Is Anyone Getting Nervous? - Posted by Michael Murray

import · January 30, 2001, 11:38am

Posted by SusanL.–FL on February 01, 2001 at 10:21:19:

?gets RIPPED out from under you, then it?s ALL over but the shouting.

When I look back over these past four years, I can see that our ?cornerstone? wasn?t as solid as it should (and could) have been. Too busy having fun and spending money like drunken sailors --instead of paying attention to ?details?.

All it took was one or two unexpected ?things? to happen to finish us off. In our case it was unscrupulous partners AND losing professional jobs within weeks of each other. I may have gotten a few singed hairs along the way—but I?m STILL here folks! :-))

I ?hear? ya when you say ?being able to wait for the ?right? tenants? to come along can make ALL the difference in the world—cause when you get desperate and make the mistake of grabbing just ANYONE off the street (to fill a vacancy), it usually comes back to haunt you BIG time. You wind up paying out more $$ than you can ill afford to do.

In frustration, I came pretty darn close to just handing back my duplex to the bank three years ago. But fortunately, and I am happy to say, most (if not ALL) of my lending institutions were more than willing to work with me until I was able to crawl back out from under the $470K ?rubble?.

Now, the peace and tranquility of my J-O-B AND being able to camp out on CRE all day these past couple of years has helped to keep me ?grounded?—and yes, has helped to keep my sanity too.

I am happy to report that, after $struggling for 54 loooooong months, I am nearing the end. One of my buyers is in the process of refinancing the Note I am holding on his commercial property. Soooo–as the REPO man circles my block, I hope I can just hold on AWHILE longer.

(P.S. By sharing our stories on the board, hopefully we can prevent other CRE friends from making the same (fatal) mistakes.)

Have a good day, Tim and thanks for sharing your story. It was very interesting!

Susan

import · January 30, 2001, 11:38am

Is Anyone Getting Nervous? - Posted by Michael Murray

Posted by Michael Murray on January 30, 2001 at 12:38:02:

What are your thoughts on the recent mass lay-offs, interest
rates, slow housing starts, RE sales slumps, etc.?? Is there any reason to be concerned or will we simply need to be creative in different ways?

import · January 31, 2001, 6:18am

Re: Is Anyone Getting Nervous? kinda - Posted by Tim Jensen

Posted by Tim Jensen on January 31, 2001 at 07:18:41:

Mike,

I have not read all the posts here, however I look at the economy as a bust and a boom.

I am a bit concerned about a down turn in the economy, it does cause for some alarm. Yes people need a place to live, but they may not be able to pay the rent or if you flip the pool of buyers will be deminished. That means longer and more expensive holding times or you have to lower your rents. That being the case, I have started to consider how much debt I want to take on. I have really limited the amount I am leveraged. I have seen it happen a lot in my area where a guy gets too leveraged and something goes wrong and it all falls apart. Heck, this year, I bought the property taxes of a investor who told me that I was doing real estate investing wrong and how his high leverage way of doing things was the way to go. Needless to say he is losing all his places because of the big mortgage payments and empty buildings. Instead of buying that nice new sports car, which he lost, he should have banked some of his money. I think it was Joe Kaiser who said owning 100 units then losing 100 units does not equal zero in this game. HOW TRUE! I guess I’m just a bit on the conservative side when it comes to leverage. In some cases, I think it has cost me money!

Now onto the positive parts of tough times. There will definanitely be a lot more deals out there. I think that you will be able to get even more of a discount too. One good thing about that is that even though the economy is tough, if you get good enough of a deal you can still rent the place out and charge less rent and still make money. Also, I think many more people will be willing to seller their place subject-to just to get out from under the debt.

Bottom line I look at the tough times as a mixed bag. It can be a great time if you plan right or it can break you if you don’t.

Take Care,

Tim

import · January 30, 2001, 10:15pm

Should you be scared? - Posted by Robert M. Campbell

Posted by Robert M. Campbell on January 30, 2001 at 23:15:02:

Conventional wisdom has dictated to the general public for years and years that rising real estate prices are good and falling prices are bad.

For the smart real estate investor, this is simply not true.

Clearly, real estate trends move prices up and down. The key, however, is not to judge the trends as good or bad. Instead, you should be ready for trends so you can take advantage of them.

The easiest - and safest - way to make money in real estate to buy real estate at a market cycle bottom, ride the uptrend for as long as it lasts, and then sell at the market peak.

Therefore, if you believe that a real estate downturn is coming, you should be saving your money. People with cash will stand like a tower of strength when real trouble hits the real estate market.

To consistently make money in real estate - with creative financing or otherwise - you must know how to factor the trend of the market into your decision making. In most cases, to ignore the trend of the market - and not be able to identify real estate trend reversals - is as much like gambling as it investing.

Robert M. Campbell

import · January 30, 2001, 7:34pm

recession=opportunity - Posted by George

Posted by George on January 30, 2001 at 20:34:33:

Many fortunes have been made in recession times…Altough I feel bad for most people who get caught into recesions, if we are ready, for us will be a blessing!!

import · January 30, 2001, 6:03pm

You gotta live somewhere… - Posted by Carmen_FL

Posted by Carmen_FL on January 30, 2001 at 19:03:36:

… so if you are getting homes given to you and need to hold on to them for a while (L/O, Rent, etc.)there will come a time when you will be able to sell them at your price.

