new to investing, a little advice please?

[Hooch]

OHHH, touchy. I hit the spot by exposing you for who you really are. Don't get your panties in a bundle. Chill out Mr. Nasty. You're wrong and I didn't gently baby you through it. Deal with it.

I find it fascinating that MR NEVER TELL A WHITE LIE TO THE BUYER has the ability to RIP A SELLER OFF GIVING THEM 13% OF THE VALUE OF THE HOUSE. Man who speaks out of both sides of his mouth, huh?

It's different because they agreed for you to screw them with no lube. LOL. 

I need not explain any more because anyone, without reading comprehension problems, reading this thread can clearly see what they need to do as you have done yourself in with no assistance on my part. You're getting desperate now and it's going to only get worse for you.

A wise man once said, Don't Go Down With A Sinking Ship. 

[propertymanager]

We're finally getting down to the truth.  You admit and advocate lying to the people you do business with.  I don't lie to people and I think anyone that does is a poor excuse for a business person.

Mike

[Hooch]

Again:

I find it fascinating that MR NEVER TELL A WHITE LIE TO THE BUYER has the ability to RIP A SELLER OFF GIVING THEM 13% OF THE VALUE OF THE HOUSE. Man who speaks out of both sides of his mouth, huh?

It's different because they agreed for you to screw them with no lube. LOL.  deal

[propertymanager]

So, exactly what are your parameters Hooch?  Buying at 50% is too high according to you (although I proved that it wasn't).  Then you claimed that experienced investors would buy low income properties at 30%, but contradicted yourself when you said that you would then offer 35% and seal the deal.  In another post, you said that it was pretty obvious that you would buy it at 25%.  Now we learn that buying at 13% is screwing the seller.  So what exactly are your parameters?  Why is buying at 13% screwing the seller, but buying at 25% or 30% is not?  At what discount is it permissable to buy without screwing the seller?  How did you come up with that number?  You advocate lying to buyers and make fun of me for conducting my business in an honest manner, but when I buy a property in an honest manner with everything disclosed, that is screwing the seller.  It appears to me that you can't get your story straight.  

Mike

[Hooch]

More lies due to your desperation.

Buying at 50% is too high according to you (although I proved that it wasn't). 

Buying at 50% is not too high in a middle class neighborhood. And you proved nothing more than that buying with the 2% rule will cash flow at $30 a month on a 15 year loan. Drop your 30 year crap. I don't want to hear that out of your mouth again in reference to what a newbie should do.

And stop with all of this 50% or 35% stuff. Buying at rent X 30 or 50 or whatever does not equal any particular percent of the ARV. That's a bunch of crap that I let you get away with so you could feel like you contributed a little to the conversation. I am now calling you on it because you continue to spread false information.

Then you claimed that experienced investors would buy low income properties at 30%, but contradicted yourself when you said that you would then offer 35% and seal the deal. 

I don't have a problem going up to rent X 35 if necessary. It is still a good deal. But I will always start and rent X 30 and try to justify that first. People walk away after giving them a good screwing with a big smile on their face when they feel that they were the ones that were twisting YOUR arm. 

In another post, you said that it was pretty obvious that you would buy it at 25%.

I would like to see the quote from me on this and what it was in reference to.

Now we learn that buying at 13% is screwing the seller. 

YES, YOU SCREWED THAT SELLER ROYALLY. YOU GAVE IT WITHOUT LUBE. However, I don't look down upon you for doing so. I commend you for doing so. If I could find someone stupid enough to hammer at Rent X 13 I would do it in a heartbeat. I just haven't run across any deals like that. Sure, I buy houses at 4K or less, but they may have 10 to 30K or more in rehab. A house in perfect condition, rented for $600 and bought for $7,800, you're good! And that is my point you are as slick as they come and I don't want to hear one more "Honest Abe" comment out of you as it will be nothing more than a bold faced lie.

At what discount is it permissable to buy without screwing the seller? 

I never had a problem with screwing the seller. My point is that it is clear that you don't either so you should shut the trap with all of this do gooder nonsense as you don't practice what you preach.

and make fun of me for conducting my business in an honest manner, but when I buy a property in an honest manner with everything disclosed, that is screwing the seller. 

Look, I'm not making fun of you man. I'm just pointing out that you should practice what you preach. You make your bold statements that basically I am a piece of crap because I will fudge the books just like every other seller does while you are on your high horse and would never do such a thing. In the mean time you are blasting some poor guy who is in some serious financial hardship and needs cash right away not having the ability to hold off for 1 or 2 days and let it go for half of it's value to a wholesaler. Even giving a person the value of rent X 30 has the possibility of being overturned by a judge. I have never had it to me but know people who have. The judge deemed it predatory. In the eyes of a judge, you have bought houses under predatory conditions. Shame, Shame, Shame.

One more word about you not being a predator and you will be requested the entire details of the Rent X 13 transaction that you made, and I will tear it apart piece by piece. You could lie and there still would be no getting out of it. UNDER NO CIRCUMSTANCE, NO MATTER WHAT. buying a house for that price is outstanding investing and shows your skills but in NO WAY WOULD IT BE LOOKED AT BY ANY JUDGE AS NOT BEING PREDATORY. 

