Buying 1st house/distressed properties - Posted by Patrick MD

Posted by Ronald * Starr(in No CA) on August 29, 2003 at 24:02:43:


I’m going to try to discourage you. First, when buying your own home it is not like trying to buy a bargain property for rental or quick profit resale. You probably have more requirements in a personal home than in investment properties. You want a certain quality of neighborhood. You want certain amenties, such as a good layout. And so on. My view is that investing in bargain properties is fine, because one can always find some renters for any type of neighborhood. Or some buyers. So, when we buy bargains, we don’t worry too much about the things that you will want to consider in your own home. That is what makes bargain buying work, in my opinion, as you just never know where you are going to get your properties.

So, in summary, it is more difficult to get both a bargain buy and a property with the desired amenities.

Also, in very high cost areas, such as the Washington DC area, it may be financcially better to rent than to own. This is especially so for somebody like yourself, that does not have to worry about quality of schools, safety for a spouse and young children and so on. If you can overcome the problems of renting, I recommend it in high priced areas. The problems: not being able to redecorate as you wish–“sorry sir, your rental agreement precludes painting the bathroom black with pick and purple pokkadots.” Not having the pets you want: “Sorry sir, the bison must go.” The uncertainty of being asked to move out suddenly: “Gee, sir, when you rented from our late folks, that was fine. But now, we want to sell our inheritance, your house.”

Then, use the money you have and can borrow to buy rental properties in lower-cost areas where the cash flow will be good. Tha appreciation should be the same over the long run with low-end rental propertis as you would have had on your own purchased home in a better neighborhood.

Besides renting for an appreciable time and owning rental properties, there is also the possibility of investing in distressed properties for quick profit turnover. Do a few deals like this, even if they are in neighborhoods in which you would not live, and you can have even more money, perhaps allowing you buy where you want to buy.

Good InvestingRon Starr****

Buying 1st house/distressed properties - Posted by Patrick MD

Posted by Patrick MD on August 28, 2003 at 19:56:01:

A mortgage broker gave me the good news that my credit score, income,
and savings will qualify me for a mortgage loan to buy my first home.
The only bad thing about the news is that the amount I would qualify for
would only be about $120,000. That will only buy a condo or possibly a
small townhouse in the northern part of Montgomery County, MD where
I currently live. Ideally, I would like a modest house in the southern part
of the county closer to DC, or in North West DC. But prices there are
higher. Would it be feasible to look for a distressed property with a
motivated seller in those areas?

Although I’m a newbie, I’m wondering if I could find such a property at
below market value that would be large enough to rent a portion of to a
tenant and live in the other portion of the house myself. I am single so I
do not need a lot of space and I could rent out the larger portion. I have
several friends and a brother who are current or former home
improvement contractors, so I could realistically make substantial
repairs to a distressed property. What would make the most sense in my
situation? I’m willing to consider a Lease Option or any other creative
ideas. I just want to find a way to afford something close to or in DC.
Any advice is welcome since I am still in the education phase of my
future RE investing career.

Re: Buying 1st house/distressed properties - Posted by TomC (MD)

Posted by TomC (MD) on August 29, 2003 at 11:20:14:

Hi Patrick,
Since you have been qualified for the $120K, you can use it as cash to buy a house at a severe discount. Remember, you can get a good deal by either getting a great price or great terms. Since you will be paying all cash to the owner, if they are properly motivated they will accept the discount. If they don’t, then they are not motivated!!

So go pick out the neighborhoods that you would be willing to live in, where the houses are selling for (and will appriase for) $200K or so. Put up some “I Buy Houses” bandit signs at the entrances of these targeted neighborhoods and wait for the calls. Be patient and keep putting up the signs. Sooner or later, the opportunity will find you.

Maybe you will find a motivated seller with a property worth $200K and they only owe $120K or less and is just looking to get out. Did I stress that they need to be motivated?

BTW - I’m just down the street from you in Silver Spring. :slight_smile:

TomC (And my e-mail server at home is down due to power outtages…should be back tomorrow afternoon if you want to reply via e-mail)

Oh, and make sure the seller is motivated. If they don’t discount, they obviously are not motivated!