I just thought I would ask first.
Ive done several rental threads but I havent done a flip thread.
Ive got two flips in progress now and fixing to develope one more for market which will make three at once .
Ive always started with a rental thread but never finished with the flips because of lack of continuing interrest . If you dont mind Ill elaborate on that subject and ramble a little bit .
I thought about writing this thread all day today after first reading my morning paper. The house building crash was on the front page and another lead article about record repos hitting highs of over 7 years ago. Then more of it in the business section with numbers and percentages of repos per loan numbers. Its pretty high and its pretty spread out over the country. Then I took my son to lunch where he wanted to eat burger barn. Its a nice place to read their paper which is recognized as our state paper . Again more of the same on the front page and the business section. I guess we could talk about dieing and death but here I think I might be able to help. Death I cant .
I got to thinking about the slow down workwise and frankly about all of you. If you wanted to hear it Id help you make lemonade out of lemons . At least some of you . If you remember I predicted this along with others in print but I can also tell you how to get a good prediction from it . When ever some one is losing there is always someone winning and the apple can taste better on the other side of things . All the while you will still be eating apples.
Then again flipping is not for everyone just like we found out with rentals here. The biggest negative I remember hearing over rentals is pricing . “It wont work here because its too high to work”. Well if the prices are too high to work as rentals then you are in luck. You are in prime time flips areas then.
Right now its not only a buyers market but its an investors market . The current record on sales says that prices are being driven down. That can be bad for new home builders building specs but it can be exellent news for flippers that did not have to pay the construction price . Fiigures that I just tallied had my new home flip ahead of another new home builder with new new specs across the street by more the double . He built the home Im flipping and it cost him more than it cost me . At his price that he paid to build it he had to sell it retail. He could not afford to sell it for less since he made a living off a construction loan basically. He has one done and sitting as I visited with him today. He told me it hasnt been shown one time . He knows that because hes still got all the keys . No one has asked for them which is a good indicator to him the realators arent working anyone on it .
That brings my memory to Zig Ziglar. If I asked for 1.00 worth of change for my dollar . How many people would jump into their pockets for change ? Not a bunch for sure . If I asked for .50 cents change for my dollar Id get offers all over the house according to Zig Ziglar . Hes my mentor when pricing a house because of that story. A banker asked my wife one time how we got people to give us money? What he might have been doing was griping as we had just made a loan that got paid off . Her answer though was true . Tim prices every thing to lead the market with the cheapest price . You can do it if you were the cheapest buyer .
They will tell you homes arent selling but they are talking about the ones that are listed . They have another list on the MLS that are sold . Be one of those . If you have the best house in the ——- range or you have the cheapest house in blank range , the cheapest one will sell first if its close in class to the highest one however the best house should also sell. The answer is to buy it cheaper and pass it on. Everyone gets to eat that way. It has always amazed me how many different people eat from someone buying a house . It has amazed me more when some one is eating good there are a lot more people around that person eating . Then there becomes a line of more people wanting to eat but cant sit down. That only happens at the best or the cheapest places to eat where the quality is above average to top notch. . Both work reasonably well.
Repos are selling cheaper than they can be built right now . Some of them can be sold for more profit than building one . So if your work is slow you might want to pick it up with a flip.
Tim
Edited 3/27/2007 11:59 pm by Mooney
Replies
One more thought to ramble on.
For my rural area the burn house Im working on is a pretty nice house. Ill probably be posting pics in this thread later of it .
Anyway what keeps comming to mind is what a nice deal it would be for a carp that needed a place to live to have found this house . 25 percent on the money and a lot of sweat equity. Its bad to the bone filthy and nasty. I looked like hell to night when I walked in the door but a shower fixed it and the washing machine running shortly after with just those clothes in it . The water was black in both places .
A carp could live there two years and get a 75 percent turn around tax free if they dont change it .
Tim
I dont think i ever responded to you but would like to say at this time i read everything you say and enjoy it, If you wrote a book i would be the first to buy it, I have 3 houses. Im getting a feel for whos who but i dont think i ever read anyone as informitive as you on property.
Thank you.
I remember several people years ago helping this board with several different things and several are still here doing it either here or JLC. Theres another board that helped me a lot which is a tile board where they really laid out the red carpet for my questions . I even thought about selling out and hanging this trade up over health reasons so I spend a year with a truckers board while still being a part time regular of this board. The most important thing the truckers did was introduce me to the math of trucking . That experince was valuable to me and it was given to me by others that were in business for themselves. Not only did it influence my decision to not sell out and buy a truck but I think about costs much more seriously in this business . I decided I would be more agressive and do less work. I would then spend more family time and that would be enough of a reward. So now IM being rewarded by family. Its nothing new , its just people helping people with the same goals in mind. I stated in a another thread here that Id like to give some back as its been good to me .
Theres lots of good subjects here with good information comming from people who have been there and done it many times . Its a good read every night for me and most of the time I just read it. Still there are others here with knowledge of properties thats very valuable and I have also learned a great deal from them. Some times I make a thread to call um out . <G> I wouldnt be surprized if some dont show up here and I end up leaving with more than I left .
Tim
Heres a dead true example of the facts of the math surrounding building .
From:
Oak River Mike <!----><!---->
7:03 pm
To:
calvin <!----><!---->
(5 of 8)
87760.5 in reply to 87760.3
Hi calvin,
Yeah, I'm not trying to dwell but it seems we just can't catch a break. Lost a few nice jobs ($50-75k) to other guys over $5-7k. Those hurt as it just seems like folks don't want quality, they want low price. The couple jobs we did win last year by going low, we barely made money on. The customers are thrilled but when I run the end numbers, we should have made more.
I'm always just trying to see what all the variables are around the business and go from there. Don't want to close the doors so am always looking for alternatives.
Thats no different than just what I was talking about earliar in the thread . Its real and its bad to the bone truthful. The truth is , everyone cant make more and pay more . Theres lots of reasons for it and then theres reasons of a certain locale that may make it different still. Some would say just charge more . Two guys lost my jobs last week by trying to charge more . One was a garage door . Ive got to tell this story;
I called the A garage door guy and asked for a quote. He bettered that and showed up hard selling the door . WOW , this guy must be slow was my thinking if hes got this kind of time on his hands . Then I say the price sounds high to me . He tells me hes the cheapest around . I still believe I tell him that garage door B guy will be cheaper than him. He tells me Ill probably have a problem with warranty if I go with him. How come I ask? Well , hes going out of business I understand . Really? I didnt know that so I called um up ! First thing I said is " are yall goin out of business ? Thats what he said so I thought Id call and ask for a goin out of business price on a door . He told me there probably wouldnt be a warranty, is that true? "
I dont really know what happened , but I got a 20 percent better price out of that guy and he threw in a warranty. Id like to add that hes the one that got my business while the other guy didnt and I am enjoying my new door . The guy was really nice and helped me with my opener for free. Ill tell several people that story. I guess I just did . Its a Walmart way of doing things .
Tim
Tim,
I always enjoy reading your take on things.
Thanks for taking the time to post your thoughts... pete
it's kinda late so i'll make this short. my idea is if it won't fly as a rental it sure wont work as a flip. 100k house,i steal it for 70k,[30% under market,there out there but a little hard to find] i should be able to rent for 1,000 a month ,less taxes,ins and maint. probably nets me 7500 a year. 10% on my money.
buy it to flip it same house same money. sell for 95k so it will move,most guys will have to borrow the money ,there goes 2k in closing and loan fees,takes 4 months from purchase to closing there goes 2k in intrest,pay real estate 6000. pay another 800 in title insurance and closing,utilites,mowing etc while showing another 500. i'm down 11,300. so net is83,700. i made 8,700 in 4 months presumibly with no fix up or labor. uncle sam has his hand out for taxes and since you were short term taxed at full rate 30% now i walk to my bank and deposit 5700.00 in my account.
why not just make my 7k in rent for the next 15 years and then sell for 150k taxed at capitol gain rate or do a 10 31 and buy 2 more?
sorry i just don't get the flippin deal unless 1. you have boatload of cash in the bank making 2.5% or 2.you have some sort of endless supply of good deals, i haven't been able to find those since 1992!
i've been doing this for 30 years,most stuff i buy i feel like is a good buy but bottom line is someone else passed on them before i saw them. i have averaged a absolute steal once every four years since i started other than that i'm buying at wholesale plus.
one more thought this whole fippin deal has one absolute winner that is grinning from ear to ear.....the real estate agent.sell the same house twice in one year and he makes 12k on the above deal and didn't tie up a nickel. larry
hand me the chainsaw, i need to trim the casing just a hair.
You put a lot of imformation in that post .
You are of course right .
Thats because your rents equal 1 percent of value . You are in a prime rental area. Some however are not , include me partly. The older rentals I have have that value and a few have even more , but not much I can buy today.
One thing you did not mention that needs to be to be fair is when a house is too great to be a rental. If you pass on the deals that are not rentals then you miss out on poker hands . You mention 1000.000 per month to 100,000 values. Is there 200,000 dollar rentals bringing in 2,000 per month? I doubt it . Theres always a limit to what a renter can pay no matter. One reason being they could buy a house cheaper if they can afford that kind of rent . After all payments would be cheaper and the tax advantage is greater.
Most renters are at the bottom of the food chain or else they are only there temporarily until they buy another house . Thats the hard facts to landlording and you know it . I bring in top rents to people waiting on a house to buy while having a greater amount of turn over. They come, they go , they buy a house . Someone else replaces them in the circle . The long term renter is the person that never gets it and if they never get it they never have it . Im sorry, but thats the nature of its being .
I know all too well that the best money is in the investment of a rental. Its a much better turn of money but there are still good reasons for flips . This post cant be long enough to list all the good reasons . Ill include a few of my own in this thread but wont make it all in this post .
I bought a piece of property wooded on top of a mountain for 8,000 @ 5 acres. I hired a dozer last week and wrote a check for 950.00. I spend two days dressing half of it and planted grass and fertilizer. I spent 350 dollars for that material. I got a market appraisel for 50, 000 and thats the listing price . With my labor extracted its still 10 to 1 on the money. I held the property long enough for capitol gains not income .
Another property that gets listed this week is a 1 acre plot that adjoins national forrest property. I bought that property at a tax redemtion sale for 750 dollars . I held it 3 1/2 years and gained permanant title . It goes on the block for 10,000 which is again 10 to 1 on the money.
Im getting too broke down health wise to care for more property with out getting bigger minded and hiring help. Ive done the math and Id have to really step it up to get any bigger . Ive got my semi retirement and its a full time job. <G> Ill keep the rental fleet I have and unless its a knock down gorgeous rental, Ill flip.
Your buying numbers are too close to the selling figures for flips . If you cant get better odds then look at other things . I did . One thing I say is I just take what they let me have as I never really get to pick it . The property always picks me and I play the hand . Ill be at another auction somewhere and buy somthing I didnt expect to bring home . The only thing I ask is it makes money by being desireable to someone else .
In all reality flipping is easiar than working although its a job in its self . Still its the excitement of the hunt and the thrill of the dealing that I would miss the most if I quit . I always enjoy owing a property even if for a little while as its much like the feel of a new truck but doesnt come with the loss statement .
Tim
i think are markets are pretty similar,i understand that your in a smaller town,but generally we both are here in the midwest,where 150-200 buys a dang nice home.
you are in the same thinking i am in that there is a top to what someone will pay for rent. anything past 1200 and i can't imagine. so that does eliminate the higher end house.
i have to say if someone approached me tomorrow with a house on the golf course and they told me it was worth 250k but would sell it today for 150 i don't think i could pull the trigger because i would have doubts about it's worth,i'd just be out of my game.that 250 house could slide to 200 pretty quickly.
you are always talking about buying right and you are 100% right,if you buy to high your screwed from the get go. but on top of that when i'm looking at a place the biggest thing i look at is "if things go wrong,what's it take to get out?" i want to buy below that figure.[even though i did take a 15k hit this summer on one i wanted away from]
your land deals are something i have never been able to do,bare ground is a art in itself. you have to be a fortune teller and be able to feed it while you own it. i have not been able to do it. if you can make it happen it's a great way to go, no toilets to fix,roofs leaking etc.
the excitement of the hunt,absolutely if you don't get a rush finding and buying there is no need to start. larry
hand me the chainsaw, i need to trim the casing just a hair.
Edited 3/29/2007 12:49 am by alwaysoverbudget
if your reading this thread and are interested in flipping you MUST read up and learn the rules on doing a 1031 tax deferred exchange. you must know all the details because i guarantee you that most real estate agents don't have clue.
this is to me probably the one biggest tax advantage to owning investment real estate. you can defer all your profits into the next house.someday when you cash out you will owe,but in the meantime uncle sam will invest his 30% into the next property,and then the next................
there is also a reverse 1031,gets more complex and i haven't done one but have read on them.there is some situations where a reverse 1031 would work out really well. larryhand me the chainsaw, i need to trim the casing just a hair.
Well land is when you have the income to nurse it or the money.
In my case I have rental income I dont need to live on right now so I invest it . Then as the property sells it comes back in multiples to invest again to grow until I need to cash it in.
I dont ever have a lot of spare money sitting around . Thats pretty common. I can get it by either borrowing against somthing I own like a rental same as a borrowing against a cd or sell somthing . The land will pay for a surgery Im going to have or at least my part of it . The rest will be invested if I can find a place to do it .
I noticed cattlemen do it first . I heard them talk about it . If they get a grand on hand they buy a cow with it . If they hold it long enough and they need the money they sell it back as a cow and calf pair . They might not ever need to sell it but they can sell it on any given Monday at the sale .
I read a rental book By Mc Millan I believe it was and she was talking about harvesting the crops . She had somthing like 15 houses with no other assets . She refinanced 5 every year so every third year it turned around . She had notes at the bank that matured that way. She took the rents as a living and did her spending off the refinance . I dont need to do that yet but it would be better than what I did do. I ended up selling a house I needed to keep when I got sick. When you get to thinking about it she was just selling the calf but keeping the cow . I could have paid the doctor bills with the rents which is what I was doing and no one as complaining but I finally just wanted it over and settled . I didnt want to die owing doctor bills so I foolishly sold a good rental after my second heart attack. I had already paid for the first one 6 months prior which ended up being open heart surgery. I mean to say I paid my part after insurance . The numbers would have been better to harvest 5 instead of selling a viable rental.
Anyway you can do the same thing on land investments or anything else you need .
Tim
Exactly my plan. I feel like if I can just get that first one--and not bankrupt myself and my family to do it--a 1031 exchange will put all that proft that would be taxed into buying power for the next one. The guy we bought our current house from did it with our purchase.
What is the market like in the 'land of OZ?' Actually, where are you and how do you go about finding your properties?
I know there are many ways to find properties, foreclosure, FSBO, cold calling.. whatever. What have you been successful with?
The market here is/has been so hot that you have to be magic to find something below market value.
I don't have the cash to buy a place and rent. I have a lot of equity in my own home, which I could pull out for that 20% down.. but then what? So, I keep an ear to the ground for that 'absolute steal' that I could clean up quickly and either flip or refinance and get rid of the equity loan, but still be able to get the rent to pay the mortgage.
Your thoughts?
I have a buddy who lives in Tampa. The market there was on fire for about 5 years or so. He had to look hard but found a number of houses, usually a couple a year, below market value and in need of updating. These were not slums but houses in nice areas. He bought one for 190k, put 20k in it and sold it 15 months later for 310k. Bought another for 420k, put 30k in it and thinks he has it sold 2 years later for 550. He lived in both so he sold them for tax free profit. A hot market is still doable, but like any other business you have to work at it and do your homework. DanT
here in wichita kansas we don't have big swings,up or down,although we are so dependant on aicraft manf. [boeing,sprit, raytheon,and lear jet] that 9-11 really hit us hard.while other areas were having apprecition we were flat maybe even lost 5-10% up until probably 05 then we have had some nice slow growth since then. although everybody hears how real estate is falling in cailf.and has pulled back from buying around here also.so if you have to sell it better be priced right or your going to look at that sign for a long time.
how do i find properties? hard question, repo's are usally to high for me,the banks have done 100% loans and now want to recover all the loaned out. that may change if they get a lot in inventory. FOR SALE BY OWNERS are the biggest WASTE of time there is.this is the kind with the 7.00 sign in the front yard. they usally have no real idea what there house is worth and they are going to error on the high side. i sell my own ,but i won't even look at a fsbo unless it's something i really want.
i didn't start out doing this but one day i looked back and said "the last 5 house's i have bought have been estates. heres what i like about them, most old people take care of thier house,they sit in them 24 hours a day thinking the furnace just made a new noise,or the air might go out so they replace it. now on the other hand they think that long green shag carpet from 1972 is still great.
so they pass on and here come the relatives,oh my this house is so ugly and gross i just want to sell so i can go buy a new tahoe.they don't have a mortage payoff thats to high, nothing.they WANT to sell.this is the house i want to buy .
now to buy these houses in a estate,heres what makes the deal.i will close in seven days with cash ,as-is don't fix nothing,and if i really want to sweeten the pot if other people are looking i will pay all closing cost. it only amounts to another7-800.thats enough so they can get a dvd player in that tahoe!
here is how i can make that offer i carried a home equity line of credit on my personal house. it is a reg. mastercard.if i'm not using it ,i'm not paying for it. as soon as i have bought the house and get that green shag out of there i have the house appraised and can usally borrow back100% of what i put down and pay the equity card off and ready to go again.
quick story on moving quick. i have a contract for a house ,guy is 95-97 years old,doesn't want someone to get it so he sells it to me. closing is a couple weeks off so he can move into nursing home. i get a call at 6:30 friday night,real estate agent says get to the title company now,he's not going to make it thru the night.i whip out the mastercard and at 7:30 pay for house and own it.he did make it through the night after all but....larry
hand me the chainsaw, i need to trim the casing just a hair.
Edited 3/28/2007 10:54 pm by alwaysoverbudget
I keep watching these flip it show, they buy run down dumps for 500k put 100k in it and sell for $750 k. that same house here sell for 25K and it cheaper and quicker to bulldoze and build brand new and still come in under 90k with lot.You cant flip here, junk is 50k while brand new is 90k, cant make no profit.
You can flip there, but you have to be mindful of the numbers. IF the junk sells for 50k, then you have to buy junk houses at 60% of that. That means your offers on 50k junk houses have to be 30k. You won't get them all, but when you get one, you'll be able to flip it, without doing anything for 40k if you want to move it fast.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
What Blue said. Percentages dont change just the numbers.
Tim
tim,
I want to thank you for this thread.
I always thought I would enter this market----in fact 20 years ago, when I went into business I thought I would be entering the "flip" game pretty quickly.
