Posted by phil fernandez on May 23, 1999 at 17:48:33:
Nice post but Mr. Smith doesn’t get it. But at least he brought his family to Hawaii for two weeks. WOW.
Posted by phil fernandez on May 23, 1999 at 17:48:33:
Nice post but Mr. Smith doesn’t get it. But at least he brought his family to Hawaii for two weeks. WOW.
JPiper - My investment philosophy against yours - Posted by JSmith
Posted by JSmith on May 23, 1999 at 08:04:11:
I am interested in learning your specific investment philosophy. I will tell you mine. I run a full-time business assigning and flipping. I assign by obtaining a signed contract and selling my rights to it for a usual fee of $2k-$3k. I just assigned a contract for $2,600 to an investor I had already lined up on a deal that required quick cash on an REO. I flip properties by either bringing in a partner, HAVING MY BUYERS LINED UP, or getting a private lender to fund the deal, repair if necessary, and sell for full market value. I recently made $16k on a flip and used non-qualifying, non-credit ruining money. Yes I could have made an additional $3k more because of the premium I pay for this service of non-qualifying and non credit ruining loan. I could have easily gone to the bank and borrowed cheaper. You say this is a JOB in your eyes. You say in your post that I am going to be ONE TIRED BOY if all I do is assignments or flips and it is too much of a job for you. To me, it’s just as much of a business as yours. I have no more worries, headaches, or future anxiety. I do not see it as a job, I see it as a very fun business. I am not tired, I am invigorated.
Do you do assignments on a regular basis?
Do you do flips on a regular basis?
Do you get loans and hold on a regular basis?
To your investment style. If you buy 1 property every 2 months to hold, in 5 years you will have accumulated 30 properties. Great, if the average is $75,000 per house, you have $2,250,000 worth of real estate and maybe $500,000 to $700,000 in equity.
Cash Flow. The most you are going to make is $100-$300 per month. Let’s split on average $200 per month. In one year you have made $2,400 on one property. One vacancy problem your profit is wiped out. One vacancy with repair problems your profit is wiped out plus a negative. Get a real bad tenant and you are coming way out of pocket. Now I know you say you may sell giving ownership. That doesn’t mean anything. Lenders with REOs said the same thing.
Future Appreciation. All theory. You cannot spend appreciation. Not only can you not spend it, but you must liquidate sometime down the road and it is funny how appreciation evaporates quickly when you sell at full market value and compete with Realtors.
Tax Benefits. Highly unlikely. Do you set up all of your holds so that you keep all of the depreciation? If so, does the IRS see it that way. If you are not the “owner” because you are busy being secret, do you think the IRS would like to know who is entitled to depreciation? Unless all of your holds are straight rentals, even your lease option are suspect to depreciation. I know, I know, I need to get my facts straight. I do have my facts straight. It may be that if you never have been audited, you can do just about anything as far as reporting what you believe is accurate. Wait until someone takes your documents and puts them through the test.
The economy of scales is what causes the problems with the buy and hold crowd in single family houses. You referred me to Helmsley and Trump, yes they hold but billions of dollars worth. Their economy of scale is much different. That’s the same as lenders. You would go into the lending business only making 1/2% on your loans unless your economy of scale is in the billions which theirs is.
Now, after I buy and sell, what do I do with my money? I loan to other investors in my area at a premium. I charge no more than 3points and 14%. I fully appreciate your idea that my style is going to make me old and tired. I see it that you are going to be old and tired. Your numbers simply do not work. At the end of the day, between non existent equity, vacancies, and repair problems, your idea of wealth on the other side is living in dreamland. Especially in single family houses. Your scale has to be in the hundreds for it to work the way you insinuate. All of this aside, would you rather make $2,400 per year on a rental, or $2,600 on an assignment? My worry and anxiety is over, is yours?
PS All of this was to make the point that because I do not borrow using my own credit, I cannot do certain types of deals. I hope I have proven my case. Furthermore, If you have 30 properties in your portfolio, I am sure you only have 4-6 personal loans since banks cut you off after awhile. How do you control the other 24? Why not control all of them that way and stay away from personal loans?
Re: JPiper - My investment philosophy against yours - Posted by SCook85
Posted by SCook85 on May 23, 1999 at 23:08:10:
I haven’t read any earlier posts of yours do I don’t quite see where all the anymosity is coming from.
I won’t comment on whose philosophy is better but I will say that the direction that I am going is a combination of the the two, so in other words I like them both.
I think it is easy to take $2000, or even $20,000 and make 100% returns on it, but when you start getting up to $500,000 or $1,000,000, 18% is pretty good. You would have to buy a whole lot of mobile homes to turn 100% on that kind of money.
My plan is very diverse. I’m buying homes that make me 60%+ returns, I’m buying to hold, I wholesale flip homes, I rehab and retail. People wonder how I do so many deals, it’s because I do them so many ways.
