How are you guys doing this? - Posted by R.C

Posted by Mary on November 05, 2003 at 22:55:31:

this was extremely helpful. This Seattle based investor thanks you for taking the time. One further question on your comment about investing in other states… I’m heading this direction and am looking for suggestions about selection criteria for chosing investment areas (and even suggestions on areas that are currently promising). I swear I’ve seen some postings on the topic but I’m not finding anything in my searches. Is there anything you remember that you could point me to?

How are you guys doing this? - Posted by R.C

Posted by R.C on October 18, 2003 at 08:26:03:

I have been reading the postings here about investment properties and it all sounds great. However the math just does not seem right when trying to purchase several homes a month and re-selling them for profit. How do you guys do this?

Wouldn’t each new house count as additional debt(as income to expense ratio). How do the banks look at each new investment debt? Also the real stumper- if purchasing investment properties with 90%-100% LTV , how can one rent such properties until sold up to 6-12 months down the line(if seasoning permits)when obviously the loan balance is high and probably interest too and it would then become negative cash flow? How then would one repeat the same process several times a month? I’m lost here. Can anyone tell me how you guys do this?

I belive I am in a strong personal financial position on the norm in these posts.

My objective;
buy houses, sell 6-12 months(or sooner)repeat process.I would like to do several houses a month.

I gross 25k-45k month
Income to debt ratio is about 40-45%(If you count child support?),Mid score 711. I am on my third house(primary residences) in 3-4 years. My current house is worth about 625-650k. I owe 489K on it.

Was thinking of HELOC or alternate method of financing for investment properties.(been reading about WLC)

I would really like to get into buying and selling investment properties. I have done some homework and not really interested in 4 plexes in my area just SFR’s. My primary objective would be to turn the houses for profit not become primarily a landlord. However I understand that they may have to be rented until sold.

I live in a very booming community in northern California. There are several new developments where the builder sells the lots before they build the houses. They will not build on these lots until there is a purchaser. You give them deposit and that will lock you in on selling price of home. These builders typically increase prices on these homes 10-20-30k several times a year until,there community or track of homes are built. My experience in these type of communities is that they can dramatically appreciate in a years time up to 50-100k. I know this community very well because I live in it and have done real well in 3-4 years with my own primary residences alone.

I want to buy houses on these lots before the builder builds them or the ones that they just built, and as the neighborhood grows around your investment so does your appreciation. Nobody is really doing this(or can’t). The downfall is you have to work directly with the builders or your agent and the builders. They don’t really bargain. The prices are practically set in stone. I guess It really does not matter as long as I can get the financing and purchase several of these homes a month.

I’m not sure if this alternative trategy will work with the builder as well, but my thoughts also were to try to put deposit down to lock price in on home and find a buyer down the line.

Question. How would you guys accomplish my investment goals based on my financial position and scenario?

Thanks to all your responses to my previous post! I am learning quite a bit in these posts.

Re: How are you guys doing this? - Posted by Ed Garcia

Posted by Ed Garcia on October 18, 2003 at 13:35:28:


When you see on the board that we as investors talk about purchasing at 90 or 100% that?s of purchase price, not FMV (Full Market Value). We know that most lenders will go appraised value or purchase price, which is ever lower.

Think about it, why would we as investors purchase at 90 or 100% of value. We wouldn?t make any money. For example, if an investor purchased a house valued at $100,000 for $68,000, they would finance 90% of the $68,000. If its any other way then I have just given you, then you?re right, the investor isn?t much of an investor.

I realize that you invest in Northern California and the prices are through the roof. However I would never invest where I can?t buy below market, and the property won?t cash flow. If you?re going to invest in an area, you have to purchase houses at the lower spectrum of the market. Otherwise known as Affordable living. If you don?t your properties won?t cashflow in the event there is a market change and you get stuck with it as a renter.

Here?s a little article I wrote a while back with your market in mind. Also I want you to know that I from Southern California and our market is just as crazy as yours.


The one thing that working with people on the Internet has taught me is the differences in the market across the country. For me it is also an eye opener. At first I felt just like any other investors in a HOT MARKET because, I was PRODUCT of my ENVIRONMENT.

It was difficult for me to find deals and because of that, after a while you start to fade and give up, because if you?re having trouble finding a deal, and keep hearing that there are no deals out there, after a while you find yourself buying into it.

The things you don?t do in a HOT MARKET, is stop making money on your buy or give up cash flow. I can?t tell you how many people are satisfied just doing a deal to do a deal at break even, and assume that they?re going to make their money with future appreciation. Pass, that?s not the way to do it.

