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FlipYa4Fake
01-13-2008, 01:02 PM
Is anyone involved in real estate investment? I wanted to hear some success stories or some stories on how some people got started. Thanks.

CleverName
01-13-2008, 01:21 PM
Well, my dad owns the property we live on right now. He bought it maybe 25 or so years ago for $30k. He's now trying to sell it for $600k+ because the area around it has been commercialized. The house on it is a piece of crap, but the property is what's valuable.

He also owns property on a busy highway, which he bought 30 years ago, but I'm not sure for how much... but he is trying to sell it for $1M now. He said he got lucky he was able to buy this one. Some investments take a while to grow I guess. I can't really offer much advice since it's not really my property!

HahnB
01-13-2008, 01:41 PM
Is anyone involved in real estate investment? I wanted to hear some success stories or some stories on how some people got started. Thanks.

Commercial or residential? Do you have any finance experience?

Killa Kurt
01-13-2008, 01:54 PM
Location, location, location.

Look for real estate near water, away from highways, good school system, and the more square footage the better.

HahnB
01-13-2008, 02:00 PM
I would first learn how to value a piece of real estate. Do you know anything about cash flows, NPV, IRR, Sales Comparison, Income Approach etc? What will your holding period be? Are you looking for a long term investment or short term...I'm assuming you're talking about commercial property, although it might be smarter to get your feet wet in the residential market. There's a lot more that goes into a sound real estate investment than most people think.

MrWebb78
01-13-2008, 02:37 PM
Now is a great time to get started in residential RE. Prices are falling through the floor, foreclosures at all time highs, and interest rates so low.

There are tons of ways to get started depending on how much money you have, how much you want to spend, how easy can you obtain credit, how involved with the investment do you want to be?

Look into publicly auctioned forclosed homes. Great way to start with significant equity in a house. Live in it for a couple years, rent rooms to friends so they can pay your mortgage for you. Then sell it for a good profit, or keep it to rent it out.

FlipYa4Fake
01-13-2008, 05:09 PM
I currently work for a large insurance company. I just completed my real estate classes and plan on taking the exam in a few weeks. I plan on doing real estate part time to gain capital and learn the market. From there I want to start small by rehabbing foreclosed residential homes and move on from there. I have read a few good books. I also have my associates degree in business marketing.

I was just curious if anyone on this forum was into REI. Just looking to hear some stories, maybe some good book referrals, good websites, anything like that. Thanks.

TwiloMike
01-13-2008, 06:16 PM
Interesting thread. I'm also looking for similar information. What are the good books that you've read?

Since I'm in mortgage finance, it's definitely something I am also looking into. '08 and '09 are supposed to be big refinance/foreclosure years.

Chickenlegs
01-13-2008, 07:18 PM
Is anyone involved in real estate investment? I wanted to hear some success stories or some stories on how some people got started. Thanks.

Bought my first house, a duplex, when I was 21 and it was the best move I've ever made. I lived upstairs and rented the first floor which covered about 66% of the mortgage/taxes/insurance. That allowed me to save money which I invested in a foreclosure. I flipped that house and made $15,000 in 2 months. I used that money to buy my primary residence and rented out the 2nd flr unit of the duplex, giving me about $200 positive cash flow a month. I sold the duplex eventually making a good chunk of change and invested some of that money in a shore house and two center city philly condos with my brother and brother-in-law. We've owned them about 3 yrs. I'm closing on house #5 on the 18th. It's a 3 unit building which I'm putting 10% down and should net me $100 a month.

As you can see, I'm a big fan of real estate. Of course, there is some risk though. The Philly condos we bought at pre-construction price and planned on selling them when the building was completed. Unfortunately, the market took a turn for the worse, so we're stuck renting them at a loss.

A couple things to remember.
The better the credit you have, the more leverage you have.
location is very important
Use as little of your own money as possible. The bricks appreciate, not your money
You make your money when you buy it, not sell it
Find a good accountant who knows the real estate tax laws.

