This could very easily be done in south florida. If your buying $50-80k houses, it be pretty easy to get houses in the 10% roi range off straight cash. If your more picky, 12-14% is def doable. Buy off wholesalers, PM me if you need one.

Thanks for the offer. I've found that I can do this reasonable well in the Detroit suburb area, which is nice because I spend about 1/4 the year up there. I'm curious though, what is a wholesaleras it pertains to real estate?

Those are the guys with "We buy houses for cash" signs. They find the deals, tie them up, and then look for a cash investor to sell them to.

Tread carefully here, the paper work takes some expertise to ensure you don't get stung on the deal. Go to your local REI clubs and try to find a mentor to work with.

GabetheKid


Most if not all real estate books out there are way too generalistic to be of any meaningful value.

Read them, but expect to only get one little nugget out of every book you read that you will actually apply.

J_V, only do this strategy if you are in an area where good houses are sold for cheap. Like around 100K.


The more expensive cities / areas will murder your cashflows if you start buying houses instead of multi plexes.


You don't want to hold on a 200-300K house and getting only a 1200 rental.

So I'm on page 39 right now in that book. What I am doing is I started a word document and am trying to do cliff notes on information that can be useful. So far after almost 40 pages I only have 3.5 pages in word of notes. A lot of the stuff he is talking about also contradicts what spex is doing. I believe spex is all about holding properties and generating positive cash flow. John T. Reed said that he used to argue for that approach but that he believes flipping is way more profitable (also more difficult, which spex agrees on as well)

I'm curious whether you guys agree with all of his points or not. I'll post my cliff notes of the initial two chapters here (if I'm not allowed to do so due to copyright or something, let me know I'll take it down) and am curious if people believe this is good information/advice. Some of this stuff is paraphrased.

Selecting Your Strategy:
• Residential is the most simple form of REI
• In residential RE, single-family is real simple. Duplexes aren’t much different. Three-and four-unit buildings are significantly different. Financing a three- or four-unit building is generally a pain
• Three- and four-unit buildings and rooming houses (A rooming house is any building in which renters occupy single rooms and share kitchens, bathrooms, and common areas. The building may be a converted single-family house, a converted hotel, or a purpose-built structure. Rooming houses may have as few as three rooms for rent or more than a hundred) also have problems with zoning. Many are illegal conversions and may be shut down at any time
• Larger residential properties generally do not have those problems, but they are hard to finance
• It is easier to get financing on a 100-unit apartment complex than on an eight-unit apartment building. Buildings bigger than two units, but smaller than multimillion-dollar deals, are almost orphans in the mortgage business
• Many believe larger buildings are more efficient. John T. Reed doubts this is true anymore. The main problems with larger buildings are the employees and all the regulation, taxation, and litigation (law suits) associated with them.
• In a residential property, when you go above a certain number of units, typically 10-20, the law usually requires that you have a resident manager
ACTION POINTS:
1. Choose a property type in which you want to specialize
2. Join a REI club
Ownership Forms:
• Most common way to own real estate is called fee simple. That means you have a deed that says you own 100% of the property as long as you live. When you die, it goes to whatever heirs you specify in your will. It is the most common way, but not the only way.
• There is no right answer when it comes to what ownership form you should use. Each form has advantages and disadvantages. You need to pick the one where the combination of advantages and disadvantages best match your needs.
• Other ownership forms include corporation, sole proprietorship, and LLC (Limited Liability Company)
• The corporation or LLC provides protection in a contract. For example, if a lender loans money to your corporation, it generally cannot come after you personally if the corporation defaults on the loan
• On the other hand, institutional lenders and lawyers know that. So they routinely go on alert when they see a corporation or LLC and require you to sign personally on the loan not just as an officer of the corporation or LLC.
• Small businessmen and landlords routinely represent themselves in court. This makes sense because their law suits tend to be repetitive and simple – evictions, collections etc.
• But in many places, you can only represent yourself in court if you own your business or rental properties as a sole proprietorship.
• If you are in a lawsuit as an LLC or corporation or some such, you have to hire an attorney for every nickel and dime legal matter
• Incorporating or using some other entity is not the only way to protect your assets. You can also protect your assets to an extent with liability insurance.
• Keep in mind, it’s not enough to just set up a corporation or LLC, you have to act like one every day. If you just set it up then ignore it, your litigation opponent will say it’s your alter ego and the court will agree and ignore the structure and treat you as if you had never incorporated or formed an LLC. All the little things you have to do to behave like a corporation or LLC is costly and time-consuming.
Some Terminology:
• A lease gives you the right to occupy or use a property for a specified period of time in return for rent
• A lien is a debt that is recorded against a property
• Almost always has to be paid off before the property can be refinanced or sold
• Most common liens are mortgages
• Liens on a property take their place in a hierarchy. By law, property tax liens and utility lens are generally first or most senior. Other liens generally rank according to when they are recorded with the earliest having seniority or priority
• When a property is sold the liens are paid off in order. In many cases, the most junior liens are not paid off.
• In many forced-sale situations, the owner who is being forced to sell has the right to redeem (buy back) the property for a certain amount (typically the amount paid by the buyer at the forced sale plus interest) during a specified period of time. This is called right of redemption
ACTION POINTS:
1. Read ‘How to Buy Real Estate for at Least 20% Below Market Value’
2. Select a form of ownership in which you plan to specialize.


