Posted by Natalie-VA on July 07, 2008 at 06:41:40:
60k doesn’t leave any room for you to wholesale and profit, so you’d have to find funding to close yourself. Sounds like you need to get to your local REI meetings and see who’s doing hard money loans. Another alternative would be to find someone with experience (and money) to partner with.
–Natalie
Other investment avenues - Posted by Brian_Wa
Posted by Brian_Wa on July 02, 2008 at 09:20:19:
I’ve been working hard the past 4.5 years on real estate investment. I’ve made a decent amount of money and currently living a comfortable life. However, I read articles about hedge fund managers and other people in the financial industry where they make hundred of millions (if not billions) a year.
As I do real estate more and more, I see this as being just another game but no matter how good we play, the chance of any of us making over a million a year is pretty rare. This is due to the nature of the business. To make 1 mil, you’d have to flip over 50 deals that net you 20k each. That’s pretty hard to do. Even if you find the deals, you will be constrained by time and resources.
Have any of you found great successes in the financial industry or other industries where the business can be more streamlined?
Brian
Re: Other investment avenues - Posted by Bob Smith
Posted by Bob Smith on July 13, 2008 at 13:03:06:
How about buying a undervalued commercial property for $3 million and
turn it around so it’s worth $4 million when you’re done? Probably a lot
easier than flipping 50 houses.
Re: Other investment avenues - Posted by Maurice
Posted by Maurice on July 10, 2008 at 12:22:34:
Boy wouldn’t that be great? Too much work though.
Once you get to the point where you are making good money you should be looking at the longer term buy and hold type investments.
Right now with real estate crashing around the country, there should be some tremendous buys.
Swoop in with your cash, buy some good rental properties with 10% down and just keep them.
When real estate recovers what happens? Suppose your properties go up 10% a year. Does that mean you make 10%? NO! You make 100% on your money because you only put 10% down.
Appreciation is only one profit center, there is also rental income, tax shelter, and capital paydown on the mortgage.
This is where the real fortunes are made. Quick flips are nice if all you want is to make a living but the real millionaires take a longer view.
Re: Other investment avenues - Posted by glen
Posted by glen on July 04, 2008 at 06:17:24:
I have a list, all be it not huge, but about 50 people who buy wholesale properties. I cannot seem to get responses to the deals I send to them. Is it more advantageous to join the real estate investor groups so you are kind of in the “circle.”
Example, I have a deal that was appraised (after repair) at $170K, repairs to make totally new is $39k.
purchase price is $79K. Yes it does need siding and total finishing inside but the numbers work.
Any suggestions?
Thanks,
glen
When I worked for the - Posted by Rich-CA
Posted by Rich-CA on July 02, 2008 at 09:57:10:
phone company we used to have a saying: we lose 2 cents on every call but we make up for it in volume. You have hit the nail on the head that when the margins are small, its very hard to achieve a 6 figure income, let alone more. There are two choices. One is to figure out how to increase the volume of “winners” until you achieve your goal. The other is to spend more time sifting for the “grand slam” deals. The problem with both is time and for the “grand slam” deals, those quickly evaporate when other investors get wind of the opportunity.
The technique I have heard of is called “pyramiding” and is a pattern most companies use when they expand. The first step would be to offload those functions (book keeping, paperwork, filing, etc.) that support what you do but to not generate more income/leads. You can either hire a service or an employee. The next thing would be an assistant, a person who knows what to do to gather the due diligence on deals so you are left with review time and not assembly time. You do have to allocate some of your time to supervise these people, but in order to move to the next level you have to go from the solo operation to a company with employees.
When I worked in the Information Systems at Wells Fargo many years ago, a co-worker got fired for this: he inserted into his program a sweep for the rounding fractions in calculations to put the discarded portion into his own account. The bank had a standard of 1/100 of a penny as the point at which they would round off (they really truncated it). The program sifted DDA (checking) accounts for charges. He was caught because the program was dumping over $100k per month into his account (this was back in 1984, so think 1984 dollars). Banks make their money on the spread, and if the volume is high enough, there is a lot of money to be made.
