All Forum Posts by: Ken DiPietro

Richard,

I see this as being put between a rock and a hard place. Keynesian economic theory states that we need to spend, and spend huge, in order to prevent the recession from becoming a full blown depression. While I am not educated enough in economics to make a judgment call on this, like it or not, this is the course the administration has chosen to follow. Since this appears to be the case, it is now our job to analyze the ramifications of these policies and allocate resources in the best possible manner, as you know.

Ben Bernanke's thesis is also an interesting piece of work. In his thesis Mr. Bernanke proposes that one way to dig ourselves out of the national debt was to create hyperinflation and then pay back the debt with the inflated dollars.

The quote below is taken from this speech,

Now, I mention this, not to deliberately take this discussion off-topic but instead to ask everyone's about whether or not this is a good time to invest heavily, as there appears to be a push to create inflation.

Thanks J. Scott and Richard,

While I understand that simply accepting anything published in the media at face value without independent documentation is naive I ran across from last year that portrays a rather grim picture.

I also found this graph which backs up J. Scott's assertion that the mortgage reset onslaught will continue through 2011 (and actually beyond) but Richard's point about these mortgages being tied to the Treasury Bill index is well taken.

My followup question is, if we need to raise the Treasury Bill index, wouldn't we be crashing the housing market? If so, how long can we keep the Treasury Bill index at what might be considered artificially low rates before that comes back to bite us in the rear?

To all,

I present this information in hopes that many of you who are more seasoned in this field will be able to shed some additional light or perhaps some balance to this author's opinion.

Over the last several months I have been following the Option-A and Alt-ARM foreclosure potential for creating another wave of foreclosures that would send tremors through the market. It appears that unless the administration is willing to dive in deeper this wave is about to break, exerting pricing pressure across the entire market from the top down.

CA Foreclosures About to Soar

Tom,

Here is the link for the property in Canfield. I'm not leaving you a lot of time as the auction only has a little more than 24 hours before it ends but if this is as good a deal as we both believe it might be, anything I can do to help you out would be my pleasure.

I didn't bother going after the data for the Austintown property as it had already be sold.

Regards,

Ken

with a Canfield address, even though I am under the impression the house is not in Canfield proper. This home was listed earlier and reached just under $16K but the sale fell through, as do a lot of auctions on Ebay. I'm passing on it and you're welcome to it if it is something you'd be interested in. I'm not sure what the rents are like in that area but I believe they would be strong enough to support the price of the house plus the cost to bring it up to code.

This house in Austintown sold below $20K and as I understand it the house should rent in the $600 to $700 range one the rehab was done.

Please understand, I didn't visit either of these homes and did not have a professional inspection done, so the actual cost to repair these homes could very well skew the numbers.

By the way, I read your blog and better understand your business model now.

Ken

Greg,

Interesting perspective, one shared by others here, as you can see.

What should probably be pointed out is that at one time Youngstown was one of the wealthiest cities in the United States, if not the world. There are homes built there that have such attention to detail that it would be all but impossible to recreate in today's world.

Nonetheless, both you and Tom are correct, Youngstown itself presents an incredible challenge, one that I don't think is insurmountable.

As a mortgage expert I will bow to your knowledge with the 203K and Homestyle loan packages as I picked up that information from the HUD site, as you can see here.
http://hud1.towerauction.net/cgi-bin/e24_select_property.cgi?id=412515744&office=e24&state=OH

Please note that HUD is pushing the Streamline loan on that $15K asking price home with the statement "Streamline K Eligible: Yes Maximum Amount $35,000"

There also comes a time when the experts are uniformly telling you that what you are doing is not going to work where maybe I should listen to you all.

Thanks, I guess I need to revisit my business plan.

Tom,

Thanks for the insight and what you're telling me confirms my own research. In fact, recently there was a local Youngstown TV news story that talked about scammers selling cheap properties on Craig's List that were condemned. There's always someone that will try and make money screwing people, thankfully they are in the minority.

Without doubt, there are some horrendous neighborhoods in Youngstown, as many of our cities are also plagued with, but the surrounding areas, Austintown, Boardman, Poland and Canfield, to name only four, are now producing some very attractive deals. Perhaps I should have been more clear when I used the term Youngstown, so as to indicate that the city itself isn't necessary my sole focus.

You are also correct in that Midlothian is close to some of the worse neighborhoods, in some areas by only a few blocks. This is again why several people that I have spoken with come from the naturalized citizens category. Traditionally, these are the people who usually will gladly settle in the rougher areas, just as my Italian grandparents did when they came to this country.

