All Forum Posts by: Dr. Scott Benjamin

Roy - always interesting to read the different methods of foreclosure. In the provinces where it goes straight to MLS, you miss the golden opportunity of picking it up pre-market. In Maryland - following a judicial sale, you have 90 days for the court to ratify the sale (in which case you can assemble financing) and the title company conducts a complete title search and presents insurable title. I moved to Florida 3 years ago and down here, you pay the full purchase price the day of the sale and you buy it with all the hair attached to it. Thanks for the info on the nuances of foreclosure law...always great to learn.

Cash for Keys!  For every foreclosure that I've ever bought - I knock on the door after the foreclosure sale at the court house steps (maybe different in Canada), show them the contract for sale, explain that it was the bank foreclosing and not me (bank is the bad guy), then offer them $500 if they can be out of the house, everything removed and broom swept in 30 days.  With the exception of several times out of 100 - this has worked.  Of course the times it didn't work, they stripped out every appliance, every switch, plug, vanity, counter....but almost always the people appreciated being treated like people and worked with us.

Cheers

Wonderful news. The insider knowledge you get from being able to view the MLS, network with other agents, and list your own property is invaluable. I got my license 15 years ago and it has paid for itself exponentially. Great job.

Brian gave you some great stuff.  One tool that I used in building some syndicates was a Regulation 504(d) Private Placement Offering.  We used a good securities lawyer, took on 13 investors and raised enough money to get into larger deals.  Read up on the IRS Reg 504 offering. 

You are the buyer of the property.  If you can't assign it - then you will have to close on it. As an agent, I wouldn't let someone tie up my property with what is technically an option, without coming to close.  Now if you are using your contract (which allows you an out) and the agent will allow you to do it - then more power to you...just not sure why they would do that.

If the agent is selling their own property - it is unlikely that they will take a commission.  If they do, it is really not material to the deal because whoever you assign it to is only agreeing to pay the purchase price (how the money is distributed after that shouldn't matter).  

Good Luck.

Two quick points: 

First, higher cash flow comes with higher effort.  I own college rentals. Huge cash flows but annual turnover, tons of turnover renovations, new paint and carpet.  Sometimes, lower cash flow and longer term tenants is important.

Second (and I stress the importance of this) is location.  Cash flow is great. Knocking back the mortgage is great...but appreciation is king.  Buy homes in areas that show promise of appreciation.

I just self-published a book with 10 years of diary notes.  If you are looking to learn more about the business - my book gives your a first hand real time look at learning the business alongside of me.  I guarantee that this will be the best real estate book you have ever read!

I just joined Bigger Pockets and I am already a huge fan. I'm not a real estate guru - just a 46 year old guy that started in real estate at age 31 with the goal of spending more time with my family and creating a net worth of $2 million so I could afford to pursue a career as a college professor.  After a really rocky investment career (making tons from 2001-2007 and giving back a lot of it in 2008-2010) I accomplished both of my goals.  I am now on faculty at Florida Tech in Melbourne, FL (http://cob.fit.edu/faculty-profiles.php) and love sharing knowledge with everyone. Check me out, I'm legit.  https://www.linkedin.com/pub/scott-benjamin/5/517/...

I started keeping detailed notes in 2001 jotting down how I found my first rehab project in Baltimore, Maryland, how I found an investor willing to put up all the money, how I struggled to learn the construction process and how I made a whopping $9,500 for 9 months work.  Over the next 9 years, I documented:

How I bought houses at foreclosure

How I bought a 20,000 square foot office building

How I flipped contracts

How I raised private equity using a Regulation 504(d)

How I learned to subdivide land and sell lots

How I invested and owned 15 college rental properties

How I invested in section 8 rentals

How I bought a vacation home at the lake and tried the vacation rental business

How I bought tax certificates

How I bought an industrial piece of land and changed the zoning to residential

How I turned that land into 63 lots and when the market collapsed...a 193 unit apartment project

How I made and lost millions of dollars in the most wide ride in real estate history 

This is not a "how to" book or a get rick quick book.  It is a diary of me learning how to make money in real estate by trying lots of different things.  I love teaching and this is my platform to share knowledge with real estate investors.

Check out my website at www.ridingthebubble.com or go straight to Amazon at http://www.amazon.com/Riding-Bubble-World-Housing-...

AGAIN, I AM CONFIDENT THAT YOU WILL GET SOME NUGGETS OUT OF THIS BOOK THAT WILL SAVE YOU A LOT OF TIME AND MONEY.  EMAIL ME QUESTIONS - I'M QUICK TO ANSWER. 

I self-published the book.  If you like it, I only ask that you recommend it to others and please post feedback on biggerpockets, write a review on Amazon and pass along the word.

Many thanks for your time and consideration.  Happy investing.

I spent a lot of time selling houses in downtown Baltimore - Canton, Federal Hill, Fells Point etc.  Those houses are 100+ years old and many of them have "charming" imperfections.  Now, I agree with your agent - a perfect home, nicely staged, freshly painted, landscaped sells a whole lot quicker than one with issues. (I can't comment on your floors because I haven't seen them).  I have found that condition and price go hand and hand. 

Look at what's available on the market in your area.  Then, pretend you are a buyer and see what you would you would offer for a house with imperfections versus what's on the market.  If you find yourself willing to knock $5,000 off to fix the floors - then consider your pricing strategy.  Good Luck.

It looks like you've received solid advice so far.  A 5% cap rate in a B neighborhood does indeed seem really low.  I've worked many B class neighborhoods in Baltimore (probably similar to Minneapolis) and our cap rate targets for "challenging" properties was closer to 10%.  

You should also consider the cash flow perspective. At 80% financing of $235,000 using 5.5% interest, your payment will run around $1,070. Annualized that is $12,840....gobbles up your NOI.

Folks,

I want to introduce you to an exiting financial rule that should get you all very excited.  When investing (whether it be stocks, bonds or real estate) your investment doubles based on 2 variables.  The first is time and the second is the interest rate.  Allow me to explain - if you had $10,000 to invest in the stock market and wanted to know how long it will take to become $20,000, you would take the interest rate (say 6%) and divide it into the CONSTANT 72 to see that your money would double in approximately 12 years.  Say you were more risky and tried to get 9% in the market, your money would double in 8 years (again, divide 9 by 72).  You can see the obvious relationship between interest rate and speed to double.

Now apply that to our real estate rental properties. If you own a house that is worth $100,000 - assume that the market appreciates at 6% (historically is about right) - that house becomes worth $200,000 in 12 years. That means, you made $100,000 in 12 years...pretty good. The difference between the stock market and real estate is incredible due to leverage. You would need $100,000 in cash to buy $100,000 in stock (we aren't going into margin accounts etc.) Now what is absolutely unbelievable, and separates real estate from the stock market, is that you probably bought that house with 25% down or just $25,000 for the same purchasing power. If you had $100,000, you could buy 4 houses for $400,000 and watch the power of compounding kick in. In another post, I'll discuss the ROI of stocks versus real estate. Really cool stuff! Happy Investing.

Scott Benjamin, PhD, MBA

The Absent Minded Professor