All Forum Posts by: Christopher Sandys

I have a friend renting a house in Thousand Oaks, CA for $6,500/month.  I can assure you that he's not like this at all.  That's the cost of the neighborhood, not some sort of "concierge experience."  

So that's what you have to ask yourself.  Are you charging above-market?  If so, then expect this.  If not, tell them to go push a rope.  

I bought a house with peeling paint, and I'm putting thousands of dollars of rehab into it, generating zero net cash, and you call me a slumlord?  What's the matter with you?

And seriously, do you really believe that nonsense about saving the children? You have failed to inform yourself on the CDC stats on childhood lead poisoning.  You're getting your scientific direction from the Toledo City Council.  Essentially, since 1978 you can see a steep drop in childhood lead poisoning approaching zero, but never reaching zero.  Because there will always be some kid who decides to eat dirt or some other such folly.  

The facts without your negative labels and preaching to save the children would have been cool.  

@Timothy W. I am sorry to hurt your feelings, but there is no need for insults. I did buy and sell several billions of whole loans (non-securitized mortgages), so, yes, I knew some people. And thanks for blaming the collapse on me. None of your pettiness changes the fact that 2x coverage allows one to cut rent in half and still stay above water. Further, I stand uncorrected in stating that the issue was appreciation seeking, not cash-flow seeking. Let me explain to you, Tim, the terms of LTV and a negAM mortgage. LTV is Loan to Value. You know this as percentage of equity. When a homeowner is 100 LTV, that means they are zero-in for equity. This was common in the period, because people were counting on appreciation. It worked until it didn't, then they were underwater and walked away. That is the collapse, and those are the ones that created it. Now, a Negative Amorization Mortage is also called an "option ARM." This was initially designed for high-net-worth individuals as a cash management tool, but it spread to the masses. It allowed one to forgo principal and interest payments, thereby increasing the loan amount by increasing the LTV.

"On the ground."  Okay, hero.

Again, sorry to hurt your feelings with a correct rendition of history.  

 It's pretty tough to go cash-flow negative when you have 2x coverage.  Don't worry about the Midwest.  My recollection of history is vastly different.  What I recall happening in 07-08 were the markets in SoCal, Nev, SoFla getting slaughtered. The strategy there was not cashflow, it was appreciation. I was working as an institutional MBS salesman and had a front-row seat for the collapse.  My clients who were smart money were buying OH, IN, PA.  The boring stuff.  The cashflow.  

Just missed one in Toledo that is very close to 2%.

Noticed on Zillow that this one sold for $47,000.  It is currently renting for $900/month.

https://www.zillow.com/homedet...

That is 1.9%.  Granted, you'll need to cover the closing costs, so the actual ratio may be only 1.75%. 

Hi @Tamera White,  For my deal I did a 3% conventional, first-time homeowner, owner occupied.  Upon purchasing, I decided the potential cash flow was too lucrative to occupy.  I am a single man, and I didn't need 3 bedrooms, 1.5 baths.  It would be nice, but I decided to take cash over the luxury.  

I worked with Tony Brancatto at Ruoff Mortgage in Maumee.  Tony is very solid.  He hustled a lot to get the city to inspect my property for a potential grant.  [The grant was not approved due to peeling paint on the exterior.  Never trust Toledo grants - but that's another story].  When I explained to Ruoff that I was not going to occupy the property they were not over-joyed, but they also were not surprised.  The mortgage was sold to 5/3 Bank within a week of closing.  Both the debt and the servicing.  Ruoff requested that I occupy the property for at least 3 months, and pay my mortgage two weeks early.  The reason being that 5/3 thought they were buying an owner-occupied property, not an investment.  It is a sign of good faith to immediately establish responsible and sound payments.  Since I got started that way, I've kept it going since then.

So, the 1%+ rule is absolutely alive and well.  (Although, as @John Vietmeyer observed, no one is brining any examples of the 2% rule).  However, I'm keeping my eye on Toledo.  I'm hopeful that prices will drop, and I'll be able to get a 2% rule property.   That would be a $55,000 property renting for $1,100, which is not that much of a stretch here.  I am keeping my eyes on the MLS.  Yep, I said that.  

I do not like to tell people how to run their business, but I will offer something for consideration.  There are those that invest for cash-flow, and those that invest for capital appreciation.  And most properties are a hybrid of the two, favoring one way or the other.  Hypothetically, higher benchmark rates should harm the value of real estate properties.  We are already witnessing that happen.  With that in mind, would you prefer a property that favors cash-flow, or a property that favors appreciation?  Just something to consider.  

Last May I bought my first Single Family Home for $64,000 plus about $5,000 in rehab. So a total of $69k. It rents for $1,100/month. That's 1.6%. Bought it off of the MLS. I had only 3% down on a conventional loan. Not quite as good as @Engelo Rumora, but another Toledo deal.  

@Michael Kotylo  Will you post the property?  I promise I wont buy it out from under you!  It will be interesting to see this one play out, and see how the seller does.  

Hi @James Wise,

I enjoyed looking at "The Ultimate Guide to Grading Cleveland Neighborhoods." There is something I do not understand.

Area Code 44106 - F?

This is the area code with John Hopkins University, several museums, and the Cleveland Clinic.  

I did a Google Streetview "drive" through this zip code, and it looks really sweet to me.

Was the F Grade a mistake?

@Travis Biziorek  Brick houses in Detriot ... now that's what we should be talking about!   

The primary, saving-grace in Toledo is the court system that keeps enjoining the City's effort to implement the lead initiative.

Back to the primary poster...  The lessons here are valid.  Be aware of what you are buying in Toledo.  None of the houses are being priced on a lead-compliant or non-compliant basis, i.e. there is no observable premium for a house that will be cheaper to bring into compliance.  Gosh darn ... I'd buy brick houses all day long knowing what I now know!  

I suspect, strongly, that the reason for this is that the City has been unsuccessful for Seven Years to implement their initiative.  That will eventually change.  Who knows when?

I'm not trying to scare anyone.  A more liquid market benefits me. Just know what you're buying, and what may/may-not eventually need to be done in terms of additional capital.