[propertymanager]

I'm done arguing with someone that clearly doesn't understand the business at even a newbie level; someone that is constantly changing his story; and someone that admits to lying to customers. 

Here is what I would suggest to newbies.  Use the 2% Rule to screen deals including low income deals.  If the deal looks good with the 2% Rule (monthly rent X 50), then do a cash flow analysis using the 50% Rule.  If the cash flow is at least $100 per unit per month, then it is a good deal provided the rest of the due diligence is acceptable (rental demand, not in a war zone, clear title, no zoning issues, etc, etc, etc).  Contrary to the assertions otherwise, you can CERTAINLY get 30 year financing on rentals, especially when you're starting.  Many people on this forum have done EXACTLY that!  I would NOT lie to buyers, sellers, or anyone else.  That is EXTREMELY unprofessional, immoral, and could easily lead to a lawsuit.  It doesn't matter if everyone else seems to be doing it (they are not) - you should do the right thing.  Finally, always buy the property at the biggest discount you can get.  You are NOT limited to buying at some percentage of anything.  Be honest; fully disclose what you're doing; NEVER LIE; and buy at the deepest discount possible!

Mike

[Hooch]

I'm done arguing with someone that clearly doesn't understand the business at even a newbie level; someone that is constantly changing his story; and someone that admits to lying to customers.

That's a great idea because you just made a complete fool of yourself and showed every single person reading this thread that you not only have reading comprehension problems but you don't have the experience that you "claim" to have. 

My suggestion to newbies on real estate valuation is:

http://www.reiclub.com/forums/index.php/topic,43281.0.html

[tomsmith143]

There are lots of things to consider when entering in the real estate investing business. Here are some advise

1.Finding Properties in Foreclosure

The biggest bargains can be found in areas where there's a large concentration of distressed properties. The banks with the most exposure to these areas are typically the most motivated to cut a deal since they don't want to get stuck with a glut of real estate they can't unload. But before you snap up the cheapest home you can find, make sure to do some research. Find out if the property is located in a decent neighborhood with good schools and healthy employment rates. (Local real estate web sites are a great place to start your research.) If you buy in an area that's losing jobs and is riddled with crime, home values are likely to take a lot longer to recover.

2. Avoid Auctions

While there are a number of safe ways to buy a foreclosed property, bidding on one at a court auction isn't one of them. That's because you're buying a home sight unseen and without an inspection. You'll have no idea whether the home needs repairs and how much they might cost. Some of these properties also owe back taxes, a headache that's transferred to the new owner. And finally, in most cases, you'll need to pay cash for the home.

The least risky way to buy a foreclosed home is to wait until the bank has put it back onto the real estate market. These properties are called bank-owned or real estate-owned (REO). Before a bank hangs a "For Sale" sign, it pays off all the existing debts and taxes, and in many cases, repairs the home to bring it up to the standards of the neighborhood. Best of all, you should be able to buy a bank-owned property with a traditional mortgage.

3. Research Home Values

Just because a home is being sold by the bank, doesn't necessarily mean it's a bargain. Home prices have fallen dramatically from their peaks in 2006, a time when loose-lending practices allowed people of all credit ranks to easily obtain mortgages. Now, many homeowners going through the foreclosure process owe more on the mortgage than their property is actually worth. To make sure you aren't assuming an overpriced loan, research home values in the area. That way, you'll be better able to identify potential deals.

If you fall in love with a home in preforeclosure that's overpriced, then you can see if the bank will allow a short sale. This is when the bank accepts less for the home than the amount owed on the mortgage. While not an ideal scenario, accepting a lower price is often in the bank's best interest. Banks typically spend $25,000 to $50,000 during the foreclosure process. On top of that, they typically end up reducing a home's asking price to match current market values.

4. Line Up Financing First

While it's always a good idea to get preapproved for a mortgage before you start shopping for a home, it's even more critical when you're shopping for foreclosed properties. Even if you have stellar credit, some lenders won't make a loan on a distressed property. Other lenders will only offer a mortgage if the house is in decent condition.

If your loan officer is willing to make a loan on a foreclosed property, find out what criteria the home needs to meet in order to qualify for a mortgage. You can expect the lender to allow cosmetic repairs, but be unforgiving of termites and other serious fixes.

5. Get It Inspected

Even if a home is brand new you want to get it inspected. But inspections are especially important when you're dealing with homes in foreclosure. When people have trouble paying their bills, they typically put off the regular maintenance on their homes. Once a home is seized by a bank, it then sits vacant and falls even further into disrepair. In a worst-case scenario, a homeowner could be so angry he lost his home that he actively destroys a property before he moves out. Without an inspection, you won't be able to estimate the cost for repairs or be able to report the home's true condition to your lender.

There are other sources of information that you can get from. The internet is a good way to start.

