All Forum Posts by: Will Barnard

Interesting blog Richard. I would have to agree that different or changing market conditions require differnt strategies to maximize profits.

My point of the last post was that True wealth is created over a long term through appreciation and not cash flow, residentially speaking. I also refered to commercial properties as the reason for cash flow. Most experts will agree that residential properties are purchased for appreciation while commercial for the cash flow. Of course, a combination of the two never hurts either.

Thanks for the blog post. It was informative.

Jmac,
Just as you would for your persoanl residence, when getting a loan on a residential RE property, you are signing loan docs "personally guarantee" the loan. You are not calling up the bank down the road and saying I know want to guarantee the loan. You gave your guarantee when you signed the loan docs. Putting the property inro an entity in which you own is not transfering the ownership. If you were to quit claim the property into an entity that Josh Smith owns, then yes, the bank would consider that a transfer of ownership and the due on sale "could" be enforced at their discretion.

The point to this subject is getting financing for an investment in which you choose to hold in an entity for liability protection, amoungst other things. So to summarize, you get a loan, signing in your name with your guarantee, and either simultaneously or after the close, you may have title or an attorney file docs to transfer the property into an entity in which you own. No problems, no due on sale clause risk. I have yet to hear one instance where this was a problem or could not be done, or encountered a lender calling the note due.

Many have argued/claimed here on BP that cash flow on residential properties is of vital importance and investors can not put food on the table with appreciation. I disagree. Once you have built a business with many rentals, you could sell one or two, or as many as necessary each year grabbing the gains from it to live off. This is not to say that you should not have positive cash flow on residential properties, you should. Only to say that it is not the only income source form the property.

Another claim is that you must buy at huge discounts to turn a profit in residential RE. Although I agree getting a huge discount is advantageous, it is not the ONLY way. Just because you buy a sfr for $30k and it appraises for $50k, does not assure you have 40% equity, nor does it assure you will turn a profit on the sell down the road. In fact, in many cases, the $30k you paid is all it is really worth and the so called equity in that area will vanish. What is important is the demographic studies: Strong diverse economy, strong job grwoth, improvement in infrastructure, strong potential appreciation, reduced vacancy trends, ratio of supply & demand, and an undervalued market.

I have read here that some buy in lower income areas at 60% of the current value in places that show poor demographics where population is decreasing and jobs are leaving. So just because you can buy at 60% of value today and turn positive cash flow, does not assure a profit down the road. Who will rent the unit when the supply beats demand and when there are no jobs.

I understand and believe that becoming wealthy from cash flow on residential properties is most likely not going to happen. True wealth is obtained from the appreciation and many tax benefits from residential RE investing. Although I beleive in cash flow, and always strive for it, the true ultimate goal is to eventually sell the residential property for large gains and defer/avoid taxes as permitted by law.

Commercial property is where wealth and long term residual income lives. When purchasing a commercial property, in essence, you are buying the cash flow. In fact, it is valued based on it's performance and not what the unit down the street sold for (comps) like residential is.

Again Mike you misquote and take what I said out of context. The aspirin bill was a joke, obviously that went over your head, and I merely stated that an area of such high taxes and lower rental rates is not condusive for cash flow. If you disagree with that, then why are you not investing there rather than OH?

You also choose to go completely off topic. We are not talking about what business I do or do not run, nor were we talking about your business. We were talking about if an investor should make an adjustment to the 50% rule or any other rule they are comfortable using when the area they invest in has notoriously higher taxes or other expenses.

If you insist on knowing, there are many aspects to my business. No I do not rely solely on cash flow to put food in my family's mouth. My business is not one dimensional as yours is. I did not change any number details on my property lists so I am afraid I do not know what you are talking about.

As far as the duplex for $155k, it has a proforma cash flow of $380 per month which includes expenses of ONLY: mortahhe, taxes, insurance, & management. It is up to the investor to calculate the vacancy factor, repairs, etc. etc. etc. etc. etc. These units are brand new and are for an investor looking for income other than just cash flow. That is all that needs to be said as this remains off topic.

Now back to the topic of this thread:

Thanks for the information Jeff, quite informative and I agree with you. India has been in the news a lot particularly all the new malls that are being built by one of the largets developers there. I did hear that people there are paid daily and do not have more than a dollar on them on any given day which is why small, low priced items sell so well there. This info came from a TV interview with a Billionaire from India. If I remeber correctly, he is the largest distributor of hair products.

When investing out of the country, there is much more to consider and investigate than just going out of state. A physical trip there would be in most people's best intertests.

Well said Primo, I agree 100%.

You seem intent on arguing that I am wrong and YOU are right, and that I know nothing and you know the laws as it pertains to this topic. I refuse to argue with you as this will be my last post on this thread.

If I was unclear in my first post, I appologize as I have already stated. I was merely pointing out that investors should act in a conservative and responsible manner and stay on the side of caution rather than a gray area. As I will clearly state, obtaining an OO loan under false pretense with no intent to live there or a predetermined intent on immediatley leaving to rent out the unit would be a fraudulant act AS I UNDERSTAND IT. Again, I am not an attorney.

I also stated that we both agree that senario #1 you outlined is fraud and senario #2 is not. That said, there is no further need for your slander or need to discredit what I do or do not know.

Now let us get back to the orginal topic of this thread which was what is a better deal, a duplex or SFR?

Ryan,
I did not see any response at all refering to only MOTIVATED & desperate sellers. Granted we are on a wholesaling forum topic, but the og question was what to use if any. If you do not use any and that works for you, great. For others, particularly newbies, I suggested using them with "courtesy" as you put it and that is all I suggested. You suggested the same:

You also said:

Ryan,
I was refering to point #1 which would be fraud. I was under the impression that the original question/post was implying that they could say they were going to live there and then move out. If that was the case, I could "say I was going to live there, sign the docs, and then "move right back out. Are you saying that would not be fraud? If I misinterpreted the question, my deepest apologies for offending you sir as I like to keep my @#$^ straight too!

I am not an attorney, and have never stated I am the authority on how a lender would perceive that senario. Are you saying you are? If so, say it so we all know you are the authority on the subject. If not, do not tell others what to say or not to say and how to say it. This is an open forum and we all are here to learn from others as well as teach others.

There are many, many posters here giving there opinions and many more who do not have the slightest clue what they are talking about. I simply posted what I understand to be the law regarding senario 1.

You said that moving out without notifying your lender was the point you were addressing. I was pointing out that if you really had no intention of being an OO, then you would be commiting fraud as I understand it from a non-lawyer, investor standpoint. If I am wrong, please post evidence to the contrary.

Those tax figures compiled with the rents not being higher = no cash flow. I would not invest in an area like that. Negotiating a lower purchase price can only help, but you must ask yourself, can you do better in another market?