All Forum Posts by: Logan Hicks

OMG Notes are like the most amazing thing ever ZOMMMMMG!!

i totally love the saying "no tenants or toilets".

Is there any kind of database/clearinghouse/auction house?

Im sure there are plenty of you out there who want nothing more to do with baltimore, lets talk :)

How much in college debt do you have left? It will become a major hinderance to you in terms of financing due to what is probably ~100K+ in college debt (effectively a mortgage)

Why not just do a mortgage takeover right after your mortgage settles?

Im looking to buy a 26 unit complex, its buy point is 185k, its city appraisal is 150k, its comp ranges in the 220-600k range.

Im looking for funding, but I have bad credit. My options?

This is a controlled situation math problem.

Situation 1 vs Situation 2.

I have 100k. I can either buy 5 100,000 properties @700 month in costs, and rent them for 1k, or I can buy 1 property in full.

My one property nets me 1k in rents. Full cash. 

My 5 net me 1500 total between them all.

Key points to realize.

My five in order to meet my 1 must maintain at least a 60% occupancy at ALL TIMES. With no costs. Ever. Five times the tenants means 5 times the risk of wear and tear and/or damage.

My one unit has very little mitigation.

When its not rented, I make no money whatsoever.

My five properties are new, therefore dont have equity for leverage. My one property is paid in Full, therefore I can leverage up to 80-90% value (80-90k) at any time.

In my opinion, take it for what its worth, I like a 50% cash in finance.

This allows for you to do a 30% leverage right away, you have half the payment, so more cash flow, but you get the diversity of risk, without too much diversification to hit diminishing returns.

For instance.

I have 100k again, I buy TWO properties, my pay is 350/month, and I make 1k per, or in essence, I make 650/property, for 1300/month cash.

I dont quite make 1500 like the full 5, I make more than the one, I gain the power of leverage, at the sacrifice of cash flow, but I have the protections of diversity, but without too much of it. Its the best of both worlds IMHO.

Hate to burst your bubble, but most lenders will only lend a portion for land, regardless of great income AND good credit.

The liquidity of land is atrocious.

At best, hes looking at 25% down, maybe more. Worst ive seen so far is 50% down.

Land simply isnt a good bet for banks. They dont want to hold assets for 20+ years.

@Matt

I want you to think about this long and hard.

The word "Free".

You are paying 137,000 for a property THEY SAY is worth 160k.

One thing you arent even thinking about, HOA. How long do you think itll be before a bunch of side by side duplexes go HOA?

On top of that, you are LITERALLY carrying the note for the builders. You are their Escape clause.

They build it, expense it, drop it on trade lines, and they have an immediate buyer, who helps them cash out of the entire venture, paying them a substantial sum per unit, per sqft, and leave you carrying the note. 

They say they are giving you equity, well thats great.

Whos gonna pay the -66 dollar balance per unit, per month?

Thats also assuming you get ideal market rent, and that another builder doesnt build right down the road from you, which happens ALL....THE....TIME.

Your equity is only good if you can leverage it, and with 137k of 160k, you are at ~85.6%, or in essence, the Equity is worthless. 

You can leverage it at all, and even if you did, its a net cash negative property set already.

As for the 1031 Exchange, LOL @ That.

What RE investor do you think is going to want, much less give you a good deal on an exchange for properties that are cash NEGATIVE?

They arent doing you a favor, they are taking you for a ride down financial disaster Ln.

Just an FYI, according to the NAHB, the cost of building the average home is roughly 200k. Thats roughly a 2200-2400 Sqft unit.

Average duplex ranges from 800-1500 Sqft.

How big is the space you are buying?

What is the quality of construction?

What is the quality of the unit itself? Marble tile? Granite or Quartz Countertops? Brand new appliances?

Those are important details usually, but on this deal, irrelivant, because most places never qual for the full 150/sqft value in building material costs.

Average is roughly 110-130 on the mid to high ends, so giving you bene of doubt, thats at best, roughly 143k @ the 130 mark for 1100 sqft realistically.

What that translates to, is what they are really building it for, in almost all reality, is more likely around 110, or 121,000, and you are paying their mark up, getting a "discount" at 137k per unit, or paying roughly 16k per unit, for 6 units, wipe the slate for them, and allow them to walk.

Thats also assuming high grade materials, and a high construction quality score, which most likely is around a 5-7 instead of a 9-10.

TL;DR, 

they arent your friends bro.

The hookup would be around the 110-120k range per unit.

For everyone who only buys "land" let me ask you this simple question set.

1. Does land generate good cash flow? (Farm lease, 70-160/acre/year)

2. Does land generate a high level of leverage?

3. Does land appreciate well? (2-4%) on average year over year, FYI

4. Do you pay taxes and upkeep on land? (Yes, yes you do).

5. Do you know what the federal Municipalities funds pay? (~8.4%, tax free)

6. Did you know, that @~8% Interest, your money doubles every roughly every 6 years?

7. Did you know, with 20 years of compounding interest, at 60k, you would have over 320,000.

8. Do you see why land is a bad investment now?

The only way Id buy land is if it came with a house on it, or a missile silo in it.

Ill settle this with one simple statement.

Walk into the bank.

In one hand, say I have 5000 Stock in *insert mainstream company here*

In the other hand, say I have a free and clear title to a RE property.

Id like to get a loan. Which one would you prefer as collateral?

10/10, Bank chooses RE.

In all reality, even the banks know, RE is worth more.

A Company can wash out in a heart beat. Become obsolete in a heart beat, get sued, get shut down, get shut out, fail.

A property can have a bad tenant, yes. And you can evict them. You cant evict a CEO thats a jackass. HPs Old CEO was proof of that. She was an idiot. Damn near crashed the stock, and damn near ruined the company. It took an act of God for the Board to replace her. 

I can evict a tenant with 30 days notice, because my leases are written on my terms. HPs Stock rules and restrictions are written on theirs.

The difference is direct value, liquidity, Cash flow, and control.

HP stock is only valuable to me when I sell high, and buy low. Theres no guarantee a company will fluxuate in a positive shift.

My RE is going to increase in value, I can immediately leverage it, I get monthly Dividends from it, and as long as I buy smart, I get great margin, far better than 10-14%, which is the average DOWJ or NASDAQ.