My neighbors advice - dont touch real estate right now with 10ft pole

My neighbors advice - dont touch real estate right now with 10ft pole

TX · Member since 2009 · 122 posts · 11 votes

Was up early a few weeks ago listening to a radio show about RE investing. It was Bob Diamond. Somewhere along the way, I called their number to get their free audio cd's and book. Ive been listening to the cd's on the way to work. At first I was about to throw it out the window, but then a few of the techniques caught my attention and sound like something I could possibly handle.

So now, im on a quest to explore this subject some more. Im reading his book and going to also get RE investing for dummies, as Ive seen it recommended here a few times. I read the table of contents and reviews over at amazon and seems like a good place to start.

Now on to the subject of this post -

I was talking to my neighbor a few days ago about my thoughts on getting into real estate by finding bargains and doing some minor fixing up and then listing them. His reply was "I wouldnt touch real estate right now with a 10 ft pole".

I know that the market as a whole is way off from its highs, but my reply was "its all how you buy the property".

I suppose my question is, what techniques can you use to get an idea of how quickly a property that your interested in might sell ?

Also, If it takes 2-5 months for a property to sell, and you have to finance, wont this just about eat up all your profit ?

So now im off to read RE Investing for dummies to get a place to start.

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Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes

What does your neighbor do? How is he investing today? What is his net worth? Is it growing? Is he the one you want to emulate?

Would you rather buy real estate for 50 cents on the dollar today or 85 cents on the dollar in a couple of years when the market is booming again? I like buying dollars for 50 cents. It's got me looking for 40 and even 30 cent dollars.

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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
17y
What I like about your neighbor is when we are all making good money with real estate, they will still be broke just like I am guessing they are now, and they are probably older also. Its like the stick market, you buy when everything is low.
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J ScottPro Member
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Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
17y
It's a tough market to sell property, but it can certainly be done (I've sold 5 rehab properties in the past three months)...

Here are some things to keep in mind:

- Take the costs of holding your property for several months into account when doing your analysis. For example, expect to pay 6 months of insurance, mortgage, utilities, etc. And make sure that these holding costs are figured into your analysis and that you can still make a profit even with those costs (YES, you can find plenty of property that can still turn a profit even with months of holding it).

- Get access to the MLS or to a trusted realtor to help you figure out how much properties in your selected area are selling for and how quickly. A good realtor should be able to tell you things like, "If you are trying to sell a 30 year old 3/2 ranch house in a good condition within .75 sq miles, you should expect to get about $146,000 with average days-on-market of 84." This is the information you need to figure out how to price things and how to determine hold times.

- Look at 200 houses before you make an offer on one. If you're motivated, you can do that in a week, though don't rush it.

- Find a competent GC who can help you determine rehab costs for any properties you're considering buying.

- Keep in mind the 90-day FHA rule, which basically says that you can't resell to an FHA buyer within 90 of you purchasing the property. Therefore, expect AT LEAST three months of holding costs (though generally it will be higher, rarely will it be lower.

- Pick up a copy of the book "Flip" by Gary Keller. Before you do that, read "The Millionaire Real Estate Investor" by the same author.

As for your neighbor, he's right...he won't touch real estate these days. And he'll also miss one of the best buying opportunities of our lifetime. You, on the other hand, should start learning everything you can so you can take advantage of this opportunity.

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Joseph M.
Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
17y
There will be a time when the gloom and doom is over , then it'll be like 2001-2006 all over again. People will be talking about how great an investment real estate is , and they'll be buying second homes (remember all those articles about people buying second homes?). Just think of how happy you will be knowing you bought when things were cheap.

You just have to ignore the advice of people that don't have the investor's mindset. They'll tell you "it's not worth it" ..it's "too much of a headache",etc ,etc.

After all of your hard work and research investing, after they see your success they'll say "you got lucky".

I'm viewing this as an opportunity, as before it would be frustrating not being able to find investments that cash flow , today it is much easier. It's not uncommon to see properties that are 70% off of their highs from a couple of years ago...and those are the asking prices.

