trying to get started
trying to get started in real estate investing, in googling, came across this site, cashflowbargains (you can add w and com to it to get it) where there appears to be some great opportunities in Florida and Tennessee. Would you assume these deals to be for real? Anyone tried these websites and the deals that they list? Would you recommend one get a first investment property out of the state where one lives? i am in so. cal and most property here is out of my budget. Any inputs appreciated. Thanks and have a good day.
Would you assume these deals to be for real?
I don't assume anything is for real - especially something you find on the internet!
Mike
well actually started googling after attending a local worskhop here in arcadia. It teaches about real estate, takes place at the city's chamber of commerce. The person seems to be reasonable but then what do I know right? Anyways, the opportunity is this, $500 down to invest in a sfr in Sunny Hills which is in a community near Panama City, Florida. There is potential there it is reasoned because of a new large airport that is being built and some other happenings. If you look at the powerpoint on the site on my prior post, I think it describes everything in detail. There is going to be a meeting tomorrow here locally where can get in for $500. Again too good to be true or can be for real? The way the incentives work it seems a good deal, first year mortgage free in incentives. And free to rent out that year so like 2 years ahead. Would you bite? I am tempted but being a first property always thinking too much maybe. Inputs appreciated.
This sort of deal crops here about once a month of so. Maybe its a good deal. I seriously doubt it. IMHO these guys prey on newbies who don't understand the rental property business.
I've not looked at the powerpoint (a red flag in itself), but I'm guessing they have newly built or newly rehabbed houses. They have a deal to get you in for minimal down using their lender. They will guarantee the rent for a certain period. They may have money back at the closing. They do all the property management, making it a totally passive investment for you.
They will make their number look good because the expense will be very low. They will say they are new properties, and they have ready tenants, so the expenses will be low.
At best, they're understating the expenses and covering the shortfall out of their profit for the guaranteed period. After that period ends, and the tenant moves out, you're stuck with the real expenses and the losses become clear.
At worst they're inflating the value of the property and pocketing a nice chunk of change right up front. As soon as the guaranteed period ends, or maybe even sooner, the payments dry up. You're left with a property a long ways off that you can't rent for anything near what they claimed and can't sell for anything near what you owe.
Don't, don't, don't pay anyone anything until you go there and check it out carefully and in person.
In the interest of fairness, I had a look at their preso. I can now say unequivocally this is total hogwash.
Slides 2 and 3 are sufficient. They sell you a house for $200K that rents for $800. Right there you know you are going to take a beating as a rental. If you don't understand why, then you don't yet know enough about rental property to even be considering it. Do some reading here, especially in the "rental property and landlord forum" and you'll get an eye-opening education.
But wait, there's more.
They say the house appraises for $240K. I'm sure it does when the developer's doing the appraisal. All he has to do is sell three houses to three buddies for $240K to establish comps, and there's your appraisal. Happened in several places around Denver. So, he now claims you have $40K in built in equity. Real equity? Zero. A house is its own best comp. If they sell for $200K, they're worth $200K. At best. See what similar houses in the same area, but without all the hype sell for. My guess is these are overpriced by several 10's of thousands.
Now he says there will be 5% per year appreciation. In Florida? In the next two years? Absolutely no chance. Most likely nowhere in FL and certainly not in this out of the way location. I would actually be astounded if you could sell it for $180K two years from now and would be somewhat surprised if you were able to sell it an any price two years from now. The $24.6K in appreciation is pulled out of ... the air.
He also claims you will get $9600 in cash flow for the next two years based on $800/month rent. $9600 in two years is $400/month. Now maybe some how for the next two years with all the incentives (assuming you get those) it does amount to $9600. What about month 25? P&I payments on a 30 year, $200K 7% note are $1330/month. Add on taxes, insurance (this is hurricane territory, remember, and certainly in a flood zone, too), maintenance (they may have built roads and houses but this is ultimately a swamp), and property management (typically 10%, plus more everytime you have a vacancy), and you're certainly looking at close to two grand a month. And the rent's $800. Oil's $130 a barrel if not $200 in two years or less, which puts a crimp in the tourist business.
Look out. You're about to run into a buzz saw. Leave your money and checkbook at home. Better yet, stay there yourself.
[[[[........There is potential there it is reasoned because of a new large airport that is being built and some other happenings....]]]]]
I don't know anything about those towns, but a new large airport is not good for property values.
No one wants to live anywhere near all that noise, so prices near the new airport and under the flight path will take a steep nose dive.
Have you, by the way, even verified independently that there is a new airport going in? Double check every thing they tell you and if you catch them in a lie, back away from the deal.
Also, 5 minutes on Realtor dot com checking the asking prices in that town will tell you a lot about the deal that is being offered to you.
Carelearn,
If it looks too good to be true - IT IS! There are a million people out there trying to separate newbies from their money. If you want to get into this business, do whatever it takes to learn the business and the market where you will be investing. I would also suggest that you join your local REIA, even if you will be investing out of state. Make friends with the SUCCESSFUL investors in your area and ask them how many successful out-of-state investors they actually know.
Good Luck,
Mike
thanks all for your insightful perspectives. I will look up many threads and try to learn as much as possible before getting on first investment property. Seems better to look locally first property since maybe more familiar with it. But then like I said, maybe tougher to look in so. cal but per some other posters, if look still might be possible, just do your due diligence.
what about companies like northpointinvestor that advertise on biggerpockets. I assume if biggerpockets would allow them to be on homepage that they are reputable, is that the case? I assume in everything, one have to do their research and nothing is guaranteed right?
try going to meetup dot com to see if there are any real estate investment groups going on in your area. live where you want , but invest where the money is!
There are good deals in Tennessee. That is my specialty. Unfortunately, there are some real bad deals here in Memphis.
I must get a call a week from an investor that is from out of state that has bought a property from one of these groups that was way overpriced and not in good condition and most likely in a war zone.
The one today had just closed on a duplex. We drove by and it was burnt out over a month ago. The investor said no it is supposed to be occupied. I really wish they would call us before they decide to buy.
If you are going to buy in markets such as this, then it is imperative that you hire a buyer's agent that is looking out for your interest. Even if you do buy from one of these outfits, at least get the opinion of an expert in the local area.
Originally posted by "carelearn":
what about companies like northpointinvestor that advertise on biggerpockets. I assume if biggerpockets would allow them to be on homepage that they are reputable, is that the case? I assume in everything, one have to do their research and nothing is guaranteed right?
We do not screen any advertisers on the site who use Google to advertise on our site. Doing so would be impossible, as there are hundreds of companies that advertise through Google on BiggerPockets. Occasionally we hear about someone who is doing something we do not endorse and we ban their ads, but that is as far as it goes with the Google ads.
ALWAYS do your homework and never take anything as a given. While we do try to screen all of our direct advertisers (non-google ads), we can't assure anyone's business outside our own.
Once you leave BiggerPockets, even through links on BiggerPockets, we can not promise that the business that you're visiting is going to do what they promise. In other words, use the internet at your own risk.
That said, as others have brought up, it is extremely important to have a strong real estate education so you are able to determine what is a good deal and what is not. Many people are looking to take advantage of people who are too lazy to spend the time learning. EDUCATION IS THE BEST WAY TO PROTECT YOURSELF!
I hope that I've been able to clarify things for you, and please let me know if you have any questions.