All Forum Posts by: Frank Adams

Hi danno;

I got started in 1978 when a job in Houston took me away from the SF Bay Area just prior to the prop. 13 election. The next two houses that I lived in I kept when I moved. When the bottom fell out of the RE market in Houston in the '80s I dumped one of them but held on to the other. BTW, during the downturn the AVERAGE house in Houston LOST ABOUT 1/2 ITS VALUE.

In '87 I started buying again, some REOs, some HUDs, some "distressed looking places from owners who were behind in payments. I slammed every extra dollar I had onto principal to eliminate debt (and extra expense) and had 16 places (that includes 6 that I owned 1/2 of each unit with family or friends). Leverage only works in APPRECIATING markets and the market in TX is VERY FLAT, about 2%-3%/year.

When I decided to move out of Houston I started to sell them off as leases ended. I sold two to tenants. I always sold for above market price and a bit above market interest rate. I charge a small down payment (usually $2K), charge $300 or so for document preparation, which I do myself. I've had pretty good success, although I'm in the process of my third foreclosure (cost about $1100 each time), but the previous two I sold for $3K and $20K more than I had the first time I sold them!

I do not do any rentals anymore, TX is a tough market for rentals. I look for deals within about 15 miles of where I live. Although I'm sure there are lots of deals in San Antonio (about 75 miles) and Austin (about 55 miles) I'm not going to spend my time driving to check out and then to do the work, then to sell.

all cash

I wasn't sure where to post this, I figure most of us read "new posts" first, regardless of topic. This is a legal issue but it applies to ALL deals.

The gist of a post that I read on another REI site is this; A guy buys a "fixer" for $95K, puts a couple of thou into it, figures FMV is about $125K (this is a bit thin for most of us anyway) and want to refi and pull cash out. Title report comes back and guess what? He only bought ONE HALF interest in the ppty!!

I get criticized by lots of folks (not on here though) for my sometimes sarcastic answers. I figure a simple straightforward answer will be forgotten by everyone (including the questioner) within 15 minutes of reading it. But by using some "biting" humor it may make for a memorable read. I ddin't post an answer on the site where this was posted, but if I had it may have read along the following lines:

or

But I didn't write either of those things, I figure he might have a hard time reading them through his tears.

As someone once told me about closings and lawyers; "you're going to spend close to an hour, signing about 15 different documents, EACH OF WHICH WAS WRITTEN BY AN ATTORNEY, and you probably don't have much or any idea of what you're signing" Probably a good idea to have an attorney who WORKS FOR JUST YOU."

Just a word to the wise.

all cash

Currently at $4578/month, but will drop $825/month when one sells one Feb. 6th. Three years ago it was $7900/month. I definitely need to find a couple of deals to amp that a bit.

BTW, those are seller financed mortgages, not rents.

all cash

I won't state flat out that it's false, just a bit misleading. Look at any deal, real estate or anything else. There are two sides to the deal "price" and "terms". Any negotiator worth his salt will tell you that a seemingly great price can be negated by unfavorable terms, and vice verse.

I' ve got several places in TX that I'll sell for ZERO DOWN. Of course I'm going to charge well above market price, and well above market interest. The question then is, what will you do with them? At market price they might cash flow, at above market there's no way.

If you're going to rehab, how will you pay for the material and labor? Assume you can buy at FMV minus cost of rehab minus 35% for your profit, which is about where most experienced investors look to acquire. You have "carrying costs" while the work is being done, and no cash reserves to handle those.

Let's use an example of a ppty with a $100K FMV, that needs about $10K in work. If the seller is desperate and I (or others on this site) can pick it up for about $50K we will do so. Some of us will offer the desperate seller CASH, a quick closing and all the things that make his PROBLEM go away. If you come in offering "creative", no money down solutions it's a solution that doesn't fix his problme, so it isn't a viable one.

In your case you bring NOTHING to the table, and desperate sellers are usually desperate because they are BEHIND ON THEIR PAYMENTS. They need CASH to get current, pay to move or whatever. Remember, your looking for "situations" (usually desperate sellers), not properties.

all cash

I've reached the point in my life where I usually just do flips, but making $6K on $26K is 23% return, if you can turn it QUICKLY. However, if you can end up with $30K in the place and have GROSS RECEIPTS of $1400/month = $16.8K/year, I'd have to go that route! Assuming that you estimate of rental income is accurate.

