All Forum Posts by: Account Closed

@Dylan Tettemer We did our first flip with a 3 year old and a 6 month old, while living in the house. The house was built in 1909 and had a gorgeous view in a very desirable neighborhood. We first painted all of the walls to protect against lead paint, just in case. We had the "safe" room as the kids bedroom. No work to be done in there until the last. The house had old bad carpet that we removed before we moved in and it exposed the nice hardwood floors. Then we used thick plastic to section a room at a time as we proceeded. Ah, we were young and innocent ;-)  I rewired and replumbed the entire house and moved bathroom sinks, tub, and toilets and walls to better flow with the space. Of course it was lathe and plaster to remove, and sheet rock to install. We had two bathrooms, so I worked on them one at a time. The tricky part was the kitchen update. That took longer than expected. My wife (now married 38 years) is very patient and inconvenience tolerant but would "lose it" on occasion. I would have to take her to relative's so she could see a "finished house". But, it turned out so nicely, that we ended not selling and we stayed there until the kids got out of college. Not what was originally planned, but a happy ending nonetheless.

@Account Closed I've done things both ways. I would now mail out 500 a week and take the calls myself though. I've had people hang up on Patlive when they found out they weren't the buyer. Patlive did their job and I recommend them if you choose to have someone answer for you. They are easy to work with, responsive and affordable. Keep your script simple for Patlive. And call the people back immediately when you get the info. 

But, there is just something about being able to direct the conversation when the seller is making the effort to make the call and you are the one they reach. You may never get then on the phone again if you have to call them back. Besides, what are you doing that is more important than talking to leads? ;-)

Hmmm, I can't find a "Chris Rivera tax accountant" in New York or anywhere else for that matter. What street is your office on?

@David Faulkner Your Question of: "what signs do you look for and how do you personally go about telling when each phase transition will start and end, and therefore that it is time to switch up your strategy?"

I make a few basic assumptions: 

1) Real Estate Markets tend to be local

2) Real Estate WILL go down eventually and come back up 

3) Basic Demographics play a huge roll

I look at how many people are in the pool of possible buyers (age group, income, family formation, investors, hedge funds etc) and the trends as to where people are moving. I look at foreign money coming in. For instance, Chinese money drove up the prices in Vancouver Canada and that bubble will be bursting shortly. When Canada imposed a 15% surcharge on unoccupied properties, that drove the investment money to Seattle which now is also crazy high, and the money went to San Francisco and Los Angeles. Since I invest in Phoenix I expect some of that money to drive prices higher there. 

I look at monetary policy and how it affects interest rates. The higher the rates, the fewer can afford to buy. That increases the renter pool and decreases the buyer pool. I look at the offset of housing starts which means the more houses being built, the more jobs and more people can afford houses. Housing permits are a leading indicator that I use to gauge how many houses will be built in the next year or so. 

I look at flood zones, earthquakes and natural catastrophes  (New Orleans is a risky place to invest because of hurricanes and flooding. One third of the people from New Orleans relocated to Houston and never went back to New Orleans.) It was a good time to own property in Houston and a poor time to own property in New Orleans. 

Of course I look at local politics. I used to buy a lot in Seattle but now you are required to accept the first applicant or be sued. The city is sending out "shoppers" to ensure compliance. Sounds like a police state. In Washington it is a criminal act to mail to people in distressed properties but they don't define "distressed". If the owner "feels" they may get behind sometime in the future they can sue you up to 6 years later. Figure that one out. 

Illinois is on the bring of bankruptcy. That to me means that pensions will fail and people expecting to live off of their pension are in trouble. Then of course there is the L.A. traffic and their crazy high prices. When I read about people who keep properties in California because some day they will be worth more yet for now are negative cash flow (losing money) I shake my head. Some states have HUGE transfer taxes just for the pleasure of selling your property. A lot of people don't take transfer taxes, property taxes and capital gains into their equations. but I do.

So, I look at trends. I look at what others are doing and how much money the are keeping in their pocket everything said and done. I ask "Is this city worth investing in for the next five years?". I assume a seven year real estate cycle. (generally)

When I see laws are changing against investing, I pull out. When I see large layoffs in an area, I pull out. When I see a new manufacturing plant is being built, I buy in.

I put some long term thought into each area I invest in.

@David McClain I would have a real estate attorney write it up. You will be better represented and it will save you (or the seller) about $10,000

@Jonathan Twombly I look at the market in three phases. (I think we generally agree)

Phase 1 we are in is to do quick flips (Subject To, no rehab, resell quickly with owner financing for cash flow), build liquid cash to be used later, buy & hold only if the price I can buy a particular property at will get me through the coming drop (buying well below today's market value).  Not Buy & Hold though. I realize you do Apartments for Buy & Hold and of course that is a very solid strategy. However, 99.99999999% of people on BP are not doing apartments. And, houses are a different strategy and on a different cycle in my humble opinion.

Personally, I would jettison any house that has a negative cash flow unless I was convinced I had a quick exit in the event the economy turned and everybody wanted to sell at once again like 2008. This good phase should last for the next year or so. So, cash flow, and build cash reserves.

Then I think we move into: 

Phase 2 major realignment, prices drop for about 3 years (boomers sell to downsize & want single floor houses & apartments - the ole' knees ain't what they used to be for stairs) & Gen Xers aren't buying - too much student loan debt and the down hill slide will be a bear. A lot of houses will come into the market with little demand and it will still be too volatile during this time to buy houses to hold. 

(Apartments will be hot, hot hot, especially if they have elevators). I expect to buy Subject To on the down slope, not hold, but rather sell to otherwise qualified buyers that can't get bank financing. The Fed won't be able to figure out how to unwind QE causing continued Fed trouble in the markets. It will takes years to sort out.

Phase 3 about 3 to 4 years from now, prices are at bottom again and it's a Great Time To Buy especially if you planned ahead and have cash. Buy & hold, Buy & hold, Buy & hold.  Warren Buffet's world.

So, my take is that it is a great time to be in the real estate market, there is a lot of money to be made for the next year. Things go south after that for a few years and then as always, it bounces back.

@Chris Potter They recently moved multnomah county to Oregon ;-)  Western Washington is fast, fast, fast and wet, wet, wet.That means you need to be quick and well funded and put up with lots of nonsense from City and County regs and sometimes the contractors actually show up. Eastern Washington has drier weather and is much more laid back and the people tend to be honest and hard working and enjoy the process. You can make money both places and I have done projects in both places. I prefer Tri-Cities and Spokane.

@Marc Maser Do a walk through and take pictures of everything. Buy a folder and keep all receipts and paperwork. If it is trashed, it is cheaper and faster to have a dumpster delivered rather than taking lots of trips to the dump. Start planning for the sale. The way to make money in flips is to fix and flip quickly. Also, if you are not there on site, the workers stop working. Fact of life. ;-)  Congratulations!

@Jason Mills First, thanks for your service. Second how will you fund the rehab and carrying costs? I would suggest finding someone with some $$$ to partner up with. That could be a friend, family member or someone who filps in the area. Locate the REIA (Real Estate Investment Association) closest to you, join and attend and make new friends.

@David J. A lot goes into finding and analyzing properties like 60 Unit buildings. You need to get up to speed on what to look for. You can do that on your own, but it will take time. Also, on commercial buildings the bank wants 25% down ($400k on a $2MM building) and your net worth to equal the difference ($1.6MM). And you have carrying costs and other concerns. It doesn't look like you meet That criteria yet. A partner would get you where you want to go a year or two faster. But with a full time job, it's unlikely you'd have the consistency of effort to pull it off on your own. Think "I'm in a rut".