Companies whose owners start taking on employees shift from direct income to taking the spread between what they earn per worker and what each worker is paid. This is a completely different “business” than investing and I have seen numerous businesses fail because the owner, who was expert in his/her field, was a terrible selector of employees.
At about 100 employees, further activity in the day to day operations by the owner starts to strangle the company.
Anyway, just some thoughts. I would start by getting rid of filing and book keeping functions. The oversight time will be a LOT less than the time to do it yourself and you will be able to handle more deals.
Re: Other investment avenues - Posted by Natalie-VA
Posted by Natalie-VA on July 06, 2008 at 07:57:21:
Glen,
I saw your earlier posts in reference to not being able to find good investor/buyers. Maybe you could start a new thread and give us examples of some of the deals. Unfortunately, you will receive some rude remarks from some people, but some others might be able to provide some useful feedback.
In regard to this deal for a 170k house that needs 39k in repairs being available for 79k, I wouldn’t take it. 39k is a huge amount for a rehab, and I would want my profit to be at least 40-50k to compensate for all of that work. My buy price would probably be around 60k for that one.
–Natalie
Re: Other investment avenues - Posted by Brian_Wa
Posted by Brian_Wa on July 04, 2008 at 08:44:23:
Most of those 50 people are probably out of money or out of the business. Real estate investor groups won’t help that much, in my experience.
What you should do is buy the property yourself and then list it via the MLS. It’ll cost you some money but if what you claim about the numbers are true, you shouldn’t have any problem selling.
Another thing I’d like to ask is you said that after repair value is 170k. What I’d like to know is what about the as-is value? Essentially what I do is find comps within a 1-mile radius of houses that are in similar if not worse condition than the subject property. See how much those went for and also how long it took before those houses got sold. I also check for similar houses that are available on the market. Once I have these info, I’d go and negotiate to a point where even when I sell it at 10% to 20% below what the comps indicate, I still can make a chunk of money.
In this market, you want to expose your house to as many potential buyers as you can. So be sure to compensate selling agents well. For instance, if you’re selling a house 10% cheaper than similarly available houses within the area and yet offer selling agents 4% commission, where do you think they’ll take their clients to first?
Do a lot of marketing my friend. You need to get a lot of leads in order to be selective. The fewer the leads you have, the more you tend to hang on to them. Even the ones that is not worth anything.
Brian
Re: When I worked for the - Posted by Tgauchsin
Posted by Tgauchsin on July 04, 2008 at 08:21:51:
** snip **
he inserted into his program a sweep for the rounding fractions in calculations to put the discarded portion into his own account.
** /snip **
Sounds like a scene from Office Space.
TG
Re: When I worked for the - Posted by James (Ala.)
Posted by James (Ala.) on July 02, 2008 at 19:34:56:
Well put, Rich-CA.
Law firms and accounting firms work on the same principle. Partners oversee several associates who do the heavy work. Partners make their money not only on their own work but on the “spread” between what the associate bills and what the associate costs the firm. The partner is the point of the pyramid.
James (Ala.)
Re: Other investment avenues - Posted by glen
Posted by glen on July 06, 2008 at 08:49:41:
Natalie,
I think I can get it at 60K Just got an email from seller, he needs out badly. If I can get the deal can you or somone tell me how to either quickly flip or find funding to do it?
Thanks, Glen
Art imitates life - Posted by Rich-CA
Posted by Rich-CA on July 04, 2008 at 08:31:55:
by copying those who are original thinkers. The unoriginal thinkers fall into the life imitates art category. If you have ever read Dilbert, the author was a co-worker at the phone company and many of his stories are actual events that happened while we were there. On one project my team attached a strip outside my cube because it was something I was notorious for…