My first Investment Property

[motion]

Originally posted by 911S Targa
What do you/ they mean by that ? My house is payed for.

The theory is that you can get a better return on your investment elsewhere than the 5-6% you're giving the bank on the debt for your home.

[motion]

Originally posted by SoCal911SC
So what happened?

I'm interested in knowing also... I find it hard to believe a "flipper" would leave 35k on the table when he sold the property to you. Why would he do that? He's no dummy. I came to the conclusion long ago that there are no good deals out there... only big risk. If you're willing to have bigger balls than the next investor, it might work out for you. Or, it might not.

An employee of the Property Ladder phoned me and interviewed me to be on the show... I wasn't the right type of candidate, it turns out. They're looking for train wrecks, I guess.

[cantdrv55]

Interesting thread. I hope the original poster gets back to us for an update. Jim, you there?

[dmcummins]

Originally posted by SoCal911SC
Exactly what I was thinking. Like the first flipper wasn't smart enough to put some cheap landscaping, etc. in and make an additional $50K or whatever in 3 weeks himself.

Didn't seem very likely to me, but I guess you never know . . .

You never know. The house sound's like it needed work and that can be a hassle. He may have had another deal in the works also and needed some cash. I have flipped a few property's in the past and sometimes its better to take a profit when you can. Even if you leave some on the table.

Good luck Jim. It sounds like you have some room to work with and know the area.

[techweenie]

Originally posted by dmcummins
I have flipped a few property's in the past and sometimes its better to take a profit when you can. Even if you leave some on the table.

This is a very wise comment. It applies to all investments. I just rode AAPL from $36 to $52.54 and got out. Yes, it went to $54 and change, but then dropped to $51 and change.

The famous investment advice attributed to Rothschild, when asked how he made all his money in the market: 'by selling too soon.'

IOW, never go for the last little bit of money. Take a satisfactory profit and move on.

[Jims5543]

Originally posted by cantdrv55
Interesting thread. I hope the original poster gets back to us for an update. Jim, you there?

I backed out. Partly because of some of the comments you guys made and partly because I realized that I am not a "flipper". The profit margine on that house was too small to make it worth my while. I am also nervous about the market and do not want to get stuck with a house I do not need/want. I did what some one mentioned. I looked at going rates to rent a house in that area and the sale price was already too inflated on that house.

I missed a good opportunity to buy a house for 160K in a neighborhood of 300K homes. It needed a LOT of work but is going to make a faster mover than me an easy 100K.

I decided to do what I do well and continue to concentrate on running my business and not trying to get rich quick.

I have a 200K line at the bank now that can be used for anything I need. If I ever see a good oportunity I will jump on it but I am not making it a priority right now. If I stumble across that one good house I will give it a stab.

[dmcummins]

I sold my last investment property early this year. I made a very nice profit and everything seams high right now. My home is also paid for and I have a line of credit at the bank. I wouldn't buy anything right now unless it was cheap or would cash flow as a rental. I'm not looking to hard right now either. It seams anyone with credit and wants a house has had time to buy one by now. With interest rates going up I would think things would slow down some. But Ive been wrong before.

I also sold some oil and gas related stocks a couple of months ago. I also made a nice profit but sure missed a big run. Its better than some of the big losers Ive had in the past.

[Jims5543]

In the last 3-5 years in this town ANYONE could turn a profit on a house flipping it. The market made the clueless look like Donald Trump. I have enough sense to know when I might be in over my head. I am not a RE expert so any move I would make would be very risky. Keeping that in mind I am treading very cafefully.

[cantdrv55]

I had looked into a couple of homes in NM. New, cheap homes coming up in a more expensive neighborhood. Sounded like a really good opportunity, maybe too good. Local RE experts say I can get $1600 in rent for a house that'll cost roughly $175K when done. I passed because it sounded too good to be true. Stuck the line of credit into my own house instead. Gonna convert my office into a third car garage, build two additional rooms plus another bathroom.

[cantdrv55]

Originally posted by SoCal911SC
I suppose that's possible, but those numbers don't seem to add up.

If someone can pay $1600 mo. rent in NM, they must be doing ok. If they could come up with that kind of money each month, you'd think they could come up with $15-$20K down to buy the house.

If they did that, and got a 30 year fixed at 6%, their monthly payment would be a bit over $900 per month.

Hard to see why most people wouldn't just do that, instead of paying substantially (almost double) more to rent.

I guess you might have some people that are only planning on being in the area for a short time and don't want to buy a house. Or maybe they can't come up with $15-20K to buy the house themselves, but if that's the case, I don't think I'd count on them being good $1600 mo. tenants.

Those were my thoughts exactly which is why I didn't buy in.

[motion]

I'm heading to Albuquerque on Monday to check out home prices/rental rates. I'll let you guys know what I find.

[turbo6bar]

$1600 * .75 = $1200 * 12 months = $14400

$14400/175k = cap rate 8.2%

I would not buy this unless there is healthy appreciation. The maximum amount I'd pay for this property would be $160000, and that's only because it's brand new. Even then, I'd probably back out, because I've passed up similar deals already.

SoCal, there are still good renters willing to pay healthy rental rates in exchange for flexibility. Good renters are hard to find, though.

[Big Ed]

Here in Massachusetts, for the past 3 years, every winter I've bought a distressed property or two, performed renovations and flipped for a profit (usually 3-4 months holding period to do the work, which I did myself on nights and weekends).

This winter, prices are too inflated, and there are too few buyers...the end is near, so to speak. So I'm out. I don't know what I'm going to do in my spare time this winter, and I expect to have plenty of it, I'm a real estate agent.

When I hear stories of guys making $30K in a matter of days, I know it's time to back out. Hell, I agree with Tabs, real estate today is the tech stock of 2000. When "everyone is doing it", it's time to leave the party.

[fintstone]

Originally posted by turbo6bar
$1600 * .75 = $1200 * 12 months = $14400

$14400/175k = cap rate 8.2%

I would not buy this unless there is healthy appreciation. The maximum amount I'd pay for this property would be $160000, and that's only because it's brand new. Even then, I'd probably back out, because I've passed up similar deals already.

SoCal, there are still good renters willing to pay healthy rental rates in exchange for flexibility. Good renters are hard to find, though.

I would take that deal in a minute. I assume that I would put little down, so the leverage would effectively multiply the return significantly.

[dad911]

Originally posted by fintstone
I would take that deal in a minute. I assume that I would put little down, so the leverage would effectively multiply the return significantly.

With a commercial property yes. Too much trouble for residential tenants.

[turbo6bar]

Have to agree with Alan. Folks getting into rentals is at a high + Price/rent ratios are high. This is a good time to zag.