Real Estate Investing

[OldTrader]

Quote from risktaker:

My experience in the last 2-3 recessions is there was a 6 mo.-1 year window at the very bottom, where such good deals could be had just prior to market taking off.

I believe those 'good deals' in other states right now, while good in terms of price, will find the rental market tough if bought with that intention. High unemployment & high vacancies in many areas are not conducive for buying & renting *yet*. My .02.

So I guess you're saying that you'd rather have the unemployment rate lower, and the vacancy rate down?

When you get everything to line up, let me know. In the meantime, in my area, I can buy houses where the mortgage payment (PITI) is half the rent. Personally I think that is a pretty good deal.

OldTrader

 

[maxpi]

Quote from aegis:



The guy who lives next door to me makes a living out of finding abandoned homes and hunting down the owners. He uses skip tracers to find the owners and then makes them a cash offer well below wholesale. Sometimes they jump at the offer and sometimes they don't.

I had a friend that did that back in the day.. he would get a quit claim deed, give them enough money to move with, and then go to the lender and start talking about how his now abandoned property was in danger of fire from transients.. he claimed that he could pay them off for ten to fifteen cents on the dollar but the lenders got to know him and they just kept making it worse for him over time... he said furniture was thrown during one negotiation.. the lenders want the people to just leave, they don't want a middle guy messing up the works... and, that was decades ago, who knows if such negotiations are possible nowadays.. it seems like lenders just don't respond to much of anything..

Financial instruments are so much more liquid that RE.. I had RE, I had renters I couldn't stand, I had headaches, and then I needed money and had to sell a house right before the prices tripled in the 90's.. $215k to $700k in a few years... never again... shoot, I had nearly accomplished complete amnesia in regard to that but the memories are flooding me.. noooooo !!! :eek:

 

[austrijec]

Quote from OldTrader:

So I guess you're saying that you'd rather have the unemployment rate lower, and the vacancy rate down?

When you get everything to line up, let me know. In the meantime, in my area, I can buy houses where the mortgage payment (PITI) is half the rent. Personally I think that is a pretty good deal.

OldTrader

here in Sydney rents are still 1/2 of the cost of owning. How can be sooo different but economies more or less the same

 

[risktaker]

Well, with all due respect to OldTrader, there are rarely properties for sale that pay for themselves as he says. Once in a while you find something, every few years, at the "perfect time" you'll get such an opportunity, but rarely. For example, in California, most 3bd/2ba houses still rent for 1/2 to 3/4 of cost of ownership as you say.
There are some good deals out there in foreclosure auctions but they're usually fixer-uppers. Sometimes you get lucky & find a bargain, but it's the exception, not the rule.

Quote from austrijec:

here in Sydney rents are still 1/2 of the cost of owning. How can be sooo different but economies more or less the same

 

[kinggyppo]

Quote from Brandonf:

I just had a guy come to me, and he is a pretty big name in the real estate investing industry. He's got a business that makes about $2million per year online teaching people how to short sale houses. It's an amazing offer he gave me, but I turned it down because I don't think that real estate is the place people should be right now. I particularly think that short sales is not all it's cracked up to be. Yes, some people are making amazing money at it, but you've got to have great contacts with brokers to get started - and I also see it as a little bit like DayTrading in late 1999 -primed for a fall.

Anyway - I'm just wanting to have some feedback from you guys -ie did I do the right thing. I know that some of you think I'm just a whore who will sell anything, and I guess that's fine...not much I can do about it, but the fact is that I won't get behind any product unless I'm 150% sure the person behind it has integrity and the product will do exactly what is promised if the buyers follow the system.

In any event: When you guys are thinking about investing in real estate: What are the top reasons that you don't do it? Or better yet, if your brother/sister, son or daughter came to you and said they want to start investing in real estate, how would you try to talk them out of it?

I think that the market has a few years to go before a bottom is in, and prices are still very high in most markets, so that makes renting not a very viable option. Anything else you guys can give me would be great....because I don't want to regret this: I left about $200,000 or so on the table.

Brandon

Its much harder to close on a short sale as usually it it bank owned. Now at a small bank there can be opportunity. I was looking at some condos in San Diego in the "Gaslamp" quarter which is the downtown area. There were some listings where the higher floor was being sold for about $30,000 less than the lower floor. I surmised the reason was the higher floor listing was a short sale meaning you had to offer to the bank and wait for the bank to respond in their own sweet time, they will alot of times reject a reasonable offer, why? because many running these depts don't know anything. You can spend a year and still not get the property. Many realtors will not involve a buyer in this due to the aggravation. I don't want to generalize as every situation is different but that is my limited understanding of "short sales" By the way, banks are notorious for losing a ton of money with bank owned properties.

 

[OldTrader]

Quote from kinggyppo:

Its much harder to close on a short sale as usually it it bank owned. Now at a small bank there can be opportunity. I was looking at some condos in San Diego in the "Gaslamp" quarter which is the downtown area. There were some listings where the higher floor was being sold for about $30,000 less than the lower floor. I surmised the reason was the higher floor listing was a short sale meaning you had to offer to the bank and wait for the bank to respond in their own sweet time, they will alot of times reject a reasonable offer, why? because many running these depts don't know anything. You can spend a year and still not get the property. Many realtors will not involve a buyer in this due to the aggravation. I don't want to generalize as every situation is different but that is my limited understanding of "short sales" By the way, banks are notorious for losing a ton of money with bank owned properties.