Strategy:
• What strategies are viable varies from region to region
• No strategy works in every area
• Some investors move because they want to pursue a particular strategy
• There are also bankruptcy planning reasons to move to another area
• There should be two aspects to your approach to real estate investing:
1. A focus on one to three or four strategies
2. General knowledge of real estate investing that will enable you to take advantage of “targets of opportunity” that you encounter while pursuing your main focus
• Even thought John T. Reed recommends specializing, his recommendation is that all real estate investors acquaint themselves with the basics of each strategy so they do not “leave money on the table” when they do a deal that offers multiple profit opportunities
• Hardly any successful investors are using a pure strategy
• In fact, the profit from just one approach often is inadequate on a particular property. But when you combine the profit from two or three tactics applied to that property, the overall deal becomes worthwhile
• You need to decide whether you are going to hold property long-term or flip it. Longer term means for a year or more. Flipping means selling the property as soon as possible after you acquire it
• Flipping is more profitable than holding, but it is also more difficult. Buying real estate is arduous. So is selling. In order to flip, you have to do both of those arduous things simultaneously or almost simultaneously. That’s really arduous.
ACTION POINTS:
1. Decide whether you are going to hold property long term or flip.
Resources Available:
• Your choice of a real estate investment strategy is determined to a large extent by your resources. Your resources include: cash, credit, time available, training, experience, talent, connections
Cash:
• In general, if you have little cash, and you want to be a real estate investor, you should regard your lack of cash as an emergency situation to be corrected as soon as possible. Many gurus and online real estate groups say you don’t need cash. They’re lying.
Credit:
• If you have poor credit, the number of strategies you can choose from will be reduced
Time Available:
• Some real estate investment strategies require a lot of time
• If your time available to invest in real estate is limited, you must only select strategies that require relatively little time
• Renovation, for example, is one of the more time-consuming strategies

I also have some questions.

1. Are triplexes and fourplexes seriously harder to finance than single family homes or duplexes? This seems weird to me. If you do the property analysis and come back with good COCR, cap rate, DCR etc. it shouldn't matter whether it's a duplex or a fourplex. Or am I missing something?

2. What ownership form would you guys recommend for me? I was going to go with fee simple, the standard ownership form, but want to hear others' opinion on the subject before deciding. In fee simple, can I represent myself in court? Is fee simple and sole proprietorship the same thing?

