The "Ask a Real Estate Investor" Thread

[boofMcboof]

Is it better to buy when mortgage rates are low or when they are high?

[doctorshockalu]

Are you finance professor Bonamo at VT? If so, I enjoyed your course in 2004

Second, how on earth do you get data on pre-foreclosures. This has been an absolute mystery to me and something I have been trying to get in on

Haha, no I am not him.

Every county will have tax deed records or some type of office that has this information. That would be my first suggestion. Try craigslist. I'm sure you have seen the We buy houses signs and ads, those are a great way to find these people.

[doctorshockalu]

Is it better to buy when mortgage rates are low or when they are high?

Really depends on what you are trying to do with the real estate. If you're trying to hedge inflation then I could see higher rates being of value but I would still view this as speculation.

I would must rather have low rates as that means a lower monthly payment which in turn means more cash flow for rental properties.

[SkinsHokieFan]

Haha, no I am not him.

Every county will have tax deed records or some type of office that has this information. That would be my first suggestion. Try craigslist. I'm sure you have seen the We buy houses signs and ads, those are a great way to find these people.

What is the most effective method for you?

I would love to get a pre-foreclosure primary home for myself rather then keep losing out to cash investors

[doctorshockalu]

What is the most effective method for you?

I would love to get a pre-foreclosure primary home for myself rather then keep losing out to cash investors

I would go to your local courthouse or tax office and just check the records to see who is behind on their payments. Put a couple of We Buy Houses signs up. Craigslist is always good. Talk to real estate agents that sell a lot every year and ask them about short sales. Look for properties that are run down and call the owner and ask if he wants to sell.

[Mickalino]

Is Dean Graziosi's book legit ?

[HSW]

I would go to your local courthouse or tax office and just check the records to see who is behind on their payments. Put a couple of We Buy Houses signs up. Craigslist is always good. Talk to real estate agents that sell a lot every year and ask them about short sales. Look for properties that are run down and call the owner and ask if he wants to sell.

I don't think there is enough soap in the world to make me feel

"clean" again after doing something like that. Why not check the

obits...wait forget it.

[Burgundy Burner]

http://www.dailywealth.com/1227/This-Is-a-True-Story

This Is a True Story

By Dr. Steve Sjuggerud

Tuesday, April 6, 2010

The older guy in front of me in line has a stack of credit cards the size of a deck of playing cards.

"So how much gas d'ya want?" the convenience store girl asks.

The guy shuffles his stack and tosses out a Capital One card.

With his penny loafers and turquoise polo shirt, the guy is dressed like a typical wealthy coastal Florida 70-year-old. But he might not be as well-to-do as he appears...

"Declined," the girl says.

He reshuffles and tosses again. "Declined again," the girl says.

I glance at his car poking out from behind the gas pump... It looks like a red Mercedes convertible, top down.

One more shuffle of the stack... The guy finally picks a winner and goes out to pump his gas.

"Living beyond their means..." the girl says to me after the guy leaves.

"Yep... He's driving a Mercedes convertible," I reply.

She says, "Ya know... he only came inside because he tried so many cards at the pump that the pump refused him."

I get a few steps out the door and I see the guy still filling his gas tank. It's not a Mercedes... It's a Rolls-Royce.

I can't say what this guy's situation is for sure. My guess is, he was in real estate (like most folks around here). As his properties went up in value, he took out loans to buy stuff. Now his properties have fallen by half, and he's broke. Even selling the stuff wouldn't do him any good... His stuff is worth less than the debts. So here he is, shuffling cards at the gas station.

I can't fix his situation, of course.

But the same set of circumstances that got this guy where he is today is creating an opportunity for anyone who didn't live quite so large. It's an opportunity to collect high income... in part because of the real estate bust.

I've been earning 18% interest here in Florida, and it's safe money (if you do just a little homework). Here's how it works...

When a guy (like Mr. Rolls-Royce) doesn't pay his property taxes in Florida, the county still needs that tax money. To get that money now, the county makes an irresistible offer to investors... It allows investors to pay his taxes for him and earn 18% interest. The interest accrues until either 1) the guy pays his taxes late or 2) the property is sold on the courthouse steps to recoup those back taxes.

The investment – called a tax lien certificate – should be very safe, as long as the value of the property is much higher than the taxes due. The details get a bit more complicated, but that's it in a nutshell.

The opportunity is huge. The returns are high, because the rate is set by the state as a penalty... It's not set by market interest rates.

Collecting 18% interest in a zero percent world sure is attractive to me... In this low interest-rate world, tax lien certificates are now one of the lowest-risk, highest-returning investments out there.

I've been buying them with my own money... You ought to look into them too.

The "season" for auctions starts in late May... so you have some time to get up to speed. Take advantage of it!

More at the above link.

[doctorshockalu]

Is Dean Graziosi's book legit ?

