If you could start over... - Posted by scott

Real Estate Investing Retail
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Posted by Ronald * Starr(in No CA) on July 09, 2003 at 09:27:36:

Marcos------------

You state: “Where you live is exactly where you invest. YOu may have to alter HOW you invest.”

In my “beginners success” post on this main board I make the point that success comes from the combination of You, the Environment in which you invest, and the Strategy you employ to extract profit from that environment. The “YES for success” formula. As an investor you can either change your strategy, as you suggest, or you can move your strategy to a different environment where it works better. I choose the latter. I like the tax sales investment strategy, but it does not work well here in CA because of so many people, so much money, and so few positive cash flow properties to absorb the money than people. So, I took it to a different state.

Of course, one could change both. That may be a little drastic. However, in some environments, few investment approaches work at all, such as here in Coastal CA. And those that do usually require extreme effort to make them operate. So, to go to another environment and then use what works there makes some sense to me.

Good Investing*************Ron Starr***********

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If you could start over… - Posted by scott

Posted by scott on July 08, 2003 at 20:16:02:

What cities in the US have the best market to start in?

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Re: If you could start over… - Posted by Len

Posted by Len on July 09, 2003 at 10:47:06:

Scott,

you have received good input here. I’ll only add one thing:

The most important word in your question is “START.”

that doesn’t mean action for action’s sake. It does mean action to determine which strategies will work best for you and for your local market. And more ACTION to set a plan and implement those strategies.

Hope this helps!

Cheers,
Len

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Re: If you could start over… - Posted by Sean

Posted by Sean on July 09, 2003 at 09:49:56:

If I were a newbie, starting out and knew nothing more about real estate than the general concepts of wholesaling and/or retail flipping, I would personally without question choose a rust belt city such as Pittsburgh (where I just do happen to operate) or Cleveland or the like.

Why? Simple. The barriers to entry are almost nill. Acquisition cost is insanely low, the housing stock is older, and nearly every piece of land is already developed, so there really is little choice but to rehabilitate the existing housing stock for new buyers.
Large established real estate investing clubs usually existin in these types of cities, and the neccessary infrastructure and support teams are also in place. Hard Money Lenders, Investor Mortgage brokers, RE attorneys etc. Popultion is generally very stable, no huge increase or decrease over time. You can very easily get up and going with very minimal cash, and can pick the brains easily of people who have been doing it in the market for 20 or 30 years.

The downside of this is of course general property values are lower, so long term holding isn’t going to make you rich unless you hold a LOT of properties. Of course, the upside to that is, the markets generally don’t depreciate either… when times are good you get modest appreciation, when times are bad, you get zero in these types of cities… but rarely if ever do you see valuation loss unless the neighborhood goes downhill.

Now, don’t get me wrong, even with property values that after repair will be in the 60s-80s, I still recognize 20-30k profit per retail flip, so even though properties are low after repair values, acquisition costs are definately low enough to make good money.

On the flip side, you don’t really have many high end properties such as around Silicon Valley… where you could buy a 3/2 1200 sq ft ranch in need of 20k-30k of repair for 350k and sell it for 450k-500k. Certainly there is more money per deal there, but you need a lot more money to get started… I can’t imagine a 15% interest only loan on 350k holding cost would be ~4500-5k a month… but on the same token there is still more than enough spread to make very good money.

In the rust belt, a 350-500k home is a 5,000+ square foot custom built stone mansion, not uncommonly on a large chunk of land too… in fact you can’t find homes of the quality of a 350k-500k home in the rust belt in areas like Silicon Valley, at any price, they just don’t build homes with anything close to equivalent quality out there.

But on the plus side, you can make far more money per deal… down side is you have to have or have access to a lot more money to get started.

I know others may not agree, but that’s how I look at it. If you are more savvy, and know more techniques and are comfortable with sub2’s, sandwich l/o etc… most any market will do.

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Re: If you could start over… - Posted by Ed

Posted by Ed on July 09, 2003 at 08:33:35:

Your question isn’t clear. Are you asking for experienced advice about “how I would do it over?” or are you relocating and wondering which cities are best for REI?

As to which cities are best, that’s a loaded question. Which REI techniques? I’m the one who posted the “Jim, I disagree” response below. Simply put, some techniques work well in some markets, some don’t, and it will take research on your part to figure out which techniques work well in your city. By “techniques”, I’m referring to specific strategies discussed on this website, for example, buy and hold, wholesaling, rehabbing, lease-option, flipping, etc. And as Jim said, there is almost certainly some technique(s) that will work wherever you are - you just have to figure out which ones.

