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i'd have to agree with sean and tackleberry. referring to part of tn-apprentice's argument reagrding people being injured by accepting zestimates as gospel: if you need an appraisal because you're going to sell a house (due to divorce, to settle an estate, or whatever), you'd be hard pressed to find any realtors, or banks that would take you seriously with a zestimate as your home value. personally, if it involves my money, i'm sure not going to take an instant internet valuation as the final say. are people out there going to make that mistake? sure. there are some really dumb people out there. often, it seems like they're far more common than just being "average." if it wasn't for these "average" people, everyone would be an investor. i'm not here to protect everyone, and neither is our government. if you're not sure about that, you should research it further. more important than this zillow argument, is the mistaken modern american belief in government to settle society's smallest problems. many other countries believe in the supremacy of their government over men, but that's not what made our country what it is today. you could rebut with a lot of law quotes, but the law is always contradictory -that's what happens when politics, money, and daily fads influence laws, over the course of hundreds of years. ever since law became an industry, the world has been plagued by lawyers, and overly-sensitive politically correct "vicitms."

to quote waylon jennings "stop the world, and let me off." i've had enough.

-dean

p.s. yeah, i got a little of topic. and it rambles. if i was older i'd be referred to as quaint and eccentric. right now i'm just crazy. 8)

i'm not a currency trader, but if you've been to downtown baghdad recently, you might not think it was a good idea. it'll be awhile before this place gets its crap together (and i'm just talking about the rampant murder and corruption. actually getting the economy on track might take decades). if you want, just send me a check, and if i'm ever in a good mood i'll send you your "profit." that should double your chances of making money, instead of relying on the iraqi's to unf@%k themselves.

-dean

rb,

frankly, i don't know crap about reo's, though i am interested in learning about them. i would like to share something (i know all cash is a fan of doing this. thanks all cash! 8) ) about washington mutual: i bought a house through them o/o, with an fha loan. 3rd worst experience of my life (maybe 5th or 6th, but i'm including everything bad). anyways, they couldn't close it on time. i paid for a 15 day extension. they still couldn't do it. i paid for another 15 day extension. they barely got it done. once i signed the initial papers, the local jerk no longer had time for my calls. then you're dealing with a multitude of people in pennsylvania (if i remember correctly), who care even less. even after the first extension, one of their bright employees starts asking about the termite inspection. it was submitted with the initial packet. if it was missing, you think someone would have caught it in the first few days. anyways, best of luck with your reo. i hope you have more capable people assisting you. whatever you do, i would avoid their mortgage products at all costs!

-dean

marv,

yeah, i hear you. your intentions are great, but the changes that need to be made in the really bad neighborhoods go a lot deeper than a nice place to live. when you have parents that steal from their kids, and vice-versa; when a father will steal the family's rent money to go on a weeklong crack spree, and the wife calls the police because he just broke in to his own house to steal the baby seat and the microwave (to pawn it for more dope). a mom shoots her son in the chest because she's tired of him threatening her and stealing from her. well, there are some serious, deep-seated problems. i could tell you ridiculous stories all day long, but they seem more the rule than the exception. who knows, maybe i'm just bitter, but i prefer realistic. anyways, not to piss on your altruistic plans, but i think they're better saved for areas on the brink, not the really bad areas. some people do make money in the really bad areas, but i'm not willing to mess with it.

-dean

marvin,

i think you're using your values on other people. in really bad low-income areas, that extra $100 can be an impossibility. we're not talking lower middle class on the brink, we're talking areas where 80% of a city's crime are occurring to 20% of the population. these areas are good money makers because the rents are not that much cheaper than better parts of town (lower middle class), but the houses often sell for 1/3rd. the rub is in the high turn-over, damage, etc. i've never invested in these areas, but i work in them. your house can be vacant for one day, and people will break-in a steal the wires and pipes out of the walls...

now, as far as affecting change, i've seen a few areas go to the better. they're primarily lower middle class (blue collar working neighborhoods), maybe with newer houses on one side, older on the other. they're caught in the middle, and a gentle push in either direction can make a fundamental change in the dynamics of the neighborhood. also, there are parts of dallas that were pretty crappy, but so many large investors went in, razing the land and rebuilding. now, some of those areas are significantly different than even 5 years ago. i'm talking crack houses one day, and $400,000 townhomes 6 months later. but, that is a lot of work, and a ton of money, with multiple large developers involved.