Of course---life has a way of intruding on business plans----babies---and then writing tuition checks( at one point I was writing checks simultaneously for my wifes' college education--and 2 sons' private schools------now I am "down" to just to sons' college expenses
since I am semi-retired from roofing now---and only 44-----this looks interesting. I have a lot of time on my hands throughout the year-------and a LOT of flexibility in scheduling roofing and carpentry gigs.
I have actually made some half hearted forays into this previously--- investigating repos-going to auctions----- but invariably---the house I focus on--the one the numbers seem to work for-----gets withdrawn from the auction.
I am a bit of a contrarian,by nature----and a bit of a plodder. I don't think well on my feet------but I think things through IN ADVANCE pretty well
this looks promising for me tempermentally.
stephen
Well honestly , Rental or flips sounds right up your alley.
The best thing about them is when you arent under the gun you are pretty well off until somthing calls you out again.
Rental wise sometimes I work a day a month to half of those days in a month. On average 12 houses ends up being 1 day per week if Im caught up. In the winter I do nothing with them unless someone doesnt pay or moves . Then theres a rush to get the money rolling again.
Flips are busy during the winter for me . I can make an auction any time becuase Im that flexible . I started out buying houses in the winter for work. Selling in April and that has worked well.
Its a perfect fit for your winters.
You are welcome.
Tim
Edited 3/29/2007 9:13 am by Mooney
Someone asked how to aproach flips.
For me its a way of life or a habit . Some people drink coffee every morning , some read the paper , some internet , coffee shop , etc. For me ;
I get a paper and unlike most people turn it to the back page first by flipping it over and laying it upside down. Thats the legals in my paper. Back Page Baby. If theres a bunch I nurse a drink over it . UNlike most people I read my morning paper at lunch or in the evening . If I have to wait on someone or somthing its with me .
I attend coffee shops to gather information and pick up other papers free. They let me have yesterdays paper which is just as good to me .
I listen to the peoples exchange on the radio and a dial a trade on another station every day. Bought a head set radio.
I pick up two trader papers on Thursdays .
The neighbor gives me his daily paper from the next town over which I get the next day. Its like eating day old donuts every day.
I check the internet auctions and listings every day.
I call my realator more than my girlfriend and my wife under stands . The girl friend however thinks Im cheating on her with the realtor. <G>
I do meet my realator and buy her lunch occaisionly.
Tim
Edited 3/29/2007 10:30 am by Mooney
Obituaries cause properties to change hands . Fire department calls on the scanner let you know a prospect is burning and where it is located for a quick jot down. Coffee shops help idenify whose house burned and who the family is of either . Coffee shops are valuble for gaining information and of course gossip and how the elections are doing and your favotite sports team. They will mention tornado damage and things like where a house is being torn down or being being moved. Its important to know things like that before the papers can print it. Once the papers run it the realators are working on it. I almost bought a scooter to ride the addtions and streets for changes like FSO signs or vaccant houses . Instead I aquired a mini van . Its proved handy . Light and water department knows of changes also and the meter reader knows first hand . I see him walking and stop to chat for a minute. The mail men stop to eat lunch at the same place every day at the same time and park in the back. I eat lunch with them when Im working on buying . If I get a legal address and no name they can fill in the blanks . The court house lists all auctions at the front steps on the front glass of the building . I shoot them with a digital camera. I check with the tax assessor and have a chat with him. I used to go out and smoke with him when I did that .
All of that is a lot of fun and looks to be like wasting time to an observer. Its not believe me .
Thats how to find um.
Tim
Good thread.. I am curious about this statement however
"I call my realator more than my girlfriend and my wife under stands" Not to be too inqusitive but just which does the wife understand about ? the girlfriend or the realtor? or both?
This seems appropriate for this thread.""http://news.yahoo.com/s/nm/20070329/us_nm/usa_subprime_foreclosure_dc Moving beyond the low income very high risk people.
That was humor . Its also humor between DW and I.
DW answers the phone and says its your girl friend. [Its a realator . ]
Tim
Once you have been doing somthing for a while business comes to you.
I get 3 calls or so a week for a nice rent house and I dont have any open.
The realators send people to me because Im noted to have nice 3 bedroom rentals . At least I accidently did somthing right with out having to learn it after a mistake . People want a nice place to live who are in transition.
People also know I buy properties but its no mass deal or anything ya know . I just buy a few along and Im too cheap for most anyone . I always say before we get started talking , " Now I probably cant give you what your property is worth but I can get you cash in a week. " That sets the tone . Ive told them right up front top price is not comming from me and they are still on the other end of the line listening .
Setting the tone is really important . I learned it playing poker . Its the differnce between winning and losing . I honestly believe you cant win with out it .
You know I probably cant pay you what youve been making but Ive got steady work and paychecks are handed out at noon on Friday. If you need time off we can always work it out . I heard Dad say that over a 100 times. He stood good for what little he offered .
I use it in the rentals . You know we cant have this relationship if you dont make good on what you said . I know you are a good person. I trust you will work this problem out for us .
Once someone makes a move on you trying to sell you their house the stage is set . If you make the move first you can set the tone . For some reason once a person hands out a high price verbally they wont back down in that conversation. Youre pretty well done that day." Well I cant afford to pay that much but I would like to have your house . If you ever entertain the idea of selling it cheaper then give me a call and thanks for your time today. Heres my card , theres a calendar on the back of it . "Shake their hand and thank them again showing being humble and kind. They might think of you for a long time .
In a poker game if you are a calling station you can only win or lose but you have to have the goods to do it . If you are the one raising you add the third dimension setting the tone of being strong . They might fold and they will never see your hand. I believe it works in business as well.
Tim
Stephen, if you are the kind of guy that thoroughly thinks things through in advance, then you'd be very successful with flips and real estate. The key to success is knowing the numbers, knowing the exit strategy and applying the hard facts to the property, then making the offer. Thinking all this out in advance is critical to taking the emotion out of the equation.
If you only concentrate on properties getting to the court auction, you'll probably miss a lot of opportunities.
If you can figure out which deals work by the numbers, then you need to talk to those owners directly, before the property hits the courthouse steps. The sellers are either finding cash to pull the property out of foreclosure (unlikely), or investors are buying the properties using a short sale technique and dealing entirely with the bankers or taking the property from the owners in exchange for their redemption rights. Either way, the property ends up in the hands of the investor and the credit of the seller is saved to some degree.
The key is figuring the numbers and you seem to have that ability. Plodders and plotters like you will ALWAYS succeed if they make enough offers based on their numbers.
blue
"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
I'm a slow thinker too, but usually come up with the right answer if I can get enough time, or find the right tool for it. I've made an excel spreadsheet that I have in my PDA (on the hip computer). The sheet already has the percentages that I'm willing to pay based on comps, what I'm calculating for resale, a repair budget, realtor costs. I enter the comp price and the rest is figured for me. You can build the same so it can think for you.
In the excel sheetcomp =xmy resale = .95x (5% below the comps but no more, often less) this'll give the buyer instant equity and a reason to look closer at yours than others.my purch price = .60x meaing pay no more than 60% of the comps but I really want it less than that though.Loan Costs or the costs of the money your using. You'll have to work a little (very little) to find a free excel spread sheet on the web that'll do the amortization to figure in what it's going to cost you to us ethe money. If you're using a HELOC that'll be different. You need to compare this to what you'd get if you invested the money at a bank or a brokerage. repair budget target is 10% of the resale price, realtor fees need to be entered. intitially you can calculate 6% of the resale price but I don't care for using realtors that get a double sale from me and are not flexible on the fee. If it's a case where I really want the property & the realtor won't budge on the relist, I get another realtor to work with so the original get's his cut in half. Usually the last time I deal with the original if that's the case. This is about business and it pisses some folks off but the smart ones know that volume can make up for lower %. Calc in the costs of the closing fees on the purch as well as maybe on the sale.
At this point you can figure how much you've got invested/forecasted. you can also figure your ROI (Return On Investment). Comapre this to what the bank or other investment company can give you for the money invested and the difference is your real profit. For example if a bank CD is giving you 5% return annually this is your baseline to compare your flipping profit to. So if your ROI on the flip was 20% your real profit was 15% since you could get the 5% from the bank while you stay at home and wathc TV or play with family. Then figure if the 15% (in this example) is worth your risk & effort. You should do better than 15% though.
All that is in the blink of an eye when you put in the computer.
Edited 3/29/2007 11:32 am ET by john7g
Larry that is a very funny and informative response!
I agree that a lot of foreclosures, as others have been batting about, will be foreclosed at near market value, or possibly more b/c the borrowers were subprime, financed 100% and paid zero principal.
On Estates, I have some acquaintances that have been holding there house-finding secrets to themselves through this most recent and profitable swell in this local market. I think they're in with an estate sales agent and have purchased several properties by estate as you have.
On your methods. We got into this house on a quick deal with a home equity line from our previous place--which we sold. I've moved lately to get another equity line on this place, which we have much more equity in, but there is the problem of seasoning--I don't have 2 years of back taxes as a contractor to show my self-employed worth/income.. Bastards! I'm making and saving wayyy more money now than I did as a parts buyer, making 14$ an hour at a bicycle manufacturer but the sad irony is I'm not worth anything until I've filed 2yrs of taxes and shown income. (Great incentive not to slide any jobs under the table too!) So anyway... poor me. I don't want to take out that equity line until I can get it for ALL it's worth--about 120g by my estimate.
? How did you locate the estate? It seems here that anyone involved with selling off estates is hounded by house scroungers. The ads in the paper will even say "HOUSE NOT FOR SALE!" You mention your agent. Are you competing with other bidders for these places?
Thanks for chatting with me and for the entertainment. What do you think they watch in the Tahoe?
first,i envy your relationship with your banker,never have been able to get that done. got pretty close once,then he decided he wanted to be a stockbroker.so there that went.you sound like your getting your ducks in order as far as financing.
i completely relate to the tax filings. i used to be so intimidated going in for a loan. but after a few started relaxing a little with the loan officer. now my reply when the ask me 'where do you work" i laugh and tell them to check off "unemployed" it's simpler and sounds better!lol and at least there is a chance i'll get a job that way.... now after 30 years of tax returns i go in with the attitude,you guys got some money that you want to some make money on? if not the next guy does,i have a perfect track record and i'm not going to beg them for a loan.
i'm not a big buyer of real estate,maybe 1-2 house's a year [ last year more than that because of a 1031] just like i don't have a banker,i don't have a real estate agent either. my thoughts are,you tell me about a house,your my guy. but if i come up with it driving around or whatever i'm going with the listing agent.they know more about the house and the sitation that the seller is in and just makes it easier. as far as finding estate house's i think it can get to be a pretty scuzzy deal,reading obits and chasing down heirs etc. i don't do any of that. in this town and i suspect all bigger towns there are areas that were built in the 50-60's that are really nice ranches that people bought to raise there kids in and are still there.i watch those areas in particular for for sale signs. 1/2 the time though it's just out stumbling around and like Tim says word of mouth that i find them. another way is to get involved in things,clubs whatever. my church started building habitat house's once a year for 5 years. well we all would work together and in the course of conversation "what do you do" comes up. because of that i have bought 4 house's over the last 5 years from that and two were so cheap i told the seller you can get more than what i'm offering if you'll just recarpet and paint. no were selling to you. i have been repaid several times over for the hours i put in on habitat.plus a plug for habitat ,i had a ball doing them.hand me the chainsaw, i need to trim the casing just a hair.
oh by the way i'm sure as they drive down the road in the new tahoe they are watching "home makeover" and wishing someone would build them a new house so they could quit renting. larryhand me the chainsaw, i need to trim the casing just a hair.
"I don't have the cash to buy a place and rent. I have a lot of equity in my own home, which I could pull out for that 20% down.. but then what? So, I keep an ear to the ground for that 'absolute steal' that I could clean up quickly and either flip or refinance and get rid of the equity loan, but still be able to get the rent to pay the mortgage."
Every buy should stand on its own numbers. At least in showdown . There are several creative ways but if the property is a great buy a banker will agree.
I dont borrow any more than 75 percent LTV. But I back off that to 70 percent or less. Then the house gets an appraisel and that goes to your bankers hands. He can now make the loan with that collateral. O down.
You should however front the money to spend on it . Dont do it if you cant nurse it for what ever it needs. If your banker wants down payment , thats it . Unless you make a construction loan. If you do that , this is an example of what it looks like;
Property will be worth 100,000 fixed.
You borrow 70 percent so thats all you can work on.
50,000 to buy it .
20,000 material and labor estimate handed to the banker.
The banker pays draws on completion of the list off the estimate in what ever sequence you two agree on. Or on completion of the work.
Knowing you have the money covered in the loan you can get creative.
You front the labor till completion.
Lumber yards give 30 days to 6 months . [lowes] Any account gives 30 days .
Pay the 30 day accounts with a credit card or credit check. You get a another 30 days .
You may choose to pay off that credit card with another till eventually the bank will end up paying for it after completion or you get ready as you arent charged interrest at the bank until you draw it .
I always put appliances on Lowes credit card for 6 months no pay till the house is scheduled for closing . Usually the day before . You must not owe any thing on the house other than the bank at closing . I take the full 6 months if I rent it .
Run the house for rent two weeks from completion. Every day or weekly paper. You should have a renter in place by the time you are done if your market is medium to strong . They will pay you a deposit and first months rent if not the last in addition. When you recieve the rent payment , pay the payment even though its 30 days or what ever from being due . Make sure your loan is set up on daily interrest. Thats a big deal over 15 years to pay your payments ahead avoiding interrest due . Also make another payment with the last months rent and keep it current 2 months ahead. You may choose to make deposits payments as well. When you give back a deposit , you do, but dont make that advance payment . Let all the money you get work for you to battle interrest.
If rent is due on the 1rst call that night if you havent recieved it and be sure to charge a penalty the 2ond . If payment isnt recieved by the end of that day you need to be present at the front door of the rental for a friendly confrontation. Talk it out and listen to what they say. If you cant work it out then start talking about them moving immediately. Be firm but polite and most people will work with you through it . If they hide from you then its over and you must step it up. If they arent going to make your payment then the name of the game is to get someone else that will in early postion using their last months rent and deposits. Not until they are even with you .
Tim
87778.36 in reply to 87778.23
"I don't have the cash to buy a place and rent. I have a lot of equity in my own home, which I could pull out for that 20% down.. but then what? So, I keep an ear to the ground for that 'absolute steal' that I could clean up quickly and either flip or refinance and get rid of the equity loan, but still be able to get the rent to pay the mortgage."
Every buy should stand on its own numbers. At least in showdown . There are several creative ways but if the property is a great buy a banker will agree.
I dont borrow any more than 75 percent LTV. But I back off that to 70 percent or less. Then the house gets an appraisel and that goes to your bankers hands. He can now make the loan with that collateral. O down.
You should however front the money to spend on it . Dont do it if you cant nurse it for what ever it needs. If your banker wants down payment , thats it . Unless you make a construction loan. If you do that , this is an example of what it looks like;
Property will be worth 100,000 fixed.
You borrow 70 percent so thats all you can work on.
50,000 to buy it .
20,000 material and labor estimate handed to the banker.
Geez Tim....if I didn't know any better, I'd swear you were working for Carlton Sheets and doing a zero down informercial LOL!
Seriously, you are doing the classic zero down deal that every book, seminar, tape and informercial is pushing. There are many disbelievers and detractors but the entire program makes sense ($cents) to me!
blue
"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
Well, I walked into a bank and told the guy what I wanted after I had previous family type loans with him. He wanted some informationn and I gave it to him. We discussed my wishes and I explained to him he would have a house fixed for 70 percent if he got it back with me improving it . However I told him my credit and income statement would stand for the house too till it was fixed if he wanted to lean over the table at me. With my ability to repay the loan and my debt load at the time DW and I could easialy make payments on the house is what I was successful at showing him . He finally said , lets do it . We did 13 in a row with him but finally changed banks over 1 percent interrest difference .
What I would like to share ;
At this point any banker in town wanted my business . I always felt like the first guy helped me and I always have felt indebted to him. I think he took a chance because I know I did . At the time we were at a high level of income for working people for this area. We were younger and in our prime. I remember being strong and fast at that time . Now Im slow and fat . My chest hurts if I walk to fast . DW and I had a lot of game in us at the time and a lot of fire . He probably read that too. Another thing is he knew I knew my business of remodeling those houses . He wasnt talking to a school teacher doing summer work.
I think you have to read out strong to a banker to do O down with them because they do want the borrower invested in the hand . I dont blame them becuse I feel the same when I sell. I want the buyer invested , not a measly 500 dollars earnest money to take my house off the market that they can get back. My costs on a flip right now is more than 5 bills per month. Earnest money doesnt make sense unless its on the home Im living in. Anyway, I dont think bankers should do O down for everyone .
Tim
Earnest money doesnt make sense unless its on the home Im living in. Anyway, I dont think bankers should do O down for everyone .
The types of loans we are talking about are business loans. The collateral supports a zero down loan, PROVIDING THAT THE PROPERTY WAS BOUGHT RIGHT i.e. 60% of fixed up fair market value. The 40% represents a healthy downstroke and the banker knows it.
That said, not all bankers want to be in the rehab business. That's okay....there are lots of people that will do it. There are lots of banks that will do it....you are proof of that. Of course, the type of loan won't be a typical fannie mae style loan.
Flips are different than landlord type holdings too. Your decision to leave a bank over a 1% interest hike reflects your business style of buying property to hold as rental property. A true flipper wouldn't be that concerned about the rate of interest. In fact, there are many "hard money" lenders that routinely make money charging 10 or more points and very high rates of interest. If a guy buys the property right, these rates are simply factored in and the property sold before the high rates eat up the profit.
Hard money lenders will do zero down deals all day, every day.
blue
"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
Everything you said is true.
I have 17 properties total with 12 rentals anchoring it . 1personal home with the remaining 5 properties being investment properties for resale.
Im in the interrst saving business . In fact Im nearly all defense minded. Thats why I keep talking about percentages. Interrest rates on that much property is a very big deal every day let alone per year. When interrest goes up a 1/4 point its a big deal.
That banker lost every thing I had because he would not match a point . I did the math and it was worth the costs of moving the inventory. He thought he had one house at risk over the point . I negotiated for 5 years at the cheaper rate for them to get all my business . When I made the offer to the new bank he quickly called it . My old banker was questioned at a Rotory lunch from the title company guy why he lost all that business becuse it went through his office . He said I guess I screwed up but I didnt think he was going anywhere since I had helped him. I thought I had his loyalty. That told me he was only thinking about the one house and he thought the rest was safe . He didnt have a clue I was thinking about it all or I believe he would have matched it but he never got the chance . Ive always felt bad about it because hes my friend but my family comes first.
