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Real Estate Dilemma
08-29-2011, 10:49 PM
So I am on the daily hustle, eyes on the prize: to make enough money to not have to work.
My field is real estate. Recently I have been scouring the listings and trying to do analyses to make the numbers work, Boston like the rest of the metropolitan Bos-Wash corridor is horrendous when it comes to positive cash flow...its like squeezing blood from a turnip.
The only possibilities I am seeing is some of the industrial/old mill cities of New England, they aren't ghetto per se, however definitely on the rough side. I am torn between:
Option A:
Buying a solid, well located property that barely breaks even, although may have some appreciation potential (if the US isn't bankrupted and the world doesn't end).
Option B:
Buying a cash cow that will give me some regular income, but forget about being able to enjoy any appreciation?
Option C:
Say F it and move out to the Midwest or the Rockies and start piling on investments out there. I am not looking for the big city excitement if it means putting my goals on hold. I figure if I am making like US 5K/month in net income, I can pretty much pull a Roosh.
I am making decent money out here, but I am not sleeping easy because 1. The economy goes to hell and I'm out of a job 2. I need to be locking down RE deals and I am not seeing the value opps.
Thoughts?
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Real Estate Dilemma
08-29-2011, 11:00 PM
Im also gonna be getting in the RE game soon.
Gotta go where the investments are to be made.
If that means having to move than so be it.
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Real Estate Dilemma
08-30-2011, 05:47 AM
I have been looking at property recently as well. I've been searching the various real estate sites and haven't seen too much that fits my description. Are you guys looking at commercial or residential properties?
In my opinion residential properties are too much of a pain in the ass and I've heard way too many horror stories. To deal with residential properties you most often need to be in the area which is a no go for me. Even with a property manager there will be a lot of shit to put up with the residential tenants (numerous repairs, broken appliances, tenants not paying rent, vandalism, liability, dirty tenants, loud tenants, increasing government regulation on rentals, and more).
I am leaning towards buying commercial properties, fill them with small businesses/tenants, and then handing them off to a property manager. The properties I am looking at are pretty cheap so I can afford to way under price the monthly rent to fill the property up quickly.
I haven't locked into any yet and I am still exploring my options.
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Real Estate Dilemma
08-30-2011, 05:48 PM
Quote: (08-30-2011 10:55 AM)zoom Wrote:
Quote: (08-29-2011 11:00 PM)Dash Global Wrote:
Im also gonna be getting in the RE game soon.
Gotta go where the investments are to be made.
If that means having to move than so be it.
Dash you mentioned before that you will enter the real estate market with limited funds. What will your strategy be?
My strategy is simple.
I will be focusing on homes for first time home owners that have been neglected and need work done to them.
The town I come from is great for first time home buyers as people are CONSTANTLY moving and going due to the huge military base of Ft. Bragg.
I will target houses that are around 40-70, than I can fix an turn a profit of 15-30K with a low - medium sized renovations than can be done in 4-8 weeks.
You dont need much personal funds for this but the more the better as you can bypass the hard money lendors that will charge high interest on the money they lend you.
With as little as 20K you can easily get into the game and have a decent amount to work with if have a similar RE market.
You have to do your homework and know your shit aka REI like the back of your hand or else you will find yourself with bad investments that will lose you money rather than make it.
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Real Estate Dilemma
08-30-2011, 06:02 PM
"low - medium sized renovations than can be done in 4-8 weeks."
I remember on here Dash, you once said you knew very little about construction work.
These "renovations" will be the eye opening part of your plan.
Good luck though, it is amazing to me that you can buy a house where you live for 40k to 70k.
A two bedroom condo costs 400k to 700k in my hood.
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Real Estate Dilemma
08-30-2011, 06:19 PM
I'm not in the real estate game, but I did take several RE classes in college. One of my professors who is a multi millionaire from RE investment projects beat it into our heads that real estate investing is all about cash flow. He said you shouldn't do any deal that isn't earning you a healthy return from day 1. Anything else is speculation, and in my opinion there's better ways to speculate than on something as illiquid and full of hassles as real estate. And prices can still appreciate in your favor, it's just risky as hell to rely on that for all your profit.
He was a fan of collapsed blue collar rust belt towns where almost everyone rented because they weren't capable of buying anything, even if there were homes for sale in the teens.
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Real Estate Dilemma
08-30-2011, 06:51 PM
Quote: (08-30-2011 06:02 PM)thegmanifesto Wrote:
"low - medium sized renovations than can be done in 4-8 weeks."
I remember on here Dash, you once said you knew very little about construction work.
These "renovations" will be the eye opening part of your plan.