One suggestion is read this website a lot. Another suggestion is find a CREI group in your local area that knows yourt town well and pick their brains a lot. Another suggestion is whatever you choose to do, think carefully about a couple of things:

One is what are your particilar skills and abilities? Are you a handyman who could rehab? Are you in a business that requires you to negotiate, so you can negotiate well in REI? Does your JOB require you to relocate a lot? Are you an impatient Type A person or a patient Type B? All those things matter.

Another thing to think about is cash reserves as you go. Look into strategies in your area that would allow you to build cash reserves you go, such as wholesaling or rehabbing. You can learn a lot about those things on this website. I’ve been a long-time buy and hold person who’s just now getting interested in wholesaling - although any smart person here would tell you that’s probably a backwards way to do it. First think about building your cash reserves through something like wholesaling or rehabbing, then build your wealth.

A third thing to think about is what is your exit strategy,e.g. how are you going to get out of what you do. Believe it or not that is important. With a buy and hold strategy, your exit strategy may be as Ron Starr says, to just die - but with other short term strategies, you have to have an understanding of how you will get out of your endeavor.

My final advice would be start small, but start. Your goal with your first investments should be not so much to make money, as to learn how to make money, without getting bit. You will make mistakes - that’s guaranteed - but don’t be guilty of analysis paralysis. Start with small deals to build confidence - but start.

For anyone to give you a more useful answer, they would need more specifics from you. Good luck.

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Re: If you could start over… - Posted by Jim FL

Posted by Jim FL on July 08, 2003 at 22:31:13:

Scott,
Wherever I had lived the longest, and if that was your present location, I suggest investing where you are.
Why?
Because you already should have a leg up, by knowing the area.
You may not know the specifics as far as numbers for your local market, but you can figure that out with research.
What do you know?
You know where the good schools are? Right?
You know where shopping, hospitals, highways, malls, theaters, historic districts are located?
If you’ve been paying any attention over the last say 5-10 years, certainly you know where there are subdivisions and developments that were recently built?
Do you know where most people work? what is the major industry?

These are all things that can help with your business, and they do take time to get to know.
trust me, I’ve relocated, and I still learn something new about my market all the time…because I’ve only been here about three years now.

If your question was meant to help you locate somewhere, don’t look far, stick close to “Home” where YOU are comfortable.

This creative real estate investing, I’ll let you in on a secret…it works EVERYWHERE!

Good luck and enjoy the journey,
Jim FL

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I agree - Posted by Anne_ND

Posted by Anne_ND on July 09, 2003 at 10:17:29:

The midwest is a great place to start doing RE investing. If you get into smaller towns in the grain belt, there’s little competition (and less likely to be investor clubs), little appreciation, and some very solid houses to be bought very cheaply. Depending on the demographics of the town you choose (local employement, local colleges) a buy and hold strategy can work extremely well.

Anne

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I liked your post. - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 09, 2003 at 09:34:11:

Ed-----------

I liked your post. Of course, some of that may be because you are espousing the same sorts of things I say.

I feel, therefore, that you have given good advice.

Good Investing********Ron Starr*************

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Jim, I disagree - Posted by Ed

Posted by Ed on July 09, 2003 at 06:19:19:

Jim, you need to be a little more specific.

You need to define “it.” I will claim “It” does not work everywhere. I agree the person who posted can do some REI techniques in almost every market - and I think that is what you were trying to say. But for example, if that person lives in downtown San Francisco right now trying a buy and hold strategy may not work.

Due to the length of this post you can see this is a sore spot with me because I almost got into trouble a couple of times just trying “it” anywhere and I read so many people here blandly saying “it” works everwhere.

We just can’t tell newbies “it” works everywhere - I mentioned over on the Carleton Sheets forum recently that over many years I tried the Sheets techniques in several locations in different states and communities. And in some places that “it” simply did not work, at least in the current market. In a couple markets I was in, the Sheets techniques worked fine and I still have good long-term rentals from doing that.

To be more specific and make a short story long, Sheets Cash Flow Analysis for example, tells you what cash flow you can expect given certain things about your rentals and a given vacancy rate, say 5% (or whatever). But his course I believe says absolutely zip about your likelihood of having those market contditions or that vacancy rate in your neighborhood. Some neighborhoods and towns just don’t have those favorable market conditions. How you come across those good market conditions is a complicated bunch of factors - and requires a lot of work and study - but I’m sure you would agree, to prevent murphy’s law from biting you, you need to work on building some cash reserves.

To answer his question my way, if I had to start over, I would have started near my home like you suggested, but I would have learned and worked on strategies (from this website) that build up my cash reserves faster and earlier, such as wholesaling, and only then then tried to build some wealth. I would have arrived at the same place I am now, but I would have just slept a lot better at night.