I'm not sure who he is but I would steer clear of most guru books. The information is on the internet for free.

[doctorshockalu]

I don't think there is enough soap in the world to make me feel

"clean" again after doing something like that. Why not check the

obits...wait forget it.

No problem, I see a lot of people that have completely backwards assumptions about real estate investors. The real "dirtiness" as you put it is with the banks. In the last couple of years the banks were gladly getting anybody into a house with terms the borrowers didn't even understand. I can't tell you how many people I talk to that have option arm loans that have reset and their payments went up $400/month. Or have negative amortization so that their loan balance goes up every month because their monthly payments are so low. These people have no clue about any of this and get into some big financial problems. I can honestly say that most bankers are complete scum and will do whatever is needed to meet their quotas.

These homeowners are facing foreclosure which will wreck their credit which will make everything more expensive for them. So if I can cash them out a little money, pay their back payments and get a good deal we both win. A lot of the homeowners I talk to are people that have lost their job a few months ago and can't make their payments. Do the banks work with them? HA, of course not. So I can buy the property from them and give them a couple of months of free rent while they get back on their feet. I still have sellers send me holiday post cards because they appreciate that I helped them out. I have sold a few houses back to them a few years later as well at discount prices.

But like I said, I'm used to the stigma that comes with the real estate investor title. If you still feel that helping people out with their financial problems makes you scum maybe you should get a job in banking.

[Mickalino]

I'm not sure who he is but I would steer clear of most guru books. The information is on the internet for free.

But for Dummies, tho ? :paranoid:

[LaxBuddy21]

How can someone get into investing without a lot to invest? Its easy for rich people to make lots of money but us middle class folk cannot get far enough ahead to make any real money! If I had the money, I would definitely be investing in real estate. Just dont know how to get the money to invest :mad:

[Burgundy Burner]

How can someone get into investing without a lot to invest? Its easy for rich people to make lots of money but us middle class folk cannot get far enough ahead to make any real money! If I had the money, I would definitely be investing in real estate. Just dont know how to get the money to invest :mad:

Take a look at what I posted earlier today. It's safe and easy to do. You can make a steady rate - a very good rate in fact.

[SC_RedskinsFan]

Take a look at what I posted earlier today. It's safe and easy to do. You can make a steady rate - a very good rate in fact.

This is pretty much what i do, but each county in each state does it a little different.

[doctorshockalu]

But for Dummies, tho ? :paranoid:

Well what are you trying to do? Flipping, rehab and rent? I'll gladly answer any questions you have.

[doctorshockalu]

How can someone get into investing without a lot to invest? Its easy for rich people to make lots of money but us middle class folk cannot get far enough ahead to make any real money! If I had the money, I would definitely be investing in real estate. Just dont know how to get the money to invest :mad:

Tax liens would be a good place to start like the previous poster stated. Just make sure you check with your county about the rules because they vary A LOT. If you are looking to flip houses, you can always get a hard money lender which will lend on the value of the property not your income. So you need to find a deal. If you are looking for a personal property then you can always buy a HUD home and use a FHA loan. They require around 3% down payment.

Another great thing to do is start to manage a few properties for other investors. You take none of the risk but learn the ropes very quickly. (Also lets you know if you even want to deal with tenants)

[doctorshockalu]

I got PM'd a question asking how do I evaluate the properties I'm looking at.

I look at purchase costs, holding costs, selling costs.

Typically, I figure in 5% in fees to buy, holding costs for 3 months differ on the property obviously. Just make sure you calculate the mortgage, taxes, insurance, materials for rehab, contractors pay, gas driving there everyday, etc... Selling costs typically are roughly 15% of the selling price which includes realtor fees and usually a few points for cost overruns.

Now how to calculate if it is a good deal for you. Take the amount of cash invested, the down payment, materials, contractors, mortgage payments. Once you have the total number compare this to your expected profit. I typically shoot for 100% ROI if it is a 3 month flip.

Feel free to ask any other questions.

[LaxBuddy21]

Another great thing to do is start to manage a few properties for other investors. You take none of the risk but learn the ropes very quickly. (Also lets you know if you even want to deal with tenants)

How would you get into that? How much time does it take? Is it something I could do outside of my full time job? This is actually very interesting to me and a good way to get my feet wet, learn some from people who are involved and a way to make some extra money on the side.

[Peeping Wizard]

How would you get into that? How much time does it take? Is it something I could do outside of my full time job? This is actually very interesting to me and a good way to get my feet wet, learn some from people who are involved and a way to make some extra money on the side.

Go get a management license and hang out your shingle. Send out some flyers and posts ads on craigs list to get some clients. You might even be able to hook up a few properties on the side as an assistant to a full time manager who has too much on his plate.

As long as you don't overburden yourself you can probably handle the job on the side of your full time gig. On the other hand you have to put up with being on call all the time. If you are working during the day and a pipe breaks somewhere, you need to have a way to get that taken care of asap.

