All Forum Posts by: Jimmy H.

I would rate JTR as "better than the average guru".

He has some free articles that contain good info.

I don't pay for any guru BS so my ability to form an opinion of him and compare him to other "guru's" is limited.

Read the free stuff online and go to the library, probably your best option as you get a more well rounded view and cheaper than paying to hear one guru's insights.

It is my understanding that the Fed does adjust rates based on expected inflation and other expectations/forecasts etc. The Fed intentionally raises rates in order to stave of too much inflation.

With the amount of money in the system sitting on "the sidelines" inflation in the near future is a given. When inflation takes prices up - including homes and rent - the Fed raises it's "risk free rate" as alluded to by Brian which raises interest rates to end users like us, which brings home prices back down - or rather stabilizes them.

Take a look back in history, enormous interest rates in the 80's.....lower asset prices....but then the 90's came roaring back.

when the market gets better both the risk premium and the risk free rate will increase. My thought is that for this reason, renters will be more plentiful, which is better for those on BP - some are starting to second guess the American dream of homeownership - renting may emerge as the "new normal" (to quote the new buzz word)

I think there is something to be said for behaviroal economics and anchoring - but there is only so long a person will "settle" to live in a lower quality home, and in a lowerquality area before they realize they want to be living in a nicer place.

Not to mention the macro-economic trends of population growth - that should help us all out.

As a recent college graduate with a degree in Finance and an MBA, I would recommend just going ahead and getting started in REI - get your hands dirty and get experience - it is the best way to learn.

The above poster makes good points about 1) the fact that college does teach you alot, is very beneficial, expecially to your reasoning and decision making etc. 2) debt

But, if you want to pursue REI full time I would go ahead and get started working in whatever field you think you might want to pursue a career in. College gives you a broad base of knowledge, for REI you want specific/technical knowledge.

Depending on your goals, I would recommend getting a RE agent license or perhaps an appraisers license. You can make good money doing both while getting yourself involved in RE, and both are a LOT cheaper than a bachelor's degree.

I am seeking a high quality standard lease template. There are a couple issues as I know things vary state to state.

What issues vary by state so that I may adapt mine accordingly? ( I live in Kentucky).

I am seeking a good lease document with all the bells and whistles and everyhting that an experienced landlord would want in such a document. I do not want to pay a lawyer and being as you can upload documents to this website - I think a good quality lease would be a great document to upload with details on how to adapt it to a particular state.

Lastly, would anyone reccommend specific sites with online "lease creators", like legal zoom or something.

Thanks in advance.

1. Terrorism/borders (lumped together because terrorism is a threat that arises from poor border security).
2. Education
3. Debt

Not sure exactly what you mean by rogue nations but that may well fall under terrorism too.

Just because there is no platform doesn't mean that such a deal can't be done. In fact I think that is what the OP is looking for - unregistered shares that are hard to buy and sell and that therefore present alpha generating opportunities because of their barriers to entry (lack of info, liquidity, etc.)

Of course, as has been mentioned previously, savvy investors looking to cash out of a bad deal could burn you.

Maybe it is just me, but I would be looking for partnerships with around 10 members that own high yield portoflio in my local market. That way I can do due diligence by visting the portfolio properties myself. Becuase these shares have no platform, have higher risk of getting ripped off, are not SEC regulated, etc. they could offer great returns and you could buy these shares potentially at a discount to what the founding members put in (especially in this market). It won't be easy to find or execute such a deal, and the risks are high so you must detemrine that the risks you undertake are truly being rewarded with alpha not just being rewarded with high returns because the risks are actually so high.

This is tricky stuff, and that's what keeps most investors away, theoritcally providing significant opportunity. I like the OP's train of thought.

The question now is: are there any BPers who are familiar/experienced with such a strategy who could bestow upon us such useful info as to help us avoid pitfalls in the process.

I think if your not going to go the SEC registered route, then you need a good lawyer with good experience, and you need to get to know and understand the business and portfolio intimately. Perhaps just as important - who is selling their interest and why (if it is such a good deal) and why are the other partners reluctant to buy the available share.

Larger partnerships and the SEC registered partnership route are another avenue to pursue, but I like the idea of the smaller local entities with no platform to liquidate their holdings.