It looks like you are trying to flip though, and I don't think it's necessarily a bad time for that. Before it was harder to find foreclosures ,fixers and the fixers were not priced accordingly . Now fixers are priced more in line with what they should be so there is more of an opportunity to put some sweat equity into something. Of course before everything was appreciating so quickly that nobody really cared what they were paying..because they knew "it was going to be worth more in a few months".
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Ben Jamin
Homeowner · Centennial · Member since 2009 · 2 posts · 0 votes
17y
I am new to the game myself, but the condition of everything is exactly why I am in the real estate business. It took me a little longer to convince my partner, but he sees all the upsides of investing in these economic conditions. It's all in the way you look at the world.... I see opportunity
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Bryan Silver
Real Estate Consultant · Seattle, WA · Member since 2008 · 134 posts · 10 votes
17y
No Name:

You neighbor is absolutely right. If you don't know what you are doing. You have absolutely no business getting involved in RE market. However, those of us that have been at this for awhile, have never seen such an opportunity for prosperity.

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Jim Doine
Real Estate Investor · Myrtle creek , OR · Member since 2008 · 343 posts · 13 votes
17y
Hey Ben Jamin, welcome to BP, love your ride, I'm a car enthusiast as well, you should introduce yourself in the new members forum, where are you from? Jim
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Kathie Shandro
Involved In Real Estate · Denver, CO · Member since 2009 · 1 post · 0 votes
17y
Glad to hear you're not listening to your neighbor! RE investing is not rocket science. Anyone can learn the fundamentals with ease.

Surround yourself with professionals who can guide you and advise you. Each market is different. Here in Denver, I'd advise someone in south Denver differently than someone in Littleton. It's important to know the unique buyer trends in each neighborhood.
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Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
17y
What does your neighbor do? How is he investing today? What is his net worth? Is it growing? Is he the one you want to emulate?

Would you rather buy real estate for 50 cents on the dollar today or 85 cents on the dollar in a couple of years when the market is booming again? I like buying dollars for 50 cents. It's got me looking for 40 and even 30 cent dollars.
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Harrison Painter
Indianapolis, IN · Member since 2008 · 759 posts · 185 votes
17y
- Buy when everyone says not to.....

- Sell when everyone else is buying......

The herd is usually wrong!!!

* CNBC told eveyone that AIG was too big to fail, GM was a great buy at $10.00, and the banks were as solid as it gets for an investment!!!

* Remember the internet bubble? Don't worry that the company is not profitable, Pets.com is THE NEXT BIG THING!!!!

* Remember when everybody was paying thousands over list price and having bidding wars over real estate?

There are a whole lot of "Where are They Now" episodes in production! :wink:

My advice:

- Buy Real Estate

Investors need to make decisions based on research and numbers, leaving emotion behind! When the masses are filled with fear, the quiet folks are out there making money!

Good Luck!
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Account Closed
Manhattan, NY · Member since 2008 · 801 posts · 61 votes
17y
When everyone else is greedy, be scared.

When everyone else is scared, be greedy.

If you have a long term outlook, now is an EXCELLENT time to invest in real estate.

It is also a great time to invest in the stock market but not in the traditional ways. But, that is for a different forum.

There is no point in trying to convince others of the wisdom of buying real estate. They either get it or they don't.

My advice? Just quietly go about your business and acquire your properties. Ten years from now you will be glad you did and they will still be wondering why they can't seem to get ahead.
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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
17y
Where are you getting that from? That is not true. If your end buyer (FHA finance) is buying at a higher price than you paid for it, all FHA requires is two appraisals and a close evaluation, not 90 days seasoning.
This is taken from the FHA guidelines page:
"Appraisers must identify all sales activity on the subject and the comps for the prior 3 years. For purchase transactions, the underwriter must carefully review if the subject property was purchased by the seller less than 1-year prior to the borrowerâ€™s application for the mortgage.