I used to match insurance every single year . I put the pressure on my agent to get me a commercial rate with some decent savings . I told him he had one year to get it done . At the end of the year I asked what he had got done and that I was ready to put my insurance up for bids again. He told me he was tired of playing the game and for me to find insurance somewhere else if I didnt have any more loyalty that that . I read that to be a bluff and he expected me to fold. I worked for a whole week searching for insurance pleading for someone to come through with a jumbo policy where I could use one umbrella to defend a claim against me. I wanted a commercial policy and not be called residential and pay those rates . Finally a guy from another TOWN called me back and said he was going to contact his head office over it . He thought I deserved a commercial plan. The decision came down to grant it and I got what I wanted at a huge savings.
Heres the biggest kicker . This is huge ! The guy that bluffed me and had all my properties carried the same insurance ! He could have been the guy to call home office of that carrier. 1 year later he somehow found out about it . Maybe they have reccords he can view. Anyway, he asked me to move the same policy to him . I said bite me. Hes a good friend or I guess he used to be .
I get 1 to 2 points better deals than people that walk in off the street into the bank. I expect it . My loan fees are halfed when I buy property. I pay one half of the normal fee. Do I deserve it ? Ive asked my self that question several times . Probably not , but I demanded it and set the tone . I think its important to take control even if its a banker. Theres 5 more bankers for me to call. All they have to say is yes or no and I call the next one . If they all say no I can call the nest town or towns if I think I got a shot . Thats what I told my banker that has my business.
On the flip side if I just had one house to flip with nothing really backing it up then yes I wouldnt care if the points were 4 higher if the percentage was there in the deal. I would do nearly anything on a 60 percent LTV so you are right on and the lenders know it so they get it when they can. Im thankful I dont have to play that game but yes I would to operate.
I dont think lenders want the property as thats not their expertise . They farm out everythng when they get a repo. They hire a reality and let them hire contractors. They make no percentage of that money they spend. On the other hand I agree with you that 60 percent LTV should get their attention . They are in the dark with the physical side of taking over a repo. They depend on others to get it done . They also incur loses of handling a repo for a period of time .
Tim
"if the property is a great buy a banker will agree. "
This is certainly true. I have the best banker I could hope to find. A great fellow, the mayor of a small town nearby. I met him a few years ago when we learned of a fclsr at auction that we really wanted for ourselves with a new baby on the way. Cash bidders only so he matched our 60g Equity line and would share the note for us until I cleaned it up and refi/reappraise.
I haven't been too aggressive in my search, but when a great buy comes along, like that fclsr, the house we are in now, or one I recently tried to steal, he's been on it, finding any way to secure financing for us, and then offering personal funds to close the deal with cash, immediately. Of course he would make a cut on using his cash, but it gives me the power I don't have to go for a place when it comes up.
The advice you give on borrowing matches closely with conversations I've had with him in his office when I've brought him my file on a place.
Thanks, Tim, for the help!
My brother has flipped quite a few houses in Denver. My brother cannot paint, fix a leaky faucet or even change a lock on a door. So, he hires the work done.He found a system that works.He found a contractor he liked and they became good friends and the contractor probably did 40-50 houses.The contractor understood that the limit on what he could be paid was about $5,000. The contractor painted the inside and the outside and simply "did the best he could" to make the kitchen and bathroom the best he could with minimal money. I believe the contractor also would install a new (cheap) counter top and sink in the kitchen.The contractor would do his best to get in and out in a week or two and pocket his money.At that point my brother had about $5,000 invested in repairs.The final touch was to install cheap flooring for a couple of thousand and the house would then go on the market.He would move them quickly this way !!They weren't show homes and they weren't anything you would take pictures of and show them off.With this system, he could pay more for the houses. Maybe he could pay 75% of retail.And there was more of a selection to choose from.One of the problems my brother had was hiring contractors who wanted to "do too much" or completely go through the houses. Some would try to tell him what repairs needed to be done, rather than just listening and doing what was asked.The regular contractor he did a lot of business with realized he was going to have a steady volume of work and $$$ so he didn't try to push or upsell.This system worked and it's something to think about if you're going to hire a contractor to do the remodeling.^^^^^^
a Smith & Wesson beats four Aces
As DanT said one time here ;
Its possible to do a lot of different things with real estate .
Ill add that a lot of people enter into it with different abilities.
Tim
Hi Tim;
Well, the truth is, I'm interested in anything that will a)make me money legally, and b)give me enough to retire on. I'm older than you, 62, and feel great, but old age is indeed coming.
I just got rid of my old rental, and started looking at multi-family stuff, using my equity in my house as collateral until I realized that the highest percentage money to be made in my market seemed to be lower cost housing that was fixed up reasonably, and sold quickly. Yup, a flip.
Now, I'm looking at a different market than you. I want a house with a basement not improved with a secondary suite. If it's a drug grow house, I can tear the interior & replace it and document everything & come out with a decent profit.
I am definitely looking at older, cheaper houses.
Quality repairs for your home.
AaronR Construction
Vancouver, Canada
" am definitely looking at older, cheaper houses."
The biggest differnce on this board is location. . What some can do others cant vice versa.
Cheaper houses is a good place to start and get a feel for it with out risk as they can always be rented for a price. Most of the time they always sell if they are decent becuse most arent that are cheap. Fixed up they turn quickly and they have several different kind of buyers that will compete against each other . They are very quick money.
The down side to them is the amount of profit . You can get a good percentage on them only to realize its a small profit . The labor is normally more on a cheaper property so watch the labor and charge it out as an expense . When you bid your labor added to the rest of the expenses you see the true profits. Otherwise they can look better than they really stand up. [nother thing is how much time the labor adds to the time you hold it .]
I bought a property and it was nearly a year before it sold dealing with process over budget [larry ] was talking about .
It sold to two buyers goverment loans with the first one defaulting . He lied about child support . Just because someone brings you a full price offer doesnt mean you have to accept it if its not suitable to your wishes. The buyer was on a 100 percent loan so he paid me nothing . The goverment didnt pay a dime so Tim ate it . Theres nothing wrong with requireing a down payment [non refunding ] and requireing your own time line of closing or else . My contacts require to close in 30 days or I dont sign them. Cheap buyers can have these types of problems constantly so keep your eyes open.
Money down and a strict time line to close often separates the players from the real people you want to sell to.
Tim
I've own real estate since i was 17.... i've sold....only 3 in almost 30 yrs... (i'm 46) and 2 of those i had partners on and I'd have kept one of those if it had been up to me...
I'm amazed how many people think walk'n away with 20k is a big deal... I just don't get it.... not bad at the black jack table but take'n the money and run'n has just never been my thing...
i have one duplex... thats my total inventory of residental and when i purchased it i thought it'd go commerical.... in 10+ years it's maybe gone up in value 50% but it stays rented and has very low maint. so it's a non issue just something to add to the balance sheet...
when everyone is doing it... thats the time to .... not be doing it... and thats what i think about flipping for the most part... if you don't have the skill sets to do the work or at least know what should and shouldn't be done... it's not a place you should go... Tim thats not you... you know what you are doing... and like me you understand you make your money buy'n.... the market will tell you what you can sell it for
around here there is plenty of property that can be purchased for under 10k and made rentable for another 5k that will rent section 8 for $500-$650 mo. much of it can be had for much less (than the 10k) but you are buy'n a job and if you aren't going to work it... you don't need it... it's not something you can be absent on...
Tim i know you know not everyone can do what you do... what looks so clear to you... is just a fogged up window to most... I use to be of the faith that anyone could do anything... I now know that just ain't so... and in knowing that... it's what allows you to do what you do... It's alot like the corporate type that pulls down 400k a year and really does very little... talks to a few folks offers opinions... lets others know whats expected of them ect... but as far as work goes...he just doesn't do much... and he too thinks anyone could do/should do what i do...
in the end... we all do what we can...
P
started out with nothing.... and got most of it left....
You are right again.
I dont live in a high end place and sell high end work . I couldnt if I wanted to because the prices are too cheap for it . Most of the hard luck stories I hear from builders here get screwed on high end jobs dealing with people with money. The builders wanted to do the work . There are a few that can make money at high end work and be smart about it .
Ill never have the talent of many here that do different things . One reason is opportunity for several reasons. The list could go on. The truth is everyone has to have their own fit for the cat they are skinning .
I stated in a rental thread how to own property O down and how to let the property pay its self out and stand on its own. I started the example with a trailer house and listed its high return of profits . Then I gave example of how 10 trailers could make more than a carps wages and pay for the land in addition. Next I showed a house in bad shape that showed the reality of what most repos look like before someone cleans them up. Both look awful and I didnt buy them so I never showed pics of them cleaned up and fixed . That alone probably killed the thread. In this thread Ill be showing the pics of properties improved.
There are several similarities to you and I . You are the second one in this thread that know that rentals are a much better turn on money. I fully agree with both of you as I know its correct. Any time you can do the work once and get paid for it year after year while getting a tax break, drwing depreciation, while all the time getting actual appreciation its win win win. However, not everyone can be a landlord and that many dont want to be one . In reality its not a glorious job like fine home building . But I have ran several rental threads and offered what I know to help.
This thread was ran on flipping seeing the news on building . My wife also brought home the Kiplinger letter that pretty much says the same bad news. My heart went out to any guys or gals here that might be having problems from the results of the news. This builder and I visited the other day about what kind of shape he is in. If he doesnt sell one of the two new houses in 6 months he will go broke . He figgured becuse my house had burned and his two new houses were for sale across the street mine would not sell for a long time . Well at least until his sold . He was wrong but I didnt tell him the bad news. I can sell mine 10 grand cheaper and be gone while his are sitting there . I can rent mine because the numbers work and his doesnt because hes drawn his equity to live. He was bragging to me how fast he was building them both which was surely true. Hes doing a wonderful job at scheduleing subs . Yesterday he had three subs show up at once and watching the progress , its not accident its happening . The builder is in a zone making things happen quickly. Hes doing a great job. Hes also writing a lot of checks letting a lot of people have profits. In the end hes going to be working for a small return. Because he doesnt have a vested interrest in the projects or other options for his defense if they dont sell I view his projects as a gamble . Business is always a gamble but not reccomended at 50/50 odds and being all in. I wanted to show another way of doing it with less gambleing.
Tim
Well I walked away from the keyboard thinking about somthing you said and it stayed in my head all day.
For one you say that people think everyone should be able to do what you and I do.
Then; "in the end... we all do what we can..."
I believe some of these guys can. They might not want to or be willing to take it on. They might not be in financial shape to handle it .
I guess we are always uneasy about changing worlds and trying somthing weve never done before .
There is a lot to learn to be successful at it like Blue says . Its easy to get the rules and not follow them too as he said . A lot of them have the building skills though.
Tim
Tim -
Thanks for this thread. It's a subject I know nothing about (I should say making money is something I know nothing about...), but one of the things I love about BT is that I learn something new every time I log on.
Thanks Kate , I thought I would commit what little I know as I sure haul a lot out of this place .
Glad you enjoyed it .
Im not the only contributor so Ill say thanks to the rest of them.
Tim
"If you remember I predicted this..."
What I remembered was that you predicted a CRASH in the housing market. What we have now is just a general slowdown.
Seems like you and I had a bet going about that, but I don't remember the details.
I poked around a bit, and this is all I could find:
http://forums.taunton.com/n/mb/message.asp?webtag=tp-breaktime&msg=77092.5
" If any of you need to sell , time is running out. All this will catch up sooner or later. "
dated 8/7/2006
I stated that lumber prices will drop with interrest prices higher . The end result will be a massive slow down of new home sales . Remodeling will remain solid through out 2007.
I hit it . Pick any paper and read it .
http://www.investors.com/editorial/IBDArticles.asp?artsec=5&issue=20070326
enjoy;
http://www.realtytrac.com/ContentManagement/PressCoverage.aspx?template=nonmemb_cm
Tim
Edited 3/28/2007 9:59 am by Mooney
Edited 3/28/2007 10:03 am by Mooney
I would hardly call this a "massive" slowdown. Certainly there are pockets where things have slowed considerably. But in other places they haven't.If you want to "pick any paper", the last article I read about Illinois said new housing was off sommthing like 2% or so. (That's been a while, though)You may have noticed that in one of the links you provided it said: "February typically isn't a big time for home sales. Blizzard-like weather across much of the Midwest and Northeast, where sales fell 20% and 26.8%, make the true trend even blurrier."Go ahead and pat yourself on the back if ya want to. But I don't agree that you hit it like you claim.
Why do overlook and oversee mean opposite things?
The point of the thread is to take the negatives and turn them to positives.
Our good natured arguement will hold with out turning the thread into a negative .
I stand to admit that every area is not in trouble , but nationally , yes.
One point to remember is that this is driving the home prices down not up.
Its also getting adjustbale arms loans into trouble with higher interrrest .
The loss of jobs and the fuel prices are major contributors .
This is not over with yet .
Tim
I believe the real issue with people not paying or not being able to pay for their hose is this...
from what i understand.. a large percentage of the foreclosures are people who never made the first payment with a zero down loan... when credit is easy it allows those who have not earned the right to be trusted to somehow become "trustworthy" forclosures are not high in those that have lived in the house for 5 or more years... and they are not high in the upper end homes (unless you go back to those who never made the first payment) again if people don't have a downpayment they don't need to be buy'n a house... I don't know the numbers but I'd wager the foreclosure rate is very low in those that put down over 15%...
with builders giving rebates and paying all closing they keep the comps inflated and keep the loans flowing... UNTIL someone that values their credit tries to sell something in less than 2 years they are upsidedown in... because the builder is still building the exact same house and offering the same deals so they sell for a loss and screw the comps... the house of cards starts to fall....
interest rates are still low.... but they ain't what they were 2-3 years ago... 1 point on 300k is a huge deal
p
From what I've been reading, those that are foreclosing are the subprimes that had very lax standards to get the loan. Lax as in no requirement for income verification, just based on what the applicant put on the paperwork. I think you're right about the the numbers being low among those that put down 15%. People who are diligent with their money and work hard to save it know the numbers.
A flip thread always sounds fun Tim....carry on!
I've watched a number of people try to capitalize on the idea of flipping and not surprisingly, they didn't do so well. It's an easy concept, the "rules" are easy to learn but the thing I've noticed is that the wannabe flippers ignore the rules.
The rules are simple: buy the property right. The wannabe flippers get too antsy and want to get into the business and buy wrong.
What's the right price? It depends on the region and depends on the individual property.
For some areas and price range, 70% of fixed up FMV (fair market value) is fine. For other regions and price range 60% is the better choice. Of course, anything under 60% will usually work and the goal of a flipper should be to find those!
Finding those is the work. Remember, even a blind squirrel finds a nut sometimes and thats what happens to those in the business like you. You are out there searching for your 60 and 70 %ers and WHOOHOO, you find a deal at 10, 20 or 30%! You hold it for a year or so to get more favorable taxation and "flip" it at a 10/1 or 5/1 return.
Thats a true "deal". Deals are what investors should be searching for...not jobs!
Everyone will tell you that those deals aren't out there anymore but I'm not so sure.
There are different opportunities presenting themselves in todays markets. Here in MI, it's no big secret that the banks are routinely selling short. The volume of foreclosures has changed the market in such a way that every foreclosure would sit for years before selling if they don't take a short sale. With so many available, I'd think someone was crazy to buy a "normal" house with a "normal" mortgage though.
The flip market here in MI is scary though because even if a house is bought at 50% of the FMV, by the time you put it back in shape, the market might move downward and you'll find that your 50% FMV is really 90% FMV....and that eliminates your ability to offer steep discounts to move the property.
MI is a prime state for landlording right now. Everyone is in a flux and renting makes more sense than buying. It's better to see how the market will shake out, rather than committing to a 30 year mortgage, if you are a homeowner. There aren't many buyers and there are a a lot.....a lot of sellers.
blue
"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
"For some areas and price range, 70% of fixed up FMV (fair market value) is fine. For other regions and price range 60% is the better choice. Of course, anything under 60% will usually work and the goal of a flipper should be to find those! "
I couldnt have said that better .
It depends on the market conditions of an area . In a quick market 70 percent LTV is strong but with a slow market it leans to 60 percent as it does here simply because to sell you mig ht have to drop the price 10 percent to reload. Buying and selling only works if the selling holds up its end. We have to make a profit and I consider 30 percent to be minimum as long as its turning .
Below 60 percent are other conditions such as repair and extra time on the market .
Tim
We have flipped a few over the years. Our market is saturated in the rental arena at the moment. Lots of new apartments have driven people out of the older rental areas. For the first time I have had a multi month vacancy.
So flips look better at the moment. We have backed out of real estate over the last year or so. But my son and I are looking again as the market starts to tank here but our business keeps growing. We are thinking about buying houses that we believe in 3-5 years will be popular and buy them now. Renting them to hold until the market improves then sell them. A delayed flip I guess you could call it.
The one thing about flipping that I notice in my area and it probably holds true in a lot of areas. A lot of guys don't have the stick to itness (word?) to pull it off. They buy a 3 month project with only 30 days of focus. By 45 days they want out, hurry the project to sell it and wind up with a POS or bail all together. Interesting to see some of the work flippers do also. Pretty poor stuff even on the cosmetics.
We recently bought a repo for my son and rehabbed it. Not a bad place at all with a lot of recent (3-5 year) improvements. Just put a kitchen in it, coat of paint on the inside and a few repairs and he was in. At 20% below the market when done. Not bad for a rookie. DanT
Buying in times like these is how I got our first 5. They were cheap but the interrest was as high as 9.5 and we just held on. They were all 5 yrs old or less at the time . First time home owners loans with nothing down I think was the problem.
Yall buying your son a repo is what I think carps should do .
Its really good to see you in this thread.
Tim
Been tying to get my head into a crystal ball lately and wondering what you're thinking of it is.
With the subprime loans failing and people being ousted from their homes they'll be needing a place to live which makes me think we might be moving towards a rental market and away from a flip/owner market.
But this factor is been twisting my mind a bit: With all the empty but new homes on the national market, who's going to buy them? 1st thing I'm thinking is a bunch of spec houses being foreclosed on. Will there be enough buyers for all these houses? Are the new but empty homes going to compete in the rental market? I'm thinking if they do they're going to drive rental prices down or stagnate them since they'll be newer & nicer with owners motivated to get an income.
Anyone know how the empty but new house numbers are broke down by state?
I do believe flips still have a market but I'm thinking it's narrowing and therefore tightening my selection process.
Good thread BTW.
john
We are moving to a rental market.
"But this factor is been twisting my mind a bit: With all the empty but new homes on the national market, who's going to buy them? 1st thing I'm thinking is a bunch of spec houses being foreclosed on. Will there be enough buyers for all these houses? Are the new but empty homes going to compete in the rental market? I'm thinking if they do they're going to drive rental prices down or stagnate them since they'll be newer & nicer with owners motivated to get an income."
Exellent question.