First of all let me say that I own property outside of my own state and am not afraid of investing in another state. For me it would have to be a respectable size deal, not a house, because of management intensiveness. The deal has to make me enough money that it will justify paying for my occasional visit to oversee it in addition to a good return.

I?ve got to tell you that I got an eye opener at my very first workshop. That?s right, old Garcia learn from his own workshop. On Saturday nights we have an open floor discussion, and each investor can present the deal that they?re doing or any deal they?re having a problem with. That was when I first realized that every investor sees a deal differently. Different size deals, different market, different ways that they would structure their deals, different thinking. For example if you have an investor that was taught the business by doing lease/options. Every time he would see a deal, he would see it through the eyes of a guy who does lease/options and he would try to structure it to do a lease/option. I immediately saw the light and how each investor was trapped by there own limited knowledge or technique.

Now not to make an investor who does lease/options look dumb. If you do a lot of lease/options, you become good at it, even masterful and now your confidence is where you project and the sellers in turn will have confidence to do a deal with you. So this is just one example of what I?m talking about.

We would discuss different ways the same deal could be done and then someone from Missouri, who is drinking a beer, would raise his hand and give you a way to do the deal that was so simple, that you realized that you missed the obvious.

We obviously would talk about the different markets and come to realize that if you were going to be successful in this business and RE investing is a business, you would have to be able to survive in the different markets.

Now for the part of the post you really want me to address, HOT MARKET. How do you handle a hot market? How do you do deals and make money in a HOT MARKET.

I haven?t had a salaried job since 1972. So you can see that I?m a serious investor and don?t play. When I was learning this business the guys that knew it would never give you any information in a million years, in fear that the next time that they see you, you?ll be bidding against them. We didn?t have Creonline and the various courses and information that is being provided. It was us and the street.

I must tell you that a HOT MARKET is going to be particularly hard on a part time investor. The reason is obvious, because they work and have a family to spend time with; they?re not in a position to spend quality time in the street knowing everything that is going on in their market. They haven?t the time to network, canvas, build a reputation as an investor, or spend the time needed to search or find deals. They?ll usually dependent on a Realtor and those of us that are full time we know what we think about dealing with Realtors.

PERCEPTION or ATTITUDE of a real-estate investor is the key to their success. Not knowledge, Not Market Place. If you have the right attitude you?ll gain the knowledge, and you?ll learn how to survive the various markets.

Lets talk about PERCEPTION and ATTITUDE:

Two-shoe salesman from competing companies in the early 1900’s were told they were going to the continent of Africa to open up a new market for their respective companies. They were to go with a few samples, and while there drumming up business, a steamer would be dispatched with an entire inventory to deliver on the orders.

The first salesman got off the plane, looked around and immediately telegraphed this company.

“Turn back the shipment! There is NO market here. NOBODY wears shoes!”

The second salesman got off the plane and looked around and immediately telegraphed his office.
"Double the shipment immediately! TONS of potential business here! NOBODY WEARS SHOES!!!

Lets talk about PERCEPTION and Donald Trump. Most people see things for what they are. Donald Trump sees thing for what they could be. When you?re in a hot market you need to take the Donald Trump perception or attitude and CHANGE THE RULES.

Don?t buy the way the market dictates, but create a market with in a market.

Now for those of you who will tell me that you can do FLIPS or LEASE/OPTIONS in any market, I?m aware of that but the profits are minimal and you have to do a lot of them and in doing so you now have a job.

Look for other properties that you can make money with that others are passing buy or don?t have the vision to see the up-side potential of.


Buy a lot and build a house.

Buy land and subdivide it into lots.

Buy a house that is zoned for units and build units.

Buy apartments and convert them into condos.

Find small homes such as a 2-bedroom house in a high dollar area, that could be renovated or a tear down to rebuild to accommodate the comparable larger housing.

Look for opportunities such as apartments with below market rents that will give the apartments upside, increasing the income and in turn increasing the value because when purchasing commercial property you?re buying an income stream.

I could go on with this but I?m sure you?re getting my drift. You need to open your eyes and stop accepting the fact that there are no deals. Don?t listen to realtors, as I said before were all product of our environment and realtors make their living in retail sales, so to find a deal through them will be difficult. When they see how you want to buy, they?ll tell you that you?re unrealistic.

Well this post is 3 pages long and if it helps just one person reading it, it?s done its job.

Thank you,

Ed Garcia