All Forum Posts by: Kathy Potter

Terry,
Real estate dealings should be above board and straight forward, even if you are doing creative things. If you need to skirt the earnest money issue or try to hide the amount, you might want to consider a different approach or presentation to the seller. An approach that makes them comfortable even though you put up low earnest money. Maybe ask Jason what he does or says to make people ok with $10.

I am in a high foreclosure area. Sales are picking up but they are primarily REOs. If owner occupied wants to sell right now they have to match the foreclosure price. Appraisers are using foreclosures as comps becuase they have become the market. Short sale sales have really slowed down. Agents and buyers don't want to deal with the frustration of those.

I don't see an end in site to our flow of foreclosures here but I think we are at the bottom for price in the lower end properties. The cheap REOs are getting multiple offers and the multifamily properties have good cap rates (10%) at current prices. Investors are buying like crazy right now. I am wondering what that will do to our rental market which has remained strong, will there be a glut or will all those foreclosed people need a place to rent?

Our foreclosure supply will be fueled by our price declines and ARM adjustments. People who bought or refied in the last 3-4 years are too far upside down to sell. They have lost jobs, were in real estate related industry or just in over their heads. Some simply don't want to pay for something they are $50K-200K upside down in, thinking that is a bad investment. They will stay without paying as long as they can, then walk away.

Four plex sounds great! Make an offer on the duplex at a price that makes you money and see if they take it. So many buyer's markets now and chances are good they have a financial need or wouldn't try to sell in this market. Make an offer with an attached financial explanation to back it up.

What do they owe on the duplex? Maybe the price they are trying to get has something to do with that and it might not work for them otherwise (but not your problem) or they would need to do a short sale.

If it doesn't work out just buy the four plex.

Offer them less for the duplex. If you buy both they may go for it. If it doesn't cashflow chances are good no one else will buy it for what they are asking.
Income property values are based on the revenue they produce. So there is no rule than duplexes appreciate better than 4-plexes or any other over another. Properties with higher Net Operating Income are worth more than those with lower NOI.

Can you put more down and it make money then? If it doesn't work out, just buy the 4-plex. Good luck!

We can all see a house needs paint, flooring, cabinets, etc. Those things are pretty easy to price, just know how much you need and the cheapest place to get them.
The harder things are things that are more than skin deep, a/c, roof, plumbing,electrical. Find a handy friend, contractor, home inspector, etc to help you learn about those things. Someone who will check out a house with you and point out those kind of things so you can learn. Even if you have to pay them, it will be a hands on education and their expertise could prevent you from making some very costly mistakes.

Great advice GoGlobe about the email lists and about the professional organization contacts. A closer and more trusted source is always best.

correction to my bad math in the last paragraph...One property at $700/month is 8.4% ROI. Three at $300/month ($900/month) is 10.8%.

Thanks Tim! Cute dog.

Thanks Jason!

When you decide to take equity from one property to by another, or several more, you have several options in "traditional financing". The HELOC we have discussed has the lowest fees and the least amount of paperwork, but usually is adjustable monthly and tied to some index, usually prime. So if you have a HELOC open for a while your costs could vary with rates going up and down.
You can do a "cash out refinance" instead, where you pull the equity from the property and have a new loan amount in all one loan. In the above example you would have one loan for $240,000, not a first mortgage and a HELOC. Or you can do a fixed rate second mortgage for the equity. Both of these options allow you to be sure of what your costs will be every month. The costs to get these may be slightly higher so you need to consider that too.

There is never one rule for how you use your money to invest in real estate you just have to know your deals and be sure they all make sense financially. Although there is usually one rule for all, and that is LEVERAGE your money. Example, If you have $100,000 cash to invest. Say you put it all in to one property and it makes you $700/ month cash flow, That is 7% return on investment. Say you take the $100,000 and buy 3 properties and they each make you $300/month, so $900/month. That is a 9% return on investment. You have a higher ROI if you find the right deals. Now you have 3 properties someone else is paying for for you and you have three properties, instead of one gaining value (Hopefully).