Originally Posted by Dustin D

thats pretty sick actually. mind me asking where that is?

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03-06-2009 , 01:18 PM

#1189

Dustin D

grinder

Join Date: Sep 2006 Posts: 592

Southern Minnesota which is about 3 hours from where I live, but my friend who is managing them lives there. There are a ton of similar deals. I made crazy lowball offers on 7 more today. The friend with 81 units has 100 percent occupancy which is nice to hear, the only risk I see to buying these is high vacancy.

The 3 I bought so far were bank owned. I bought one for 21k from Chase Manhattan bank. In the past couple of months they had declined offers of
31k and 25k. Then they accept my 21k offer. Go figure

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03-06-2009 , 07:12 PM

#1190

paratacus

Pooh-Bah

Join Date: Oct 2006 Posts: 4,789

Quote:

Originally Posted by Dustin D

paratacus, read this thread first thats a good start

Doin' it now, man bit to read, I see my book question has been asked already whoops

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03-07-2009 , 12:05 AM

#1191

spex x

Real Estate Mogul

Join Date: Jun 2005 Posts: 1,828

Quote:

Originally Posted by Dustin D

Slow down. These deals aren't going anywhere. Follow through on the offers you've made. Then get the units rented out before continuing. You don't need 15 empty houses. BE CONSERVATIVE and take it slow.

Congrats though, these seem like great deals.

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03-07-2009 , 03:58 PM

#1192

Dustin D

grinder

Join Date: Sep 2006 Posts: 592

The nicest one got rented already for 600. I decided to only get liability coverage of 1 million on each property. I'm pretty sure its the best way to go in my case, but if you get a chance would be interested in your thoughts. Not having more coverage will save me about 400 bucks a year.

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03-08-2009 , 06:50 AM

#1193

Thornsten

centurion

Join Date: Jan 2006 Posts: 102

Quote:

Originally Posted by Dustin D

100% occupancy = rent too low imho.

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03-08-2009 , 11:01 AM

#1194

Dustin D

grinder

Join Date: Sep 2006 Posts: 592

Quote:

Originally Posted by Thornsten

100% occupancy = rent too low imho.

Yeah maybe, but part of it is that the rental market is strong right now. He puts up a sign for rent in the yard and gets 12 calls on it within a day or two. That's the only advertising he uses.

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03-09-2009 , 01:42 AM

#1195

Central Limit

adept

Join Date: Jan 2006 Posts: 992

Spex et al.,

Okay, I read a book by John Reed last week: "How to Buy Real Estate For at Least 20% Below Market Value" I can certainly see why you like him so much. Excellent writing. I really enjoyed his style. But it seemed like he wrote the thing on his home computer with noone to edit it. Sone really peculiar typos in there.

Anyway, here's my question: every deal in there depends on having a very clear knowledge of what a property is actually worth. But I don't feel comfortable with my own assessment of fair market value for properties. I don't really know what to expect homes to sell for. So how can I get better at determining fair market value? Especially in such an uncertain, downward moving market as the current one, it seems difficult to determine fmv.

Also, what are the websites you use for checking comp sales? (<-- I realize this has prob been answered before but I can't find it.)

Quote:

Originally Posted by Central Limit

Spex,

Would you mind elaborating a little bit on John Reed? I'm in the mood to do some reading about re investing, so I looked him up on Amazon. The reviews were not favorable and pretty specific, eg:

"John T. Reed views himself as the anti-guru Guru; a straight talking dose of honesty and reality among a sea of real estate investment gurus, many of whom, at best, are misleading and, at worst, advocate dangerous and illegal methods.

So does this book deliver? No. What Mr. Reed does is offer a brief chapter discussing various methods to buy real estate at a discount. It appears that Mr. Reed has no experience with the majority of these techniques, rather he tries to summarize other investors' methods. Mr. Reed's lack of experience may explain the absence of any nuts and bolts instruction.

No one is going to read this book and know how to execute one of the techniques. You will merely know of the techniques existence, at which point you will have to learn the nuts and bolts yourself. In many cases, the techniques are well known (e.g. foreclosures, pre-foreclosures), making the book useless. In other cases, Mr. Reed will recommend further reading. For example, in one of the early chapters he recommends a program priced at just under $500."

"Great topic, but the book was outdated. Most of the information cited in the book were for events that took place in the 1980's! That is 20 years ago! A couple of examples that he mentions took place in the early - mid 90's. Nothing recent.

The material contains good comments and ideas, but don't kid yourself to think that this book contains up-to-date examples. Save the money and buy this book used (yes it is available plenty of places online used, even though the author denies it)."

Not trying to be confrontational, but is he really the author I should be reading?