Once people have money all they have to worry about is how to keep it . There are plenty of people with money and they remain quiet. You dont hear about them but they are there . They are very conservative. They make sure before they plop their money down its a sure investment . They always have their money invested commonly in things like CDs. They are baby boomers and retirees mostly or damn near it. They cant make their kitty again. Some own businesses that are making money and want to fish off some of the profits into future investments.
Lendors have had a hay day at selling their forclosures in the recent past . Of course they want their money back and they will try to get it . Sometimes they even make a profit . Remember when a house goes through the first stage , they own it . They own that repo free from the borrower as that person defaulted on it. So normally you are unhooking the lender when you buy a house , not the one who defaulted. The lender gave money on the loan for the house and the collateral. Lots of folks dont think about that or know it for some reason.
You can buy someone out of foreclosure . You can make the sale with the bank bidding in their minimum and take it away from them. You can buy a repo which means its at its last stage where the lender owns it .
There are a lot of lenders out there and they do things differently . Some hire big out fits to sell for them like Cityside. USDA sells their own. Banks like to list their properties with a realator. Fannie Mae and some other goverment lenders list with realtors. No matter how they do it it pretty much works the same . Heres how;
The property is appraised . They set the price the same . The longer it goes they will either reduce it or they will take offers. It works like the internet sites mostly do;
The first two weeks , 100,000 lets say.
The second two weeks , 95,000.
They keep stepping it down until they move it . People watch those properties every day. When it falls within their bidding they take a stab at it . It works the same when listed with realators. You might be nailing off decking and get a call on your cell and its your pretty little sales agent telling you they have just lowered your future property and its time to move on it . Of course she is not alone and you wont be the only one she calls either. Silent auction effect. People start hitting it with offers. Someone will get called and they will own it or it goes to the next lowered level.
If an area has a lot of repos , you may be displeased to find that those sales are recorded by appraisors. Prices begin to drop until they settle down steady. You might find your 100 grand house drops to 92,900 in a hurry. You pay the appraisor but they are hired by the lender . THE END RESULT IS THEY WORK FOR THEM. Its a set up so beware of it . I could make a living making appraisors liars. Ive always said it and Ive proved it too many times. Most of the time they are a poor result of what a property will bring but they are the acting God in this case. However they are normally close to value except if they get tricked . They miss termites often and screw up into inflated appraisels but it isnt often. They do drive bys when they are busy. I caught one red handed or should we say with out hand . I turned him in and made the bank pay for another one . It seems the house was locked and I held the keys the day he did it .
When a lot of repos hit the market you can bet on higher rents. When it happens interrest rates are always high and when they are rents go up. Every single time . Thats a landlord harvest time . We were near starving when houses were selling on every street . Fammine or feast but this is lanlord feast time .
Always be careful of the timming . Its the one thing most people bet on. Its like a flush draw. Is it going to hit ? When will it hit ? One thing is certain . You will either win with one or lose by one . Same thing. Its time to tell my story;
Interrest rates were 8.5 and climbing . Building had all but stopped . The only ones building had the money having customs built . Carps were eating light with out meat. There was a repo sale every day of the week if not three in a row on the court house steps .
I showed up at my first sale standing alone and bought a house for a dollar over minimum from the goverment . Second sale the same thing . I bought 5 in a row and got scared . I had no competition so was I crazy? ???? I rented all 5 houses for barely enough money to cover them. Then I decided if I was going to go broke I might as well make it a million. I quickly bought three more and stopped but by then I had competition . News travels fast. Rents continued to climb with high carrying costs. I raised every year and started to make money breathing easiar. Then in just a few months time interrest had fallen to 5 percent . I refinanced and the journey had come to its end of being scared. My retirement was set . Now we are starting the same thing all over again except Im set . Rents are going up again because of the rates and the slowed sales. I just raised the rents on the first one I ever bought and its been raised 50 percent total since the starting rents. Im entering the next storm with 12 rental houses. Im still looking every day to buy them but I dont want any more to keep unless they get dumped in my lap. I believe the best buys will be this comming winter . Ill be out every day looking in Jan and Feb unless the storm strikes sooner. But that will be the right time in my mind. It all depends on what interrest does and how many repos start showing up.
Its a cycle . The time to buy is when its at its worst for the cheapest buys but at the highest risks . When the risks are low the prices are high. The time to move all in is in the heart of the storm of repos . Wait till the storm is over and cash in your harvest . Much like farmers gambling on crops. You can lose your butt and have nothing if you arent levered .
Tim
Interesting thread. Especially since DF and I just purchased our first property with the full intention of renovating, repairing, and adding to, with the hope of selling for profit.
Some of our homework we've done diligently, like finding the worst house in a really good neighborhood. Based on the comps, we felt justified in paying almost full market value. So far, we've got a little less than 60k invested in this property. The monthly carrying costs are around 500.00, so we're not pressed for time, and are liking the idea of intentionally sitting on this for 12 months to minimize the capital gains liabilities.
Here's what we've got:
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House built in 1910. 3 BR, 1 bath, large family room, large kit. In city of Statesville, NC, bordering, but not in (thank God), a local historic dist. Typical lot size for area (75x150).
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Planning to invest 50k in materials for renovations, additions, and improvements. Hope to sell for 190k-220k. I'm not counting my labor, this will BE my job for 4-6 months.
This property next door, sold for 62k, was extensively (albeit poorly) renovated and resold in the low 180's.
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This one across the street would probably fetch 160k all day.View Image
This one's on the market now for 245k. Way too much for a POS with a lot of sq. ft.
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Next door, other side. Recently appraised for nearly 200k.
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So, let's review.
Purchase price and carrying costs for 1 year: $66,000
Costs for addition and remodel: $54,000
Total investment: $120,000
Selling price: $220.000
Profit before comissions and taxes: $100,000
Am I WAY over-simplifying this whole thing? Being overly-optimistic? Maybe have my head shoved so far up my a$$ that I'll never see daylight?
I don't see how, with these #'s, there could be any question about what to do. But, seeing as how I'm just an old nailbanger, there's probably several variables I've yet to discover, let alone consider.
Hope this isn't a hi-jack. It's intended to be a response to the thread title.
this isn't a hijack,it's what the thread is all about.
first i like your house,looks solid,sets good,has some curb appeal. if the other house's are worth that kind of money i think you did really well. nowhere around here can i buy a house for 60 sitting in a 200k block,nowhere.
now from where i sit,and don't let this affect you at all because all i've got is pics to look at. i think your high on the resale. the yellow house that you say is 160 looks closest in size to yours,the others all look to have a bigger footprint and have a second floor on top of that. the house next i can see new windows,new elec,new concrete work,looks pretty good for the 180.i know you think the work is shoddy ,but when buyers walk thru they don't know the difference if its "pretty"
i still think you have lots of room to make great money,just don't sign on for the new 100k boat yet.lol good luck and think about flipping quicker and doing a 1031 exchange into the next one,then cap gains don't matter. larryhand me the chainsaw, i need to trim the casing just a hair.
Thanks Larry,
Actually 220 is 5 below what our agent quoted based on my description of planned improvements. Personally, I'd be okay with anything over 200.Live in the solution, not the problem.
what all are you planning to do,you mention addition? keep us posted on the progress . i got to say when i'm talking flipping my imagination doesn't go as far as adding on,just new kitchen,bath,paint maybe a roof and the one thing i completely lack on is landscape. i couldn't plant a dandelion.hand me the chainsaw, i need to trim the casing just a hair.
Sorry to take so long to get back to you.
The addition I referred to will be a 24' x 32' off the back of the house. It will encompass a carport, kitchen & DR, mudroom, and have a "bonus room" upstairs that I may or may not finish depending on how the budget holds out. At a minimum, I'll rough-in for a 3/4 bath up there. It will essentially be a small Cape Cod w/ a shed dormer off the back, turned at a right angle to the existing house.
On the existing structure, I'll rebuild the front porch, add a "Brady Bunch" bath between two of the three BR's, redo the master bath, new windows, paint, floor coverings, and landscape. There's some structural issues with the 100 year-old floor framing that will need to be addressed as well. I'd be comfortable putting up to 70k in materials and subs into this place.
It's going to be a substantial project, but I think the neighborhood warrants it. The economy here is going gangbusters as well, so I'm not bothered by taking my time to do it right. I don't have the "band-aids on bullet wounds" mentality that the more successful flippers and landlords seem to have, so the biggest challenge for me will be to try to find some middle ground. At the end of the day however, I'm more interested with what I see in the mirror than what I see in the checkbook.
I'm planning to do a complete thread on this one when I get started in earnest. Probably within the next 45-90 days. In the meantime, thanks to you and everyone else weighing in on THIS thread. Very helpful info. here for someone like me who is ill-suited to the "business " side of our business. Live in the solution, not the problem.
"I'm planning to do a complete thread on this one when I get started in earnest. Probably within the next 45-90 days. In the meantime, thanks to you and everyone else weighing in on THIS thread. Very helpful info. here for someone like me who is ill-suited to the "business " side of our business. "
I didnt copy your whole post but Ill be commenting on some of the oter parts of it .
The ill suited part ; Ive always felt that way in some part of it . Ive never done a 1031 tax exchange as Larry. Im not an agent . If I had been I would carry more knowledge than I do and experience in that arena. If I were to ask more of my self it would be in the legal area. The accounting would be better suited other than relying on just percentages. I still dont know how to get the percentages of a rental held 20 years on the money to flipping it but I know that its outstanding . So being a mathmatician would be very impressive and IM NOT . I do have things going for me such as skill and experience but I read every week it seems of some professional in another area of business that has been more successful than me . So Im always humbled by others and this place is a good place to hang out to be humbled and learn more . I believe knowledge rules and its a pretty good road to be on and be logged on here. <G>
You mention looking in the mirror on this project and not using cost cutting objectives. You mention landlords as an example .
First no offense . <G>
As long as you have a vision and numbers of where you see your self going with this project , its your gamble . It always is and you will only have to answer your self .
I had an idea that people would rent a nicer property than we had available . If that were true and successful I would be in a market by myself and would in fact not be competing with the rest . They called it setting the market which was what happened . There however were no comps of others wading the swamps in that area . Pioneer business . That took gut feelings and looking in the mirror at my properties of what I envisioned . I had to build from that and no one knew what it was except me . I had a hard time getting realators to understand it as they kept trying to sell me junkers. I told more than one they were wasting both our time. It was really hard to understand as I would buy what seemed like a junker but had a good foundation and frame and location. I admire your vision.
However dont lose sight of the check book. Dreams become night mares if they lose money. Have respect for successful people and try to mentor from them at least what you can eat .
Ill be looking forward to your thread .
Tim
if i was looking at your project,and i will say if i had this same house and neighborhood presented to me i would grab it in a minute.anytime your buying a house at 33% of surrounding house's,it would be hard to pass up.
i would approach this a little differently though. just looking at this house it looks like i could spend 15-20k on it [no new additions] and have a great house that i could sell quickly for say 150k because i would have a nice nice house priced 30-70 less than everyone else.thats a great postion to be in. less work,lot's less risk, and let the next guy dream about the big addition.
my problem with getting that deep into a house by building on ,is the next guys vision can be completely different. i guess this really comes from commercial real estate. what can be perfect for one tenant is demolition cost for the next.
if you feel real confident about building the addition and the cost of construction and resale [and i gotta tell you i wouldn't base it on what a real estate agent with nothing invested tells me,they have a habit of telling you what you want to hear]go for it and have some fun and make some money. lets get the sledge hammer and do it!!!! larryhand me the chainsaw, i need to trim the casing just a hair.
One thing I havent touched on in this thread is time involvement .
In our advice given to David it made me think that it needs to be discussed.
When I take a bad remodel as I have now [aka the burn out ], its time involvement is pretty demanding . Much like an addtion but a lot dirtier . That changes a flip to another type of one that doesnt require hardly any time .
The mountiain property was found by accident at the cafe . I was eating there anyway and noticed my victim wanted to talk to me . No search time involved. I said it would be a nice day for an open top jeep ride as I had mine out side . We made a nice drive and ended up making a deal in about an hour .
I bought the property for 8 grand , paid 950 for a dozer and held the property a year. Its going on the block for 50,000 as I said .
In addition Im out a years interrest on 8 grand . Ive spent about 3 days on this property mostly watching the dozer and taking naps at the cabin just down the road from it . I got to do some atv riding and really looked at that time as vaccation time much like golfing . That was a lot more enjoyable than gutting burn out and the time spent for the moneys much better .
Investors look at deals first as no hands investments . They are the simplest to do. There is no limit to the number as to compared to time involved. McDonalds is one of those types of businesses to own. They simply operate them selves as comapred to a car dealership.
Its then possible to do two deals to one hard one and still have the time to look for more . As one of my brothers once told me , Its hard to find a good job working at a bad one or working at all. "
So time management is important along with time needed that ties up money that could be used to multiply if it werent tied up .
Additions and total remodels are not quick multipliers. They are very time intensive .
Tim
Edited 4/1/2007 12:40 pm by Mooney
I bought the property for 8 grand , paid 950 for a dozer and held the property a year. Its going on the block for 50,000 as I said .
Tim, That's a beautiful 1031 property!
Instead of paying taxes on the full 41k income, you'd get to invest the full 41k into another property. It's not a complicated process. It doesn't have complicated forms. EVery title company knows how to do them. It might cost you an extra $250 closings costs .
It all starts with your intent. Did you intend to hold this property for passive income? Yes.
blue "...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
Very good points Larry, and ones that we HAVE considered. The addition is actually contingent. It depends on my ability to increase the value of the prop. with the 20k we currently have available, then refi. for the cash to do the addition.
The back of the house, where the kit. is, sits about 4" above grade and is badly suffering because of it. The rear 6 feet has to go regardless, thus the add-on. The size however is negotiable.
My landlord comment should have read "some" landlords. I've worked for guys who shouldn't even be allowed to own property. I don't know how those types sleep at night.
My DF has a background in rentals from where she grew up in Niagra, and wants to get into that market down here as well. I'm not completely on board yet. My thinking is, that in this area (semi-rural south), where the cost of living is very comfortable, why does anyone need to rent? I have to ask: what have you done to eff yourself up so bad that you can't go down to Clayton or Oakwood and drive home in a new singlewide???Live in the solution, not the problem.
Flips aren't suitable for 1031 propertys.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
as far as i'm concerned all real estate is suitable for a 1031 including flips, why do you disagree?maybe you know something i don't .thanks larryhand me the chainsaw, i need to trim the casing just a hair.
Larry, real estate income can fall into different types of income, according to the IRS. I'm sure Bill Hartman can elaborate a lot better than I.
Anyways, propertys bought as flippers are categorized as dealer property. Dealer property is taxed the same as ordinary business income and not eligilble for 1031 exchanges.
A guy like Mooney can get away with mixing the propertys and stay under the radar, but someone that is doing a few flips each year will have a much harder time proving to the IRS that they bought and held the property for passive income purposes. I'ts not impossible, but risky. The risk is great too because the IRS can lump ALL property into dealer property and demand the back taxes.
Real estate taxation laws are complicated and not for the feint of heart. A good REAL ESTATE cpa can help avoid some awful pitfalls. It helps to have a good Tax Lawyer in your hip pocket too.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
I really don't know anything about the details of 1031 exchange other than it is for investment income.And flipping property is property held for business sale. Also fipping is a business and any profits would ordinary business income and Self-Employment taxes.Where property goes from being any investment property, even if sold short term, and business inventory I really don't know. But part of the determination would be how much work is done to the property (AFAIK it is the same if you do or pay for it) and propably what you main profession is. And probably how often he does it.Where the dividing line is I don't have any guess..
.
A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
Its the time line of the holding .
Other than that I dont know a lot except whats been mentioned. I know how to do it as for my case anyway.
If I buy rental "type " houses that will make the numbers to qualify to keep for a while I can rotate stock. I think I explained that somewhere else here . Dont remember where though. For general explanation Ill explain but IM not really up on it either . Ive just been told what I need to do by the CPA.
I try to buy what will sell or rent meaning they need to qualify for both. Well the numbers needed for rental property are the problem. Its lower numbers than property to sell. The curb appeal and location need to be strong with either but not all rental property holds those values. Thats part of the reason Im reccomended by the realators becuse my properties were bought in selling locations meaning they are desireable to transition people that spend most of their time owning .
With that said its best to make a house a rental for a couple of years but at least one . Im torn on doing that with the one Im working on now . Ill pick up an extra 30 grand if I keep it the two year term. I wont break that down right now but I really need the money for a surgery so if I sell it Ill take a hit . As a alternative Ive listed the mountain properties and if they sell the decision will be to make the house a rental for at least two years . Its really a selling type house and is very top tier for rental. The numbers barely work as its too much house for the rent cap here . That means I wont make the best percentage off it but it will make the difference in the two years and plus.
I can sell one Ive had several years if I want to and replace it with this one . That will be capitol gain and not income . Or anything held two years with no question.
You are right on the thinking if they are projects and the project takes a year they get looked at as income or if the project is done in the same year as its sold or somthing like that . My understanding is that would be the same as a spec house . Holding it for a year under a lease document after the projects completion should take care of it . Id think, but Im not authority on it . If I wanted to shave time close I would ask again and pay for a visit to the cpa.. Id rather myself drop an older property and keep the newer one if I had my rathers. Thats part of harvesting methods.
Tim
Tim-
Just wanted to comment on your mention of loyalty and friendship with the people that you deal with. I respect that, and it's one reason that we moved from the suburbs of NYC to a small town in VA. I want to have those relationships and feel comfortable with the people I deal with. OTOH, I'm not quite as "defensive" as you and would consider paying a small premium if I felt the relationship warranted it. Case by case situation.
As far as the flips, on Long Island, that was essentially impossible. The local realtors had their favorites and before they even had to list the property with MLS (24hrs?) they were already on paper with a binder. I had a couple fights with brokers that weren't taking care of the sellers that they were hired to represent. I'm not sure where the numbers are here in VA. Some houses go cheap - 65-75K isn't unheard of. But those are houses that wouldn't bring too much more if they were fixed & flipped. Usually in bad areas. Even the somewhat better houses 150K - by the time you get into them and get them sold, it's too long. Forget about the ones on the lake. I may get rid of 1 or 2 of mine for some cash, but the taxes are going to hurt. Everything was depreciated to "zero" (land value), so all the income I keep will be taxable. I want to do it before the democrats get the capital gains rate back up.
Good thread and good for you that you have the time, energy and enthusiasm to chase the deals down. But then again, all those lunches that you have to take people out on are all deducible too, right... ain't so bad. :-)
Don K.