TwiloMike
01-13-2008, 07:56 PM
Bought my first house, a duplex, when I was 21 and it was the best move I've ever made. I lived upstairs and rented the first floor which covered about 66% of the mortgage/taxes/insurance. That allowed me to save money which I invested in a foreclosure. I flipped that house and made $15,000 in 2 months. I used that money to buy my primary residence and rented out the 2nd flr unit of the duplex, giving me about $200 positive cash flow a month. I sold the duplex eventually making a good chunk of change and invested some of that money in a shore house and two center city philly condos with my brother and brother-in-law. We've owned them about 3 yrs. I'm closing on house #5 on the 18th. It's a 3 unit building which I'm putting 10% down and should net me $100 a month.

As you can see, I'm a big fan of real estate. Of course, there is some risk though. The Philly condos we bought at pre-construction price and planned on selling them when the building was completed. Unfortunately, the market took a turn for the worse, so we're stuck renting them at a loss.

A couple things to remember.
The better the credit you have, the more leverage you have.
location is very important
Use as little of your own money as possible. The bricks appreciate, not your money
You make your money when you buy it, not sell it
Find a good accountant who knows the real estate tax laws.

Very nicely said. I agree bigtime.

Darcy Tucker
01-13-2008, 11:29 PM
Use as little of your own money as possible. The bricks appreciate, not your money
You make your money when you buy it, not sell it

Can you please explain these in more depth to me as I'm very interested and clueless.

Chickenlegs
01-14-2008, 03:22 AM
Can you please explain these in more depth to me as I'm very interested and clueless.

Put as little money down on the house as possible when you buy it. Money you invest in a house is dead money. When you sell a house, you get your down payment back plus the appreciation the house made for you. You don't get your down payment plus interest on it. So essentially the money you invested in the house is sitting there for years not making you any money.

I should state this theory will only work if you are responsible with your money. If you're a spendaholic, put down as much as you can afford, otherwise you'll spend that money on something stupid.

You make your money when you buy basically means don't over pay for a house. If you overpay $15,000, that's $15,000 less in your pocket when you sell.

Darcy Tucker
01-14-2008, 11:59 AM
Thanks. Cleared it up for me.

jdeity
01-14-2008, 01:11 PM
I was just curious if anyone on this forum was into REI. Just looking to hear some stories, maybe some good book referrals, good websites, anything like that. Thanks.

story -
saved cash last year, bought cheap house that needed a ton of tlc (moved to a cheaper state, FL, so my cash would be good for a blue collar house). Learned a ton about a million types of things regarding renovations, spent about double what I expected on materials (doing all work solo), and am close to finishing right now (many, many months later than expected). Everyone said renovations take longer / cost more than you'd expect when you start, seemed to be the case for me! Cannot say if it's a success or not until it's appraised, soon I hope!! The aim was for ~50k on this, but it's looking more like ~40ish right now.

About websites, I have never found one that I liked. I found a million horrible, horrible sites filled with people who don't invest and have dumb ideas though! Books are pretty much the same, only I have found some decent stuff in books, the only stuff I'd recommend though would be real estate textbooks ("real estate principles, a value approach" is my favorite general book - hell based on your age/location/fact you're applying for a license, you may already be holding this book :) ), and stuff by john reed I find really good (for info only, guy's very preachy which is annoying, but good info).

jdeity
01-14-2008, 01:16 PM
A couple things to remember.
The better the credit you have, the more leverage you have.
location is very important
Use as little of your own money as possible. The bricks appreciate, not your money
You make your money when you buy it, not sell it
Find a good accountant who knows the real estate tax laws.

Firstly - congrats on your successes!!

A couple of things I wanted to add, or at least differ a bit in opinion on (would like your thoughts), are:
- location is important, definitely, but value is far more important. A great deal on a poor location is still a great deal, an okay deal on a great location is still just an okay deal. Location, however, seems to be more important, from what I've seen/heard, on longer holds and rentals - not *that* paramount for quick buy/sell.

