Spex, thanks for the awesome thread, i feel like i've learned a ton reading it over the past few days. I know you don't really flip houses, but maybe Giddyup/Tien or others could comment. I would still very much appreciate your comments though if you have any.

The only realtor i know in my city is the one i used to buy my house 3 years ago. I have a few target neighborhoods i am looking at for potential flips and am unsure if just calling this realtor and have her start pulling comps and info from the MLS for me is OK, or if I should be doing things like this myself. Also, if/when i successfully flip a house, is there anyway to negotiate a lower commission % or is the ~6% something standard that you cant really control and just have to factor into the numbers?

Thanks

bump.

Some observations about how you're going about this. Flip candidates are almost never found via realtors. Usually to get the kinds of prices you need to flip a house and make any money you have to use aggressive techniques like pre-foreclosure, foreclosure auction, etc. Its not really a matter of looking in certain neighborhoods. Usually its a matter of looking in certain large geographical areas (like large cities, or even several cities).

Realtors have no skill for finding bargain properties. And rightfully so considering that a realtor's job is to get the best price. If the property is being listed by a Realtor, that person is going to have the fiduciary responsibility to the seller to get the best price. That pretty much precludes bargain purchases.

You definitely can negotiate lower commissions. However, the best realtors (the ones you want) probably aren't going to be that willing to take much less than the market rate. On the other hand, the best realtors typically have the most business sense. I'd say its worth a try.

Spex x Great thread only onto page 3.. So much great info.

Quick question, Since most your family is in the RE game or were. Did you soak up all the information they gave you. Did you go to college and learn some more, or was talking to family better investment time then paying for classes. I hope that made sense.

Oh yes, for sure. However, none of my family was very good at REI. They were mediocre at best. I learned more of what NOT to do. but they definitely got me interested in it to begin with.

Ha! I majored in religious studies. It wasn't until later on (after grad school) that I realized I didn't want to pursue that academic life. but I was a pretty lazy guy so I wanted passive income. That has always been my focus.

Spex I'd love to go in on a property w u just for the experience and I'd make it worth ur time plz pm me

Spex great thread, i've read through it a couple of times over the last year.

I'm graduating college this fall and basically have my choice of the country to move to as my field doesn't really require a specific geographic location. I've only ever lived in California and have seen in this thread that getting off the ground areas like California and NYC are just to expensive and competitive to start out in. I'm serious enough about real estate that it is my number one criteria for a destination. Going off that, do you have any advice (either a specific location(s) or a feature of that market that I should be paying attention to) of where I should relocate to?

Thanks for the whole thread,


Lucas

good question...I'm guessing he'll say Detroit

It really depends on what you want to do. You could go to a place like Detroit and buy property for $1. But you'll have a harder time renting it out to anyone. Personally, if I were starting out I'd probably find a state that tends to have looser laws regarding manufactured housing and start out doing mobile home deals. Then I'd buy MH parks.

But as a general rule, you want to look for a two things: 1) good economic base including blue collar work, 2) stable or increasing population trends. IMO, blue collar towns that are growing are the best candidates for rental property investment. Think Chicago, Milwaukee, Tulsa, OK City, etc.

Then again it depends on how you want to invest. Low income housing, apartment buildings, development, flips, or what?

I'm not sure how helpful I'm being. I don't analyze too many cities for investment, so I'm not too sure how to answer the question.

I am a done with my bachelors degree in economics in 6 months and I am currently looking into different business opportunities for me and a friend. We have a decent lump sum of cash, about 300 000 USD. We are probably gonna start this business in Sweden and I think that the house market in Sweden is really similiar to the American market, about the same prices depending on the population on the different cities you invest in. The major difference is that mobile homes is basically non-existent, we only use trailers for vacation in Sweden + the tax situation is different but we do not have to go into that.

So we are currently thinking about getting into real estate, I have some accounting background and we're both decently clever. Feels like the fact that we have decent capital should be in our favor as well. However, we are at the brainstorm phase and we find it pretty tricky to start off, you mentioned earlier that it might be better not to pay too much in cash for example, what you recommend for 300 000USD? Should we try to be pioneers for the Swedish MTP? (:

I don't know what to say other than you just want to buy properties that show a significant positive cash flow. $300k is enough to buy retail property, however, IMO you should probably stay away from commercial to start. Perhaps some small multifamilies costing around $150k or less with significant upside on rehab would be good. I mean, mortgaged the properties would have a smallish amount of your cash tied up, and you'd have plenty left for catching up to the learning curve.

Mostly, I advise that you start off small and leave plenty of cash in the bank. Don't invest it all at once. Do a deal, make it work, and go from there.

I'm thinking about putting in a cash offer for a house. How much lower can I shade my bid, considering the greater ease of the transaction for the seller?

The ease of the transaction is equal for the seller either way. Unless, of course, you are going to put all the cash into escrow as earnest money (i.e., put it all at risk up front).

I mean, almost all of the time for a seller all offers are cash offers. So I guess you're suggesting that a seller somehow benefits from you bringing all cash to the table. But what is the benefit? Unless its a distressed transaction where speed is a huge factor, then I'd say having cash won't make much difference. Certainly the seller wouldn't be willing to sell for below FMV (unless they're dumb)

The reality is that having a preapproval from a bank almost always makes it a done deal. Not every time, but almost every time.

This is not true in my experience. Some relatively high percentage, say 10-15%, of pre-approved borrowers do not survive the final underwriting review process unscathed - whether it is an increase in interest rate, a decrease in amount the lender is willing to loan, or both. I've heard a lot of complaints about the automated pre-approval process lately. Then, there is normally a buyer's contingency on obtaining acceptable credit terms written into sales contracts. Buyers can back out, and receive their earnest money back.