Keep in mind though that lower income ppties come with management problems, late pays, possibility of evictions, higher maintenance/clean up on tenant changes. Still, you could have ALL your money back in about TWO YEARS, which is a very sweet return on your investment!!

I'd probably rent is, if your numbers are accurate.

all cash

My advice would be to SLOW DOWN, just a little bit. You have to present yourself as a confident, can-do person. Unfortunately right now (if I'm reading your post correctly) you're presenting yourself as a bit of a BLOW HARD.

Sorry, that's the way I read someone who calls himself "millenium investors" but not only doesn't have the wherewithal to pull off a deal, he DOESN'T HAVE A CAR in a country with more cars than drivers. I'd start by getting my financial house in order. Instead of "get rich quick" guys (although Robert Allen is a great read) I'd start with Dave Ramsey and get myself "squared away" financially

I don't mean to be unduly harsh. I was in your situation in 1976, newly discharged AF, but 28 years old, liviing in my brother's tool shed. Yikes, talk about your sibling rivarly. First I finished my degree, then I took the FIRST JOB that was offered me, even though it paid less than what I had made in the AF, and got a part time evening job (quite a disappointment as I was a COLLEGE GRADUATE. Within 6 months I had moved up two jobs (still working evenings though-the extra cash was nice) and was ready to buy A HOUSE FOR ME, not an investment house.

Try this, it'll work.

all cash

OK, first off those people barely exist, and the ones that do always make sure that they're suing someone with really deep pockets, large retailers, hotel chains etc. 99.9% of stories that you hear about outlandish lawsuits are complete BS, dreamed up by polititicians trying to pass "lawsuit reform" laws that are much more likely to HARM YOU than to hurt you.

That's why I've always carried an umbrella policy, currently at $1 million, formerly at $5 million, I pay about $175/year for that in TX, probably cheaper in states where insurance is regulated!

Often, how you treated them doesn't matter. If someone gets hurt, they're going to file with their insurer, if their insurer doesn't want to pay (and they never do!), that company will sue you, and thereby your insurer.

A very tiny percentage of injury lawsuits in the US are individuals suing other individuals. IIRC it's way more than 99.9% business to business, almost always it's insurance companies. Which is why insurance companies pay such large sums to own (or rent) their state legislators and US congressmen!

Buy insuance and sleep well at night.

all cash

I've pretty much always operated under my own name. I did form some LLCs and put my properties into them, 3 ppties per LLC, but I owned them free and clear. Having a corp or a LLC is NO PROTECTION if you do lots of things wrong. Doing things the right way is the best protection.

I've been at this almost 30 years, bought and sold between 80 and 100 ppties and owned as many as 16 rentals at one time. I've NEVER been sued, never had any damage that I could call "intentionally trashing" on the part of a tenant.

all cash

Sitting around tonight paying the tax bills on the ppties that we're holding first position paper on. Got to the bottom of the pile and had our two houses and and vacant lots, wrote the checks and realized something:

There's NO PENALTY as long as I pay it by the end of January, we get NO TAX DEDUCTION because we take the STANDARD DEDUCTION. Did some quick math in my head and realized there's no point in taking that money out of the money market fund now when I can do it next month.

Not sure what I'll earn in the MM fund in 30 days, but I drive past the tax office about 3 times a week so it won't even cost me a stamp to pay in January.

Not much, kind of picking nickels out of horse s**t, but every little bit helps.

all cash

Commercial!

When was the last time you saw a bank, pension fund or insurance company investing in residential? Like Willy Sutton, they know where the money is! Also if you're in a state like TX, and a commercial tenant doesn't pay (hey it does happen, I was in Houston in the '80s) there are things you can attach. In residential down here I guarantee you that anyone worth his salt can keep everything he owns EXEMPT from you attaching it.

Better cap rates, better cash flow, longer term tenants... SCHWEET.

all cash