EJG Homes Renovations - New Construction - Rentals
A link re: 1031s that seems pretty exhasutive. I'll check with my CPA before thinking it applies to me.
http://www.spectrusgroup.com/facts1031.aspx?ct=11&src=goog&kw=1031+exchange+companies&vc=1031group&gclid=CJu8luHenYsCFRV2UAodCXcakA
from one of the pages there (emphasis is mine)
Who should consider a 1031 exchange?
If you have real property that will net you a gain upon sale (generally property that has been substantially depreciated for tax purposes and/or has appreciated in fair market value), then you are exactly the person who should consider a 1031 exchange. There are 5 tax classes of property: 1) Property used in taxpayers trade or business. 2) Property held primarily for sale to customers. 3) Property which is used as your principal residence. 4) Property held for investment.5) Property used as a vacation home. Section 1031 applies to the first and fourth categories, and potentially the fifth category. Business use is defined as, "To hold property for productive use in trade or business." Property retired from previous productive use in business can be qualifying property. Investment purpose defined as real estate, even if unproductive, held by a non-dealer for future use or increment in value is held for investment and not primarily for sale. Investment is the passive holding of property, for more than a temporary period, with the expectation that it will appreciate. Property held for sale in the immediate future is not held for investment.
Thanks for the insight Don and joining the thread.
Tim
first this disclaimer :anybody that follows my advice that ends up in jail i will be sure and write them every week and send cookies.fair enough?
last year i sold 2 bought4 all were 1031's. one that i sold was only held 4 months before it sold and exchanged for another one. i am what is called a passive investor.[the only income i make is from real estate,no other job] now you read irs's definition and if it's perfectly clear to you,please explain it to me.my main understanding of it is i must be involved in the management and overseeing of my proerty.
i absolutly agree with you if you declare real estate as your employment.1031's won't work.if your flippin alot of house's a year [i don't know what that number would be and i expect no one else has a clear number either] and that is all your doing is flipping house's,it probably isn't going to work.
but i think the subject of this thread was for guys in the house building/remodeling/handyman bussiness to supplement your income by picking up a house and using your skills to rehab and resale.
i don't see any problem with a guy buying a house and selling it and buying another. now if somebody is reading this and thinking they are going to sell a house and take the money and buy another one with half the money and go buy a corvette ,IT WON"T WORK thats not a 1031. at no time can you touch or hold any money from the sale,period.one time a closing agent asked me if i wanted to see the check from selling a property,yeah lay it on the table so i can look at it,but no way was i going to touch that check.
take the house that david bought,and using his numbers. buys ahouse for 60 puts60 in it sells for 220. 100k profit.now if he will do a 1031 and buy 3 more for 70k apiece by the time he pays closing cost etc he will use up the 220. at closing he borrows 100 grand to fix up these three.first thing i would do is rent 2 of them and let them make the payments on the loans of approx 160k.60k on first house and 100 rehab loan. fix up the third one and sell it. now if you like being landlord your on your way time to go buy a couple more. if not take the cash,lets say200k pay the tax on it andpay off all your loans. you now have 2 properties that need rehab and flipped or continue to bring in 1250 each a month.there is no way that irs will object to this [remember my offer at begining lol]
i started doing 1031's in the mid 90's and don't know for sure but have done around 18-20 of them.now i'm not sure i'm i'm winning any races,but this is how i got to where i am, is with 1031's and keeping the tax man out of my pocket. they are the best tax insentive around to be in real estate. larry hand me the chainsaw, i need to trim the casing just a hair.
The funny thing about the irs regs is that they aren't etched in stone.
Your claim that your propertys are suitable for 1031 because your only income is from real estate probably won't hold water, based on what I know about the law.
On the other hand, your propertys might very well be suitable for 1031's due to the nature of the income. Furthermore, your intent is very important in determining whether your propertys will qualify for a 1031.
Just so I don't have to send you cookies, practice this statement: "I bought this property with the intent of renting it out and earning passive income. Before I found a tenant, a buyer came along and made me an offer that I couldn't refuse....so, I sold my property....it looks like a flip, because I really didn't own it that long...but I intended to hold it for passive income".
The confusing thing about the 1031 regs is that they are intended to deal with passive income propertys, but we all know that sometimes situations change. Income properties suddenly become flipper properties. That's just the way it is....so sometimes flippers will qualify, sometimes they wont. It all depends upon the intent of the investor when he bought it.
Now you know why I said that you ought to have a good tax attorney, skilled in real estate in your hip pocket. I visited one that didn't know you could do a 1031 with relatives.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
you hit the nail on the head,you don't go to the audit and say"when i saw the price on it i knew i could buy it and sell it in 30 days and make money" time to pay the tax man and do not pass go.
one of the ones i sold after holding four months, i really decided i didn't like the house. everytime i touched something 5 more things would happen.sell it and move on.
also i'm not saying my status as a passive investor helps me or hurts me,actually under occupation on my tax form it says "retired"
the etched in stone deal ani't that right ,just call irs and ask a question,they will hemha around and never say"this is how it is"
as far as a 1031 from relative all i no about it is it needs to be a arms length transaction,anymore to it than that? larryhand me the chainsaw, i need to trim the casing just a hair.
"but i think the subject of this thread was for guys in the house building/remodeling/handyman bussiness to supplement your income by picking up a house and using your skills to rehab and resale."
That was absolutely correct and still is people.
I think the spin off on the taxes is a good thing although it holds a certain negative . Lets work through the negative !!!!! Let us make lemonade !
How many of you have worked for a pay check? ??????????
That happens to be 1 to 1 on the money with hardly no deductions. No shelter. Lets not forget that. Its full taxation!
I read on here by the experienced contractors [my hats off to them and my respect] about pricing in jobs and finding your real cost of doing business . [what have I been talking about ?] In figgurring a price to sell your self as stunt man on one of these jobs you have to figgure in your risk and profit . [did I say that ? ] Well here my take on it ;
What the above really means in a nut shell is you pick your fights . You dont go into battle with the odds against you . You know your numbers and expectations before you jump. You are selective . Percentages rule with known numbers. In other words you only play your best hands.
What they are not talking about is selling any higher than 1 to 1 ratios. Sure you might be able to over price a job here and there but the odds are you will get caught by an opposing bid so its not somthing to rely on. The job will normally sell at the bottom of three bids . Most bidding and awards are done exactly like that . So with out arguement lets agree that most bidding is 1 to 1 ratio just like pay checks only hopefully a higher pay scale. <G>
Most of the people on this board work on a 1 to 1 ratio.
I think its interresting that people I respect have commented in this thread that they dont agree with flips . They have stated rentals are better and they were right but remember what this thread is about . Weve had rental threads .
So lets say that somewhere you worked for 20 dollars per hour in your life time and got hit with taxes with out deductions but you still kept comming back to work. 1 to 1 ratio again. Does that mean that I would suggest not going back to work becuse it doesnt offer enough benifits ?
5 to 1 on the money could mean that for every hour you spend on a project you get rewarded 5 times . Well in this case it would be 100.00 per hour and 10 to 1 would be 200.00 per hour when you would have worked for 20.00 . Although we might have been working 1 to 1 for 20.00 per hour paying taxes on 200.00 per hour is a bad idea? Its still a net bring home of 100 bucks an hour even if we get hit with out deductions covering SS. Know the percentages just like the wise contractor and apply common sense.
Then there are odds to win or lose. I think thats also important to consider. Am I 100 percent sure the client will pay me for my services? Risk in secondary proportion; Will the client speak good or bad about my job performance and reccomend me to others ? Or will they be throwing stones at my butt behind my back? Thats risk of future business.
Will the house I buy stand a 100 percent chance of selling ? If not will it rent to save my butt? What escape options do I have ? What are the alternates to plan A? If a project was bought with 5 to 1 odds could you sell it in 30 days on 2 to 1 odds to escape ? Will the 5 to 1 projected odds cover somthing missed ?
Entering into a flip and knowing as much imformtion as can be obtained can protect you before entering into battle . Anlysis of the negatives can proove to be true or false considering your conditions. Your conditions wont be the same as some one elses so you are the only one you can ask. I laugh about it still but DW asked me one time why I spent time asking people that did not know as much about our situation as I did . For them a rental would be a BAD thing in their lifes but in the end they have blessed ours. Still if I had listened to the negatives and followed it as advice I probably would still be working on a 1 to 1 ratio. 10 to 1 thought that would be the smartest thing to do and the 1 was my wife because she knew more than the people I was asking .
Tim
Looks like we are in the business in a minority here.
Who woulda thought it with all the carps .
If I live to be a hundred Ill never understand it .
Tim
Here are some pics on two subjects . The first set is the Woods mountain investment property before it was cleared .
The rest of the first set.
Woods mountain cleared;
Im just posting 2 pics of the burn out Im working on. Pics inside would be really dark. <G> Ive fixed the front including the siding and garage door . Ive redone the inside of the garage it self . Ive removed most of the debri inside Im going to . Ill try to get some pics tomorrow of the inside light permitting .
Tim
Edited 4/1/2007 11:37 pm by Mooney
opps
Ok everyone . Fun with math.
We have talked about the return percentage on a flip.
Here is what the other guys are saying about rentals ;
On the house that is burned ;
30 grand cash sale.
Im going to be out about 10 to 15 grand so lets move it up to 45 to go.
Im not counting my labor so if I were it would be higher . 10 grand labor I suppose.
So now its up to a maximum 55 grand with me getting paid which IM not but it has to be figured in.
The new houses that are being built just like it across the street are listed for 98 grand. This one is 6 months old . Same sq ft.
The house will pull a maximum of 800 rents which falls short of 1 percent to value per month . Thats what landlords shoot for . [800 might be extreme as I havent tested that rent but Im dead sure it will rent 12 months per year for 700. ]
Im going to set the rent here for example at 750 per month as Im comfortable since its new or will be in a new addition.
It should raise in value 5 per cent per year in addtion to gaining rents . Rounded thats 10 grand .
At 750 per month it draws 9 grand per year in rents . Unless the inflation causes a rent raise which is very possible but cant be calculated.
The selling stigma on the house right now is that its been burned and the other houses are brand new with warranty. I would assume its not worth what the others are so Ill set it right now at 95, grand to go . Also its got fencing , grass , and a storage building the others dont . Looks like a solid 95 grand to me so lets go with that . If it were new it would be 100 grand. Dont forget that please.
If I sell it now it will be 49 percent taxation with SS included. Right ?
So lets say I get 90 grand at the table with a cost an actual 45 grand with out my labor. Thats half that to me right ? 22,500 cash to me .
Or I keep it for two years . The numbers are ;
New price of 110,000 . At this point it will be worth the very same as the houses around it and there will be plusses for the fence and the S building .
18,000 in rents for 24 months.
Captitol gains tax of 24 percent at sale on 110,000 leaves a tax of 24,600 dollars.
Resulting in a gain of 55,400 cash to me .
The total result ;
19,000 in rents
55,400 in cash after taxes
Brings a total of 74,400 in gain in two years.
I wont count the deductions because I will have to give those back such as depreciation. Anything that is charged to the house however will stay as an expense. Its not known so again it cant be figgured. Nor the extra gains or losses in rents .
Thats what the guys are talking about when they say keep them.
Can someone do the math on what the labor will pay back on 15 years to keep it? Or the total gains off the given numbers?
Tim
tim i think you missed a little on your figures if you sell two years from now. lets see if i can remember them. sell for 110, but you have a base cost of 45k from biuying and fixing,not much depr. to worry about.so you have net profit of 65k. you pay state and fed taxes of 24.5 for a total of 16,250. so you walk from the closing table with 48,000 plus the rent you have brought in. now i always throw this little figure in if you sell right away 22.5 would earn5% over that 2 year period so thats 2k [try not to spend all that intrest in one place.]
if i understand your question correctly about what your return over 15 years would be, i'd rough it in a 15yrs x 10k a year =150 for cleaning up all that black krap! not bad for a few months labor.
you talk about selling to rasie money for health. well ican see 2 sides to this if you sell i would only sell in the year i spent the medical.a t least let med cost deduct from the gains. plan 2 would be the best these figures come up with would be you walk with the orig 45 plus the profit of 22.5 =67.5. if you went out after this was done financed it for lets say 60k at 20 years,would it still postive cash flow? i don't have the book here. if it would i would look at keeping it,i'm not sure i have heard you say how old you are but i'm guessing mid 40-early 50. so if this thing would bring all your money back plus make a 100 a month,when you hit retirement age it's allmost free and clear to sell or eat off of.
now thats coming from a guy that came home tonight and said [i want to selll them all,now!] there are days this isn't much fun. larry hand me the chainsaw, i need to trim the casing just a hair.
"you talk about selling to rasie money for health. well ican see 2 sides to this if you sell i would only sell in the year i spent the medical.a t least let med cost deduct from the gains. plan 2 would be the best these figures come up with would be you walk with the orig 45 plus the profit of 22.5 =67.5. if you went out after this was done financed it for lets say 60k at 20 years,would it still postive cash flow?"
I said I might leave this thread with more than I gave . I think you hit a three point shot plus I worked today trying to pull off a trick play.
I had not even thought about the medical bills off setting the gain. I just watched a guy tonight go all in on A3 unsuited. He called quick and didnt think. He got caught not looking . I need to slow down as things are happening fast here .
I attended an auction to day looking at another house . I was there early and decided in an hour it would be another labor intensive rebuild . Several calls back and forth between DW and I we decided I would be in at the right money at 60,000. We made a decision to walk over 60. DW has wanted this house bad , like really bad . Shes been watching it for several months . My realator wants it to to sell. Both wimmin are really high on it and think its a hot older house with charisma. I took it to 50 and stalled . They got a 51 bid and I was heading for the truck. I dont even know what happened. I told DW on the phone when I called from the truck that I couldnt do another one like this before surgery. Ill be lucky to get the burn out done taking care of the grass thats growing and the other properties. No way I can do it .
I called the realator and pretty much told her the same thing . She was disapointed as well . She asked what was the plan now ? I told her I needed to keep the burn out and finish it on my hands and knees if I had to to keep the costs down. I felt like I had to have the burn out added to inventory. If I do that I should be at 50 grand to finish it . [I think] No subs , no help just me . BUt I gotta have money.
I asked her to do a search to see if the 1 acre that surrounds national forrest could sell for more money. Thats the one I bought at a tax sale for 775.00. She called back at 5 pm and said she had good news . She complemented me on thinking about it and asking her . She hit it at 15,000. Up from the 10 grand I was thinking about .
Im putting the rest of my vaccant properties up for sale in the morning plus that mountain lot for 15.
Im looking to be clear of the surgery and the burnout . It wont take it all but somthing needs to hit and Ill retire from sale what doesnt have to sell. I need the house and surgery. I dont need recreational property.
After you shook me by the ears tonight and woke me up, Ill shedule surgery after the dealing hits. Ill ask about how long it takes to get billings posted and plan it .
Thanks a lot for the heads up! I was not thinking .
Tim
remember the saying" consult your tax advisor before taking advice from a 12 year old on the internet" lol. it does sound like you have your plate full with outhout ordering up the next one,when i get that way i just get to feeling so overwhelm i don't know where to start. larryhand me the chainsaw, i need to trim the casing just a hair.
"I had not even thought about the medical bills off setting the gain. "Not exactly.First you will pay SE taxes on the business profit on fixing up and selling the house.Then the profit becomes part of your income. Then you need to figure deductions on sch B. That is where you put mortgage interest, property taxes, contributions.And medical expenses. You can only deduct that amount over 7.5% of you adjusted gross income.Another option is to refi to get cash out and keep it for rental (invesemtn).But a warning. Mortgage interest can be deducted as investment if interest if the money is used for investment purposes.Mortage interest on a residence can is deducted on sch B if it is security by the property. You can have 2 residences with mortgages.Classical example was someone that had a rental property that he finaced and used to build a new personal home. It went to tax court and he could not deduct it as investment expenses as it was not used for an investment or as personal mortage interest as it was not security by his home.But mortgage interest deduction is a realatively minor expense."Im looking to be clear of the surgery and the burnout . It wont take it all but somthing needs to hit and Ill retire from sale what doesnt have to sell."Of course there are non fincial consideration and sometimes peace of mind outways it all..
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
I knew part of that and part I didnt but the trouble is my mind wasnt on it .
Thanks for the imformation.
I stated before that this business has so so much to learn and part of it nearly has to be jack leg . A little of this and a little of that but a whole lot of skill in the trades. Add to all this stuff to the trades does make it advanced but if I can learn what I have anyone can. Thats why Im still being humbled by imformation I should have been calling the ball on. I learn it again. Sounds like I need to brush up on some tax laws. <G>
The answer that keeps comming up to live is that properties need to be kept under shelter. Then take money from them that way. But , this was a thread for flipping.
Still taxes should not be a scare tactic if the odds are great. When I got the 15 grand price from the property I paid 775.00 for I know its somthing over 15 to 1 odds. Actually at 3 to 1 odds on the money with out risk , the taxes are a moot subject compared to 1 to 1 non sheltered money. A person has to do the math.
Tim
To follow up with positive ;
You are working your same job every day getting the needed income to support family . Nothing changes you will miss there . Its not like jumping from a clift into another job. That money doesnt have to change and I dont believe in gambles unless Ive got the odds . Even then I dont like gambling with more than I can afford to lose .
It does take getting off ones butt and making it happen. You will be doing things other people dont want to do. I always think about the people entertaining us in the olympics. The countless hours they practiced and the number of times they fell on their butt . The sacrifice they made with their lifes.
You will be doing things like working 7 days per week for extended periods. If you swallow the deal Christmas day will be an opportunity to work. I know it gets crazy. You get used to working with lights at night and getting by on a smaller amount of sleep. You make demands on your self you wouldnt think of doing for a customer . Every day is ran like the last day before vacation. You get pizzed at night the hardware store isnt open. Lowes is a dream come true they are open in the evening and on Sundays .
You do things you wouldnt do like work on plumbing and will cuss when it leaks right after you fixed it. You will find your self doing many things you never got paid to do because it isnt in your feild , but it is now . You will find your self solving more problems you havent tackled before. Lots of things that are new that seem like jumping fences but you gain satisfaction when you get done with new projects.
The good news is that when youve been doing it long enough you will know it . You will say , I fixed that problem with a garage door before and I know whats wrong . Then you find that youve been there before on the next problem although its nothing you were trained to do originally. Once the circle gets made you will realize you graduated but youll still see problems you have seen before believe it or not . Im refinishing a fiberglass tub right now and its my first . I bought tools to do HVAC but I dont know anything about it really. I inspected a lot of it . I know more codes on it than I know about it . I removed a system and Im going to put it back after I cleaned the soot and smoke from it . I had to find the cleaner that worked to remove it and that was tuff but I found it . Super Clean . It was in my arsenal for rentals . I find my self on this site and handyman sites as they know things others dont . I went to a tile site when I needed to and others. I call a friend . I buy more tools. Ive got a floor finishing machine of all things . Ive learned it will do hardwood floors in addtion to many other things . Im going to save ceramic tile floors from a house fire . I have a brotherinlaw in the fire restoration business. I called him several times and now respect that as a trade where I didnt before . I was once again humbled by his imformation. I did burnouts years ago and thought I knew pretty much what I needed to know but I got a new up to date crash course. Its endless but rewarding .