[doctorshockalu]

Where you live there are numerous real estate investing groups. Go to one and just take it all in. If you don't have a problem with talking to new people introduce yourself to a few people and ask if they have any rentals they would be interested in letting you manage. Even if they don't I guarantee they will know an investor that does. This is probably the number one need in real estate.

Just starting out you could easily manage say 10 properties outside of your full time job. Just be prepared for the tenant calls at 10 at night saying there is a water leak. Typically property managers make between 8-10% of the gross collected rents. Some landlords simply want you to collect and deposit the checks. Others want you to sent out the letters saying pay or move out on this date, taking deadbeat tenants to court, etc... Just make sure you are comfortable with what they expect of you and get it in writing. If they are having problems with a specific property you can even let the investor know you are interested in a rental and they might give you a good deal just to get it off of their hands.

Put some ads in the newspaper, craigslist and talk to some realtors. This should at least find you one or two properties right off the bat you can manage.

[doctorshockalu]

Haha. Peeping Wizard I did not see your post until now. Funny we both mentioned the nightly calls about water pipes being busted. Just goes to show you these problems are universal.

Sidenote* One of the worst tenants I had was a few years ago. I didn't get a rent payment from him, spent next couple of days trying to get a hold of him with no success. Went over their a week later and there were roughly 250 canned jars of piss laying all throughout the kitchen and bathroom. He had cut his water off 3 months prior.

[SkinsHokieFan]

So the investors/flippers are now out in force in my area

House got listed for 260k (this is in the 22042) zip code, cash offer made that day for 360k.

How long till the next collapse?

I'll just patiently wait and save up cash for a while longer

[Maximus71]

None. credit score is in the mid 800's

I never flip them, too many hands reaching into your pockets at closing time for that. Plus the transaction is entirely too documented. I keep them all as rentals.

This is very intersting comment about your credit score being in the 800's. I am not try to imply you are lying but hear me out, I am a mortgage banker and I have MANY investors who need loans for investment properties. You stated you keep many of them as rentals, I am sure you know the guidelines that you can only have a maximum of 8 to 12 loans for investment properties (with the larger banks) financed.

To this day, I have never seen an investor with over 7 mortgage loans to have a fico score higher than 730 (middle score) even though all of their payments were made on time and their DTI's (debt to income ratios) were around 20%. The reason is that you are carrying too many debts, high limit debts and thus makes your score suffer, I know, Its retarded specially if you are making monthly payments on time and a mortgage should not be treated as a line of credit/credit card or used for scoring. 800 + score could only mean you have paid cash for many of your properties.

[Maximus71]

No problem, I see a lot of people that have completely backwards assumptions about real estate investors. The real "dirtiness" as you put it is with the banks. In the last couple of years the banks were gladly getting anybody into a house with terms the borrowers didn't even understand. I can't tell you how many people I talk to that have option arm loans that have reset and their payments went up $400/month. Or have negative amortization so that their loan balance goes up every month because their monthly payments are so low. These people have no clue about any of this and get into some big financial problems. I can honestly say that most bankers are complete scum and will do whatever is needed to meet their quotas.

These homeowners are facing foreclosure which will wreck their credit which will make everything more expensive for them. So if I can cash them out a little money, pay their back payments and get a good deal we both win. A lot of the homeowners I talk to are people that have lost their job a few months ago and can't make their payments. Do the banks work with them? HA, of course not. So I can buy the property from them and give them a couple of months of free rent while they get back on their feet. I still have sellers send me holiday post cards because they appreciate that I helped them out. I have sold a few houses back to them a few years later as well at discount prices.

But like I said, I'm used to the stigma that comes with the real estate investor title. If you still feel that helping people out with their financial problems makes you scum maybe you should get a job in banking.

So if I jump off the cliff and tell you that you will get rich doing it you will follow me? BS, its not the banks, I am a very successful mortgage banker and I do it honestly and ethically. Almost all lenders I know do the same, if the consumer is stupid enough not to read what the lender is offering then its their fault. In some cases, yes the lender is definitely in it to rip you off but with the new regulations and guidelines and penalties its going to be very difficult. The scum comments you are making is way out of line and trust me, many bankers and consumers look at people like you that are the same. There are many real estate investors that should be in jail for what they have done but due to a loop holes in the system they are still ripping people off.

[Maximus71]

I am sure this is a typo.

Actually prices are still overinflated and when interest rates bump we will see another bubble.

Talking DC metropolitan area.

DC Market? Almost every appraisal in the DC/Old Town Alexandria area coming in higher than expected. The only reason if prices drop again in our area is due for another series of properties that hit the market is short sale or foreclosures which is a possiblity as banks are trying to work with the borrowers to keep them in their homes with the help of loan modifications or the HARP programs. Recent studies have shown that most of those borrowers end up foreclosing anyway.