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03-09-2009 , 08:40 AM

#1196

spex x

Real Estate Mogul

Join Date: Jun 2005 Posts: 1,828

Quote:

Originally Posted by Central Limit

Spex et al.,

Anyway, here's my question: every deal in there depends on having a very clear knowledge of what a property is actually worth. But I don't feel comfortable with my own assessment of fair market value for properties. I don't really know what to expect homes to sell for. So how can I get better at determining fair market value? Especially in such an uncertain, downward moving market as the current one, it seems difficult to determine fmv.

Also, what are the websites you use for checking comp sales? (<-- I realize this has prob been answered before but I can't find it.)

Normally residential property is appraised based on comparable sales. The appraiser will pull out several comps from recent sales in a given area and compare them to the property under contract. Just have the realtor pull some comps off the MLS for you. It won't take long for you to get a good feel for the market.

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03-09-2009 , 01:18 PM

#1197

jbauer14

centurion

Join Date: Jan 2008 Posts: 122

Quote:

Originally Posted by spex x

Spex,

First, just want to say thanks again for putting out all of this good info. Very valuable.

I have a follow up question with respect to determining the sale price based on the comps.

I have access to my Realtor MLS where I live in Canada, so I am able to determine what a house in the area sold for in the past several weeks to a month.

I understand that if the amount of homes sold in the area is not that high (using a time period of a month....houses are selling, but two months is more like it), you should expand the area to determine the comparables. My question is: not all houses will be exactly alike (e.g. 3/1 versus 3/2 & garage vs 3/2 & carport), so is there a way to attribute a cost to, for example..a garage? An additional room? I feel that the best way to get the cost is to make all the sold homes equivalent to the subject house and measure the sold price.

For example, if a 3/2 with no garage sold for 200K and two months ago, a 3/2 sold with double garage sold for 205K, should I assume that the difference in price of 5K is the value of the garage? Or is it the two months that went by?

Thanks!

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03-10-2009 , 03:02 PM

#1198

Lucky

Pooh-Bah

Join Date: Feb 2003 Posts: 4,080

Hey Spex,

Once again thanks for this thread.

You mentioned that it's tough to get rentals that cash flow on the coasts, and better in the Midwest. Checking realtor.com this seems to be very true in Wisconsin.

There are many houses that have been converted to 2/3/4 unit rentals. One is:

59,900
3 units
"potential" rents of 1375
not great neighborhood, but this is wisconsin (non milwaukee)
2300 sq ft lot
2550 sq ft building
4b /3ba (two units are one bd, one is 2)
near schools/busline
comps are all higher
seller will help finance.

Looking at this deal, it would look like it would have to be great. I know the neighborhood, it's not horrible as there really arent any awful/scary neighborhoods here. With a little hustle it could be fully occupied.

What should I be leery of? Rezoning? Old house ready to fall apart?

One other weird thing is it seems most of these places, the owner pays for heat in the winter.

Also as far as seller willing to help finance: does this mean he's super motivated or looking to make more money off someone who cant get financing?

I have good credit and the money for a down payment. What down payment would be required and is it tough to get banks/countrywide to do deals this small?

Zillow has it at 69k. If I could get it for 50k, could I get loan for over that to put 3k into repairs/improvements?

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03-11-2009 , 12:12 AM

#1199

spex x

Real Estate Mogul

Join Date: Jun 2005 Posts: 1,828

Quote:

Originally Posted by jbauer14

Spex,

For example, if a 3/2 with no garage sold for 200K and two months ago, a 3/2 sold with double garage sold for 205K, should I assume that the difference in price of 5K is the value of the garage? Or is it the two months that went by?

Thanks!

Normally the appraiser will attribute a value such discrepancies. Like, they might add $10k for one property having a larger lot or something. Where they get these numbers I have no idea. I guess its an appraiser's trick or something. Appraisal is far from an exact science. If you can get into the ballpark of about 10% give or take, IMO that is pretty decent.

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03-11-2009 , 12:17 AM

#1200

spex x

Real Estate Mogul

Join Date: Jun 2005 Posts: 1,828

Quote:

Originally Posted by Lucky

Hey Spex,

59,900
3 units
"potential" rents of 1375
not great neighborhood, but this is wisconsin (non milwaukee)
2300 sq ft lot
2550 sq ft building
4b /3ba (two units are one bd, one is 2)
near schools/busline
comps are all higher
seller will help finance.

What should I be leery of? Rezoning? Old house ready to fall apart?

Hire someone to do an inspection. You should be fine.

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One other weird thing is it seems most of these places, the owner pays for heat in the winter.

Be careful here because this can throw your expenses for a loop. get accurate numbers on this for several years.

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Also as far as seller willing to help finance: does this mean he's super motivated or looking to make more money off someone who cant get financing?

Most of the time it'll be a motivated seller, but sometimes this is because the property is unfinanceable for some reason.

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I have good credit and the money for a down payment. What down payment would be required and is it tough to get banks/countrywide to do deals this small?

With good credit and a downpayment, anything is possible.

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Zillow has it at 69k. If I could get it for 50k, could I get loan for over that to put 3k into repairs/improvements?

Yes, probably.