-dean

mike,

good news! (for me) just found a tenant for $1200/month. you said i should be able to pocket $150-$200, so now i figure another $100 should put me in decent territory.
i originally wanted to rehab & sell, but stuff came up (as it always does). but i guess now i have my first rental. it worked out either way. i wanted the cash back for another rehab, but i can hard-money my next one. definitely learned some great things. my next rehab should be completed a lot faster, and my margin will be tons better. and, my mortgage on this property is fixed, but my rents will go up, as well as the price appreciation (it's in a solid lower middle class neighborhood, good schools, etc.). so, i should be okay.
thanks for taking the time ot comment on my question.

-dean

mike,

thanks for doing that for me. all though after looking at your analysis, i'm wishing i didn't know. :cry:

quick question:what all is contained in my operating expenses?

i had figured $1,100 (rent) - $810 (piti)= $290. i was going to put that entire amount away every month to build-up a contingency fund.

i plan on doing maintenance myself. thanks to the full rehab, maintenance should be fairly easy, for the next few years.

confused (more than normal),
-dean

p.s. the real problem is that i jumped a little to fast on this one, and should have shopped a little longer. learned a lot though, so it'll still work out for me.

mike,

i tried to put my property throught the analyzer, but had a few problems. i don't have all the loan info with me, and my internet connection is so slow that it times out almost everytime i change one of the fields. and i'm only paying $65 a month. bargain!
anyways, i thought maybe i'd give you the numbers, and see if you (or anyone else) wants to give an opinion on it.
after everything was said and done, the loan was $85,000. i only put down about 2.5%, with about 2% for closing (this is all from my terrible memory). i rehabbed it for around $12,000, and it was appraised for $117,000 (had it in the paper for 3 days, and got a full price offer on it -it fell through, and the rest is a long depressing story). it can be rented out for $1,100/month. my piti was about $890/month, but they just lowered it to about $810/month. it had a pretty complete rehab. the only thing that might need to be replaced is the roof (5 to 7 yrs left -barring hail storms).
anyways, i just wanted your opinion on whether it seems like i got my numbers right. i'm not really using any kind of analysis or template, more like some common sense and a calculator.
btw, i recently read your blog. pretty good stuff. you've got me thinking more about trying to focus on rentals. thanks for all the help you've been giving around here.

-dean

man, there are a lot of posts on this topic. i'm not even sure if i actually read them all. one thing i did notice was that some guys kept talking about the 1% not being realistic in some markets. it sounds like they just plan on buying a property, and then trying to get 1% of retail for rent.
i'm pretty dumb, and all these calculations hurt my head. i figure all my holding costs (piti, a % for repairs, a % for vacancies, etc.). then i see what the going rents are for similar houses in the area. someone had a link on here awhile back. rentometer or something. you can google it. if the going rent can't cover all my costs and give me a small profit, it hardly seems worth it -unless i'm banking on appreciation, or rabid squirrels. don't be confused, the money you figure for repairs and vacancies is not for getting a bunch of one dollar bills and going to your favorite "bar." i would imagine, that after you have a substantial amount of rentals, you'd probably have a decent amount of cash set aside for contingencies, and the majority of your rental income will accessible.
i think the thing myself and the other newbies need to focus on is turning that initial profit, as i mentioned previously. the more complicated stuff will be important, but i don't think it's the number one concern starting on your first house or two. and, i think that a couple of successful rehabs, or rentals under your belt increases your credibilty with lenders and other investors, which in turn can lead you to better deals, and more of them. best of luck.

-dean

mrs.southpaw,

there's a link on here for rei clubs. look on the home page. if you can't find it there, i know it's in the discussion boards. it's under one of the main subject headings. i'd look and attach it for you, but my connection is slower than dial-up, and i don't have the patience...
or, just do a google search for "houston real estate club investors."

-dean