I should also point out that I used the Midlothian deal as an example of what $25K can purchase, not necessarily as the kind of property I would buy into, you are 100% correct, there are better deals to be had. And with respect to getting a lot done with a little cash, that's why I'm here, to learn from people like you, who know the "ins and outs" of this business.

One more point, it is my understanding that what Youngstown is going to try to do is come back and levy some pretty hefty fines against landlords and absentee property owners that allow good homes to fall into disrepair. Instead of needing cash, this is a way the city can raise cash - and we all know how governments loves to do that.

Thanks for the advice, I appreciate the time you have taken and I look forward to learning more from you as well as the rest of the professionals here.

Tony,

Cleveland is roughly an hour and a half away from Youngstown by car, whereas Cincinnati is roughly four and a half hours away.

My feeling is that if you are going to become involved in the rehabbing end of the business you need to be incredibly watchful over the process. This will mean that you will either need to be on-site everyday or will need someone you can trust to be able to perform regular inspections on the work you are paying for. I'm not sure how you would be able to do this in two or more cities at the same time without significantly adding to your costs.

However, as I find properties in your target area I will be glad to pass them on to you, and I would appreciate it if you would do the same for me in Youngstown. It might be in our mutual best interests to identify several other people in locations across Ohio to partner with, as Dayton, Columbus and many other smaller cities as well as the more rural areas are going to need to be serviced.

Have a great vacation.

Don,

We are discussing a partnership with a Real Estate broker who will act as the pass through to close the sales and handle all of the paperwork.

The business makes money providing a service, finding the home for an out of state buyer, helping the perspective buyer handle all of the rehab costs by lining up all of the contractors and handling inspections during the rehab process.

This also provides us with the opportunity to "cherry pick" which houses we wish to purchase and rehab out of the constant flow that we will be offered. As we will be acting as a wholesaler we expect to purchase whichever homes we wish to own at a discounted (bulk) rate as well as being able to procure them (hopefully) before they sit for months and become junk.

Tom,

I'm not sure why you assumed that I'm interested in selling "vacant trashed out houses" to "illegal immigrants and people already of the government dole" as nothing could be further from the truth. It is my understanding that people "on the government dole" can't own houses.

Let's talk specifics.

In Youngstown right now there are now roughly 4,500 vacant houses of which over 1,000 are in good to excellent condition. An additional 1,700 or so require relatively minor rehab to become livable and there are funds to do so. This information can be confirmed here.
http://www.mvorganizing.org/downloads/MVOC_Strategic_Demolition_Policy_Brief.pdf

The people I am talking to have the money to buy the better homes on that list for cash and/or enough for a downpayment and qualify for a FHA Streamline 203K loan which would allow them to fix the homes which need it.

These people are small business owners, who will bring their businesses wherever they choose to live and are smart enough to understand that a house that costs $25K is better than any house in DC that costs $250K - which is what they would be looking at in the seedier neighborhoods of Washington DC.

I would also like to point out that this would be a step forward for Youngstown, would contribute to stabilizing the city, and increasing the value of any properties you might own in Youngstown.

Here is exactly the kind of listing I am referring to.
http://valleyrealestate.ohio.remax.com/Listings/ListingDetail_r4.aspx?LID=58594303

You will note that the seller is asking $25K and has already offered to pay closing costs. This home is in excellent condition and needs very little. Based on a full priced offer with a 10% downpayment, 6% for 30 years, this would make the P & I $134.90. Add in taxes and insurance and we are looking at somewhere in the low $200s/month. In other words, this is less expensive that buying a new Buick - and a lot of the people I am talking to see that as value.

Now, one more piece of information I would like to bring to your attention. The City of Youngstown is going to take action to ensure that many of the homes that have been foreclosed on are not left abandoned to decay - for obvious reasons.

As we all know, there are a lot of these low value homes in Ohio that most investors are looking to do something with - I am looking to service that end of the business. It has been my experience that Real Estate brokers are not too motivated to sell a house that will generate three to six percent of $25K. Maybe you are having better luck or using Ebay to dump these properties. I would love to hear how you are dealing with this and if you are satisfied with your results.

Maybe we hit things off on the wrong foot. I'd like to think that we can remedy that because I'm not looking to make anyone angry here or argue the relative benefits of selling homes to people you may not approve of in an area you described as a "hellhole." So, instead, how about if I change the direction of this discussion and ask if you have any properties in Youngstown you would like to sell? If you do, I'm anxious to prove what I can do, given the opportunity.