I admire you for the amount of deals you have done. I don’t necessarily agree with your philosophy as a whole, but it works for you and you are doing well with it.
My Philosophy - Posted by JPiper
Posted by JPiper on May 23, 1999 at 19:06:47:
My investment philosophy in a nutshell: Buy low, sell high, and keep as much of what’s inbetween as you can.
How you do this of course is the complicated part.
I’m not especially interested in your techniques. To me they pay too little attention to the cost of money (hard money lenders and partners are always the expensive way to go), too little attention to the tax ramifications of what you do (taxes are currently taking away 1 out of every 3 of your deals.), and too little attention to getting your money working for you instead of you working for your money. In your case I gather that much of your reasoning behind this is fear based?..fear over creating any sort of personal liability. Further, I’m not out actively looking to find deals that make me $2,600. My wife would spank me for that. As I said before, your techniques are excellent techniques for people who are getting started, or people who have little cash or credit.
My strategy is driven by the seller’s situation. I’m going to put something together that resolves whatever the seller’s situation is, and enables me to put money in my pocket. What method that may be is going to depend on that situation, what my personal situation is at the time, and what I best think I might be able to accomplish with the property. Factors that always go into my thinking are the tax ramification of what I do, along with the other costs of doing what I want to do, and the risks of what I am proposing to do.
I’m not at all concerned about taking on a personal liability for a loan, but if I don’t have to I don’t. But don’t inject too much meaning into that?.what I never avoid is my PERSONAL RESPONSIBILITY in a situation. That’s where reputations are made and lost.
So my original post stands. I believe that the BEST method is driven ENTIRELY by the situation. The more tools you have at your disposal, the better the opportunity is to profit. The real key is knowing when to use what tool?.I’ve spent a lot of years developing that particular knowledge.
Where you got the idea that I’m a buy/hold investor is beyond me. However, again, I am DEFINITELY focused on the tax consequences to my decisions. To the extent that I can minimize taxes I will do so. Taxes are the largest single cost in a deal.
Re: Why does anybody’s investment philosophy have to be AGAINST anybody else’s? - Posted by PeteH(NYC)
Posted by PeteH(NYC) on May 23, 1999 at 14:55:48:
I believe both JSmith & JPiper make money in real estate. Who told anybody to put the freaking gloves on?
Where is your LONG-TERM strategy? - Posted by Matthew Chan
Posted by Matthew Chan on May 23, 1999 at 13:25:34:
Dude, you need to read about wraps like Bronchick’s Cash Cow Course or even anyone’s Lease Option course. It looks like you only know about making money on the “front end”. You are not seeing the “back end”.
And regarding personal loans, it has already been covered previosly in another post.
Regarding the flips and assignments, when will you be able to stop “working”? Where is the residual or passive income potential here? Why would you want to work until 65 flipping and assigning? It sounds to much like a real estate broker’s job where their income is only as good as the next sale.
Where is your long-term strategy, if any?
Re: JPiper - My investment philosophy against yours - Posted by Ed Garcia
Posted by Ed Garcia on May 23, 1999 at 12:12:41:
When I posted, it was in answer to Amy. I didn’t even see your
But as I see, you attempt to match wits with Mr. Piper, and
challenge a man who
has been to where you’re going.
young Bull verses the old Bull.
two bulls sitting under a tree on a hill top watching some heifers in a fenced
pasture. The young bull says to the old bull, “Hey lets run down the hill, jump over
the fence, and take on a couple of heifers.”
The old bull said, “Lets walk down t
he hill, go through the gate, and take on the
JSmith, you’re out of your league.
I decided because of your limited experience, I would attempt to walk you down the hill.
(1) Your mode of operation is small thinking. It’s just li
ke Jim said, a beginner’s
way to start. If I thought like you and limited my investment goals to small flips,
I can’t tell you how depressed I would be.
(2) To be successful in this business, you have to have foresight. Why woul
d you even consider
doing deals only one way? It’s too limiting and restricting. You are missing deals.
The reasons for doing flips are for fast cash and because there is not enough profit in a deal
to warrant putting finan
cing in place. Not only are you restricted to the amount of deals you
can do, but you are limited to the amount of profit you can make in each deal.
If I made the type of profit that you boast about, I would keep my mouth shut.
To be honest with you, when I read your challenge to Piper (My investment philosophy against
Yours) I was embarrassed for you.
You might impress a newbie who doesn’t know any better, but to the others, who have been doing t
for a living, you sound ridiculous.
(3) JSmith, I teach investors financing. I can’t tell you how many millionaires are coming to our
workshop because they want to learn more about financing and different ways to do dea
They’re already deal makers. They started off just like you and then realized that they needed to learn
more to grow.
In this business we are always learning.
I’ll be teaching them how to get a working credit line.
s credit line will allow them to make cash offers. The cost for a line of this type is usually
Two points over prime. But this type of financing will allow them to get a better buy because they can
not only offer cash, but a fast close as well .
