BiggerPockets

Hello all,

First off, I would like to say thank you to everyone who has given so freely of their time and experience. The wealth of knowledge you have provided here is certainly a generous gift.

Years ago I studied for the real estate broker's exam but decided against going into the field - not that the knowledge hasn't served me well over that time.

During the last 30 years I have been deeply involved in high tech, primarily the PC industry, including a couple of decades running my own business selling and servicing computers, ran an ISP and have worked my way up to industry spokesperson in that field.

Now I am looking to widen my horizons, even though I am not kidding myself into thinking this is "easy money" or that I will jump into this full time right away.

Specifically, I am interested in applying my high tech skills to this field, finding both traditional and innovative ways to leverage my abilities to market properties, starting out on the lower end of the spectrum and working up from there.

I look forward to exploring any opportunities that I may be offered, working with as many people as I can effectively service, learning everything I can, and teaching if I am fortunate enough to be able to.

Again, thank you for providing this opportunity,

Ken

Tom,

Thanks for the response.

While your point is 100% accurate, I believe I might have a somewhat different angle to utilize by marketing to people in from outside the city, based on the perceived purchasing value of their dollar.

In the last week that I have been experimenting with this concept I have interested four families to the point of calling on real estate agents there with one driving up yesterday and visiting several properties. I believe this gentleman and his wife are going to buy.

What needs to be said is that this is the equivalent of penny stocks - so your comment about making money is perfectly valid.

Tom,

Quite the contrary, I am looking to sell these homes, one at a time, to retirees, and actually where more interest seems to be coming from is from the immigrant community who feel they can afford a house even making Wal-Mart wages.

What needs to be understood is the perspective of people in, say, the DC area, who are looking at homes starting in the several hundred thousand dollar range. These people have come to the conclusion they will never own a house.

Now, while you might consider Youngstown a hellhole, they see a chance at the American Dream and oftentimes have the money to buy a home there for cash, or on a mortgage so small that it is inconsequential.

If you would like, I can provide specifics of active listings that are attracting these people and we can discuss how any investor who owns properties that meet the standards of these listings could also "unload" these homes at a fair price.

Tom,

I'm not sure why you assumed that I'm interested in selling "vacant trashed out houses" to "illegal immigrants and people already of the government dole" as nothing could be further from the truth. It is my understanding that people "on the government dole" can't own houses.

Let's talk specifics.

In Youngstown right now there are now roughly 4,500 vacant houses of which over 1,000 are in good to excellent condition. An additional 1,700 or so require relatively minor rehab to become livable and there are funds to do so. This information can be confirmed here.
http://www.mvorganizing.org/downloads/MVOC_Strategic_Demolition_Policy_Brief.pdf

The people I am talking to have the money to buy the better homes on that list for cash and/or enough for a downpayment and qualify for a FHA Streamline 203K loan which would allow them to fix the homes which need it.

These people are small business owners, who will bring their businesses wherever they choose to live and are smart enough to understand that a house that costs $25K is better than any house in DC that costs $250K - which is what they would be looking at in the seedier neighborhoods of Washington DC.

I would also like to point out that this would be a step forward for Youngstown, would contribute to stabilizing the city, and increasing the value of any properties you might own in Youngstown.

Here is exactly the kind of listing I am referring to.
http://valleyrealestate.ohio.remax.com/Listings/ListingDetail_r4.aspx?LID=58594303

You will note that the seller is asking $25K and has already offered to pay closing costs. This home is in excellent condition and needs very little. Based on a full priced offer with a 10% downpayment, 6% for 30 years, this would make the P & I $134.90. Add in taxes and insurance and we are looking at somewhere in the low $200s/month. In other words, this is less expensive that buying a new Buick - and a lot of the people I am talking to see that as value.

Now, one more piece of information I would like to bring to your attention. The City of Youngstown is going to take action to ensure that many of the homes that have been foreclosed on are not left abandoned to decay - for obvious reasons.

As we all know, there are a lot of these low value homes in Ohio that most investors are looking to do something with - I am looking to service that end of the business. It has been my experience that Real Estate brokers are not too motivated to sell a house that will generate three to six percent of $25K. Maybe you are having better luck or using Ebay to dump these properties. I would love to hear how you are dealing with this and if you are satisfied with your results.

Maybe we hit things off on the wrong foot. I'd like to think that we can remedy that because I'm not looking to make anyone angry here or argue the relative benefits of selling homes to people you may not approve of in an area you described as a "hellhole." So, instead, how about if I change the direction of this discussion and ask if you have any properties in Youngstown you would like to sell? If you do, I'm anxious to prove what I can do, given the opportunity.

Welcome Ken.