A "short sale" by definition is NOT bank owned. By definition, it is a property owned by the borrower, who wants to sell for a price less than the balance of the mortgage. The bank would have to approve such a sale, but they do not own the property.

OldTrader

 

[OldTrader]

Quote from risktaker:

Well, with all due respect to OldTrader, there are rarely properties for sale that pay for themselves as he says. Once in a while you find something, every few years, at the "perfect time" you'll get such an opportunity, but rarely. For example, in California, most 3bd/2ba houses still rent for 1/2 to 3/4 of cost of ownership as you say.
There are some good deals out there in foreclosure auctions but they're usually fixer-uppers. Sometimes you get lucky & find a bargain, but it's the exception, not the rule.

Hey Risktaker:

I just told you they are all over the Midwest. You seem to be citing California as an example, so I'll assume you're from California. Trust me, the California market is nothing like the Midwest market. So if I were you, I would not generalize the California market.

So that you know, I was active in the So California market at one time, mostly Orange County and the Inland Empire. I haven't been there for a while, so I've purposely stayed away from making any direct comments. But when I was there, the rent was well less than a mortgage payment would have been as you stated. So at that time I bought properties at a discount to their market value, and then resold them. I never rented a property. However, as I mentioned earlier, a friend now tells me he can buy properties in the Inland Empire and rent for positive cash flow. This guy has been in the real estate business for about 40 years, so I suspect he knows what he's talking about. Think about it, the interest rates are very low, property prices have come way down, and you don't think that just maybe you could make a deal that might be covered by the rent? My friend in CA tells me that there are deals to be had at the auctions there, and that he can hold them by renting them out. He's a pro. I'm not sure what your qualifications are. But I definitely know you don't know what you're talking about when it comes to rents in the Midwest.

OldTrader

 

[risktaker]

You're right. I *don't* know the MidWest. I was under the impression from one of you posts a while back you were in CA though?

Quote from OldTrader:

But I definitely know you don't know what you're talking about when it comes to rents in the Midwest.

OldTrader

 

[Brandonf]

When I say it's like daytrading was in 1999, I'm not talking about the risk of losing money. I'm simply saying that everyone and their grandmother's dog seems to be getting into it right now, and it's easy money for the time being..and I don't see it lasting.

Quote from OldTrader:

I'm very familiar with real estate investments. To me, at least based on what you wrote, it sounds as if you don't know much about real estate investments in general, or short sales in particular. Just calling the way I see it.

Briefly, a short sale in real estate is just a technique you use when the property is worth less than the loan balance. So when you make statements like "like daytrading", or "primed for a fall", what I begin to think is you really don't have a clue. All that could happen to short sales would be that there were few, or no, property worth less than their loan balance. Then of course it would not be an applicable technique. Are you expecting that? According to what I see and hear, we have more properties in that condition, not fewer, and certainly we are no where near none.

"Daytrading" makes it sound like there is a risk. Huh? What risk? If the property is worth less than the loan balance, you are simply seeking lender approval to sell the property at the reduced value. Where's the risk?

You think you need "great contacts with brokers to get started"? Well, I don't know what this guy is teaching, but it isn't difficult to find brokers, you don't need them to get started, you can do short sales without brokers. So I don't have a clue what you're talking about.

Most people don't understand real estate investment. Especially stock market guys. In real estate the idea is to buy well under the market. To do this you need a motivated seller. Do you think there are any motivated sellers around these days? If the property is worth $200K, and you buy it for let's say $140K, do you think you could resell the property for a profit? Do you think that a bank would agree to their loan customer selling you a property for $140K, if the loan balance was $170K?

Did I say anything about the real estate market going up? Did I say anything about renting a property? But are you aware than in many areas these days the rents are considerably higher than the equivalent mortgage payment?

You evidently are asking about whether you should promote someone. I wouldn't know since I don't know the details. But I can tell you that real estate investment is a viable method of investment if you know what you're doing. Short sales are one technique that works when you have properties worth less than the loan balance. It's no more complicated than knowing that banks will take a loss on their loan if they believe that it is prudent for them to do so.

OldTrader

 

[kinggyppo]

Quote from OldTrader:

A "short sale" by definition is NOT bank owned. By definition, it is a property owned by the borrower, who wants to sell for a price less than the balance of the mortgage. The bank would have to approve such a sale, but they do not own the property.

OldTrader

that's my point you are dealing with the bank, they are making the decision not the homeowner. This is why it is like pulling teeth. Ask a realtor who is mainly a buyer broker and ask them what they think of getting involved with short sales. I have an inlaw who had a client looking to buy a short sale condo listed for $150,000, an offer was made for like $140,000 which was rejected by the bank. That same property is still owned by the bank and relisted at $100,000 and has not closed. Maybe the banks need to write down these loans.

http://homebuying.about.com/od/4closureshortsales/qt/112707_QualSS.htm