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Re: If you could start over… - Posted by John (Rome)

Posted by John (Rome) on July 09, 2003 at 04:39:11:

Jim - where are you located? I seem to recall Lakeland correct?

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Great Post! - Posted by Eric C

Posted by Eric C on July 08, 2003 at 23:20:26:

Hi there Jim -

I was going to say pretty much the same thing as you did – you just did it so much better (and quicker).

Hopefully, those interested in this question will look closely at your answers and find the wisdom in them.

While it seems to be human nature to always believe that the “grass is always greener” somewhere else, it ain’t necessarily so.

Successful people are found everywhere. What Jim is suggesting is that you make use of what you already know.

Don’t ignore his advice.

Good post, Jim.

Take care,

Eric C

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B.S. - Posted by Jim

Posted by Jim on July 09, 2003 at 14:18:17:

Ed,
You said:
“Jim, you need to be a little more specific.”

Why?

No one asked about a particular method, and frankly, just because someone cannot make a method work in their area, does not mean it does not work at all.

Heck, look at good ol JTR the cre basher, this clown thinks most, if not all, creative investing methods don’t work, are illegal or immoral…because he is an admitted FAILURE in this business. Yup, that is who I’ll take advice from…NOT!

The person Scott here asked the board a GENERAL question, so I responded accordingly.

No offense, but no one was mentioning the sheets course in this thread, so where that came from in your post is beyond me. The “Cash flow analysis form”, what the? I conduct my own due diligence, and don’t have some “Course sheet” to fill in.

If you have failed at your investing attempts in certain areas, don’t think it does not work there because of that…that is merely the case for you.
Me personally, I’ve bought and sold properties creatively in SEVERAL markets, and assisted others with creative deals in just about EVERY major metro area accross the US. I even have someone I’ve helped who has purchased some rentals for holding, in california.
Was it easy?
Nope!
Nothing worth anything ever is, in my opinion.

You said “it” does not work where you are, and you are right!
I say “it” does work there, and I am right as well.

So, tell me again why I need to be more specific?
Boards like this and others are here for discussing the various aspects of the business, but they do not replace common sense…which is what the investor needs to have FIRST, no matter what methods or techniques they are working, and where.

So, “It” DOES work, and no further definition is needed from me, my advice here is free.
I hate it when people pick apart and complain about FREE stuff…sheesh!

Take care,
Jim FL

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RE: Ed I’m going to have to disagree with you… - Posted by Marcos

Posted by Marcos on July 09, 2003 at 08:46:05:

Are you open to the possibility that you didn’t yet know how to work “it” wherever you were? To say that real estate investing doesn’t work in certain areas is false. Because people do make it work. I know investors who buy and hold in San Francisco. They buy and hold and lose and cash out HUGE a few years down the road. Does it work for them? I would argue that it does.

Now on the flip side I do agree that real estate investing needs to be adjusted to the area that you invest in. The way I invest differs from the way every other person on this board invests. We may use similar techniques, but we each develop our own style and certain twists. But, I will say that I know people personally in almost every state in the union, including the communist state of California (wink), and “it” does work in ever state.

Some of the points you brought up about having a cash reserve are definitely valid. I totally agree on those. But, I think those were beyond the scope of the matter at hand.

I believe that Jim was right on. Where you live is exactly where you invest. YOu may have to alter HOW you invest. But, it really is the best place. I have friends who live in DEPRECIATING markets who are successful. They adjust to their market, they find what works. What works for me may not work for you or for Jim. But I bet if you look long and hard enough you will find something that works, and something that YOU can do. Everything comes with a price after all. And if it was easy, everyone would do it.

Just my thoughts on it,

Marcos

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Re: If you could start over… - Posted by Jim FL

Posted by Jim FL on July 09, 2003 at 13:34:58:

John,
No offense, but what the heck does that have to do with the discussion thread at hand?

I’d think asking personal information and quuestions would be best left to private e-mail, not an open forum.
I’d sure hate to have to shoot some online stalker who decided to try and pay me a visit.

I’m in Florida, and that is all the board needs to know, thanks for understanding,
Jim FL

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thanks(nt) - Posted by Jim FL

Posted by Jim FL on July 09, 2003 at 13:32:38:

no text

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Ed I’m going to have to disagree - Posted by Houserookie

Posted by Houserookie on July 09, 2003 at 12:05:33:

Marcus,

Both Jim and Ed are basically saying the same thing.
Jim feels real estate can work everywhere, with local knowledge on how to work “it.”

Ed says he just can’t tell newbies “it” works everywhere - because methods have differing result depending on the area.

The bottom line is real estate works, EVERYWHERE.
You might have to add spice to make it you but it works.

Cheeerz,