I am a real estate investor based here in CT. I see your point and I agree with you 100%.

I have plans of moving my operations in Ohio after my vacation from the Philippines.

I am interested in buying REOs that are in need of a good rehab.

I don't know anything about the different places there but I have been doing some research on Cincinnati and Cleveland. Is Youngstown anywhere near these two cities?

Thanks.
tony

Tony,

Cleveland is roughly an hour and a half away from Youngstown by car, whereas Cincinnati is roughly four and a half hours away.

My feeling is that if you are going to become involved in the rehabbing end of the business you need to be incredibly watchful over the process. This will mean that you will either need to be on-site everyday or will need someone you can trust to be able to perform regular inspections on the work you are paying for. I'm not sure how you would be able to do this in two or more cities at the same time without significantly adding to your costs.

However, as I find properties in your target area I will be glad to pass them on to you, and I would appreciate it if you would do the same for me in Youngstown. It might be in our mutual best interests to identify several other people in locations across Ohio to partner with, as Dayton, Columbus and many other smaller cities as well as the more rural areas are going to need to be serviced.

Have a great vacation.

Tom,

Thanks for the insight and what you're telling me confirms my own research. In fact, recently there was a local Youngstown TV news story that talked about scammers selling cheap properties on Craig's List that were condemned. There's always someone that will try and make money screwing people, thankfully they are in the minority.

Without doubt, there are some horrendous neighborhoods in Youngstown, as many of our cities are also plagued with, but the surrounding areas, Austintown, Boardman, Poland and Canfield, to name only four, are now producing some very attractive deals. Perhaps I should have been more clear when I used the term Youngstown, so as to indicate that the city itself isn't necessary my sole focus.

You are also correct in that Midlothian is close to some of the worse neighborhoods, in some areas by only a few blocks. This is again why several people that I have spoken with come from the naturalized citizens category. Traditionally, these are the people who usually will gladly settle in the rougher areas, just as my Italian grandparents did when they came to this country.

I should also point out that I used the Midlothian deal as an example of what $25K can purchase, not necessarily as the kind of property I would buy into, you are 100% correct, there are better deals to be had. And with respect to getting a lot done with a little cash, that's why I'm here, to learn from people like you, who know the "ins and outs" of this business.

One more point, it is my understanding that what Youngstown is going to try to do is come back and levy some pretty hefty fines against landlords and absentee property owners that allow good homes to fall into disrepair. Instead of needing cash, this is a way the city can raise cash - and we all know how governments loves to do that.

Thanks for the advice, I appreciate the time you have taken and I look forward to learning more from you as well as the rest of the professionals here.

Greg,

Interesting perspective, one shared by others here, as you can see.

What should probably be pointed out is that at one time Youngstown was one of the wealthiest cities in the United States, if not the world. There are homes built there that have such attention to detail that it would be all but impossible to recreate in today's world.

Nonetheless, both you and Tom are correct, Youngstown itself presents an incredible challenge, one that I don't think is insurmountable.

As a mortgage expert I will bow to your knowledge with the 203K and Homestyle loan packages as I picked up that information from the HUD site, as you can see here.
http://hud1.towerauction.net/cgi-bin/e24_select_property.cgi?id=412515744&office=e24&state=OH

Please note that HUD is pushing the Streamline loan on that $15K asking price home with the statement "Streamline K Eligible: Yes Maximum Amount $35,000"

There also comes a time when the experts are uniformly telling you that what you are doing is not going to work where maybe I should listen to you all.

Thanks, I guess I need to revisit my business plan.

Ken,

I am not saying to give up on your idea. I just think you are going to have a difficult time getting anyone to move into this area. For the small business owner, you still have to have customers willing to buy your product and a safe place to work. Ytown, doesn't offer much of either. Now as far as Austintown, Boardman, Poland and Canfield.. Oh yeah. If you can find these same type of deals in those citys, then yes that is prime. I can tell you that the last $25K home that I looked at in Canfield, needed around $30K just to make it liveable. The only thing that I have found selling in those communitys for $25K are trailers.

Here's one with a Canfield address, even though I am under the impression the house is not in Canfield proper. This home was listed earlier and reached just under $16K but the sale fell through, as do a lot of auctions on Ebay. I'm passing on it and you're welcome to it if it is something you'd be interested in. I'm not sure what the rents are like in that area but I believe they would be strong enough to support the price of the house plus the cost to bring it up to code.

This house in Austintown sold below $20K and as I understand it the house should rent in the $600 to $700 range one the rehab was done.

Please understand, I didn't visit either of these homes and did not have a professional inspection done, so the actual cost to repair these homes could very well skew the numbers.

By the way, I read your blog and better understand your business model now.

Ken