All Forum Posts by: Michael B.

Here's the important part:

Not something to laugh about, either out loud or silently.

Clean up that mess first. That comes before investing or buying a personal home. To use a Dave Ramsey phrase -- When broke people buy real estate they become broker.

I really don't see a need to wait until after buying the personal house to start investing. However consumer debt comes to the front of the line. Clean up the student debt over the next few years, and also any other consumer debt laying around (credit cards, cars, etc.). Then you'll be ready to invest in real estate.

Until your personal balance sheet is in order don't go borrowing more for real estate.

Really bad idea.

How long do you plan on having this mortgage? Another 20 years, maybe?

The financial industry is changing quickly. Practices that were acceptable only a few years ago are somewhere between forbidden and illegal. Something like this has the potential to bite you when you least expect it.

I think Ned came pretty close:

But you're going to hold this mortgage for a very long time. Today's market won't last. It will probably get better and worse over the life of the mortgage. Bankers will come and go. And at some point some fiery young VP will want to make a few bucks for the bank by harassing loans not in compliance. That could mean due on sale, legal fees, rate hikes, or a dozen other ways of making your life miserable.

To succeed at real estate you have to play the long game. Don't let some minor momentary gain endanger that.

I take just the opposite tack: I tell my tenants that renter's insurance is an overpriced ripoff and probably will be of no use. Don't waste your money. The value they assign to a 4 year old couch or dress is so low it's not worth pursuing.

All small insurance policies (renters, vacation insurance, extended warranties, full coverage on older cars, etc.) are overpriced and great moneymakers for the companies. But they are of very little value to the customer because the payouts are so low and so improbable compared to the premiums.

The basic rule of insurance is that if you can afford to take the loss don't buy the insurance. And buying renter's insurance is one of the worst offenses to that rule.

A single discussion on a single website does not a good sample make.

New construction tends to be a very cyclical business and it has some really big players nationally and in most regions. The entry point is higher than rehabbing (depending on the definition of rebabbing) and it's more sensitive to economic downturns. All of which add risk.

Investors vote with their pocketbook on what's best for them. Indeed rehab profit margins have slipped over the last year. But in most areas the number of rehab jobs happening at any given time greatly outnumber the new construction projects. Meaning lots of very savvy real estate investors that think their path to profit starts with an ugly house, not a pile of dirt.

Land contracts are inherently riskier than regular sales, and you have to be compensated for taking the risk.

Most of the time the price is raised, along with a reasonable interest rate. Maybe sell for a 20% above appraisal. More important than getting an interest rate is getting a good down payment, at least 15%, preferably 20%. That will keep him interested in paying and give you a little cushion to get him out if it goes South.

But a last note of caution. You're asking for trouble when you sell to a guy who can't qualify for a mortgage. That means he's stiffed creditors in the past, why would you be any different? You're taking a risk that is too risky for the banks. Understand that if the economy falters further there's a decent chance he'll stop paying, and if that happens there's a decent chance you'll have to spend a significant amount on lawyers to get a clear title again.

But it's all bad. I've been involved with 4 land contract deals over the years. Only 1 of those had any issues, and on that one we were able to work out a solution eventually. But just understand that if things go bad it's going to be harder to reclaim the house than it would have been to evict a tenant.

I'm not sure that's true. They don't have to tell you anything, but they can. I've found that some will some won't. But I've called and gotten info several times.

John Bagwell:

Are you saying that California describes Note Finders as blood sucking parasites? That's harsh, even for California.

Brian Burke

In Florida the HOA can usually tell what is owed in HOA fees. However frequently they don't have the total to include attorney and interest fees. That is something that I learned the hard way as mentioned above. The 'other' part ran the total to $10,000 in my case when I was only expecting $6,000.

Lesson learned.

The numbers look good. However for your first deal, are you up to managing a cheap duplex in Price Hill?

Cash flowing deals are easier to find in tough areas, but it takes a special type of landlord to profit in such areas. Tests can come when you least expect them.

But I seem to recall that East PH was worse than WPH. But I could be out of date since I left Northern KY several years ago.

I'd be careful about marketing yourself as a 'Wholesaler' to the general population. To a lot of people a wholesaler is the guy who sets up a table at flea markets with steak knife sets, exercise videos, and ratcheting screwdrivers.