All Forum Posts by: Robert Leonard

I received a couple postings of properties in Detroit this morning and I did a little digging-in to find out more about the area and I came across

http://www.crimemapping.com/map.aspx?aid=0c6c72dd-7122-4509-b897-17f60e517d9d

With all the Detroit chatter on BP, I was surprised that I hadn't heard anyone mention this site, so I thought I would share it.

After searching BP, I found that @Brandon Turner wrote a post about the site a few years ago, but since I haven't heard mention of it, I thought it was worth posting to refresh the audience on a tool that I think can be very informative to the potential buyer.

Disclosure: I have no affiliation to the website.

@Account Closed!

Whether you flip or buy/hold, if you buy right, you make your money when you buy. Buying right means paying wholesale prices that are nowhere near retail. Yes, that's much easier some places than others, but it happens everywhere.

It is possible to buy at or near retail and still make money on real estate investments - people do it all the time. BUT, that's where you can also get creamed if your timing is off. Unless you have a crystal ball, that's very high risk.

I think a fundamental buying criteria is that a property will be profitable for either strategy IMO.

@Veronica Roye!

PROS

Seller financing can offer several benefits when you deal with someone offering good terms. You save on closing costs, because you don't have the normal appraisal, origination fees, points etc. If you had a high debt to income ratio, this seller financing will not appear on your credit file. With the qualification requirement, you still have to qualify for the financing (thanks to Qualified Mortgage (QM) rules in the new Dodd-Frank regulations that just went into effect in January) you shouldn't be set up for failure.

Why would an investor (seller) offer financing? It allows the seller to make a better return on their money by charging you 8-10% rate of interest than they would make if they sold the property to someone who paid cash or obtained bank financing. They would then have to take their money and figure out where to invest it to get that kind of rate of return.

CONS

Without an appraisal, you better know what you are buying, because sometimes, sellers will owner finance to get more for the property than the bank would finance to an outright buyer. Don't buy any "anticipated appreciation" BS. Appreciation happens, but it's never guaranteed, so you shouldn't pay for it. In your case, you lose the good payments that would have gone on your credit history if you financed through a traditional lender instead. Some of the savings on closing costs will be negated by the new qualification requirements - I haven't seen pricing on this service yet. The qualification has to be performed by a RMLO (registered mortgage loan officer) to be a qualified mortgage and keep the seller out of court in the event of default.

Beware of the nefarious seller who doesn't intend to sell, but they are on the no maintenance real estate investor con game. They will buy properties and never touch them. They want to get a good down payment, and you do any maintenance, you pay for any repairs needed, you pay the taxes and insurance. Then they get as many payments from you as they can get and at the first glitch in the arrangement, you are considered in default and you get the boot. Under any other financing arrangement, you might take a hit on your credit report or have to sell the property that you have some equity in, to fix your situation, but that's not an option when they use strategies that are faster than foreclosure to take the property back. Then they do it again to the next sucker! This WAS used on owner occupant buyers, and while the QM rules protect owner occupants, they do not apply to financing to investors! So it's just a matter of time before those who want to be investors start getting targeted by those characters.

In summary, seller financing can be a good thing, but the devil is in the details!

@jason aycock If I were in your shoes and I had a decent paying job, I would set a goal to buy 2-3 buy/hold properties a year while keeping my full-time job. Avoid consumer debt and make sure my credit score stayed high. Learn how to manage my own rental properties. Live well-within my means by never borrowing as much as creditors will allow for a personal residence or on cars. Take advantage of the opportunity to leverage your income to buy properties using your job income and personal credit.

Carry high amounts of insurance coverage to protect your minimal assets until they grow enough to need an LLC for asset protection.

Delay the "good things in life" to buy assets (properties and ROTH IRA investments) that will provide streams of income for years to come. Buy a property instead of a boat or membership to a golf club and about 15-20 years down the road, you will be able to buy the boat for cash (if you still want it) and/or golf around the world.