- regarding using as little of your own cash as possible, that doesn't always work in your favor. That's a blanket statement I see a lot, and unfortunately it does not hold true for everyone, anyone's specific cash reserves and their credit score/interest rates available are big factors and may make putting down more cash a better idea.

jdeity
01-14-2008, 01:17 PM
<<sorry I didn't catch your clarification on the 'as little $$ as possible", but still I'd say that even if you're not a compulsive spender, there are times where pushing to get as little down as possible doesn't work in your favor>>

Chickenlegs
01-14-2008, 01:50 PM
Firstly - congrats on your successes!!

A couple of things I wanted to add, or at least differ a bit in opinion on (would like your thoughts), are:
- location is important, definitely, but value is far more important. A great deal on a poor location is still a great deal, an okay deal on a great location is still just an okay deal. Location, however, seems to be more important, from what I've seen/heard, on longer holds and rentals - not *that* paramount for quick buy/sell.

- regarding using as little of your own cash as possible, that doesn't always work in your favor. That's a blanket statement I see a lot, and unfortunately it does not hold true for everyone, anyone's specific cash reserves and their credit score/interest rates available are big factors and may make putting down more cash a better idea.

I agree. Long term you look for location. If you're flipping it's not as important, but still important.

I still think as little money down is the best option. Instead of putting 20% down, why not put 10% down and put the other 10% in another investment which can make you money. Like I said before, it's dead money when you put it into a house.

jdeity
01-14-2008, 01:59 PM
It's definitely dead money sitting around, but here's what I meant. Say you're looking at a purchase, you may find that, by going so low on % down, your interest rate gets too high, to the point where you're better off keeping the interest down by putting down a higher payment up front.

Not always relevant, for instance we wouldn't have saved much (anything?) by putting down a bit more - we would've had to go to ~20% down to get a much lower interest rate iirc. But with good credit and a sizable cash reserve in the bank, we got a solid rate with 0% down, and it wouldn't have made sense to put down 20% and keep the cash tied up there for a slightly lower rate, the difference just wasn't enough.

Chickenlegs
01-14-2008, 03:02 PM
It's definitely dead money sitting around, but here's what I meant. Say you're looking at a purchase, you may find that, by going so low on % down, your interest rate gets too high, to the point where you're better off keeping the interest down by putting down a higher payment up front.

Not always relevant, for instance we wouldn't have saved much (anything?) by putting down a bit more - we would've had to go to ~20% down to get a much lower interest rate iirc. But with good credit and a sizable cash reserve in the bank, we got a solid rate with 0% down, and it wouldn't have made sense to put down 20% and keep the cash tied up there for a slightly lower rate, the difference just wasn't enough.

That's a valid point, but with good credit the rate wouldn't be that high. For those with poor credit, your scenario may pertain to them.

Chickenlegs
01-14-2008, 03:12 PM
story -
saved cash last year, bought cheap house that needed a ton of tlc (moved to a cheaper state, FL, so my cash would be good for a blue collar house). Learned a ton about a million types of things regarding renovations, spent about double what I expected on materials (doing all work solo), and am close to finishing right now (many, many months later than expected). Everyone said renovations take longer / cost more than you'd expect when you start, seemed to be the case for me! Cannot say if it's a success or not until it's appraised, soon I hope!! The aim was for ~50k on this, but it's looking more like ~40ish right now.

About websites, I have never found one that I liked. I found a million horrible, horrible sites filled with people who don't invest and have dumb ideas though! Books are pretty much the same, only I have found some decent stuff in books, the only stuff I'd recommend though would be real estate textbooks ("real estate principles, a value approach" is my favorite general book - hell based on your age/location/fact you're applying for a license, you may already be holding this book :) ), and stuff by john reed I find really good (for info only, guy's very preachy which is annoying, but good info).