Actually, if you “sell” them creatively (owner financing, contract for deed, PacTrust, etc.) the possibilities get very exciting. Most people will still want to own a home - and if you are offering terms close to what the banks are offering if interest rates go up, it makes YOUR offers look better! It would be a good time to build that monthly cashflow we all look forward to, heh?

import · January 30, 2001, 12:48pm

Re: Is Anyone Getting Nervous? - Posted by Rob FL

Posted by Rob FL on January 30, 2001 at 13:48:08:

I’m all for the economy slowing down some. The only thing I hope for is that interest rates continue to stay in the 9% or less range. A recession coupled with high interest rates will make things tougher for investors also.

Imagine buying a property, rehabbing it and then not being able to sell it to a retail buyer because nobody can qualify.

There are pros and cons to a recession.

import · January 30, 2001, 12:09pm

I feel concern (for my community)… - Posted by SusanL.–FL

Posted by SusanL.–FL on January 30, 2001 at 13:09:01:

…with all that I see happening these days.

Just the other day I was reading about some MAJOR area closings of large companies (J C Penny closing about 50 affiliated Eckerd Drug stores; Montgomery Ward going belly up.) One org. after another filing for Chapter (whatever) for protection. Lower wage scales and little if anything in the way of raises for those with J-O-Bs.

I see shops closing up and ‘strip’ malls remaining half vacant down here year after year.

Loss of business (like the closings I mentioned) can really affect a community.

I guess I am rambling here but I have (true) fear in my own heart right now for my own ‘circumstances’…and they “ain’t” good folks…

import · January 30, 2001, 11:45am

Re: Is Anyone Getting Nervous? - Posted by Matt B

Posted by Matt B on January 30, 2001 at 12:45:28:

Maybe it’s just my “shark smelling blood in the water” instincts, but I am getting excited! I see MANY opportunities opening up because of this.

Want an example? I can find more motivated sellers looking for someone to take their properties off their hands. Many will be very open to the idea of someone taking over payments by doing a lease option, thereby relieving them of the payments that they can no longer afford for whatever reason.

I can then find MANY tenant/buyers to put into the properties because due to circumstances in their life, they have had some sort of credit problem or lack of savings for a down payment that prevents them from immediately going out and being able to buy a house conventionally.

Why? Was there something bad going on in the market lately?

import · January 30, 2001, 11:41am

I am getting EXCITED!! - Posted by Mark (SDCA)

Posted by Mark (SDCA) on January 30, 2001 at 12:41:14:

I am a buyer and maybe now we will start to see more deals out there.

Mark

import · January 31, 2001, 10:19am

‘limiting the amt. leveraged’… - Posted by SusanL.–FL

Posted by SusanL.–FL on January 31, 2001 at 11:19:35:

re:
I have really limited the amount I am leveraged.

These are wise words, Tim.

re:
I have seen it happen a lot where a guy gets too leveraged and something goes wrong and it all falls apart.

This is exactly what happened to me.

(Learned the hard way—but at least, I learned…)

Susan

import · January 30, 2001, 12:44pm

A blessing in a recession!!! - Posted by Darin in CA.

Posted by Darin in CA. on January 30, 2001 at 13:44:06:

I can’t wait to have a recession. I’m a real estate investor. When the market is bad that is where all the money is made. I pray everyday for a quick swift one that knocks most of the country down to the ground. Any others agree with me?

import · January 31, 2001, 3:10pm

Re: ‘limiting the amt. leveraged’… - Posted by Tim Jensen

Posted by Tim Jensen on January 31, 2001 at 16:10:54:

Susan,

It is great that you are honest enough to share that with everyone. I am also glad to see that you have learned from your mistakes. I want to share a little more…

I have some landlords friends that I eat lunch with a lot. One day, we began talkign about a big landlord in town and how he had 100+ places. My freind Fred (not his real name) shared with me that it doesn’t matter how many places someone has, what is more important is how much money you make and whether you are in control. Fred continued to tell me that he has only 20 place, however they are all paid for. Now on the surface you would think the guy with 100+ places was more successful and doing better. Fred continued, he told me that having his places paid for allowed him to wait for the right tenant. This can save a lot of headaches, there was no staring down the barrel of a monthly payment each month and just putting someone in a place to get it filled. Also, with only 20 places there was no need to hire a crew to do work. He could do most of it himself and did not have the overhead of the guy with 100+ places. At 100+ places you have employees insurance an office. Those things can be real headaches. Also, with that many places you may get a lot of vacancies at one time and that can kill you because on a 100+ places you definantely have mortgage payments. When you have that many places you can not afford to always wait for the right tenant. Another point is with 100+ places that landlord was always always running to put out problems. In other words, the properties controolled him not him controlling the properties.

Finally, they guy with 100+ properties made morew money than Fred, but not by that much.

The lesson was that sometimes less is more.

Just an opinion,

Tim Jensen

import · January 30, 2001, 2:39pm

Re: A blessing in a recession!!! - Posted by Gary

Posted by Gary on January 30, 2001 at 15:39:20:

absolutely…I lived through interest rates in the 15% range and prices were very depressed. Seller financing was the norm and no banks involved. I bought my house that way for $80k and today it is worth $275k. Wished I had bought 3 of them! Recessions come and then go. Buy during recessions with creative financing; don’t panic…