Profit, profit and profit.

In sufficient amount and percentage, produced quickly enough.

I specialize in lower priced, $25K-$55K purchase price, FMV of $55K-$90K resale. I'm not too concerned about the amount of work needed to bring it up to marketable condition, but I don't like to put more than $10K-$13K into a property on top of my acquisition cost.

I like to be able to complete my rehab in less than 90 days, that's doing everything except major electrical and HVAC myself. It usually takes me two weeks TOPS to sell once I start advertising.

I sell for low ($2K usually) down payment at 8%-12%, 30 year amortization, 10 year balloon. There probably is NO limit to the amount of those houses I can sell in my market.

all cash

All Cash,

To clarify a bit...

You are buying a property that needs work and you do most of the work yourself. I assume that you buy for cash. Is that correct?

After all the work is done you proceed to sell using seller financing with a $2K down payment.

Are you indicating that you leave the cash you have in the property in the property while earning a good return (the yield on the cash invested is better than the interest rate the note)? Any issues with having all your capital tied up? Even if you happen to have a pile of cash so it is not much of an issue, what would you do to extra some cash if you found more deals than you could fund at any one point?

Some possibilities is to obtain financing before selling and use an AITD/wrap. Or you could sell a partial interest in 1 or more notes that you old. Or you could try to get a loan against your portfolio of notes without a partial sale.

Just trying to understand the model you use.

John Corey

All Cash,

I'd be interested to hear you answer to John's question too.

Hmmm, I had not seen the replies asking for more info. My SOP when I go into bp is to look at the right side of the homepage and see what's recent/active. Sometimes when the site is busy topics that I've bee on get moved out of the top 10.

Yes, everything I/ve bought for the last 12 years, and a few before that.

Yes.

The smarta** answer is, "there's no way that could happen!" Not because I've got so much money, but because I have an objective, and a strategy. My objective is to have balance between my RE and Equities (stocks and stock mutual funds) holdings.

I will never allow my RE to become greater than 40% of my net worth. At present it's about 29%, which includes my residence.

I guess the simple description of my model is that in my deals I am;

rehabber,
General contractor as well as (almost) all subs
selling agent
lender
Collector of fees for writing contracts
Closing agent

I guess you could consider that as having a modicum of control.

Since I've bought a few notes in my day, I know the kind of profit available on that end, so I would never sell one. I've never seen a deal so good that I would give up the money in my hand to go after another one. If I really thought it was that good I guess I could go over my 40%
rule.

To expand a little bit on how I answered propertyhog's initial question.

I see some newbies on here trying to justify going after a thin deal, "because I've been looking a long time ans I need to do one", or "it's better to start on a thin deal to get my feet wet", or, "I want to confirm that this 'system' works". IMO, none of those are good reasons to do deals.

You do deals for profit only. Whether your plan is to obtain that profit in the form of; proceeds from a quick flip, cash flow from renting, option fee from assigning, excess of rent over PITI on a lease option, you have to know before signing anything with a seller which it's going to be! You can't sign up, start advertising, start working on the property and then decide. The exit strategy is really the starting point.

all cash

thats a good point, thank you.

I am thinking of buying a house, i live near chicago the cheapest house,condo etc i can find within 1 hr of my work is about 100k maybe a litte cheaper but thats hard and forclosed, or broken more than my funds will allow. My family say that will be about 850 morgage plus 200-300 month taxes. Keep in mind illinois tollway and gas to get to work will raise it even higher. I make 600 a week no retirement insurance etc it is a family buisness. My wife makes about 400 a week,but can be transfered just about anywhere believe it or not. We are both almost topped off at are jobs. My idea is to buy a move in ready house ,financed in wisconsin for like 35000 pay off all other bills and have the wife transfer there quit my job, and move up there. Will 400 dollars a week support that? What is the deal on forclosed homes will they let us buy one? What about buying your first house 3 hours away? I imagine my new job there will be hard to find and not pay well. It just seems here i will work to pay a morgage gas etc. id rather live in the country. Am i leaving a good thing i am 26 what do you think? Someones opinion would be appreciated.

Well my advice is not going to be specifically house related, more personal.

You wrote;

If you're "topped out" at 26 you need to take action. That action does not include buying a house. In fact I'd say you need to rent the cheapest place you can find and cut all living expenses to the bone.

Then get some education, whether it's college, trade school or what have you. I'd recommend a book titled "28 Days To The Work You Love". I think that's the title.

Visit your local junior college and see if they offer any vocational/aptitude testing. It might turn out that you have a real aptitude for something completely different than the family business and are totally unsuited for it.

Right now you're working for way less than the average income in the US. You could get a job today at Dairy Queen that pays more than you're making.