Did you ever consider hiring help? Time is of the essence on a flip. I like to think if you're paying help, you're paying for value. There's noway one person can get everything done in a timely manner on a flip. I'm sure I don't have to tell you how those mortgage payments can eat away at your profit.:eek:

jdeity
01-14-2008, 05:18 PM
Did you ever consider hiring help? Time is of the essence on a flip. I like to think if you're paying help, you're paying for value. There's noway one person can get everything done in a timely manner on a flip. I'm sure I don't have to tell you how those mortgage payments can eat away at your profit.:eek:

I wouldn't want to consider getting help anymore, but I actually had help going into it. <Really> Long story short - my brother dropped out of high school and has no marketable skills, job, motivation, etc. I offered him a chance at being with me in investing and said he had a 1 year 'trial period', if he worked to my liking he'd be my partner. He not only didn't make the whole year actually working (actually it hasn't been a whole year quite yet), but even the work he did wouldn't have been to my liking (based on effort more than actual quality/results). So anyways I am doing it by myself becaus of that, but knew it was a possibility beforehand, even though I did expect he'd make the year.

Either way though, this wasn't a 'flip' per se. I mean, we're (fiance and I) not just trying to sell right away, we're aiming to keep for 24 months so we can sell tax free then (thanks irs121 :thumbup:), for now we're keeping it our primary residence. We're just planning to siphon out the equity once I finish the renos, depending on what the appraisal comes back at, and cash reserves/etc are, maybe <hopefully lol> there'll be enough cash around to grab something else to rent out while you can still get stuff for next to nothing.
(actually, on that note - how'd you get a triplex with a 10% down? I dunno why but I guess I was planning on ~30% down for my first property that will be an actual 'investment property' loan for a rental property.. I know it's easy to have real low downs on a primary, but thought you go way higher than 10% on an investment/rental unit. Wanna know how you went 10%, because a triplex <any property under 4 units total right?> is considered residential, if I can get into a residential rental for 10%, damn that'd be nice lol!)

jdeity
01-14-2008, 05:21 PM
That's a valid point, but with good credit the rate wouldn't be that high. For those with poor credit, your scenario may pertain to them.

That's how I've seen it so far. I know when we got ours we had close to 800 ficos, so it made sense to go 100%LTV on the mortgage, but I've heard of situations before where it was just pointless to do so.

TwiloMike
01-14-2008, 06:59 PM
Firstly - congrats on your successes!!

A couple of things I wanted to add, or at least differ a bit in opinion on (would like your thoughts), are:
- location is important, definitely, but value is far more important. A great deal on a poor location is still a great deal, an okay deal on a great location is still just an okay deal. Location, however, seems to be more important, from what I've seen/heard, on longer holds and rentals - not *that* paramount for quick buy/sell.

- regarding using as little of your own cash as possible, that doesn't always work in your favor. That's a blanket statement I see a lot, and unfortunately it does not hold true for everyone, anyone's specific cash reserves and their credit score/interest rates available are big factors and may make putting down more cash a better idea.
Regarding putting as little as you can into a house: if your intent is to hold it a short while (under two years) and you intent to fix it up and flip it or to simply flip it ASAP, there are mortgage tools that will act in your favor even if the interest rate is a bit higher. If you finance it as an investment property then your cash reserves requirements will be high, but if you finance it as a primary residence (assuming you don't already own a house or the house you own can legitimately become your "second home"), you'll have a fairly easy time obtaining a loan.

Chickenlegs
01-14-2008, 08:07 PM
I wouldn't want to consider getting help anymore, but I actually had help going into it. <Really> Long story short - my brother dropped out of high school and has no marketable skills, job, motivation, etc. I offered him a chance at being with me in investing and said he had a 1 year 'trial period', if he worked to my liking he'd be my partner. He not only didn't make the whole year actually working (actually it hasn't been a whole year quite yet), but even the work he did wouldn't have been to my liking (based on effort more than actual quality/results). So anyways I am doing it by myself becaus of that, but knew it was a possibility beforehand, even though I did expect he'd make the year.