I would keep working my job until it just doesn't make any sense to hold a job that somebody else needs more than you do. If you don't enjoy your job, capitalize on what it can do for you in your REI business and check out ASAP. That's my $.02.

@Scott S. I don't know if you listened to the longest BP podcast ever, but it sounds like you are thinking of buying "Waldo." If that doesn't make sense to you, you have to have listened to the podcast to get that.

This sounds like a very unconventional property. Read that to mean unpredictable, non-conforming use, generally, get ready for some hard (expensive) lessons in this business. If you find value in doing things the hard way (like Josh) go for it!

@Brandon Hall this is one of the services provided by a property manager or one of the services realtors provide in the property management category. It probably requires a realtors license (check your state law, it's required in my state). The fees aren't that lucrative where there's competition for the business. The fees are usually the first month's rent, at the most, down to $150-200 to find a tenant for someone, like everything else - it's negotiable.

@Nicholas Jasmine

@Nicholas Jasmine

@Nicholas Jasmine

@David B. I can point you in the direction of the two most knowledgeable guys on this subject ...

@Steven Hamilton II

and

@Dmitriy Fomichenko

@Account Closed I started where you are, no experience, no family in the business or any related fields, but I figured out one thing that is the key to anything you want to learn - I know how to read. Anything you ever want to learn, I bet you can find a lot of good books written by very accomplished people in any field. Library cards are free (to users, thanks to tax payers). Now we have this cool Internet thing and you can access the library from the palm of your hand anywhere you are anywhere you can get on a computer!

When you have more time than money, commit to learning and finding out the lowest entry point that you can access to get your foot in the door. That doesn't mean, buy something in the worst neighborhood that will be the most hands on management challenge ever. It means learn your market and the surrounding area market that's within reasonable commuting distance. If you are in a high end market, look outside of it. Go to REIA meetings and just be a sponge, learn, learn, and learn some more and start getting to know people in the business.

If you have a little money, do a little investing in a ROTH IRA. If you don't know what that is, look it up. You can start investing in good quality low cost mutual funds in that ROTH IRA now and start putting your money to work now. Don't put any lump sums in there all at once. Follow the "dollar cost averaging" technique and over the long run, the ups and downs of the market will work to your advantage. I know this site is all about real estate investing, but this will allow you to create a pool of money to invest in real estate one day, that will allow you tax free growth of your real estate investments. That's after you convert it to a self-directed ROTH IRA. You don't want to start with a self-directed account right now, you need to build up some capital and you can only put $5.5k per year into a ROTH IRA (if you are married, your spouse can open her own account and contribute the same amount).

https://personal.vanguard.com/us/whatweoffer/ira/roth?WT.srch=1

I invest with Vanguard, but I am not an employee, nor do I receive any compensation from them in any way.

Just take it serious and take the business approach to real estate and avoid thinking it is a game. No matter how many times you hear people say, just jump in the game, you learn from your failures. If you just jump in, you are likely to break a leg. If you know what you are doing and follow some pretty well proven strategies (you can learn them all here and in a few good books) that you understand before you jump in, you can always scrape a knee or get an unexpected nick or cut, but you won't break a leg and get seriously hurt. Sorry to put you through metaphor overload, but I hope that all makes sense to you.

@Paul Gomez the best way is going to be a market specific answer, so hopefully someone from your area can chime in?

In my market, for a first time home buyer, I would recommend taking advantage of some of the "owner occupant first" buying opportunities that exist. In my market, there are some really good deals on REOs for owner occupants. You can find lots of those properties that need only minor rehab in my market. That's what I would recommend if those are available in your market.

Those owner occupant first programs are offered buy HUD, Fannie Mae, and some of the big banks too like Wells Fargo.

If you have the funds for a large down payment and you want to do more investing, I would only put down as much as I have to, to avoid any kind of PMI, MIP or whatever else they are calling any kind of mortgage insurance. FHA mortgage insurance is very expensive and it is for the life of the loan, unlike the way it used to go away once you get below 80% LTV.