The only thing that separates your life 5 years in the future from your life today is the books you'll read, the people you'll meet, and the education you'll acquire. Unless you still want to be in the same relative financial position when you're 36, 46, 56 and 66 you need to start taking action today.

Sorry if I sound a bit harsh, but I know what I'm talking about. When I was 25 I was pretty topped out too. HS graduate (barely) and a boss that promised me that if I didn't start educating myself up to my potential that he would do his best to make sure that my future performance ratings would ensure that my military caeer was over.

Get busy man. The future is up to you.

all cash

i here you, but i am saying buying a 35000 house seems to be the cheapest if im getting a new job anyway, plus im paying 890 rent could maybe get 1 bedroom for 650 but that seems to climb fast, is it worth restarting here at these prices? also that income if after taxes, dq will be 1-3 of that really. Thank you

To pick up on a point All Cash made about investing for profit.

A newbie sometimes wants to do a thin deal because they can not find a better deal. Should they?

Pros

1. Experience. Better to keep learning. A thin deal will teach you about doing a deal from start to finish while not doing a deal keeps you blocked.

2. Some profit is better than no profit.

3. Emotional issues related to being frustrated vs. feeling like you have a deal under your belt.

Cons

1. Stuff happens. You could be looking at a sink hole. If the deal is thin on the way it then it is more likely to get thinner then to turn out more profitable.

2. What you do not know you do not know can burn you.

3. Education is fine but losing all your money and damaging your credit while learning is a tough way to go. Credit damage can hold you back for years compared to not having a screw up.

John Corey

thank you that makes a lot of sense, and ive already spent alot $ for my credit.

I believe you should save significant down payment money. Once you have that perhaps your family would help you buy a cheap house or a duplex with you paying everything (taxes, insurance, maintenance, yardwork etc.) The income from a triplex or a duplex leaves you sometimes paying little to nothing in rent yourself. Remember you can only take expenses on the rental part of the deal. Then, hold on to the property, puff it up, keep A1 tenant and sell in two years making part of the deal tax free. Then you have some equity and you will learn to deal with tenants.

The only difference between your situation and a young friend I know who bought 7 properties in the past two years is 1) MBA 2) His father and mother' s money 3) plan 4) desire to quit working as a bartender. He's doing foreclosures (rehab), short sales, long term rentals, etc. all at once. Other people's money and family financial backing.

people who invest are looking for a cash cow! A property that has equity in it.

Yeh, alot of condo "investors" in Miami are finding out how fast chasing a sure thing in real estate can turn on you overnight. Did anyone see Schiller on tv last night advising home owners to stay put in their homes and if they own two or three-selling so not to have so much "exposure". Newbies had better know their market thoroughly by research and talking to mentors and experienced investors before testing the market these days. Follow experienced advice.

Talked to a grandmother yesterday who's daughter moved in with her and left her house (with her animals in order to show her house)--and one year later the water pipes burst and damaged the house significantly. Took one year to sell and wound up with enormous expenses and a "tremendous loss" in value. The realtor had assured her daughter it would take 6 weeks to sell the house.

Seasoned real estate brokers state few people have excellent credit while operating in a tighter lending environment. Thin deals aren't going to get you anything but trouble.

Interesting.. everyone says the money is the bottom line.. but I have learned that experience and knowledge is also extremely important to them. Why would they want to get involved with someone who doesn't know what they are doing, or can mess things up?

Any thoughts on this?

One thought is that experienced investors know what they're willing to deal with. They know how to structure the deals they're looking for. So long as a transaction is within their scope of knowledge and experience, there's nothing to worry about, regardless of if the other person is green.

If a new guy brings an investor a deal where the math works out and the right clauses are in place, what's the problem?

I agree, but ultimately the best investors(not necessarily the good ones)[/i] are the best psychologists, they study human nature and social interactions and after they are done looking at your shoes......they'll look in your eyes and either feel confidence or trepidation......they can basically smell fear and treachery.....So, if you are going to present a deal to and investor...whether is a private, institutional, etc.......make sure you ask yourself the ultimate question...."is this a deal I would take on if I were on the other side of the table?"....if the answer is YES....make sure you've done your homework!......if the answer is NO.....pray that your dealing with a rookie or someone who doesnt care about their money.....Believe me if the deal has merit he'll do it and most likely he'll do business with you again, he'll lend you or JV, or invest with you once more.....and if he doesnt, he might recomend someone to you......and if he doesnt.....at least he'll respect you and keep you in his e-mail list.....who knows? you might get a call out of the blue one day......

take care

You can not answer that question I am sorry. I purchase home Subject to and I have no problem with little to no equity. As long as I get 2-3 mortgage payments out of the seller I will take the home. Provided the interest in 7.0 or below and fixed.