Then on some it will be just what you are trained to do and you will have pride you can push a job with your skills and tools on your own job. The big word is you OWN it .
Tim
Very nice thank you, I was happy when the neighbor came over to ask me for some help as everyone said im the man that could do anything, My boy came over with his buddys and they said they thought i could fix anything, The guys at the lumberyard were amazed when i ordered block to do a foundation.
bill, i read this yesterday and went oh krap i have done something like this,did i just not get caught? so i got questions,help me out on this..
first when you say residences i can have up to two with mortgages. i take that to mean i can have a mortgage on the house where i live plus i could have one on a cabin at the lake? but if i had a ski cabin in the mountains i couldn't deduct intrest on that one?
second on the example you gave that a guy financed his rental and then took the money to build a new house for himself. now i can't remember what happened yesterday so i may be wrong on this. if i buy a rental house for 100k and pay cash,spend 50k rehabing it for a total cost of 150 ,appraise's at 300k,it's rented and bringing in income. now i decide to build a new house and go borrow 250k on this house. if i remember correctly i can write off the intrest on 150k of that loan but the other 100k i can't. basiclly you can't finance for more than you gave for it and write off all on the mortagage?
the intrest deduction is a minor deduction on the personal side,but in rentals it's offsetting your income dollar for dollar. larryhand me the chainsaw, i need to trim the casing just a hair.
the intrest deduction is a minor deduction on the personal side,but in rentals it's offsetting your income dollar for dollar. larry
You said that before but didnt finish it . Its the only thing at the time I disagreed with but I wanted to say , it is to me ! LOL.
I believe if I sell the house now its self employment tax plus SS just like I did a job.
Bill didnt answer you right back so that means hes looking it up. He will be back.
Tim
"I believe if I sell the house now its self employment tax plus SS just like I did a job."As Larry gave an example if he bought a stock and sold it for a profit the next day that would be short term capital gains. While taxed as ordinary income there is no SE taxes.Likewise you could buy a house and do nothing and sell it the next day at a profit and have no SE taxes.And likewise if you did "nominal" amountof work on it such as cutting the grass and washing the windows you could sell it without SE taxes.But where you are doing significant amount of work, such as the burn house, it then you are selling your labor. Exactly like you built a house and sold it. That is business income and thus SE taxes.BUT I HAVE ABSOLUTLEY SO IDEA WHERE THE DIVIDING LINE IS BETWEEN THE TWO TYPES OF ACTIVITIES.
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
"BUT I HAVE ABSOLUTLEY SO IDEA WHERE THE DIVIDING LINE IS BETWEEN THE TWO TYPES OF ACTIVITIES."
You meant "no" . Thanks for the reply.
What you are talking aboout now is similar to what Blue was referring to but I dont use it loosely. Intent .
I think Ill menton what I think about along these lines while Im in action.
Doing it your self has advantages and disadvantages. There are many of both.
The American way is to think if I do this my self Ill save all that money. It depends on intent and action. Since everyone is famialr in this thread with the burn out Ill use that one .
The builder across the street is operating on volume doing no actual physical labor at all he keeps the jobs moving and offers a skimming approach of the top of several pies while getting his fill he hasnt dipped into any one property or at least thats his intent . Hes got a lot of deductions .
When I faced this property, I did have and still have several other things to do so I thought about knocking it out with subs . If I had four of these jobs then it would be the only way.
The intent had to be made whether I kept it or sold it as to the way I complete it . Its time right now to have it placed on the market which the starting season is the 1rst of April. Walmart makes its money off supposedly 10 percent millions of times over but if you dont have millions ,... I didnt like starting out under the surrounding new houses when I know I have as much house and it will be just as new . Facts are facts though as when you know you are beat in a poker hand you must fold no matter how much you wanted that hand to win. The only way for me to win over is to keep it as we have discussed.
I know Im going to keep it and that means I wont be paying uncle Sam. A sub would be dead money that I will either lose interrrest on or I will have to pay for it . The first time I learned that was when someone I knew financed their appliances on a new home loan, 30 yr note on a washer and dryer. Figgure the interrest some time on 800 dollars for 30 yrs .
Rental property breeds that type of thinking and feeds it . If you have a mortgage on a rental the less the principle the more money you will make off the house through out the whole loan. Also less taxes when applied. Thats what brings in bottom dollar thinking with the goals to meet at the end of the year . The problem is you have to meet the challenge on a daily basis. Things like paying the mortgage 30 days out before its due and a hundred other little things add up to profits. Then another lesson is learned which goes right in with a tax discussion.
I really want to make this point because its an important one in this discussion. Sometimes we have to bring every trick we know out to the table and this is one that needs to be mentioned;
I say that there is no difference between a dollar saved and a dollar earned as it looks the same in the bank. Thats really true if we only look at it that way.
However its not true in some cases in the big picture. If I pay taxes on the money earned and I dont on the money saved then Ive picked up an advantage. Those can be winning odds. If I put time out there instead of money there are several benifits depending on the conditions. and it can be reversed when we talk about volume out put. If I hired 10,000 dollars worth of subs and kept the house they worked on for 30 years thats about 73 dollars per month. 876.00 per year . 26,280 dollars full term of note. If you can put that kind of figgure together 100 times , youve got a living with out working for it . That thinking can be used for taxes in that if you never sell the house you will never pay taxes on the gains . You will pay the profit from the rents but not any taxes when there are no proceeds from a sale . If the property is put into a corporation it could be held by family members 100 years or so.
Holding a property has several ways to win.
Tim
Several things can happen owning property that can be a gift . Ill mention a few that has happened to me .
The hyway department paid me 20 grand for 45 feet of right of way when they widened the street. It was on a steep hill side I could not mow . They took the trees and now I have a view.
They county contacted me wanting to do the same thing but they didnt pay me . I gave it to them but Ive got building lots on that gravel road and a house thats too close to it due to dust. Im thinking I picked up 20 grand off that freebe .
When you buy a house and turn it to a rental , you dont pay a dime on it if you are smart and have done the math.
You always buy the property for what I consider wholesale and should be able to cash it to a profit at any time .
Keep in mind renters make all payments , taxes and insurance or its not really a rental. It should also make money above that . DanT and I figgure a property has to bring down 200 per month for us to hold it with renters. All of mine make more than that now that time has passed but they all did from the first day . Or more .
After time passes and you made a good decision on location several good things can happen. Rents are going up as we speak and Ill speak about that a little later. But actually what is happening is appreciation or inflation how ever you want to look at is going on . All the while you are just holding it paying none of it . Its a gift with rentals . I never compute that number into the deal because a land baron told me not to as its windfall. The banker calls it a direct wind <G> Ill give an example of a rental Ive had 11 yrs ; [I just picked it because I have told that story several times as an example ]
I bought the property @ 32,000 off the court house square from the US marshal. I put about 3 grand in it to start recieving rents . I was fast at that time so it only took a couple of weeks . <G> The renters paid the principle down to around 7 grand by now . Its increased in rents 100 bucks from time gone by and Im looking at raiseing it again in these times . The raise in rents are free income to me as now the commecial plan of insurance isnt costing me any more . When interrest dropped to 5 percent I locked it in and refinanced it for term. That dropped the payment on the same amount over a 100 bucks . So now Ive picked up an additional 200, all the while its being paid off by renters. The property is now worth 80 grand and was worth 42,500 when I purchased it . All the while its got depreciation which will come home to bite when it runs out . But all the while its been gaining in value while they have been giving me that while its being paid for which is a gift unless I sell it .
Thats one average property that I say its nothing special. Ive made much better deals than that one . Last year I bought one the goverment fixed for 50 cents on the dollar and picked up two addtional lots for nothing . Absolutely. However the one above has been solid income and had been a solid investment . It hasnt set the woods on fire but it paid for a truck too. Truck is paid for now and it might be making payments on a new tractor. I shopped for one today. The house will make the payments easily while I still am making payments on it as an example of one .
The truck and tractor are expenses and they are needed to run this business .
We sent the girl to college on two of them basically and shes done . Where would I have come up with that money? I never came up with any of it as the renters did it .
Owning property can be a windfall you didnt pay for if its a rental.
I know its a flip thread but I think both go hand in hand .
Tim
The reason why it works .
Right now houses have been bought by people holding on to as much as they can hold on to. They bought all the house they could make payments on. That worked until several things have hit them too hard. Theres a lot of people out there taking advantage of them. The over all conditions have taken its toll.
The price of gasoline and fuel for their homes re; electricity, wasnt figgured . They wanted what they wanted by damn and they deserved it . They got jacuzzis and hot tubs , walk in closets , two and three car garages , etc. They bought a house next to the Joneses . Rates were affordable at the time and the cheapest mortgage was adjustable arms loans. Thats where when rates increase they do too making bigger payments . The newspaper is blaming them. They are not the only ones to blame. 911 increased insurance costs a respectable amount . Hospital costs and that insurance is a monstor of it own. Right now some 40 percent of the American population are not covered by a major plan. Car insurance is up some 70 percent from 10 yrs ago. Cars went up and now come with higher interrest.
When people dont make more money somthing has to break. They cant afford a new car loan or their credit wont let them buy one . Ladder is more true . So they visit the huslters like Car Mart . You can buy a car that day for a small down payment on bad credit . They will take your income tax return. All the while they sell you a worn out vehicle thats usualy a lease car with high miledge that looks ok. At 40 percent higher price than its worth. They carry the paper . If they didnt the bank would not loan you that value on the car . Credit cards gave people 0 percent interrest but not now . Many people have fallen into that trap and cant get released . Its costing them big time and they arent swimming up stream. They pay the interrest .
People have to sell their home or somthing has to break. We have an across the board price reduction on a starter home here because we have been flooded with them. The builders still havent stopped building them and we have a record now on the MLS system. If you want to sell and get it done then you better under price it or it will sit there . When they sell under priced those become comparibles to your house . So quess what , the prices are now falling according to the board of realators. Supply and demand .
The problem is theres a boat load of people that cant afford to sell them at a discount so they lose them if they cant pay . They bought in the highest priced times with the cheapest interrest rates and no longer have those rates . High and high makes a hookers dress. Theyve been hooked in the jaw hook line and sinker . They are ready to be pulled out on the bank and theres nothing they can do about it . The lenders cant handle all the repos and get those high prices either . They will finally let them go in hard times for big losses .
I could write them a book right now to follow but they wouldnt spend the 10 bucks on the future . The time is right now to buy at 60 percent on the dollar or dont buy. They will end up selling but homeowners wont be doing the buying at those prices. They should pay the current rates on the slashed properties until this thing breaks and rates fall to 5 and then get financed long term. The next wave like that hits will be the next building boom and they will pick up another 40 percent. No one told them cheap rates were the worst time to buy.
Now is the time to carry the paper for them at higher rates and hold the prices up. Thats what Blue wanted to do. Now is the right time and be a manager of them. You can make a living off the difference. Its close to the same thing as leasing a rental but you get some effective money up front and sign some different papers that says they are done when they miss two payments.
Tim
The next wave like that hits will be the next building boom and they will pick up another 40 percent.
I'm not sure that another boom is coming and I'm not so sure that 40% will be realized.
I think we might lose another 40% before we stabilze.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
Thats why they call Poker gambling.
Nothing is ever for sure .
Why do you feel that way? Facts or ole age skepticism? <G>
Could it be we dont have an answer for the fuel crisis?
Tim
I feel that because the factors creating the runup will not be returning soon.
The runup was fueled by boomers moving up. Now they're downsizing.
The runup was fueled by unprecedented debt. Now the debts are due.
The runup was fueled by borrowers with good credit. Now they have bad credit.
The runup was fueled by people with jobs. Now the jobs are overseas.
The runup was fueled by interest rates and policies that were the most favorable to borrower/buyers in history. Now they are tightening up policy.
If your area didn't benefit from the runup, then it probably won't get hit too bad.
I'm not a pessimist, but I"m also not willing to be a buyer unless the numbers that you are talking are met. Even if propertys drop 40%, if they are bought right, as you suggest, the numbers will work. I think it's more critical than ever to be diligent about hitting the numbers that you are suggesting.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
Blue,
The runup was fueled by boomers moving up. .
I think you are only the third person I have ever heard say this, and I think it is dead on accurate. The market force that drove the last 10-15 years is no longer there, and it will not be replaced. That is reflected also in other areas. For instance school enrollments. As the boomers moved through new schools had to be built. Now enrollments have declined and shifted, and some schools are being closed. At least that's how it is in our area.
Now they're downsizing
I do not totally agree with that. Some may be, but I believe that people are more inclined to want to stay where they are. There is a slice of truth to both sides. If you are talking large houses, then I think those homeowners will downsize. But smaller houses (Lets say 2400 sqr ft and under), I tend to think they will stay put, and modify as needed. At least that has been my experience so far.
Bowz
Bowz, when I talk about downsizing, I'm talking about boomers trying to get rid of their 3500sf mcmansions. In our area, I could walk in and take over hundreds of mcmansions with zero down and assume their financing. All day, every day.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
Well this was going to be my next post anyway.
To follow why it works I cited the reasons.
Now the play on such a market .
I dont know long term when its going to come back but it always has come back as its supposed to be a cycle . What goes around comes around .
This looks pretty bad to me as well and I dont see help on the way to answer the problems except in a few areas.
When the economy gets near bust the interrest will fall back down. Thats a given but I dont know when. Mean while we might still be digging a hole . Its not an answer to the economys good health picture.
What you cite is certainly true and doesnt hold long term answers either.
Now let me get on with it ;
Right now if I sell 10 percent under market it will lead the market here . It will sell if its listed as so. So on a 100,000 dollar house I lead out and price it at 89,900 it will last on market 30 days or less. It probably wont sell in 6 months at 100,000. Thats what it takes right now to move in the residential market . So I back off on my offer price to reflect that . I only figgure its worth 10 percent less to begin with and Im still good to go for the next 6 months out .
Id like to school this young builder a little bit but it would bite me in the butt if I did . He told me the other day he had to have his listed price which is full retail. I think hes in trouble . He turned down a solid offer that day for 10 percent less and its been listed a week. He could have visited the bank but he turned it down . He could have sold the next one but he declined. Hes only got one play and thats to build . Hes geared to do only that unless he revamps his business . Mainly he runs a framing crew and no one is framing new ones now . We have 125 new houses on the market on our small MLS which for this small twon is huge . We lost a factory and ave another one working 4 days per week. The biggest employment is the cheapest paying around . Hes building too mch home for low wages. In my opinion hes lost his market . I could slide under him with the home I bought that he built which idenical to what hes building for 10 percent less. I can afford to do it but he says he cant replace his at the lower price . So buying has to be cheaper than building them right now . Or else walk with nothing invested.
What ever happens , we are going to have the same number of people needing a roof over their head just like walmart knows that however bad it gets they will sell groceries and staples .
The rental pool will get larger because there is no choice . Rental prices will increase becuase of supply and demand . I dont look at apartments as being part of the big demand but houses to replace past homeowners will be . They still want to live like they are homeowners. Any family of four wants a house if they can swing it . Im still renting houses to couples both working that should be renting apartments. They dont have kids so they can afford it. Big statement there . So my range of clients is pretty large and select over the smaller rentals . I believe the rental business is the place to be right now but buys cheap enough can flip at 60 to 70 percent LTV if money is needed by the investor . On the other hand it takes a different goat to be a landlord so Im not exactly promoting that for everyone .
Tim
So buying for flip should be figgueed on a short term market no longer than 6 months out . If the percentage is there I dont think its a gamble as long as its not priced retail on the retail market . I think a person could do one after another if they could buy with the right percentages which has always been the problem. Buying is much harder than selling .
I view the rental sector much stronger over the next few years. This is where long term gains can be had with rental prices climbing . If we take your negative outlook on the economy which I agreed with BTW, then if the buy works on a rental plan now , meaning the numbers line up, then I think it will only improve making those deals even better.
Building specs right now seems to be suicide. I think framers will have to switch to remodeling or somthing until this thing is over . You have had more experience there than I. I would not build a spec right now even if someone were twisting my arm to break it . With materials way down I might figgure building duplexes.
I like the school thing and any other activity that changes dated properrty around. Ive looked into some but so far it hasnt had good numbers for me .
Im thinking about more recreational property buys as we are short on listings on the MLS. Im also thinking about renting cabins but I have to build or buy them first . I need to runn a thread on cabins and recreational property as I know there are a few here .
Tim
That builder is crazy.
When the economy gets near bust the interrest will fall back down
The interest rates aren't that high! It's not like the early 80's when interest rates hit 18% and the housing industry was bust. The industry is hurting and I believe will bust soon and the interest rates are at near record lows!
I think the birds have come home to roost. There were a lot of weird market forces pushing the housing prices up in an unnatural way and now the piper has to be paid. It was just like the dot com bust. There was no rational reason why the dot coms were appreciating and the same thing can be said for housing. The economy was flat, but housing prices were rising. It didn't make sense. When you looked underneath the surface, you found the mortgage companies driving the house pricing by offering zero down financing and sometimes a lot more than that. The appraisers were guranteeing the appraisals even if it didn't make sense.
I'm very concerned and I'm usually an optimist.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
I dont know much about your region as you are from Mich. except what the news kept talking about . I realize its really bad there with so many people losing their jobs . Still what you mention is not every where.
I personally know of only 5 Mcmansions around here .
A new porch on the double wide trailer and get rid of those concrete blocks laid lossely for steps is a big deal round here.
People round here dont over extend on houses as much as they do cars, trucks, four wheelers, boats , golf, bass tournaments , etc.
They do things that are radical but homes are not normally one of them. 5 differrent people got fired when our basketball, team went to state playoffs. They wanted to go to LIttle Rock and stay while they watched all the games . They told the bosses to take their job and shove it when they were told they couldnt have the time off . Men quit their jobs every year for deer season.
I think they just took advantage of the lower interrest. At least that was the reason everyone around here wanted to do it . Now its went back up its like tomatoes went to 59 cents per pound when they had been .49 cent . They wont buy tomatoes for a while .
The real truth is , its more affordable to build now with the material prices down. As you say the interrest is not that bad .
The labor however is still trying to be high after they got a raise during the boom.
I think it will settle down.
BTW, I know you are not negative and are normally upbeat.
Tim
Edited 4/7/2007 11:26 am by Mooney
Buying a job.
Guys Im trying to cover all the subjects under this threads heading .
Ive done this I dont know how many times and is an important part of the business if you are in the business in the first place and need some work.
