All Forum Posts by: Dory Peters

First, it's not a matter of if they failed; rather, it's well documented in history that they failed--and when they failed. I'm not suggesting that their failures diminish their great accomplishments in any way; rather, their failures make them more human--and more approachable.

Second, information marketing is a legitimate and respectable business. Sure, there are a few, bad apples working in every industry. Some, who have questionable character, are peddling good information marketing products; others are hocking questionable products. Yet, the do-it-yourself revolution wouldn't have taken off--as it has in the US--without excellent information marketing.

Third, I'd like to know who claims to not do business on their own behalf. Even the Bernie Madoffs of this world--not that I condone what he did--do business on their own behalf, so that point is basically a non sequitur. I think part of what made the aforementioned others great is that their work, that they did while conducting their own business, helped (and in many cases continues to help) lift other up. I hope that others who come after us will be able to say the same thing about most of us.

Without an appraisal, you won't know whether $200K is too much to offer.

Also, please keep in mind that one's residence isn't an investment. Retail buyers (such as yourself) and investors purchase properties with very different goals in mind. We (investors) are most concerned about whether a purchase will turn a profit via its cash-flow for a rental, or the proceeds of a flip. Although location, schools, the color of the walls, etc matter somewhat for us (with respect to the marketability of a property), we're not as concerned about that stuff. People in the 'hood buy homes or rent--just as people in the 'burbs do; we simply want to be on the receiving end of those transactions.

However, if you really want to know what I'm willing to pay for a home (as an investor), then I'll gladly tell you. I like to evaluate residential properties using CMA/BPO/appraisal, and using an income analysis. I'll weigh the results thereof depending upon my exit strategy. You're probably already familiar with the prior, so I'll address the latter. Let's say that 3/2 SFHs rent in your area for $500/month. The most I'd be willing to pay for it is $500*7.41/.1 (or $37050). That doesn't mean that I'll offer $37050; instead, I might pay less if my inspection(s)/appraisal(s) brought certain issues to light.

Many lenders aren't doing HELOCs right now, and many of them are only doing rate/terms--not cash-out--refis.

You need to shop your scenario around to several lenders and mortgage brokers to see what they're willing to offer.

Hopefully, you've already set a deadline for when you expect to have completed the rehab. Have you had a recent appraisal and/or BPO? If not, then you should do that. You need to get an idea of what that property is worth now, and what it will be worth subject to the modifications that you intend to make. You need to determine now how much time and money to budget for this project so that you won't go over-budget, and so that you'll hopefully be able to lock-in your profit.

You also need to factor in the current market conditions into your planning. Do you know the current, median sales price in your area? Over the past 3-6 months, has the median sales price trended upward, downward, or sideways in your market? If downward, then by how much per month? You also need to get an idea of what the cumulative DOM, and it's trending. Also, you'll need to price your property aggressively if you intend for it to sell quickly, and determine how much work can you afford to do to profit from or at least break even on this transaction.

Will,

That's exactly my point. Although the amount of risk for a particular opportunity doesn't change, one's percentage of exposure to that risk does lessen with group participation. That's not to infer or imply that each participant will share the exposure to that risk equitably.

Every opportunity has a linear combination of risks and rewards. Ealier you stated, "Diversification is for investors who don't really know what they are doing and need diversification for safety." I agree, and I'll go a step further. I believe a lot of investors are ignorant, lazy, and/or apathetic. I believe that many of them (mis)use diversification as an alternative for digging into the fundamentals for each opportunity. I view their form of diversification as playing a round of Yahtzee: rolling multiple dice.

Investing, farming, and gambling all share something in common: they all involve playing games with numbers. I view farming and gambling as opposite extremes of a spectrum. The less an investor knows about the underlying fundamentals of a particular investment, the more s/he is gambling. Similarly, the more s/he knows about those fundamentals, the more s/he is farming. Farmers know what to plant, where to plant it, how to nurture it, and when to harvest it. Farmers also know (or learn) that it's unwise to only plant a single seed, and to expect a bountiful harvest. I believe investors should do something similar.

Another way to spread out the risk is via group investing: partnerships, JVs, TICs (N/A in some cases), or syndicates. I prefer syndicates.

I agree: get everything in writing before you begin to do business together. Actually, one of my mentors (a real-estate attorney) basically advised me (and others) to plan for the worst, and to draft every partnership or JV with the "break up details" ahead of time. That way the dissolution will proceed more like an annulment verses a messy divorce.

You needn't explain anything to the seller about your end-buyer. Frankly, that's none of his/her business.

If I were you, then I'd make an offer with an option to purchase the property for $210K (on the buy-side of your deal). Afterwards, I'd offer to sell the property to your end-buyer with seller financing with a balloon payment, and have your tenant/buyer to refinance you out of the deal ASAP. Keep in mind, that you'll still receive your assignment fee out of the proceeds at closing, because you rolled the assignment fee into the purchase price. Another bonus with this arrangement is that you'll receive a slight positive cash-flow from the interest spread (provided you structure the deal correctly) until your tenant/buyer refinances you out of the deal.

Opinions and laws are subject to interpretation. I agree that the move was a bold move in a different direction. The administration made a Machiavellian decision, and I hope that the ends will justify the means in this case.

Interesting thoughts, but it seems that the loan underwriters already perform that service: they assess what they think one can/will bring to the table via the credit checks, requests for information (tax records, banking records, etc), data mining, etc.