3. Anyone live in or around London Ontario and wants to discuss local strategies or in general REI? I know I am probably not as knowledgeable yet as most people in this thread about REI but I am pretty determined to learn and start looking for properties to invest in early 2011. Let me know...

4. I want to go to school next September and do something that will help me with my REI career. I was pretty set on going to UWO for economics but had an idea about going to a trade school for carpentry or something that will help me learn how to fix up houses. I think I would really enjoy flipping houses but it scared me off when I heard several people say it's not for beginners and it's extremely hard. Thoughts on any of this?

5. I set aside 25K for school and put away ~30K as my initial REI BR. My question is this. I want to start with mobile homes and build up my capital like spex and so many recommend in this thread as a way to get my feet wet. However, I don't know if this is possible in my area. I'm not sure if there are enough MH parks in and around here to pursue this strategy. I'd be willing to drive up to one hour to do deals but don't think that driving any further really makes sense because travel costs might make a deal not worthwhile given they're small deals in the first place. If it was an apartment complex, then driving 2.5 hours for a really good deal is a different story. Am I right or should I not worry about this? Also, anyone know if London Ontario and the surrounding towns are suitable for this strategy? How do I find out myself? Just Google "buy MHPs London Ontario" and see how many are for sale? What about trailers that people use as cottages? Are these the type of MHs that I should also be focusing on? Or just on ones in the city where people live year round. I just am not aware of any and it makes me believe that this might not work in London Ontario.

Sorry if I'm not being clear. I'm sure I'll have more questions in the near future. But I'll leave it at that for now.

Thanks,
Gabe

Anyone could try to answer my question please?

What are the pros and cons of buying an apartment and financing it partially with "black" money (=money that will not be declared for taxes)?

"black money"..... you can buy anything you want at any time. Heck, if you owe the IRS, they don't specifically care where the cash comes from, as long as they get paid.

Someone somewhere may inquire about HOW you came to be in possession of the cash, but thats beyond the scope of this thread.

pro= u dont pay taxes

con=they can seize it to get the amount owed to them

am i missing something

No they are not much more difficult. The problem I am seeing in S Florida is in appraisals. Because a 4 unit building is still considered residential the appraisers will still use comparable sales as the primary appraisal method. Most multifamily buildings are being bought cash at 15+ cap rates here. The problem is that when you want to buy something with financing you will have to pay more and the comps aren't there to support it. The funny part is your COCR is often much better if you pay more then cash prices and finance it.
Your confusing two things. Fee simple refers to your legal rights as the landholder. Sole proprietorship refers to a business type.


You can own a property both in fee simple and sole proprietorship. You can own it fee simple and an LLC. Most properties owned personally or by some type of LLC or corporation, or REIT or whatever are Fee simple. The other types are for married couples (tenancy of the entirety) and other special circumstances.

That being said you will be buying your properties fee simple. you most likely wont be ever asked this question as its pretty much is assumed in almost every deal.

I would buy your properties in a land trust or LLC. Both offer tax advantages and liability protection.

Thanks GittyUP,

Just clarification about question 4..I was asking whether carpentry is the right program to help me add value to properties whether through flipping (renovating myself, reselling) or adding value and raising rents...

I'm pretty sure there is a 1 year carpentry program where I live and if I remember correctly, I believe it's 30K for the year and is pretty intense and I'm considering applying for it.

Thanks!
Gabe

Gitty,

If I'm mistaken, you mentioned before that you do RE in Florida everywhere sans the panhandle, has that changed? I don't read this thread as actively as before as it is now purely theoretical instead of almost purely as before.

Gabe,

Most of the stuff written ITT and in most resources is for the US. You'd probably need to find some Canadian resources to help out as I have no clue what could be different. Some may translate perfectly (math stuff) other things may not at all (legal).