To the OP's comment on wanting to avoid front end fees: If a partnership is established with a cash flowing portfolio and wants to take advantage of opportunities in this depressed market but needs equity to do so - I think this provides a perfect opportunity to come in as an additional partner and contribute to how your new funds are invested, as well as buying into an already profitable partnership - I fail to see where the extra costs would come in as I am not talking about investing on the ground floor of a start up, and therefore the costs would no be any greater as you would avoid the fees I beleive you are referring to (legal, startup fees,etc.). And depending on what amount of capital your looking to invest, the start up costs could be marginal anyways.

-That is my train of thought, let me know if I missed the ball completely, lol

This property is located in a relatively nice Cinci burb. It is REO bank owned foreclosure, no short sale. Listed with a realtor at $157,000. Currently vacant (i've yet to figure out why banks vacate all the tenants in MH properties, I know they don't want to be landlords but they make it harder on themselves b/c MH investors invest based on returns.) but it is rent ready, in good shape, with all appliances etc. 4 one bd's and 1 two bd (5 family unit). Two bdr should rent for $700, and the One bdr's should rent for $500.

2% rule would make this worth 135,000, even though it is a bit out of the 2% rules' "range of relativity", so to speak. I am thinking about offering 115,00 and coming up to maybe 125,000 max.

County auditor has property value listed at 225,900 (55,900 land and 170,000 improvements) and taxes are a hefty $6,356.43.
Bank purchased at foreclosure sale 4/14/10 for $112,000. Probably lost a lot of money on foreclosure and trying to recoup some through this listing. Wouldn;'t expect them to accept much less then $120,000 b/c after comissions and legal they'll be losing money (based on repossessing at $112,000). I'd say they want 135,000 at least (guess). The previous transfer was made 11/05 for $251,000 and prior to that the alst sale was in 1992 at $85,800.

thoughts?

Perhaps this is where you could use cash on cash return as well. You should know what you'll have to put into a project, and that is why people use detailed cash flow metrics because it is the cash flow that really matters. Even in business cash flow is the most important. Check out J Scott's profile and you can download a good cash flow spreadsheet he has uploaded for the use of BP memebrs.

The trick is to use many metrics and to understand exactly what the metrics mean. I like cash flow IRR and 50% rule for screening.

I think Don was saying he plugs inflation for the discount rate?

Choosing a discount rate, and as Bryan indicated - knowing your exact cost of capital per project is the difficult part.

IRR is probably the best means of investment analysis IMO. Similar in some ways and incorporates time value of money, but gives you an exact number for the "return" of the project. You can compare these returns. But, as you will realize, the deeper you delve into getting the "best" and the "most exact" investment analysis you realzie that there truly are so many variables that can't be quantified or plugged in.

10% IRR vs. 11% IRR - well it's a no-brainer then, right? Well not exactly because you can't quantify potential costs you overlooked, area the house is in, condititon of the market, or even what buyers might just happen to show up at your open house and make an offer a year from now. Point being, investing is not an exact science, although the use of IRR is smart in terms of investment analysis and is one of the most precise analyses, at the end of the day you must fall back on your "gut" and intuition. Your brain can use such analysis (IRR) and also take into account other qualitative aspects of a deal that no model will ever comprehend.

That is why many investors use good rule of thumb metrics, like 50% rule, for initial screening. Calculate a more precise cash flow, or IRR if you wish, and then make the decision intuitively.

A consumption tax seems to me to be no better than an income tax. I thought for a while that it was the better option, and perhaps it is (would put CPA's out of business). But wouldn't people simply make their big purchases overseas? If the U.S. had a consumption tax an no income tax it would incentivice people to work and build wealth here. But when I went to make a large purchase, say a car, I would just goto a dealership in Canada where there was no tax and buy the car "duty free". In the globalized world that we live in, might there one day be some worldwide uniformity in tax rules? Won't the world as a free market system lead to an overall equilibrium state on issues such as taxes, as well. Of course this is a theory that is imperfect in practice but we are likely headed that way.

In terms of double dip - like I said above, I have trouble calling it a "double dip". This problem will not get any better until banks start lending. And banks will not start lending until the government gets off their back! Gov't wants to push the blame on the greedy banks, when it's quasi entities are the ones who incentivised the banks to do what they did. Package mortgages and get them off your books with no retroactive risk to the original lender - that's how the secondary market works. Now the gov't and regulators want to use the situation as an opportunity to take more control over the banking industry. That is where the trouble lies - more regulation leads to less lending leads to lower home prices. The fear shouldn''t be of a "double dip" but of "chronic stagnation".