After I decided to quit working for the public I survived on this plus ones I had already done and turned to rentals. Buying repos for a job has supplemented my income of over 50 percent several times . Today its still a big part of my existence .
It just happens to be the best time of year to buy them when construction slows down. One hand patting the other one . I mentioned earliar that the best time to buy was in winter while every thing is dead looking and cold . Theres less offers so there is less competition. Often a house sells because of the lack or the advantage of opportunity.
Most listings by season makes spring number 1 and that is the next season past winter for you to flip in. But also remember that when you make offers in the winter some of them will he last springs listings . There are many hard luck stories that go with 9 month listings so the best buys by any season is the winter . Thats right , winter is the number one season to buy a house for price reasons. Everything looks bleak in the winter and their nine month listing looks worse.
All you can do is make offers and walk away. It has to be on your terms because you have to make a living and you have enough experience working on houses that you dont need more . The money must be there or move to the next one . Theres always been another deal to come down for me . Its like the last girlfriend is never the last one .
Winter is prime time , be there !
Tim
Making a living on borrowed money!
Sound scary? Its not if the numbers line up.
The burn out one more time .
I could sell that house for 85, grand if I wanted to take quick money and lead the market for a quick paycheck. Thats not a gamble as long as it listed for 85 to say look here IM leading the market ! Once you lead the market which means you have the cheapest house in a set price range you will get ALL the lookers. The front door on the house will need to be a swinging one in this case senario. Lookers tell other people and lookers say , hey we can do this cant we ? Lots of people generate positives. The fact is if the poker hand was played exactly that way it would generate income quickly.
When I looked at the house I figgured 30/30/30 in my head.
30 to buy
30 to fix material and labor
30 profit .
So I dropped 5 grand in the profit . Big deal.
I also am not taking a paycheck and trying to fix for 10 skimping on materials.
The fact is the seccond 30 could have made my living !
There would be nothing wrong in this case living on borrowed money if the complete amount would have been borrowed.
Tim
tim,you talk about auctions,is this your main source of properties? are these repo's on the courthouse steps or what i call market type auctions where there is a seller and a auctioneer and the seller can say yes or no?
as i mentioned earlier the type of house i have been buying is a estate house,i'm not chasing hearse's or anything,just run across one and ends up being the one.
i have bought probably a 1/2 dozen over the years at market auctions and the ones i bought back in 80-94 were great bargains even then. but i have never had much luck chasing the repo market either when the bank owns it or at a auction on the steps. the owner usually has way to much in it and the bank bids what they are owed and that usually is at least 95% to as much 120% of fmv.
last repo i tried to buy would of been for myself. it was a owner built finished to sheetrock. no cabs nothing.house was worth 260 done. bank thought this guy was gold and had advanced him 290k! he got sick, they repoed. i was high bidder at the auction with about 10 others there at 165k. no way they said we'd take 275. see ya. that house is still setting today 4 years later.it's now a total of 9 years old sitting in this nice neighborhood unfinished with weeds a foot tall. if i was a neighbor i would have cookout some night that gets out of hand! i talked to the bank a year ago they still think they are going to get out.i do think as the reo inventory gets higher these banks will readjust there view.
also word of mouth, it can't be beat,because when they come to you they want to sell and know who you are and your not going to jack them around like homeinvestors or whatever.
market type auctions are still pretty strong here,i sold one this summer and it brought about 10% less than on mls. some of the old junker type houses are pretty good buys but i'm just not into them.
i guess to sum my sources up it's pretty much word of mouth and stumble across a estate house once in awhile.but i would sure like to come up with a more reliable source for replacements when i do a 1031. larryhand me the chainsaw, i need to trim the casing just a hair.
Larry,
as i mentioned earlier the type of house i have been buying is a estate house,i'm not chasing hearse's or anything,just run across one and ends up being the one.
Interesting to note this. Last week I went over my SEP-IRA stuff with the broker. We discussed some realestate stuff too. He told me about another contractor client he has that does similar to what you and Tim seem to do. When I asked where the other client found properties, the broker said, "Lately he had been buying them from estates. He averages 8-10 offers per year, and buys 1 or 2."
regarding your 1031 exchanges: Is there a requirement that the exchange must be for "like property". What I mean is, it seems 20+ years ago when I worked for the rental place, you could not exchange a duplex for, say, an office building. I am wondering, because we are considering selling my shop and acreage, and paying down the house mortgage. But we will take the capital gains hit by doing that. However we are also leaning toward rentals, and the proceeds from the sale of the shop would go further if we could roll that tax free into duplexes.
Probably an accountant type question, just wondered if you had any insight.
Bowz
DISCLAIMER:all this is worth exactly what you paid for it. lol
it does have to be like kind,but that really is pretty liberal. house for a duplex,commercial building for a single family house, a duplex for office building would be no problem also you can also exchange for land. now all these have to be held for business or investment purpose's. you can't sell a rental house and roll it to a house your going to live in.[that can be done but you will have to rent it for a time before you convert and this all gets pretty sticky,so lets forget that for now].
as far as selling your shop and paying your mortgage down,i don't think there is anyway you can do that. lets say you sell your shop for 200k and your base cost is 100k and you find a single family rental for 125k and buy it. then you take the 75 and put it on your house.your new property will have a base of 100k and mr taxman wants taxes on the other 100k.
i'm probably not going to explain this very clear but to sell your shop [still talking 200k]the replacement property will need to be 200k plus,now that can be 2 properties for a 100 each. i just did one that it took 3 to get above what i was bringing in. irs calls it BOOT if you received boot you will pay taxes on it.
one of the most important aspects of a 1031 is you can not touch the money for any reason.that is why you hire a intermediatary. most any title company will do this for you with some additional cost. last one i did it cost 500.for them to handle the funds.
next important thing is the time line involved. you have from the time you close on the shop till you identify your replacement 45days,remember that number cause 1 day over and the 1031 is gone. now once you have identified the property you 6 months i believe it is from your closing date to get it closed,never took one out this far so i'm a little unsure.now the good part to this is you can name multiple properties for replacement and not have to close on but 1 or whatever you want. there are several rules on how many but roughly it's 3.
another thing is on the contract when you buy and sell you need a sentence in there about wanting this to be part of a 1031 exchange.
the only question i would see on yours is how you have handled ownership with your business in it. did the company pay rent to you or do you own it in your company name and it was just a business expense? if you kept it in the business name, i think your 1031 would need to be in the business name also.
there is lots of reading on this and it gets pretty easy once you understand it.it's a great way to save 30% in taxes and reinvest and continue making money on that 30%. larryhand me the chainsaw, i need to trim the casing just a hair.
as far as asking a accountant ,be sure the understand a 1031,i've got a pretty good tax guy he has about 2500 clients that he files taxes for,but onlyone other guy and i do 1031's. so when ever i do one he's like give me a day to read up on this and get back to you.i like that in he don't just shoot from the hip with what he remembers. bottom line read and reread the irs sheet and then ask questions. larry hand me the chainsaw, i need to trim the casing just a hair.
Thanks for the insights. We own the shop and 9 acres in our personal names. We bought it more for the land to build on, but never did. When I started on my own I figured on doing more woodwork than I do now, and I thought some day I would have a larger operation, (and would need a shop for those operations). DW has not been a fan of keeping it, but raw land values around it have gone up quite a bit, so I also looked at it as an investment.
I'm just sorting through what to do with various aspects of life, and the shop equity is a chunck of change not really giving the return it could elsewhere.
Thanks again,
Bowz
Thanks to all for a very entertaining and hopefully motivational thread. One aspect of the business that does not receive enough of the attention is that the most money is made when you buy, it has to be at a big discount or you are sunk before ever getting started. Second thing to remember is that eventually inflation/rising values will cover all mistakes, if you can afford to hold on that long.
Bowz, the answer to your situation, I think, is that you can probably make the exchange to income property, but you can't have the money from the equity. A creative way might be to refinance for cashback then exchang with very little cash due to you. Not sure it would work, but may be worth investigating.
Tim, you have made a very good case for rentals in your market, but what would you suggest in the higher priced markets where the rent won't cover the payments. Some people in my area have made money by betting on what was a rampant inflationary market-- houses were going up 30 percent a year, so if they could afford a short term loss, ther resold in two or three years and did well, but paid big taxes. Now the prices are heading down, but still to high for positive cash or even neutral flow, so do I wait longer or just hope to ride out the market? Probably hard for you to believe, but here people are renting 550,000 to 650000 thousand dollar houses for 2200-2800 a month. I know the math looks stupid, but lots of people are hoping for continued ridiculousness from the market.
So the old saying still applies, location location location, and good timing helps too!!
Thanks for all the input
Dan
If rent or some other type of income wont cover the property cost for holding it then for one thing you arent talking about a rental, its a flip.
Those types of flips are common on the tv shows as poop as they seem to be but they are showing some facts .
People buy a property for a flip that is not their residence for somthing like 200,000. They fix it and try to return 100 profit or some such figgure . They over price it to begin with and argue with the realators on what it will bring and end up losing their shirt .
If IM buying somthing that wont rent Im looking for 60 cents on the dollar properties because I know they are going to be aligators to my wallet until they are sold . I figgure in borowing enough money to make payments on it plus all other expenses . There arent many out there I can buy for that kind of money discount so its a rarity it comes along . On a mini mansion, I dont have an answer for you except be ready to move in it and have your house sold or have very deep pockets and know going in what you are up against . Not many people can afford them. Very limited buyer base and right now a shaky market which is why the 60 percent to value . I dont like taking chances and when I gamble I want house odds.
You can make those deamnds before you invest your money or be prepared to walk away. People will tell you that you cant buy property like that but Ive done it many times . I get 1 property out of 1 to 12 offers or auctions . Its a times consumming business . When I tell what I made on properties like what I listed here in this thread I havent told the others I looked at and really wasted a lot of time on. The only thing I can say is that through out the year it averages to be a good income . You sure will have your dobber down when youve looked at 9 properties that fell through and you didnt get it done . Its a sense of rejection thats hard to over come inside. It makes you wonder sometimes when you spend an hour looking at a junk heap why you are even considering this type of busines? There are so many hours of research spent and when you pull up on site you know you have just blown a half day or a full day on nothing . Ive crawled under them to find they are eaten up with termites and cant be saved. Ive drove up and noticed roof lines are sagging which means I cant save them and market them. Its a loss and losses have to be shaken off . Then on top of all the work I have to find something desireable at ,my prrice which is hard to do and takes dilgence . I know that it can be done . If I didnt it might get my goat and I might quit . It works but its a lot of work.
So if you find somthing thats too expensive to rent then the price has to match the risk. The property has to stand on its own. It has to sell to finance it and it has to lead the market when you sell it which here is 10 percent off .
Tim
Frustration over comes you damaging your wallet .
Ive seen it happen mostly to gamblers.
They try to make good decisions and try to play tight . The drought of no success overcomes them and they go all in On A2 . They do it out of frustration not calculated thinking . They know how to run the numbers to get their odds and figgure the play but for some reason they have a blow up and put their money into the pot . When your money is spent in the pot its gone . Its community money at that point and you have to win it back, but it isnt yours any longer . The resposibility is yours to get it back and its somtimes hard if it was thrown away in a blow up or what I call a brain fart .
The only thing I can advise to it is from old days when as a boy I shot a single shot .22. There are stories older than mine that said they didnt have money for shells but that wasnt my case. My problem is that you only get one shot at game before they are gone with a single shot .22 and you knew it . You had to make that one shot your best one of the day or come up a loser . When I started investing I always remembered that problem I had as a kid.
When I started out I didnt have any money saved. I had an income statement and credit . After remembering the story as a kid I said this ;
I dont have any money so I sure cant afford to lose any borrowed money.
I dont know how many times I said that out loud for myself to hear it but it was for myself it was told out loud. I would guess thousands which was repeated over and over . I drilled it into my head to train my self.
Most of the property you will look at and buy will be property that was bought with bad decisions . Some just failed for some reason and may be innocent but those had no back up plan either . You must succeed before you put your money into the pot or at least have house odds . Most of the time Ive got an exit plan or several odds to outs to pick up my hand . I dont like gambling on a draw which is futures .
If I hold two aces I still like to see a straight draw or flush in the final bidding . Two more outs to win in case some body picked up a tray. It also hold odds to draw a another. If good odds are played again and again it becomes house odds , same as. The house always wins in the end . So picking your hands to play is crucial and not having brain farts and going all in on nothing .
I cant relate enough how much gambling is just like business .
When you know with out a doubt you can rent a property after knowing fully well all the costs , to me its not gambling and thats my favorite place to be . At heart Im not really a gambler as it really makes me sick unless Ive got the odds in my favor stacked , then Im dangerous. Or I might appear to be . Really I just know the numbers where someone else doesnt have that knowledge and to them it looks like gambling . Thats where you will hear their negatives about what you are doing . To check your self just ask , Do they know what I do? Most all cases they dont and are hearing themselves talk to be heard. People who have the knowledge about somthing dont find it necesary to display it . They have the power within themselves. They have confidence and you must have it before you put money into the pot.
Tim
Did you ever laugh at a tight azz person?
I get laughed at all the time .
I just had lunch today with DW and she wanted me to just go buy a new tractor and get it over with because we need one now . I explained I just cant do any thing that way. I have to try to steal one or I cant live with my self . It doesnt matter what it is so I thought Id share what my thoughts were on just a tractor . This business gets into your head and stays . Ive been on the phone today and on the internet . Part of my time was pricing tractors trying to give my self an edge to somthing I know nothing about . Frenchy does but I dont folks .
This is some things I found ;
View Image
http://www.brinkleyauctions.com/tractors/tlist.html 200 miles away from me .
http://www.ironplanet.com/jsp/s/item/150313?h=400%2F2%2CNewSearch 300 miles away from me but the auction is online .
If I dont get to buy a tractor at my price Ill walk away. It has to be at my price . I now know what these tractors are worth in my area and have proof . If I buy a tractor at my price Ill work it till my work is done and sell it for a profit if I choose to.
I will not spend my money till I get odds . I WILL NOT release my money into the pot unless I have the odds!
Tim
Those posts were written because I would hate to have any helping hand to anyone losing their shirt . And bein a cowboy aint all ridin and shootin.
I think my work is done here and its a good time to end it for its at its end .
It ends with dealing with risk and the buck should stop there .
I hope this travels with you what ever you decide to do.
Tim
Thanks Tim. It was a great thread.
Ditto on the thanks Tim. Never too old to learn. Too stubborn sometimes. I've got this one bookmarked.Live in the solution, not the problem.
Well it might not be over if someone has questions or somthing to bring into it . Im about tapped of what I could think about .
The thread had me thinking today about the elect transfer what ever number it was so Ill be posting questions .
Your welcome .
Tim
I enjoyed it very much well done, I did not say much as the average price in my town is 750 grand, My house would be around 400 grand but i can see a spec 100 yards away for one and a half million, Theres no cheap houses around here, My buddy sold his for a million and there tearing down the house to build a new one, So as a blue collar man im priced out of the game, I do have a rental in a town further away, My Q to you if i may ask is this, I have no cash but own a few Homes There going up 15 percent a year, last time i sold i got nailed on taxes, How do i get a little cash??? should i just borrow a little on them?? I own them free and clear but just need some money for kids college
Refinance or home equity type of loan.
If the loan from the house is expected to be a short amount of time , just borrow off the house you own and hand them the deed for collateral. That just looks like car loan or a CD loan. That way it doesnt have to go through closing , be apprasied , and all the other costs involved except your loan fee .
Tim
Hey Tim
Did not look in here for a bit. Then it was too long. Just spent the better part of the afternoon reading the last 70 or so posts. Really appreciate you putting it down on electrons.
Scrapr
Youre welcome sir .
Tim
I guess Ive bought every kind there is except Ive never got an estate sale done .
Ive been screwed by the auctioneer and seen many others screwed as well.
I was at an estate sale one time on a local house in city. It was bad dated but otherwise a solid house. Everything was in working order but the colors were awful , you know the deal.
I said well, the only way I can buy this house is rent it until it really needs remodeling and get some money from this old stuff in it . I did not think I could market the house for sale .
There was an old man there , say 80 yrs old . He was sitting in a wheel chair by himself .
The auctioneer said the house will have to bring 80 percent of appraisel. He stated what it said and told us the number it would have to bring but he would presnt the highest offer . He couldnt get a bid so I started it very low . Anyway this old guy and I took it through 20, 000 dollars worth of bids and I let him have it . No one else bid but he did get it for 80 percent and the number stated it would have to bring . They didnt let him have it after they had announced it . Had it been my winning bid there would have been some trouble as I would have caused it . The auctioneer ended up buying it becuse he was getting 15 percent for the sale so in effect he bought it for 35 percent off app.
I was at another sale around the corner , same auctioneer , and I was working ring for him and did back up calling . I set the house in and it took off and ended up at the price needed to sell. Anoter old fella was high bidder . They didnt let him have that one either . The auctioneer bought it .
Here an auctioneer has to be a realator to sell a house unless the owner wants to sell his own house . So in the end a realator/auctioneer has first shot even after the sale is done .
Ive tried several times to buy estate houses but have never got it done .
One more . I attended an auction where I opened the bid on an advertized absolute auction. Thats supposed to mean it sells. I was the only bidder but matched the low bid . They didnt sell it to me and I just walked instead of causing trouble.
The auctions I mostly attend are foreclousures at the court house steps . As I outlined earliar there are several different types . What I like about them is that I know the amount of money they will be started at . They always give it although they might n0t have a number unil the day of sale I will know before it starts . Normally I call it in the day before and its given in the afternoon before a morning sale the next day.
Ive been working this morning on the same thing . Ive been making calls and they will be answered back to me when the info is known. They will gladly call me back. Sometimes I get the price when I call in the first time depending on who has it .
It would be a long post if I described every type but my favorite are goverment owned or forclosing sales on the listed owner. I prefer the later . So Ill describe that kind;
That sale is the kind where the owner has the last shot at getting it back normally on a cash basis . He or anyone else has to satisfy the mortgage and thats all! Lets say a subject got a 100 percent loan on 30 yrs. He has no paid in equity but he has increased value of say 5 percent per year . Well right off hes letting it go for 50 percent on the money just by new values. Thats where I like to step in. Theres normally late charges and back taxes as well that run it up to often 60 percent ltv. Thats alright if I can fix the house with 10 percent of that and market it or rent it at 70 percent LTV. 70 percent is my end result of investment and no more . Its all number crunching many properties until one fits the numbers. When I get a subject that looks like a fit I go see it if I dont know it already in my memory. I do a bid labor and material estimate sheet so I will know what my costs are complete. If that matches the numbers , I attend the sale . As I said , those sales are cash so its mostly an investor sale however sometimes a smart homeowner will be there with a letter of immediate credit for sale if they have money to back it up with said bank but they have to show proof of cash at sale time. That lets most retail buyers out as most have to have their bank order an appraisel and more red tape so they cant come up with cash the day of sale .
