All Forum Posts by: Charles Worth

@Ryan Van Fleet

It is not unusual to see $650 though I think $500 - $550 is more typical. 

@Stephen Lee

It doesn't work like a typical transaction. There are various regulations both internal and external that are followed and the reason behind certain things can be unclear. For instance, they may already have a buyer but they need to list it per the fiduciary duty of the bank. In that case, they may not want your offer either because they have people buying a package (same money, less work) or they know the person well, etc. there could be a bunch of reasons. From the person's perspective dealing with it, your extra $5K makes almost 0 difference they would much rather have an easy compliant process.  So unless you are going well over what they already have or get their attention some other way (i.e. they know you will buy a lot of properties, be easy to deal with etc.) it doesn't make sense to deal with you in some cases. 

@Account Closed  is trying to make I think is that when flipping is a business its the same.  When you rent a home you have people who go out, make money and pay the rent that is how you make money. As a flipper you have people who go out and work (contractors, project managers, etc.) and the flip sells thereby paying you as well. When you treat it as a business that money comes in just like it does in a rental. You have property managers, Jay has project managers. If you didn't have property managers you would be dealing with leaky faucets and complaining tenants and I am not sure why you think thats better than dealing with contractors, brokers etc. on a flip.

Now what i think is probably more being discussed is the various characteristics of the two strategies and here is where I think it pays to have some perspective because it highly depends on your situation and the market. Do you need the money now, many people do which is why they flip. What is your tax bracket? In a lower tax bracket flipping makes much more sense than a higher one, etc.

 Than there is the market, if people are overpaying for properties flipping can make a lot more sense assuming you are ok with the timeframe. It can also be a lot less risky to flip than hold if the prices are not right. Also, TK companies who flip to investors often operate in areas that are def risky for holding properties without the right managers. 

Also, considering you sound like you are getting in with little of your own money that means you are levered. It may seem like a dream but what happens when you have a huge capex hit in multiple properties or a string of vacancies, what would happen if you had 100 properties and that happened? 100 properties also means 100 properties you need insurance on, 100 properties you need to keep track of etc.  If you levered each one at $100K per property it also means $10MM in debt, good luck getting more debt if you find a great opportunity with that kind of balance sheet. 

Oh and if the market goes down you have 0 equity which means those properties can't be sold or refied without taking a hit and if you overpaid the problem is even worse.  Ask anyone who said the same free money thing prior to 2008. 

And when all is said and done let's say you make $200 a door cash flow per month which is $2.4K a year, it will take 10 - 20 years to make what the flipper made in 6 to 12 months. Of course, in the long run rentals will be better off its true, also taxwise its much better to do rentals at least for much of the portfolio and if you have appreciation rentals are way better but that is a lot of qualifications and as I said at the start not even fits that and not every market is in the right time for those assumptions 

Not saying you are wrong just that there is a good reason and various risks with both strategies none are really right or wrong. 

@Joel Owens

not to take over this thread but it seems to have already done in another direction anyway.

Considering your very informative post, where are you seeing that type of opportunity now considering it is long gone in most places?

@William Englehart

I came to the same conclusion and they also couldn't find my properties that really made sense under my standards. Its really MLS inventory sold by brokers was my take on it.

@Alex Zuroff

I have found that the estimate of appraised value is typically fairly spot on, Alex has been good at estimating that.  That being said, I would ask Alex if that number is appraised value he is normally very responsive (I really never bought off the web site).

@JR Hinds  agree on property management though I will say because its section 8 the process to fill vacancies is longer because you need to get an inspection etc. you can't just move someone in there and if they did you would regret it least that is my take and yes def frustrating. 

@Jeff Schroeder

Not that it was addressed to me but I was initially not going to do TK or Chicago before I met Alex. I think Alex and his reputation is the most important piece and he has stood behind his product even when he didn't have to.  He doesn't sell anything else (no courses, classes etc.) and doesn't really do the hard sell. 

@Ryan Pounds

you are asking the wrong questions. I was a little younger than you when I first made good money I worked at a major investment bank with computers) and by the time I was in my last year of high school I made a good amount more than anyone in the school, teachers included. I can tell you that money means 0 right now. No matter how much you make it will be a lot when most people you know make little ot nothing and when you probably have few expenses. Rather, than focusing on money you should focus on experiences. Learn as much as you can even if you make less money doing so at first. It is those experiences that will build relationships with the people, teach you what to do and what not to do and give you leg up on people who started later. With those tools, I would be surprised if you don't have the tools to reach your goals. 

@Thomas Clark

A ton of ways to fail but here are some:

1) Bad landlording including not screening tenants right, letting them do things you shouldn't have etc. vacancies, evictions and/or tenant damage can kill. Get a professional tenant and you could be in for death by a thousand cuts. 

2) Not knowing your numbers - If you buy with the wrong numbers you can get in trouble quick. if you just assume that you buy for X rent for Y and pay Z in mortgage, insurance and taxes you will be in for a big suprise when things start breaking etc. turning your good investment into a money trap

3) Related to number 2 and a fairly common one if you spend all your profits and don't reserve when suprises hit you will not have enough money to cover it

4) Not keeping up the property - No one wants to live in a dump, a slum lord attracts slum lord tenants and this can eventually catch up to you

5) Speculating  - This could go very well or very bad. However, if you are incorrect and you have a negative cash flow property you bought because you thought you would make it back in equity and the market turns down you will eventually fail

6) Over-leverage - If you buy too many properties and something happens (market downturn, property problems) the bank will foreclose on you.  In addition, some loans can have 5 or 10 year terms or not be fixed rate so if rates rise or you need to refi at the wrong time, sorry you lose.

7) Overpaying - If you buy a property at too high a price you can cash flow but still lose because when you exit or try and refi you will pay around 5% in many cases to get in and out plus maybe not get your full purchase price out.

8) Construction/contractor issues - contractors who take your money, do a poor job, take away too long etc. can cause major losses.

9) Buying in the wrong area - If your B area turns into a C or a D the equity values will plummet as will your tenant base . Tough to make money with rents falling, vaccancies going up and property values going down. 

@Anthony Perez

$350K sounds a little more like what I have seen, under $200K I had not seen really unless there is a major issue. 

@Account Closed

There are a lot of others who I have talked to that also had issues with the fees and some who I think paid and had issues. On the other side they are offering 100% financing so its tough to really offer that and take in a lot of people without having a huge cost problem on their side so I can see the business justification as well.