All Forum Posts by: Stone Jin

How are you planning on paying for the property to acquire it?  Sounds like he is not in a better financial position than you.  I'd be wary because of two things, what if things go sideways and now he has skin the in the game.  Can you hire another contractor, are you liable in returning his cost and paying for his labor if that happens?   The other is once he has the job locked down, he doesn't really have an incentive to fix it fast since there is no real reward at the end of it while you have to cover the carrying costs.  He could drag this out for months while you are paying interest on hardmoney.

Doesn't sound like a win win to me.

Good luck.

I met an apartment wholesaler once that said when he vets a property he does his 10's and two's.  He sits in the parking lot at 10 AM, 2PM, 10PM and 2AM with his windows down for 30 minutes and just listens to the community.  If there are a lot of people just loitering at 10AM/2PM, he wonders why they aren't at work.  If there are a lot of people loitering at 10PM/2AM he wonders why they are outside instead of sleeping.  You can apply the same concept and drive the neighborhoods at those times for 30 minutes and see what types of people are around.  I think once you drive enough neighborhood it's pretty obvious what types of neighborhoods you will be comfortable investing in.

I think a common saying on BP is that newbies either need to bring the money or to bring the deal.  I know that @Shiloh Lundahl often offers education at his meetings and has a way for new investors to learn and invest at the same time.  

I do not invest with Shiloh however I know that he has helped a lot of new investors along the way.  

Good luck on your journey.

I would agree with the other commenters.  #2 is a loser because you essentially will be working for free for 15 years.  Plus any cap ex would put you in the hole.

#3 seems like a lot of work for not as much reward as #1.  #1 would seem like the best option at this time.  I'm not sure how you came up with 7K (115-85 = 30K - 10K for commission/holding cost + 2K for cosmetic fix up = 18K- capital gains of 4K = 14K?  I thought you were paying cash of 85K, what is the financing cost?

Buying at retail is fine if you plan on keeping it for a long time.  I think buying it at a discount just offers more exit strategies.  Say you found a better opportunity and you want to sell your rental.  The full price property may lose you money where as the discounted may allow you to exit with a profit. 

I'm also in the software industry and can also consult (insert x hours) to make up the difference in cost between buying new and buying used.  However for me personally I think most of the fun is finding the deal and figuring out how to structure win win win win win situations.  

I think it all depends on your cash position and on what you want to do in the future.  I think a lot of the 20% advocates are assuming you want to acquire many more properties.  However if you have a boatload of cash to deploy and not in a rush to buy more properties, then I would say maybe 25% is better, than at least you are earning 8-10% on that extra 5% than what the bank is offering sub 1%.  If you are in acquisition mode and plan on buying several in the near term, then having the extra cash available is probably better. 

Good luck,

Why don't you post your deals on the forum and solicit opinions that way?  Everyone is going to have their opinion of what is a good deal and what isn't, meeting with 1 or 2 people may have widely varying advice/guidance.

I believe the prudent move is to always play in the middle.  When the going is good, people tend to move on up, when the going goes bad people tend to move on down.  Either way you will be getting the better choice in tenant.  That's our strategy anyways.

Thanks @Shiloh Lundahl for posting on interesting threads so it pops up on my keyword alert.

When the market corrects, like a lot of prudent investors, I will likely grow my portfolio. The last few years have not be rewarding for buying off the MLS in Phoenix. I'm repositioning my portfolio into better return on equity properties in the midwest, so taking some of the appreciation and spending it.

As for the last crash, I wasn't in the market heavily but had a few properties.  I was underwater on them for awhile but made the payments and survived.  They have been my worst performing properties 10 years running, I sold 1 and thinking about selling the other.  I think everyone in 2005 had the fear of missing out syndrome, so they all bought (myself included).  The shear volume of people doing it and failing is what ultimately caused the collapse in my local market.  Investors are still a small percentage of total transactions.  I still remember people camping out at builder's site for a chance to be in a lottery to buy a new house, crazy times.

As for your case, 500K for a quad is like Phoenix prices, doesn't seem like midwest prices to me.  The fact that you will be 100% leveraged should be concerning because if anything happens you will immediately be under water.   That would make me nervous.  I think you are already suspecting a correction is coming, so why put yourself in a position to immediately be underwater.  If you were in it with some skin, then you may be able to weather the storm better.  Just more exit strategies.

I have a house up in Pinetop that we used personally for 3 years.  After 3 years the drive became tedious and we just didn't use the house as much.  I tried to sell it last summer but with no success so I converted it to a long term rental.  It got rented in the winter time after about 3-5 weeks on market.  The PM charges me 13% flat rate (so not lease fee no renewal fee no upcharge on services etc etc) which works out for us.  

I couple of thoughts.  1 is, if you plan on using it in the summer time which is the peak season, how many days are left to be rented out?  2 the market is fairly saturated for furnished rentals up there so competition will be high.  We use to own and manage 4 short term rentals in Phoenix and know the amount of effort it takes to operate it successfully.  You can hire PM to do it for you, but I would assume they charge anywhere from 25-40% of gross.  3. We have a 5 and 2 year old kids so in the same boat as you, they didn't enjoy the outdoors as much as you would think.  The pinetop country club is mostly full of retirees so there is a limited number of kids around.  We were lucky, the neighbor had 4 kids that lived there full time and they were close in age with my kids so they played together often.   4. Last thought, the house we bought was built in early 2000's however I didn't realize when I bought it that it only had head and no AC.  During the day it can still get pretty hot.  

The lesson that I learned from my experience is that it is way better to rent a vacation home than to own a vacation home.  

Good luck,

Stone