Waiver of the financing contingency is worth something. Even if the seller is not under time pressure, there is an opportunity cost associated with passing up a sure sale.

Hi I've read a few pages of this thread but I haven't been able to find what I'm looking for. If this question or something similar has already been answered please direct me to that.

I'm at the brink of committing to an investment plan. I'm looking for long term growth and have a high risk tolerance. What are the advantages to choosing real estate over other forms of investment? What are some characteristics or situational advantages one may have that may make real estate more lucrative than other forms of investment?

What I said is that preapproval is almost always a done deal. IMO, 85-90% of the time is 'almost always'.

Either way, 1) a seller would be stupid to accept less than full FMV just for a no banks offer, and 2) a giving a concession for a no banks offer will likely open any agents/brokers involved in the transaction to complaints of malpractice (rightly so).

That is true unless you're making an offer in a distressed situation or an REO or something.

Good question. It depends a lot on how you invest and what other specific investments you're considering. I'll point out first off all that RE is generally not passive, and I'm not aware of any way to make it totally passive. I price the non-passivity into my deals, and I recommend that you do too. Anway, here goes:
1. Passivity - compared to other small businesses, REI is much more passive
2. Safe leverage - REI is a much safer way to leverage your money for higher returns.
3. Tax advantages - REI offers unique tax advantages, most notably depreciation. These advantages shelter your income against taxation.
4. Multiple ways to make money - This is a big one. Positive cash flow, mortgage paydown, appreciation all contribute to ROI.
5. Opportunity to make money quickly - Another big one. Using some strategies you can make several multiples of cash invested over a short (1-3 year) period of time. Cap rate values multiply NOI. So at a 7% cap rate when you spend $100 to get another $100 in net income per year, you add an additional $1400 in equity ($100/.07=$1428). Thats a 14x multiple of the cash invested.
6. Geographically diverse - Principles can be applied from anywhere, including out of state or out of country investing.
7. Easy - REI is pretty straight forward stuff. At least at the level I do it. If you're doing $10M deals, its probably another story.
8. Low competition - There are a lot of great opportunities waiting for someone creative to come grab them.

Thats all I can think of right now but I'm sure there are more.

Spex, About your 45% rule. What % do you attribute to utilities?

For example: You are looking at a duplex that has split utilities and the renters altready pay Water,Sewer, Gas, Electric, trash and are responsible for their own snow removal and yard work. What % of the gross would you figure for your expenses and how would you break that % down?

Also, in your experience if buy something for say 50% of what the city has for a tax base, are you able to argue that it is worth exactly what you paid and get the tax base lower?

Thanks for doing this spex x, you've made lots of people lots of money with this thread.

I'm only through the first few pages, but my question is relatively urgent. I just moved to Salt Lake City 3 days ago (I'm 24 and a professional poker player). I am definitely going to be living here through the winter (to ski) and maybe beyond. I really like the houses, the community, and the people I've met so far. The homes seem great, and are all reasonably priced (i.e. ~200k). If everything went to **** I could pay for it in cash out of my bankroll, but it would be a pretty big hit.

How stupid is it to buy a home right now? I have a place I can live at for the next month or so while I look, so that's not an issue. I would also be able to take advantage of the 8k tax credit and also be able to get some tax breaks on my poker profits this year (right?). I do like the area, and would probably buy a 3-4br place and rent out the rest of the rooms.

I guess my question is, is it suicidal to buy a home in this situation? After being in a city for only 3 days? (I do have some friends who have lived here a couple years). As I see it, worst comes to worst I could hire a property manager and rent the place out if I wanted to move out of the city and I could probably pay off the mortgage safely in a couple years anyway and still save/invest money elsewhere. Thanks for your help and also feel free to correct any flawed generalizations I have made.

PS, where is a good place to check on the general trends of the SLC real estate market? I have used zillow but that's about it. My only other "info" is that I think this city is a lot cooler than it is stereotyped to be, which makes me think demand will go up in the future.

Thanks again =).

I realize this is a personal and very situational question so anyone who has any experience on similar issues please feel free to chime in as well.

Although I agree with the points spex posts here. You have to keep one thing in mind: diversification. One thing that owning Real Estate doesn't have is diversification.

I think you should take your time and think this through carefully. If you want to live in SLC, great, buy a house and stay there. If you don't know where you'll be in a year, then do not buy a house. This is a weird question so I don't really know how to answer it.

haha fair enough. thx for the input.

Finally! I've read every post in this thread, geesh it seems like I should throw some type of party or send spex a bottle of wine or something.

It's so amazing what I've learned from this thread alone, I wish I had the $ to start in on multi-unit or SFH's as some of the other people in the thread, as I've seen plenty of posts and known before I was finished reading them "Uh oh, spex is gonna shoot em down" just based on his simple rule of find positive cash flow above "x" percent and regardless of the volatility of the market, you'll be fine.

An older family member of mine that has rental properties has told me that whenever people aren't buying, they are renting, when they are buying, there are still people renting and the prices don't fall back down if your in a good area, so it's a win win, and now I can see how to do it myself.

I'm going to attempt to start doing Lonnie Deals soon, however here in AR it seems that it's pretty rough starting out with licensing and such. Without this thread I'd be perturbed, but now I know how to approach the situation.

The first deal I found, I called the MHP and they said they don't allow owners to lease or rent, so, onto the next one!

Again, amazing thread and thanks a lot spex.

1. Have you read Deals on Wheels? If not, buy it.

2. You're not leasing or renting if you're doing a LD. You're selling and financing. Do you see the difference? You sell the home. You no longer own it. The owner is living there. But, you allow the seller to pay you in installments, with interest, and in exchange you are first lienholder on the home.

Anyway, read Deals on Wheels.