I hope this information will help you in a lot of ways. Good Luck in your future real estate investing business

[robdedgar]

My mentor also does section 8 rentals as well.  He usually buys 3 bedroom houses and in Savannah Ga he is owed 940 a month from the government every month.  He said since the tennant does not pay anything for the house, they are more likely to stay there longer.  Which equals a good investment.  Avg rental to the same tennant is in the 8-12 yrs.  if the tennant trashes the place section 8 reimburses you an amount and removes the tennant from the section 8 list.  I plan on going to the office and finding out more about this program before i start renting out to thier recipients.  The only thing i would prefer to go my own way is buying houses through the probate court, where he buys pre-foreclosures.  I think it would be much harder and more competition.  I wouldn't put it past myself but at this point I will take an easier route while I am learning.

[Hooch]

I don't know where you are but Section 8 doesn't normally pay a dime for a trashed house. Also, even if they don't trash anything they are very hard on a house. Think of someone spending 24 hours a day on wear and tear on the house vs the average Joe who works and only has 3 or 4 waking hours a day in a house.

I do Section 8 rentals. There are a few benefits but disadvantages as well that must be taken into consideration.

[davevita]

It seems to me you could use education to make some very important decisions.
I only know one place for that.
Shoot me an e-mail and I'll share it with you.

Talk soon.

[furnishedowner]

Moveright,

Where are you with your plans?

If your real estate agent is not familiar with the $8,000 free down payment government money, GET ANOTHER AGENT!  Your agent should be educating you, and guiding you into something that can actually close AND work for you.

Furnishedowner

[Dave T]

Hooch,

The financing term does not seem to make much difference if you are putting all your cash flow towards principal reduction.

If you have a $50K property and the 30 year loan generates $100 per month in cash flow, but only $30 per month with a 15 year loan, both loans will be paid off in the same amount of time if you are applying all of your cash flow to the loan balance.

A fully amortizing $50K loan at 6% fixed, is paid off in 5 years with a monthly payment of $966.64 per month.  Does not matter whether the loan was a 15 year or a 30 year loan, it will still be paid off in five years.

I always advise the beginning investor to take 30 year loans for the lower required debt service.  They can always choose to apply excess cash flow to principal reduction to shorten the loan term, but they are not locked in to a higher loan payment that may not be affordable during vacancy periods.

I agree with you that the cash flow is less severly affected by a single vacancy in a multi-unit property than in a SFR.  The SFR investor mitigates this affect by buying more SFRs.   A single vacancy in a three-plex still leaves two units generating rental income.  A single vacancy in a portfolio of 3 SFR will also leave two properties generating rental income.

Since you seem to invest in low income housing, maybe you do get some Section 8 tenants who are perpetually unemployed.  I only invest in middle income housing and my Section 8 tenants generally have jobs and work the same number of hours as my mainstream tenants.  The difference with Section 8 is that the Section 8 housing authority will pay the full rent each month if the Section 8 tenant loses his job.  If my mainstream tenant loses a job, I usually end up with a vacancy.  As far as wear and tear goes, in my experience it is about the same on average for a Section 8 tenant as for a mainstream tenant.  I get higher wear and tear from tenants with kids than I do from tenants without kids, regardless of whether Section 8 is paying the rent.

[Hooch]

The financing term does not seem to make much difference if you are putting all your cash flow towards principal reduction.


You are correct. "IF you put the cash flow towards principal." With exception of slightly higher interest rates on the 30yr.

I always advise the beginning investor to take 30 year loans for the lower required debt service.  They can always choose to apply excess cash flow to principal reduction to shorten the loan term, but they are not locked in to a higher loan payment that may not be affordable during vacancy periods.

Ok, I understand where you are coming from. I suggest 15 yr and buying so it can be paid off in 5 simply due to the fact that most people tend to not be very disciplined. I see MANY investors go under because they live off the excess cash flow. Then get refi's at full market value and live off that loan, etc. If you buy to pay it off in 5, 15 yr will give you plenty of cash flow for those vacant periods. If you are buying to pay it off in 15 or more than you would definitely need to do the 30. I would love to see the newbies take NO cashflow and get it paid off quickly. Quick wealth requires doing just that.

I agree with you that the cash flow is less severly affected by a single vacancy in a multi-unit property than in a SFR.  The SFR investor mitigates this affect by buying more SFRs.   A single vacancy in a three-plex still leaves two units generating rental income.  A single vacancy in a portfolio of 3 SFR will also leave two properties generating rental income.

Yes, multiple single families would definitely minimize risk. To minimize it right off the bat a newbie can buy a multifamily.

Since you seem to invest in low income housing, maybe you do get some Section 8 tenants who are perpetually unemployed.

Yes, my Section 8 people are deadbeats.


I only invest in middle income housing and my Section 8 tenants generally have jobs and work the same number of hours as my mainstream tenants.

Section 8 around here is not a middle income thing. The program here serves deadbeats. Here they have very strict requirements on how much they make. They don't have to make that much before they are paying the entire rent. Some do work low income jobs but most don't around here. Most often, if they work, they are working part time as they will have too much for the program otherwise. They would be paying the full amount on rent, still having to go by all of the program requirements, etc, so they just get off the program. That is how it is in Roanoke VA. I understand it is different depending on who is managing it and where you are.
 
And I agree, if they have kids the wear and tear is excessive regardless of who is paying the rent.