All Forum Posts by: William Jenkins

This is probably more county/state specific regarding the MLS, but I would 100% analyize the taxes independently from what you see in the MLS or any advertisement. Most taxing jurisdictions will reassess periodically (every year or two or three) and recent sales will come up and be used to raise (rarely lower) the assessment.

Assume taxes will be based on the higher of (1) your purchase price or (2) the existing taxes when creating an investment pro-forma.  I always look at raised assessments as almost a 100% guarantee if the sale price is higher than the current assessment.  If I can get the assessment lowered based on the sale price then it is icing on the cake for me.    
 

Bad parts of a down market:

1.  You can have problems finding tenants (increased vacancy) and rents may decrease (decreased or negative cash flow).  Don't always buy the argument that a down economy means more renters... In the last recession/depression households consolidated for the most part.  Kids kept living with parents, roommates vs studio, etc.  

2. Unless you have long term fixed debt (i.e. 30 yr fixed mortgages primarily for SFR), you face refinancing and interest rate risk. In the last recession/depression property values fell significantly which made refinancing a major problem. Many had more than their equity wiped out and had to come into a loan closing with cash..... LTVs also went down. Not good especially if you are leveraged and have multiple loans coming due. Increased rates can also through a wrench into a refi and your cash flow.

3.  Many on here are think a downturn will be this panacea of opportunity.  Its can be true to some extent (I am an optimist), but not as much as people think.  When the market is in the toilet, buy side "good deals" are everywhere, but the use or exit opportunity for the property is typically non-existent.  That is the opposite of this market.  You have to be able to buy, hold, hold, hold, and sell/rent into a turning market.  You need (1) access to equity capital (do not rely on being able to get debt... lenders will hate real estate again) and (2) the intestinal fortitude to pull the trigger when it seems like things could keep going down and (3) more cash than you think to hold hold hold....     

A 5% return is TERRIBLE.  I'm not sure how he is getting others to commit to those terms but if so I would love to know and use his investors... LOL.  

There is no upside in this thing....  Best case scenerio you make a measly 5% (~$400 over 4 months).  Worst case scenrio you lose a relationship and $25k.

Do yourself a favor and stay out of it.  Whenever I hear people looking at marginal deals because their cash is in savings "earning nothing," I just want to shake my head.  Repeat after me.... "Cash is not trash!"    

@Geoffrey S. Most on here will tell you to leverage to the hilt. That mentality has worked well for the last 8 years or so but like all good things that will come to an end at some point. I don’t see the issue with debt pay down at all. I do think it would be wise however to make sure you have credit lines available for future use If necessary. When blood is in the water financing his MUCH harder to come by.

@Larry King - I develop, own, and broker towers. The non ionIzIng radiation you speak of is not issue unless you are literally standing right in front of the antennas. That is obviously not happening in your case or on any case for that matter. There are numerous articles on the internet that talk about this perceived issues and reputable ones disprove any problems. There are quacks out there that will say otherwise though.

@Todd Dexheimer - That is impressive indeed.  Also, that stock is just one example but there are many others out there that would have performed very well over the same time period.  

For those who didn't look it up, $5k invested in PM in 1960 with reinvested dividends would be worth a little over $25M today.  You would also be getting approximately $1.25M paid out in dividends annually.  There are lots of stocks you could have bought with the same strategy and turned in into $5M, $10M, or $15M.  There are also some that went to $0.  

I wouldn't be on this site if I wasn't a firm believer in owning, developing, and investing in real estate.  I have more in real estate than I do in equities and other financial products but I keep my options open and always will.       

One important differentiator between equities and real estate...... Real estate is work! It is a business and not a passive investment in almost all cases (except perhaps NNN). I can guarantee you that you didn't turn $20k into $10M as a passive investor. The hypothetical Altria investor had their money working for them (passive) and you were 100% working for yours (active). That does not diminish your success at all, but it is worth pointing out.

@Todd Dexheimer - I like @Bill F. am curious if the $10M you referenced is 

1.  The total equity value you personally have in the deals you created

2.  The total equity value of you and your limited partners combined or

3.  The market value of your portfolio without taking debt into account.

Always like to make sure its an apples to apples comparison.  Turning 20k into either is impressive, but 1 exponentially more than 2 and 3.   

Investing in RE and the market are not mutually exclusive. I think any prudent person would have part of their net worth in both. It is a misconception that equities cannot be levered. Interactive Brokers allows you to margin at sub 3% rates (floating of course) and they allow more leverage then you might think. Dont bet the house though. I’ve actually been deploying more into the market than in RE lately due to a lack of RE deals. Some good bargains in the market if you are looking for dividend growth. PM, T, and many others. And for those that say you can’t become rich in the market. Go to a historic dividend calculator and put in $5k investment in 1960 into MO (Altria) and see what it would be worth with reinvested dividends. Yea.... No midnight calls and much better than most on here will ever do in RE.

@Todd Dexheimer LOL!!!  Brings back memories.  Before 2008.... "I'm in real estate" = rock star.  After 2008.... "I'm in real estate" = pathetic loser and don't invite him to any more parties.  

First, you are going to have to subdivide the property which means getting a survey and going through the jurisdiction's subdivision process.  Check with the jurisdiction on the process and requirements and get a handle on those costs.  Also, buyer or seller paid?  

Second, you are lacking quite a bit in your financial description of the property.  Work the numbers for a flip and for a buy and hold separately and see if it makes sense.  Ignore the previous appraisal and run your own numbers.