I make cash offers off a house that I already own from the bank that already has an appraisel less than a year old or the president does an in house ap that morning and lets me have a cashiers check for the amount I need . You can do the same thing with cds . I handed over cash to the goverment with out a deed but I get somthing in writing as often it has to be granted by the courts to issue me a deed . Thats ok as long as I get proof in writing .
Those are the cheapest sales going , but take a lot of time researching them.
Tim
i agree with the idea that a lot of people overbought to stay up with the jones.the problem i see and you have mentioned is that as these repo's hit the market they will be in the 150 and up range,pretty pricey for rentals.
i bought my first rental in 77 and started buying about one a year [i was making 5.75 a hour doing body work and had money to invest,va loans cost 35.00 to assume,those were the days] and kept buying through the 80's where there were some great buys. my dad who also had rentals would shake his head and say"i hope you can keep them rented and make the payments"he thought i was nuts compared to what he had paid for property and what it rented for.
so maybe it's me getting old and going "there nuts for buying a 150k house to rent " but i just don't have the gonads for it now.the oppurtnity is probably coming in the next 18 months the same as back in the 80"s and if you are young guy wanting to get involved go for it.
stating your goal
mine in the 70's was,i was self employed and i looked at these as a retirement program. they have worked out pretty well and my lifestlye for better or worse can be credited to the rentals. but i will give this advice to anyone who has about the same goals for 30 years down the road......... buy the very best property that you can afford to buy,in the best location you can afford.say that to yourself 10 times.
heres why i say that in the late 70's early 80's i bought what i considered to be nice house's needing fixed up. they were all 3 bedroom ,ch/ca, 1 car garage, 1 bath,about 20-25 years old.in pretty fair middle class neighborhood.these were all nicer than what i was living in. now fast forward 30 years,these house's are obsolete by most standards for home buyers today,nobody wants 1 bath,nobody wants a 1 car garage and the neighborhoods have turn to other investors like me so they are now probably 70% rentals. so now when i sell i'm selling to another investor and guess what he wants it cheap.
i should have bought less numbers but twice the house and still be in a buyers market . if your looking to get into this know what it will rent for,not what the real estate agent tells you,look at the paper ,go out and look at some house's in the range you want to buy. do not get big headed and think someone will pay you more than the guy down the street,renters will move to save 20.00 a month if your not in the market. then find one run, the numbers and don't expect to get rich right off the bat,it will probably take you 5 years to get the rent to making that payment on a new boat or whatever. 20 years down the road you will say to yourself "man i should have bought more of those 150k house's when i had a chance.now there bringing 325k! just take the plunge larryhand me the chainsaw, i need to trim the casing just a hair.
Well I dont see you in a dilemma at all.
You are right that 3bd 1 baths , single carports/ garages are out dated but not for every one . Its still a pretty nice deal to a retired couple that didnt hit the jack pot on retirement . Yea its a cheaper house but lots of people need cheaper houses .
As for me I tried to chose location location, but what seemed most important was to buy houses that would go down the road for 30 yrs and out last me . No old big houses that have wood siding you cant match or keep paint on. No wood windows that leak air . I tried to hit 70s houses or up to get stud walls and drywall, modern wiring , insulation, good windows , etc. They both have been very important calls .
What you have is exellent rentals that dont have to compete with apartments . Not even duplexes. That has set my business apart as mass apartments have been built here and every time a building goes up and they rent out I tighten up. I could have had an old set of apartments and got thrashed by those new ones . The houses have stood their ground very nicely as a house is a step up from an apartment . Im the only guy in town in business renting 3 bedroom houses .
I started later than you did so I do have a good inventory of 2 bath houses. They are not paid for though. I feel Im rooted and I figure you are too which means we arent gambling anymore like we did .
Tim
"first when you say residences i can have up to two with mortgages. i take that to mean i can have a mortgage on the house where i live plus i could have one on a cabin at the lake? but if i had a ski cabin in the mountains i couldn't deduct intrest on that one?"Yes.I am looking at Lasser's tax book, not tried to read the IRS pubs.But Lasser says "principle residence" and one other. You can could pick which one of those to do.It also has "A residence that you rent out for any part of the year may be treated as a second residnece only if you use it for personal nonrental purposes for more than the greater of 14 days or 10% of the rental days. ..."This is off the subject, but I know several people that have condo's in ski country that they rent out. But because of the all of the IRS rules on personal use of rental they find that it is easier to just rent a different unit in the same complex when they go sking."if i buy a rental house for 100k and pay cash,spend 50k rehabing it for a total cost of 150 ,appraise's at 300k,it's rented and bringing in income. now i decide to build a new house and go borrow 250k on this house. if i remember correctly i can write off the intrest on 150k of that loan but the other 100k i can't. basiclly you can't finance for more than you gave for it and write off all on the mortagage?"That is the rule for sch A mortgage deductions on a mortgage for a PERSONAL residence.Cost (inclduing improvements) + update to $100k.But that has absolutely nothing to do with investment property.You could take out a personal note, a mortgage on a rental, or a mortgage your 3rd personal home and it is deductable if used for invesment purpose and not if used for personal purposes.Here is what pub 535 says."Allocation of InterestThe rules for deducting interest vary, depending on whether the loan proceeds are used for business, personal, or investment activities. If you use the proceeds of a loan for more than one type of expense, you must make an allocation to determine the interest for each use of the loan's proceeds.Allocate your interest expense to the following categories. * Nonpassive trade or business activity interest
* Passive trade or business activity interest
* Investment interest
* Portfolio interest
* Personal interestIn general, you allocate interest on a loan the same way you allocate the loan proceeds. You allocate loan proceeds by tracing disbursements to specific uses. ""Secured loan. The allocation of loan proceeds and the related interest is not generally affected by the use of property that secures the loan.Example.You secure a loan with property used in your business. You use the loan proceeds to buy an automobile for personal use. You must allocate interest expense on the loan to personal use (purchase of the automobile) even though the loan is secured by business property.""How to report. If the proceeds were used in a nonpassive trade or business activity, report the interest on Schedule E (Form 1040), line 28; enter “interest expense†and the name of the partnership or S corporation in column (a) and the amount in column (h). If the proceeds were used in a passive activity, follow the instructions for Form 8582, Passive Activity Loss Limitations, to determine the amount of interest expense that can be reported on Schedule E (Form 1040), line 28; enter “interest expense†and the name of the partnership in column (a) and the amount in column (f). If the proceeds were used in an investment activity, enter the interest on Form 4952. If the proceeds are used for personal purposes, the interest is generally not deductible."A number of years ago a friend of mine had some rentals in partnership with her son. He has a CPA does his return and then copies me with all of the deprication and expenses and I do her return.A few years ago they sold a rental on installments with a wrap around mortgage.She had interest income from the sale which was taxable.But the interest on the orginal mortage which they where paying could not be put on sch E as it was not related to any of the rentals. So it went on sch A as a deduction.At the time she did not have a mortgage on her house and did not have enough deductions to overcome the std deuuction..
.
A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
bill,thanks for the the info.i didn't mean for you to be reading irs booklets at midnight! at least that ought to lull you to sleep. i'm kinda slow on this stuff so i'm printing this off and digesting it a few times. gives me something to do at lunch! maybe a guy shouldn't but i try to really pay attention to how much money i have to share with my partner ,uncle sam. he doesn't help clean toilets,pull up dog stained carpet,or fix roofs, so i try to be as tight as i can when sharing profits with him.thanks again for the effort.larryhand me the chainsaw, i need to trim the casing just a hair.
87778.88 in reply to 87778.86
tim i think you missed a little on your figures if you sell two years from now. lets see if i can remember them. sell for 110, but you have a base cost of 45k from biuying and fixing,not much depr. to worry about.so you have net profit of 65k. you pay state and fed taxes of 24.5 for a total of 16,250. so you walk from the closing table with 48,000 plus the rent you have brought in. now i always throw this little figure in if you sell right away 22.5 would earn5% over that 2 year period so thats 2k [try not to spend all that intrest in one place.]
You missed the rent for two years @ 18,000.
Other than that we are doing close to the same math.
Thats on a two year deal and not a 1 year.
If I sold it now it would be income wouldnt it ? Self employment tAX AND SS @ 49 percent before deductions? Its not capitol gains until it has been held long enough and the intent has been proved . After two years it gains the full discount if Im not mistaken. Well its not a discount but its a lower rate of tax . Am I wrong ? I know its a variable rate Im dealing with here . LOL.
Tim
tim,thats a lot of house for 100k. it's surprising to me the difference in building norms and were only 300 miles apart[i think your by little rock]
first around here very few houses are built on slabs where down there everything is because of soil conditions,exception being like your lot you have with a slope so they can do walk outs.
around here nobody builds a full brick house,and i mean a 750k house will have a brick front ,with siding on the rest. i notice when were down around the lake how rogers/bentonville everything is full brick. is it just cheap to do there or are we just a bunch of tightwads here? i like brick houses,less maint,looks solid ,i have a few 1955-60 full brick rentals and they look just as good as they did in 55. your house here would be built with a full unfinished basement,brick up 4' on front,2 bath .selling price would be about 125-135 plus we have specials on the street/sewers that add 15-22k to the top of that and have to be paid off in 20 years. most places don't have that cost. total price 150 + larryhand me the chainsaw, i need to trim the casing just a hair.
Well you missed me a tad . Im in NW Arkansas . Im 100 miles West of the Rock. With that said ,
We have a brick factory in my little home town that fully services NW Ar. We get seconds dirt cheap.
I think we are the cheapest on this board for prices every time it comes up.
Its so hard to make a living here I can figgure out why we dont get all the retirees. We are so cheap.
That house will have to be right up to snuff brand new to bring in 750 to 800 per month. Thats .75 percent per month to value. 1300 heated with two car garage. Privacy fence on sides with chain link back for pasture view. House is 6 months pld in a brand new addtion. Sucks dont it ?
Tim
First off, great thread. Interesting reading and very informative even if I never rent or flip properties.
A question on your Woods mountain property flip. What made the property worth so much more after clearing the land? Is it plain old curb appeal? Was the prior owner not informed enough about the land's worth? Both reasons?
BTW, hope your surgery goes smoothly.
Phil
Quantum materiae materietur marmota monax si marmota monax materiam possit materiari?
The subject that owned the Woods mountain property had all his property frozen by the goverment for back taxes. Hes a builder , trader , real estate agent , works for an insurance company as a adjuster on a cat team they send all over the US.
He had bought a piece of property just prior to that happening that cost a great deal of money. With out being able to move he would go broke . He was selling his house when we signed our contract by permission of the US goverment . I didnt know that and he didnt tell me . I took the contract to closing company to close for a cash sale. She called the next day and said it had been frozen. They worked a deal with them that he could in fact sell it if it was after the sale of his house which was suposed to clear the debt. I dont know . Anyway it closed after that sale and he moved on to bigger and better things he could borrow money on. This property and his house wouldnt budge and he couldnt borrow money.
I assume that after all that happened he took his losses on this property in order to have some wiggle room. It wasnt what he wanted to do anymore . On the property he had bought he hired a dozer with the money I gave him which wasnt much but it was enough to clear the top of another mountain where he owned 40 acres. He had already been offered more profit off that than he had made on his house and the 5 acres I bought . If that was true it makes sense . He couldnt hold on to all of it evidently. There always a beer drinkin cryin song goin on with my business . Im used to it as its quite common and causes these cheap sales.
On the other hand the realator said it would not sell unless it was cleared.[for a good piece of money] After I cleared it , it surprized everyone . We didnt know it would be that awsome . Thats when I called the girls out to look and DW said you cant sell this for 30,000. So I called my girl friend and she valued it at 50,000. DW and I both agreed it will have to bring full price or we will keep it . So to fully answer your question we uncovered a diamond we didnt realize we had . Im sure the previous owner didnt know it either or I would have had to pay more but whenn he came to me he knew it would be cheap or I would walk. I gave him cash and again that was what HE needed.
So several factors made the deal.
Thanks I dread the surgery but its a must now so what the heck, Ill do it .
Tim
This kinda reminds me of the other thread .
Im with Larry but theres not enough information.
You do realize your house wont be comapred to the other two in an apprasiel?
I think its fine you have them around it. Im more interrested in comps and the selling features of your inside . Thers too much blind to call. Not enough info.
Solid looking house . Looks to be straight with a good foundation.
Tim
Man, 102, takes out 25-year mortgage
Brendan Montague
A pensioner aged 102 has been granted a 25-year mortgage despite the fact he would have to live until 127 to pay the loan back.
The property investor from East Sussex has taken out an interest-only £200,000 mortgage and hopes to meet the £958 monthly repayments with income from rent as he joins a growing army of retired people hoping to cash in on buy-to-let schemes.
Most lenders set a limit at 75 years for mortgage applicants but a handful, including Woolwich, and Bristol & West, have no such restrictions. This has led to a rush of applications from older investors.
Jonathan Moore, of Mortgages for Business, an independent adviser based in Sevenoaks, Kent, told how he brokered the mortgage for the unnamed 102-year-old, one of hundreds he has arranged for pensioners. “This is a new phenomenon.Obviously there is an element of risk if property prices and rental income suddenly fall but there is no sign of that at the moment,†he said.
Background
* Mortgage lenders to pay back millions in exit fees
* Impact of higher rates in doubt as house price rises gather pace
Related Links
* Rates of 10 per cent 'needed to control boom'
* Is it too late to fix your mortgage?
Richard Stone, 75, from north London, owns 10 houses and has taken out a £120,000 mortgage. The retired maths teacher admits such a commitment at his age can be “quite stressfulâ€.
Charities supporting the elderly have warned that the stress of taking out a large loan could affect health and urge pensioners to seek advice before making such a financial commitment.
Gordon Lishman, the director-general of Age Concern, said: “It’s crucial that people think about the long-term implications.â€
I was reading this thread then saw this, I dont know if it is funny or what????
Well there is a new movement of reverse mortgage where someone buys the old folks home and lets them live there and they can draw out 70 percent from "their appraisel".
Sounds like the same thing.
Tim
Tim,
Thanks for the thread.
Regarding older people and mortgages, I was told a bank takes a risk of an age discrimination lawsuit if they turn down an applicant who would otherwise qualify. Never heard of it happening, but in the land of litigation, I suppose anything is possible.
Bowz
You are welcome .
I dont have any knowledge on age discrimination but Ive known for quite some time seniors had no problem getting loans . I guess I never questioned it . There will probably be someone come along that does have the knowledge though.
To all;
After further review Id like to take the opportunity to apologize if I stepped on any toes in this thread . Contractors in general I guess. Ive been one and Ive been there done it and bought the T shirt . I dont or didnt mean to make less of the business . Its the way I see it and no one should be taking advise from a 14 yr old on the internet anyway. My hat is off to contactors who can get good odds on their time . I only see it from the cheapest bid world and I may be negative in the thought process because Im a buyer more often than a seller . My thought process may then be slanted but my numbers are still good unless someone wants to challenge it and Ill meet it without aggression.
The thought process of the thread was to help those in need of some extra help or ideas with their business in making it rounded from your skills you possess in the first place . With skills and some smarts which I assume you have or you wouldnt be here Im trying to show that a flip or a rental is easiar to accomplish than saving the money outright all the while being taxed on the money you sweated out . It doesnt have to be that hard . We have shown sevral things positive about owning property and who deserves to own it more than people who make a living working on it? It saddens me to watch people reap the benifits from your labor when you should be getting your share. Especially in the form of your retirement .
Tim
After further review Id like to take the opportunity to apologize if I stepped on any toes in this thread
Just a comment to that: I've learned a lot by having my toes stepped on. Often the truth hurts. About 14 years ago I had a conversation with an electrician on a job. His stinging comment was to the effect...."At what you charge, you won't be around in a few years. Why would I want to establish a working relation with you?" OUCH!
Carry on
Bowz
I get to make saw dust tomorrow , yepee. LOL. Its about time .
The fire department sawed the trusses in two in the living room and kitchen.
At least Ill get to use some saws and nailers for a while .
Tim
tim,to be truthful with you i have never paid capital gains tax in 30 years of real estate.,i thought it was a year or 18 months before it was declared a capitol gain and not taxed at reg. rate. i have always sold and said to myself what am i going to do with the money,put it in the bank,no. so i always just reinvest back into real estate thru a 1031 and have actually done a couple trades,but thats hard to do to find another party that wants your as bad as you want theirs.
how long are you looking at before surgery and recovery?
oh i gotta ask why did the fire dept cut rafters???? was this up on the roof side so they could get water to it? larryhand me the chainsaw, i need to trim the casing just a hair.
I think 18 mos is it .
Thats why I want the two years on the house . Ive got it on the mountain property that is cheaper . Ive found another property to replace it .
Actually I would do quite a bit better in two years anyway because my property isnt worth what the others are right now that are new and I didnt compute that . After a year the house will be worth 10 more because its trailing 5 right now becuase it isnt new . That erases it self in a year.
I need surgery now but I aint gettin it under this load. Grass is growing like heck right now too. I wont go into all the things Ive gotta wrap up otherwise pay someone else to do it . Im too cheap for that . <G< I talked to the surgeon this week already so any time is good for him but not me .
Since no one has asked ;
Its not heart surgery. Its two knee replacements . The ticker is doing its job.
I wont be able to walk much less work after this is over with for quite a spell. If it was the ticker Id say the heck with the work. If I was smart and had made a desk job it wouldnt be so dad gum rough. I should have done the surgery this last winter but I would have missed these two deals. If I dont take any thing hard to do I think I can limp till this winter . Its just pain all the time . I get up in the night to use the restroom and wonder if Im gonna get there or not as it really gets stiff and painful. Working is not as bad. Im bone to bone on both and one has made a saddle in the bone so its past due.
Whenever it happens yall will have to put up with me cause there wont be anything wrong with my fingers. <G>
Tim
Edited 4/4/2007 9:48 pm by Mooney
tim,first i've been thinking,if you sell this now do you pay social security on it? if i bought walmart stock and it doubled the next day and i sold don't i just pay income tax on that as a investment? i don't know ,you ought to ask a tax guy so you know for sure.
on the knees i have a 30 yr old daughter with bad knees, same thing bone to bone,they won't do replacement because she is so young. so 3 months ago she went in and had the cartridge replaced.big ordeal havard grew some new stuff and basiclly they relined her knees. going as expected so far,she won't know if she's completely fixed for 2 years.then it's on to the other one. knees suck you have to use them everyday. i know it's easy to always have one more thing to do,but finish the house and let the weeds grow,they will die down in the winter.lol larryhand me the chainsaw, i need to trim the casing just a hair.