Good luck though, it is amazing to me that you can buy a house where you live for 40k to 70k.
A two bedroom condo costs 400k to 700k in my hood.
For people like me it IMPERATIVE that you find a recommended experienced contractor to work with. They will be your life line and will affect the project greatly. A good contractor can walk through a property and see what works needs to be done and calculate a general budget for the renovations. They can get quality work done fast and for a good price. Evaluation / Budgeting / Time are the main biggest factors in determining how much money your gonna make on flip.
The big thing for most newbs is determining what is a good investment and what is a bad investment. Buying a house for 60K thinking you only gotta do small cosmetic work to find out you have to fix the foundation can turn a profitable flip into a flip your gonna be losing money on or just breaking even.
For people that do their research and prepare there is tons of resources online that will pretty much guide you through your first couple of deals.
Haha I cant believe people pay 400K for a 2 bedroom apartment. You can buy a mansion for that kind of bread in my city!
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Real Estate Dilemma
08-30-2011, 07:15 PM
"A good contractor can walk through a property and see what works needs to be done and calculate a general budget for the renovations. They can get quality work done fast and for a good price."
After you actually bang out 50 of these, let me know if you feel the same way.
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Real Estate Dilemma
08-30-2011, 07:23 PM
Quote: (08-30-2011 07:15 PM)thegmanifesto Wrote:
"A good contractor can walk through a property and see what works needs to be done and calculate a general budget for the renovations. They can get quality work done fast and for a good price."
After you actually bang out 50 of these, let me know if you feel the same way.
After 50 id be doing the evaluating and budgeting myself, hell much sooner than that actually
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Real Estate Dilemma
08-30-2011, 08:12 PM
This is a great site for people looking to get into the RE game or that is relatively new to the scene.
http://www.123flip.com/
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Real Estate Dilemma
08-30-2011, 11:12 PM
Getting involved with contractors and doing renovations is a massive cost sink. Also, buying for capital appreciation in the USA is a waste of time and nothing short of gambling. I would say the same thing for Europe and most developed economies at the moment. Global markets are in the shitter, debt is rising and we could see government defaulting in the next few years.
The other major issue is going to be inflation eventually, along with interest rate rises. You cant print money like that and think there will be no ramifications for it.
Buy for returns, not capital growth. You need a hedge against rising interest rates (which are coming worldwide soon) and you need to pay those loans off or see enough fat to cover a lot of the hidden costs you will get spanked with. Inflation wont see house price growth for a while, but it will catch up again at a later stage when things eventually come right. Which means you need to hold and have plans to hold for a long time.
Also, flipping houses? In 2011? Lol, you need your fucking head read if you want to get into that shit. People cant get money and liquidity has dried up. It will get worse too before it gets better, and if you dont have experience with this already you are in for a lot of pain. Its not that easy and if it was all the currently struggling housing contractors would already be doing it! Ask yourself why guys with skills, tools, relationships with building material suppliers and a good knowledge of the local housing market are not buying up homes in swathes to flip them.
But people still need shelter, and if they have a job but cant get a loan, they can still pay rent. When you consider how many lost homes to foreclosure or how many have walked away, finding renters is not going to be hard if you are reasonable in what you charge and the property checks all the boxes for a renter. Basics like close to transport, schools, shops, nightlife, its safe. Vacancy rates are still high and there is an over supply, which is why you need to make sure you are renting homes out that make for good rentals before they make for good personal homes. There is a difference.
Also, Pid mentioned commercial property. Its traditionally a much easier hold than residential, but your problem is higher costs! You can have longer vacancy periods and there are more costs associated with commercial property too. You also need to be sure that you are in the right area and its not a forgiving investment like residential property can be. The trick with commercial property is to have tenants for it before you buy. Not easy at all, but its the best way to do it.
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Real Estate Dilemma
08-31-2011, 12:34 AM
But surely, out of all those guys chasing down a quick payday, even a minority would exist that would pick up these bargains and use their unemployed asses to flip homes.
The jump from contractor to developer is small. One renovates your home or builds your office, the other buys and renovates property they own for resale or rent. The market awash with cheap homes, and with their ability to source cheap materials and their own labour, they could be buying and selling reno's at double speed if there was a sizeable market for it. They would do it at a cost far lower than you can.
They are not doing it though, are they? They were buying up lots of land and building homes to sell 5 years ago though. In droves when the market was pumping. This though, they avoid like the plague.
There is a basic principle at work here. You lose money when over capitalise. Investing money into renovations with the current oversupply of housing, along with no realistic chance of capital appreciation over the next few years, combined with interest rate rises that are looking very likely, is not what I would call identifying a gap in the market.
