All Forum Posts by: Jason Barnett

Have the realtor friend pull comparable, nearby houses that have sold recently (prefereably last month or so). Also have the realtor check to see what the "days on market" is in the area and have them use comps for houses that sold quickly. This gives you a conservative estimate of after-repair value for a rehab.

I highly suggest that you at least walk through the house first. Most auctioneers I know won't do the inspection because it doesn't mean much for their potential buyers. Look for everything that is wrong, then go and find out how much it will cost to replace all of these things. You really want to focus on the mechanical systems (roof, heat, electric, water)

Just ask your lender about prepayment penalties... some have them, some don't. Obviously you want to use one that doesn't have penalties.

If you want to defer taxes you can do a 1031 exchange. Ask a CPA or search this site.

I understand that, but that's not why I asked. I look at this as an ADDITIONAL way to find deals. They charge a monthly fee to use the site so I was wondering what kind of hit rate people were getting from the site. In other words, how cost effective is this site?

Sadly there are people that fall for this sort of thing. Here is a story about John W. Worley, a "Christian Psychotherapist" that got sucked in for more than $40K of his own money and almost $600K in bad checks from corporations. If you receive a chain mail / forwarded message then I highly suggest you send this story back to the sender.

For all of us truly paranoid people here is one answer: GPG.

You can use it to write private emails that cannot be read by "big brother".

For those of you that want truly private emails there is an answer: GPG. The technology is complex, but here is the basic way that it works:

I download GPG and use it to create a "secret key" and I am the only person in the world with this secret key. At the same time I create a "public key"; this is something that I give to other people that tells them who I am. This public key is also unique to me and this is what I need to give to my friends.

I then go meet up with someone in person and we prove who we are (photo ID, or maybe we have known each other for years). I give them my unique "public key" so that they can send secret messages to me. They also need to give their "public key" to me so that I can send secret messages to them.

I now go back home. I write a message to my friend using the "public key" that they gave to me. GPG the encrypts the message so that it looks like gobbledy gook to the human eye. However, when my friend receives the message they will be able to decrypt it and read the secret message just like any other email. But the only way they can read it is if they have their unique "secret key". Result? My friend and I can communicate with each other over email and no one can read our messages.

Very cool stuff. If you are interested in this topic I highly suggest you google for "encryption email GPG" for more information on how this stuff works.

Some things to remember:
1. You can only send / receive secret messages if both people are using encryption.
2. If you lose your secret key you can *never* read any of your messages. Ever. So don't lose it!
3. You should never store your secret key on a computer that is connected to the internet. Either store it on a different computer or better yet on a portable USB disk.

Slash your personal expenses to the BONE. No frills.
Build up assets (CASH and investments).
Apply for 1 credit card, use it and pay it on time every month. Maintain a low balance (10% of your credit line is fine).
Network with local REI people and find a mentor in your area. Ask the mentor to train you in the art of "wholesaling" so that you can gain experience and build up a little cash.
Your education in Finance is critical. I would suggest you also consider Accounting, Marketing, Law (Contract), and Entrepreneurship (if offered).

Thanks for the positive feedback... so I suppose that this would be a good message to make sticky?

If you have read the analysis from top to bottom and you want to take the next step... then focus on this sentence:

Being successful in real estate (or any business) is about creating value. Bird dogs create value by negotiating a good deal. Realtors create value by finding buyers and closing sales. Even biggerpockets.com creates value by providing lots of useful information and a place for like-minded people to network with each other.

Whenever you are looking at a deal you need to ask "how am I going to add value to this deal?" Look at where you create the most value and focus your scrutiny on this area.

In the case of our example property your main source of value is holding on to the property and waiting for it to jump up in price. So if you are going to buy the example property then you have to feel really good about your appreciation estimate. If you are looking at a cash flow rental then scrutinize the net income. If you are a Reatlor then scrutinize the days on market for that property. If you are a real estate guru then scrutinize the difficulty of the material in your book. And so on.

OK I'll bite. What kind of control do you offer to investors?

I was the one that asked the question... and thank you for the detailed response! Yes, I do have a couple of follow up questions:

Redemptions: let's say that I buy a property at a tax auction for $50K. 3 months later the prior owner comes up with the money to redeem the property. Do I just recieve a check for $50K or do I get any interest?

Are states uniform in the way that redemption works?

It seems that if I am a full time investor with some extra capital lying around then I should be looking at states with short redemption periods. But if I can hold on to a tax certificate for a long period of time (say, money in an IRA) then I can earn larger returns of 25%+. Is this pretty much accurate?

If a property is REO then the title should be clean.

Yes, you will definitely want a trusted realtor. Going to an REIC is a fine way to network for a realtor or you can just talk to some of your IB friends. I'm sure you're not the only one doing real estate on the side, just ask around.

As for determining sales price... you pretty much need to get MLS data for that. This is where your realtor friend comes into play... they will tell you the price that you should be able to get if you try to sell a house retail in less than 1 month.

As for repairs... I would suggest doing it all or doing a true flip. If you can assign the contract to another investor without doing any work to the house then it will put a few bucks into your pocket, but if you're going to rehab you might as well go to the effort of doing it right. And don't forget to factor in holding costs and opportunity cost!