Thremp,
I realize that this thread and most of the material I read is assumed that you're in the US but I'm sure there is a lot of overlap. Legal stuff will likely be slightly different, expected cap rates and other rates of return might differ from region to region, but I think that I could still get a ton out of this thread and the books I have because there is still likely a ton of overlap.

Gabe

Flipping houses is not for beginners. I started out flipping houses because I had no choice, needed cash / capital.

If you have capital or capital sources, go get yourself a multi unit first and hold on to it for the time being and learn what you can. When you feel ready, buy another.

Only get into flipping houses if you come across a gigantic steal of a property, or if you have experience with real estate.

You can't walk into a closing agent's office with a briefcase of money and tell the guy to pass the deal. I'm not 100% sure about this, but there may be a law against closing agent's accepting cash.

Nonetheless, any reputable closing agent will not accept cash.


You have to deposit it in your bank account and go get a certified check / bank draft / whatever.


This leaves a huge paper trail at the bank, especially if you walk in with 100K in 100$ bills and they ask you where you got that money from..... I'm pretty sure this is going to raise red flags right away.



The only thing you can really do is make a side deal with the seller. Sell it to you at a reduced price, meanwhile you give him a briefcase of money while he signs the deed at the closing agent's office.

But again, not everyone wants to do this.

How much time do you have a week to dedicate?


If you have a lot of time, go get your agent's license so that you have access to the MLS. This allows you to do daily checks for new properties, get a feel for the market.

Go get your carpentry license too if you want. But that's taking one step back instead of one step forward.

I played poker for a living for the past few years and less than a month ago decided to quit and re-shift my focus to REI and going to school. So I have quite a bit of time for the coming year. I set aside enough money to cover my future tuition, about 30K for my REI bankroll, and a year's worth of expenses. In a couple months I'll probably start playing a little poker to maintain my expenses and maybe save a little but wont be spending too many hours grinding. So in short, I have quite a bit of time. And the past two weeks (since I started really focusing on acquiring knowledge for REI) I have read 2 books and started my 3rd one today. But I'm open to other ways of acquiring knowledge/experience so the agent's license might be a good idea for me.

How long does it take to get an agent's license? How expensive is the course?

How come you're saying getting my carpentry license is one step back? My thinking was that if I do so, there are a few pluses

i) I have a back up plan to fall on if REI doesn't work out (carpenters make pretty good $, don't they?)

ii) Like I mentioned earlier, when I buy properties, I could be my own contractor for a lot of things (I enjoy fixing and building things and using tools even though in the past I haven't done too much of that except for assembling stuff when I buy it etc. -- but that's what the course is for, for them to teach me)

iii) If I am busy with looking for and analyzing/buying properties and don't have time to do my own renovations or fix ups, I will be a lot less likely to get ripped off because I'll know how the business works first hand

Why go work for 10$ an hour and bang nails with a hammer if you can make much more with poker? If your only profit in a real estate deal is the hours you put into banging hammer and nails together, you bought the property wrong.

This is why I don't suggest flipping to start out if you don't know anything.


Buying a multi unit, and learning how to fix it up as you go along is much much better than going all out in a house flip and getting completely bogged down in it. Trust me, this will happen.

On that point, keep playing poker and keep making money. Don't quit it. Play until you make more money with real estate than you do poker. This may take a few years, but the anxiety you get from playing poker is much much less than the anxiety you WILL get when you aren't making much money in real estate in the first few years.


This is much simpler than you are making it out to be. Here is the formula I wish I myself took:


1) Grind the **** out of poker
2) save poker monies.
3) Buy multi unit
4) hold on to it
5) repeat steps 1-4
6) profit


As for reading material. Just read / reread this thread over and over. Put 50 books together and they won't give you as much info as this thread.



Takes no longer than 6 months to get the real estate license, about a thousand or so.

And if you don't want to get screwed by contractors, here is what you do, or what you should be doing anyway.


Go to your REI club or whatever real estate investment clubs out there. Go there often and start making friends.

