Originally posted by Bryan Alenky:
you seem to go off on a soapbox issue of yours in just about every post i've seen you write, whether it's the younger generation, or predatory lending, etc. it's always a story with you. there's plenty of hardworking young guys in business and on this forum, so give some of us a break, will ya? you have plenty of experience, and i'd love to talk real estate with you as you're very knowledgable, but i know when i ask you questions, you'll probably shift the topic to one of your tangents.
Hi Bryan, I know, thanks for the reminder, I'm getting to be a cranky old man! It happens to alot of us especially after you try to hammer away at ethical issues and it seems it doesn't sink in. I've noticed your attitude is very forthright and enjoy your communications and questions, even in your replies I've noticed a higher level of professionalism, so it's not just the younger generation so much as a few that seem to lack the business ethics necessary to be successful in this business. And, we certainly have older investors that have been shisters for years, but then you'll notice that they are not really what I would call successful either....money alone does not make one a success in my book.
Looking at a reasonable profit, you might consider the cap rate as we use that as our expected return and in the valuation of properties. The cap rate reflects the risk assumed, as pointed out above, and the return on our investment as well as the return of our invetment.
If you go to an attorney who has been in the business for 2 years, the value of his services will probably be less than the one with 40 years experience, not so much as he knows more of what is contained in the statutes, but that his experience in applying the law to benefit his client.
The skills you acquire in real estate are similar, if you are new and you flip a property that was not touched and you try to get 35% profit, and get it, you may be viewed as greedy considering what you brought to the table, more like lucky, but if I made it, those in the business would probably say something like, he identified a great bargin and worked magic to bring it to market value. Is it fair? No, probably not, while the young attorney may not be viewed as experienced, but if he is talented and demonstrates his ability to win, the value of his services go up, in time.
Being seen in your community as to how you operate is very important in this business. I'm in a small city, 150,000+ with about 10,000 agents, but news and the word travels fast. If you get a reputation of being a ripp off artist, you're dead in the business, no one will work with you....black listed! So, as one becomes known and accepted in the community (and the business) you can make that extra 5K, maybe 10K....maybe 50K on a deal that most would only pull a modest fee out of and without scrutiny.
Guess what I'm try to say is that new folks should not expect to walk in the door and pull out as much as an experienced investor in some cases. Many times it's best to be stealthy and testing the waters, making a reasonable amount of profit in a community than walking in and trying to pull out 35% profit...I guarantee you people in the business will be watching you and the first thought will be that you pulled a fast one....just human nature, IMO. And, if it's too much, that's when others will begin to squak, maybe call their attorney....
So, make what you feel the deal is worth, what is reasonable for the effort, risk and expertise required to put the deal together.
Again, sorry for the brashness. Good luck!