I would call that stupidity.
The banks have stopped moving on foreclosures. They cant afford to have more bad debt on their balance sheets and they can even sell the stock they have. This is why you have people living in homes they have not paid a cent for in the last 2-3 years and the banks are just leaving them there. So there is more stock coming and supply is not going to be an issue for a very long time.
Where is the gap here? People with jobs and bad credit records after they were burned. That, together with quality property at lower than replacement cost prices. Its not that they cant afford those cheaper homes, its that the banks have closed shop for most of them. By providing rentals to those people, using dirt cheap property, your returns are higher. Most importantly, stable and requiring far less management
My 2 cents.
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Real Estate Dilemma
08-31-2011, 12:47 AM
Hey Harry,
You can make money in any market. I do agree with a lot of assessments but there is always a price where a house will be sold. As you know, a lot of people are under water and thus can't price their homes to sell. If you purchase at the right price, then you should be able to sell houses.
I believe you were talking about builders jumping in on the real estate bubble. Big difference... Lenders were giving away money to anyone with a pulse and people were purchasing based on monthly appreciation.
I know of a guy that got stock with around 18 houses he purchased at full retail. He was planning on selling them in a couple of months but the bubble burst on him before he could sell him. I and others tried to tell him it wasn't a good idea but greed got the best of him just like so many others.
Recently, I just had a friend of the family purchase a foreclosure in the 20's and turn around to flip it in the 50's. 50's was a good price for the neighborhood which is why it sold.
I don't buy the premise that contractors would be jumping into flipping if it was profitable. Most contractors have no clue besides their skill set and drinking beer. They are the worst money managers I have ever witnessed which is why dealing with them is akin to a used car salesman.
My friend had his own construction company and was making millions only to spend it all with nothing to show for it. I still think he could build it back up but his money management is the worst. He simply drains the company of all revenue and that is common for that group of people.
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Real Estate Dilemma
08-31-2011, 08:00 AM
HooliganHarry,
Bro, you are way over dramatically the market condition's. Flipping houses in 2011 is still a great way to make some bread.
It all comes down to your market your operating in. If you are in some mid west industrial town where everyone is getting layed off and leaving doghe than yea you are gonna have a hard time making money. But if you are in a town with plenty of jobs, college towns, military towns, ect than there will always be people buying homes.
Its a good thing people really dont know how easy it is. And are still gripped with fear and doubt. More deals for me!
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Real Estate Dilemma
08-31-2011, 08:01 AM
Quote: (08-30-2011 09:43 PM)BostonBMW Wrote:
Quote: (08-30-2011 08:12 PM)Dash Global Wrote:
This is a great site for people looking to get into the RE game or that is relatively new to the scene.
http://www.123flip.com/
Good stuff, DG!
Another good site: http://www.biggerpockets.com
Yea im on BiggerPockets myself.
With that and 123Flip you have EVERYTHING you need to know to become a successful REI
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Real Estate Dilemma
08-31-2011, 08:22 AM
Quote: (08-31-2011 08:14 AM)Hooligan Harry Wrote:
Quote: (08-31-2011 08:00 AM)Dash Global Wrote:
HooliganHarry,
Bro, you are way over dramatically the market condition's. Flipping houses in 2011 is still a great way to make some bread.
It all comes down to your market your operating in. If you are in some mid west industrial town where everyone is getting layed off and leaving doghe than yea you are gonna have a hard time making money. But if you are in a town with plenty of jobs, college towns, military towns, ect than there will always be people buying homes.
Its a good thing people really dont know how easy it is. And are still gripped with fear and doubt. More deals for me!
Dude how many houses have you actually flipped? Have you bought property before? Sold property before?
Flipping property is feasible when there is liquidity in the market OR you know renovations can be done on the cheap. If there were buyers around the banks would not be hoarding stock. What you want to do is very high risk.
You put your faith and make big financial decisions based on a the information from a blog like 123flip? Are you serious? Look at the damn thing and tell me if that is the sort of shit that screams "MONEY" to you.
Lol good luck to you dude. Hope it all works out, all I am saying is that you need to make sure you do your research a little more and understand that if it sounds too good to be true it probably is.
Just be careful is all I am saying, debt is a killer and a house is a terrible asset to own when you cant sell it.
Evaluating real market values and renovation costs is basic investing 101.
A smart investor wouldnt buy a property without KNOWING the renovation costs and factoring them into the equation to see if the deal will be profitable.......
I aint saying that the RE game is full-proof and nothing ever goes wrong but if you put in the time and study and learn the game inside and out then you can make a good living.
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