If the Seller has not owned the subject property for over a year, the underwriter must obtain information on the price the seller paid for the property and the exact date the seller purchased property. Any increase in price within the first year after the seller bought the property must be carefully analyzed and appropriate steps must be taken to justify a value/price increase.

Cost of renovation and improvement may be required from the seller and a second (FHA) appraisal may also be required. The FHA underwriter is to follow the PA Bulletin 03-044 that outlines the steps to be followed for property being â€œflippedâ€. Note: Any costs involved to validate price increase may not be charged to the buyer."
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Mark N.A
Real Estate Investor · North Carolina · Member since 2008 · 1k+ posts · 483 votes
17y
No Name:

Real estate is NOT a fast and easy way to wealth. Then again, it certainly is for a gifted few.

In my own case it has taken persistence, patience and perspiration. And luck! You cannot prepare for every Black Swan event.

I believe most of the succesful investors here live, eat, sleep and dream Real Estate. It's their passion and they love persuing their passion.

Your neighbor's words are good advice for a majority of people. Many people are just not 'wired' to succeed in REI.

But if you are then jump on in! We keep score with dollars, and while it's fun to grow 'em, it really really sucks to run out of 'em.
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J ScottPro Member
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Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
17y
Will,

You're wrong on this one:

http://www.hud.gov/news/focus.cfm?content=2003-05-02.cfm

"Re-sales occurring 90 days or less following acquisition will not be eligible for a mortgage to be insured by FHA. FHA's analysis disclosed that among the most egregious examples of predatory lending was on "flips" that occurred within a very brief time span, often within days. Thus, the "quick flips" will be eliminated."
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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
17y
I'm not wrong. I was quoting an article on the web. If it is wrong or outdated, then so be it.
I will read the link you sent. How are you so sure that your link is the current accurate doc and not the one I quoted?
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J ScottPro Member
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Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
17y
Originally posted by nationwidepi:
I'm not wrong. I was quoting an article on the web. If it is wrong or outdated, then so be it.

So, if you quote something that is incorrect (i.e., you don't check your facts), then it's not your fault?

I would suggest trying to take a bit more personal responsibility for your actions and your words. There's nothing wrong with admitting when you make a mistake, but denying it only makes you look untrustworthy.

Just my $.02...

Originally posted by nationwidepi:

I will read the link you sent. How are you so sure that your link is the current accurate doc and not the one I quoted?

Because I don't just rely on what I read on the Internet...I rehab and flip houses for a living. And every time I put a house under contract to sell to an FHA buyer, his/her lender forces me to wait 90 days before the deal closes.

That said, I wish I was wrong about this (as do all the other rehabbers I know). It would make my business a lot easier.

And if I am wrong about this, not only will I happily admit it, I'll jump for joy.

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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
17y
I have no problem admitting when I am wrong. What I was saying is that I took the information off their site and copy pasted the verbiage. If it is my responsiblity according to you, then so be it.
If that is the case, every person who posts a bulletin on an article here must accept "responsibility" if the article is incorrect?

I just had this conversation with my lender last week to confirm I will not have a seasoning issue with my FHA approved buyer who I am flipping a short sale to via double close. He told me as for now, we were in the clear but it could change come June 1.
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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
17y
Originally posted by J Scott:
I would suggest trying to take a bit more personal responsibility for your actions and your words. There's nothing wrong with admitting when you make a mistake, but denying it only makes you look untrustworthy.
Untrustworthy? Are you kidding! I "suggest" you make sure you post current information from your sources before trying to discredit me.
I just went to the link you used to state I am wrong and noted that the article is from May of 2003! That is 6 years old!
Here is the copy paste from your link:
"The Daily Message

Friday, May 2, 2003 "
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J ScottPro Member
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Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
17y
Originally posted by nationwidepi:

I "suggest" you make sure you post current information from your sources before trying to discredit me.
I just went to the link you used to state I am wrong and noted that the article is from May of 2003! That is 6 years old!