Make friends with the guys / gals that have done real estate. Start networking, get to know people.


When a situation comes up in your multi unit and you aren't sure how much it costs, go ask around. Ask your real estate friends, ask 5 different contractors, ask ask ask.


Eventually you'll get a good idea of how much it should cost.


1-3 years down the line you'll know enough not to get screwed for most jobs and then you just keep going with it.


Who the heck needs their carpentry license except to bang hammer and nails together? Screw that, you already know how to make easy money playing a freaking card game. Forget carpentry unless YOU REALLY REALLY LOVE IT.



BTW, I say it is 1 step backwards because the time spent learning carpentry is better spent getting your real estate license and grinding poker for more investment capital.

Gabe,

Didn't wanna dissuade you from reading it. But rather that there may be something out there that specifically highlights the differences which would help a ton rather than something rehashing the same topics over and over rather than something designed just for this purpose.

First, I just want to say thanks to everyone who took the time to answer my questions/offer advice. I'm really glad I found this thread.

First, the reason I stopped playing poker is because I just don't enjoy it anymore. Another reason is that last year i made just under 100k and this year I only am up like 16K or something. I just lost the spark and motivation and figured I'd use the money I've saved from poker to get into REI and get an education (originally wanted to go to school to become a paramedic and do REI on the side but then decided going to school for something more related to REI would probably make more sense).

Now, assuming I'm going to school, what program would you recommend that will best help me with my REI career?

Now, I don't plan on grinding the **** out of poker anymore because I just don't enjoy that and I'd rather do something else (even if it pays a little less) that I enjoy. I will still play, but I wont be grinding a ton. It's more for maintaining my life expenses.

About flipping. I never said that's going to be my strategy. I am in the process of figuring out my strategy. I am trying to learn and absorb as much as I can right now and the strategy I think I'm going to use is constantly changing as I get more knowledgeable.

However, assuming I'm going to school, why not go for carpentry and get a back up plan (I don't think they make $10 an hour). I was just saying that another bonus of getting my carpentry license is I can do a lot of fix ups and renovations myself (not that I'll be renovating as my main strategy).

As for this thread, I'll read it after I finish my current book that I am reading (How to buy real estate for at least 20% below market value by john t. reed) which actually talks a ton about flipping (which I'm disappointed in).

But as a side question, you are only really concerned with buying that cheap only for flipping, correct? I mean obviously it's good to get a good price on a rental too but as long as the numbers work out, it doesn't matter if you're paying market value, correct? whereas for flipping, a lot of the profit comes when you buy so you need to buy below market value. Am I understanding this right?

Also, about REI clubs, I don't believe there are any in London, Ontario. I know there are some in Toronto (2 hour drive). Would you recommend me still joining and attending weekly meetings in Toronto if I can't find a club in London?

About the real estate license. I'm going to look into it. But I'm wondering, is there no qualifications? I ask because I dropped out of college after completing the first year to play poker. Is high school enough to take the course? Or can anyone take it you just have to pay and pass and then you get your license?

Once again, I really appreciate all the input!

Thanks,
Gabe

Accountancy if you are relatively smart or law if you are above average smart.

Electrician if you are below average smart.

Carpentry if you are high school level student.

You gotta go back and read this thread. Spex tells you exactly how you should go about analyzing a buy.


Attend monthly meetings in Toronto then. Go check it out.


High School.

Thanks Tien,

Would electrician really be more useful than carpentry? Could you elaborate why?

I'm going to read this thread after finishing my book. This thread is like a book itself so I'd rather read it like one and I don't like reading 2 books at the same time.

I'll look into the REI club and the real estate license. Would you recommend me attend my first meeting soon or after I read/acquire some more knowledge and actually start looking for properties?

Also, about the REI license, by getting it, I'd be a real estate agent? As in, someone who shows people listings and takes them to them and earns commission on his sales? Just curious..

Thanks,
Gabe