Either way though, this wasn't a 'flip' per se. I mean, we're (fiance and I) not just trying to sell right away, we're aiming to keep for 24 months so we can sell tax free then (thanks irs121 :thumbup:), for now we're keeping it our primary residence. We're just planning to siphon out the equity once I finish the renos, depending on what the appraisal comes back at, and cash reserves/etc are, maybe <hopefully lol> there'll be enough cash around to grab something else to rent out while you can still get stuff for next to nothing.
(actually, on that note - how'd you get a triplex with a 10% down? I dunno why but I guess I was planning on ~30% down for my first property that will be an actual 'investment property' loan for a rental property.. I know it's easy to have real low downs on a primary, but thought you go way higher than 10% on an investment/rental unit. Wanna know how you went 10%, because a triplex <any property under 4 units total right?> is considered residential, if I can get into a residential rental for 10%, damn that'd be nice lol!)

Stellar credit baby, that's how. Lenders usually like to see 20% down on investment properties but with good credit and some assets I was able to get away with 10%. My broker said it's tougher now with the changing mortgage standards, but they're out there. I haven't locked in my rate yet but investment properties are usually a slightly higher rate. I worked my numbers on 7.5% and still have $100 positive cash flow, so it's a no brainer.


Smart move holding it for 2 yrs. That was my original plan on my primary residence. I bought it about 3 yrs ago and was going to take my time fixing it up and sell after 2 yrs. Problem is, I love the neighborhood and love what i did to it, so I'm staying.:) Eventually I'll have to refinance. Got a 7 yr interest only loan.

TwiloMike
01-14-2008, 09:11 PM
Stellar credit baby, that's how. Lenders usually like to see 20% down on investment properties but with good credit and some assets I was able to get away with 10%. My broker said it's tougher now with the changing mortgage standards, but they're out there. I haven't locked in my rate yet but investment properties are usually a slightly higher rate. I worked my numbers on 7.5% and still have $100 positive cash flow, so it's a no brainer.
Yup, generally if the loan makes sense on paper it can be funded. Exceptions can be asked for and granted, and compensating factors are a huge deal. Is your investment property a conforming loan amount?

Chickenlegs
01-15-2008, 03:30 AM
Yup, generally if the loan makes sense on paper it can be funded. Exceptions can be asked for and granted, and compensating factors are a huge deal. Is your investment property a conforming loan amount?

Yes. I hear the rates for jumbo loans are quite a bit higher. You would probably know more about it than me. Is that correct?

I see you live in Jersey. I'm in south Jersey and on Sunday mornings, 10:00 am, there's a real estate show on 950 am hosted by Jay Lamont. He's been in the business forever and is a fountain of knowledge.

TwiloMike
01-15-2008, 07:51 AM
Yes. I hear the rates for jumbo loans are quite a bit higher. You would probably know more about it than me. Is that correct?
Yes. Thanks to the credit crunch there isn't as much of a secondary market for jumbo loans so they are harder to sell off once originated. Underwriting standards are significantly more strict on jumbo loans but they ARE doable if they are full doc, higher down payment, etc. I have corresponding bank relationships, for example, where I can take clients who willing to take a 15 year jumbo loan then prices can actually be as good on jumbo loans as on conforming. (last week, for example, a jumbo loan could have been had for 5.75%. now it's more likely to be 6%... still fantastic price on jumbo)


I see you live in Jersey. I'm in south Jersey and on Sunday mornings, 10:00 am, there's a real estate show on 950 am hosted by Jay Lamont. He's been in the business forever and is a fountain of knowledge.
Oh wow, I did not know this. I'm very glad I chimed in! I will be sure to catch this show. Thank you very much!