Just because a rule was written six years ago doesn't mean it's not still in effect (sorry, thought that was obvious). Instead of arguing with me, why don't you just do a little research. If you did, you'd quickly realize that you are wrong.

Don't feel like doing the research? Let me help...

Check out Section 203.37a(b)(2) of the current FHA regulations.

Yes, the rule was written six years ago. Yes, the rule is still in effect. No, this is not an obscure rule...every investor I know who rehabs houses is all too familiar with this rule.

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Harrison Painter
Indianapolis, IN · Member since 2008 · 759 posts · 185 votes
17y
Let me help you fellas out here........

While there is a rule that has been in effect since 2003, there was a waiver of this rule signed on June 9, 2008 for a period of one year.

Waiver of Requirements of 24 CFR 203.37a (b)(2)

So It looks like Will is still trustworthy......at least until June 9, 2009!! :lol:

Look, this stuff is all confusing, and this market is changing all the time. So for anybody to say with confidence that they know exactly what is going on is just fooling themselves.

Heck, this waiver could have already been waived! LOL

The only plan of action I have is to consult with my Mortgage Broker, and pray that he knows what he is doing!
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Account Closed
Manhattan, NY · Member since 2008 · 801 posts · 61 votes
17y
That waiver only applies to properties sold by a mortgagee less than 90 days after getting title through a foreclosure action.

In the case of the double-close flip of a short sale Will describes above the waiver is being used to allow FHA insured financing to the end buyer. There are exceptions to this exception.

This however, should be a lesson to everyone. The people posting here post based on their own experiences and opinions. There is no research staff to rely on to verify or refute anything. It is up to each reader to verify and validate everything the read.
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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
Here's a link to the waiver Harrison mentions: Waiver of Requirements of 24 CFR 203.37a (b)(2).

Taz makes an excellent point. Do you own due diligence of any advice you receive here.
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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
17y
Originally posted by Jon Holdman:
Taz makes an excellent point. Do you own due diligence of any advice you receive here.
And I would add to that, attempting to "prove" someone is wrong from information they copied directly off the FHA website is not the best course of action. Lets face it, the lending market is basically so screwed up write now, lenders themselves don't even understand or know all the rules as they change by the day. It is not a matter of who is wrong and who is right. In many cases there is no right or wrong, just multiple ways of doing things.
Originally posted by Harrison:
Look, this stuff is all confusing, and this market is changing all the time. So for anybody to say with confidence that they know exactly what is going on is just fooling themselves.
The only plan of action I have is to consult with my Mortgage Broker, and pray that he knows what he is doing!
Exactly what I did, which is why I posted what I did from the website directly.
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Harrison Painter
Indianapolis, IN · Member since 2008 · 759 posts · 185 votes
17y
Point to Ponder: BP has set a very high standard of excellence, and we as members need to work hard to maintain that reputation.

That said, this is still a public forum and all advice needs to be researched that it is not only correct information, but if it will work for a particular situation and location.

Just keep in mind that there is something to be learned in real estate every single day, and no two transactions are ever the same! :D
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Michael Culler
Real Estate Investor · Tampa Bay, FL · Member since 2009 · 180 posts · 17 votes
17y
Doing the opposite of what the masses say is always good.

When the market was getting sick appreciation, and even a guy with a crappy credit score could get a stated income 100% loan, it was time to sell property. You could do just about anything involving real estate and make sick money from 2003-2006. You could easily see that it was a house of cards waiting to come down if you were looking from a lenders perspective.

However, now that MOST people dont qualify for conventional loans, it is time to be a buyer of real estate. In my market at least, a buyer is such a precious thing, you want to nurture the buyer, caress the buyer if you will...

So if you find yourself in a situation where YOU can be the buyer. You have a lot of power in this market. This means you can cherry pick, make low ball offers, etc...

This is a market where the buyer holds the chips is all I am saying. Will the market continue to spiral down? Perhaps, but that doesn't matter if you buy for under 50 cents on the dollar and cash flow, right?
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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
17y
I agree. Don't follow the sheep, go against the grain.
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