Oh and by the way, don’t tell me you already know about this type of financing, and then go into a
Equity line because they are not the same. Two different animals.
I’m not going to talk about my workshop because it sounds like I’m promoting it.
The reason I brought it up was to demonstrate the fact that the real players, know where it’s at.
They understand the value of versatility and the power of cash.
When an investor starts out in this business, they have to do deal just like you because
have no way to go.
But whatever you do JSmith, think about this.
Imagine this. You go into a deal and set it up for your lease option, or a flip, or a seller carry back. And then I come into that same deal-with the ability to offer ALL CASH–
and tell the sellers I think you’re a mooch who doesn’t have the cash.
Do you think for one minute after talking with me they would even talk to you?
Money talks, Bulls- - t walks.
Re: JPiper - My investment philosophy against yours - Posted by Frank
Posted by Frank on May 23, 1999 at 11:31:17:
How can i get more information on your investment philosophy? It seems to me that you are doing very well with it.
Is getting loans so bad?? - Posted by Sue (NC)
Posted by Sue (NC) on May 23, 1999 at 10:56:44:
I buy foreclosures, and make a tidy profit. Last one sold made about 30K after repairs (but before taxes). The owner was nowhere to be found (moved out of state) to I work out a purchase. The bank wasn’t about to give me ‘special’ financing. Partner? Kiss 15K goodbye. I guess I could have assigned my bid- for about 6K (I had one offer).
I make my living doing (mostly) foreclosures. Your strategy would have me giving up at least half of my income. For the risk of being liable on the loan. Well, if my purchase price is good enough to be attractive to another buyer, then there will certainly be enough for me to fire-sale the property without losing my credit or any money. The risk is even less statistically, since I’m doing several at a time. One bad property isn’t going to spoil my ‘little empire’.
Not that loans are for everyone. I have no problem, and lose no sleep carrying ALOT of debt. Others don’t want the burden or the risk. But I AM lazy, and happy to admit it. I don’t want the hassle of finding other investors to take over deals I find. I can do them myself, and keep all the profit.
And by the way, I have 2 lenders who will give me a virtually UNLIMITED number of loans. Commercial lending departments are not all saddled by that 4-5 loan limit.
Re: JPiper - My investment philosophy against yours - Posted by phil fernandez
Posted by phil fernandez on May 23, 1999 at 09:11:26:
LOL. I get a big kick out of you.
What you are doing with your flipping is working for peanuts. $2,000 per flip. All you’re doing ,with these so called flips, is playing realtor. Now is that creative?
And then with your $2,000 profit you say you are lending that money at 14%. Guys here are doing Lonnie deals and making 150% return. Now your 14% doesn’t look to attractive does it.
Guys here are buying and improving paper and getting 50% returns and greater. Again your 14% doesn’t look so good.
Your problem is very clear. You’re full of yourself. It’s your way or no way. You are not flexible nor are you creative.
BTW have you signed up for Atlanta yet?
Your Investment Philosophy vs the World - Posted by J.P. Vaughan
Posted by J.P. Vaughan on May 23, 1999 at 08:56:05:
You have really proved nothing except that you think
your way is the ONLY way. As Jim Piper stated before,
in his first response to Amy, “There is no one technique
that always works, and no one method that is better than
all the others.”
Jim’s point, with which I agree, is that an investor
needs to have a variety of ways to approach a variety
of situations and deals. I really can’t see how someone
can rationally disagree with that, especially since the
vast majority of experienced investors understand that
You’re also arguing moot points. No one here has suggested
that either appreciation or tax benefits are reasons to
buy real estate. They are not, and Jim Piper would be the
FIRST person to say so.
You have demonstrated one thing: You feel the way you
do things in the ONE correct way–the Holy Grail. Good
for you. So what?
I agree - Posted by Barbara (ME)
Posted by Barbara (ME) on May 23, 1999 at 16:20:15:
To each his own is what I say.
Re: A Tattle without the Gun Battle… - Posted by Mark
Posted by Mark on May 23, 1999 at 23:24:52:
Suggest what is right, oppose what is wrong; what you think, speak; try to satisfy yourself, and not others; and if you are not popular, you will at least be respected; popularity lasts but a day, respect will descend as a heritage to your children. ? T.C. Halliburton
Let people talk, let them blame you, condemn you, imprison you, even hang you, but publish what you think. It is not a right, but a duty, a strict obligation laid upon anyone who thinks, to express what he thinks in public for the common good?to speak is a good thing, to write is better, to print is an excellent thing. ? Paul-Louis Courier
JPiper, and others: First I’d like to thank you warmly for all that you’ve given to this forum.
Truly…I am left speechless by your works.
Re: JPiper - My investment philosophy against yours- The real bottom line - Posted by G. S. Hoops
Posted by G. S. Hoops on May 23, 1999 at 23:54:26:
Isn’t the real bottom line the fact that you are both doing what you like and making a living at it. Does it relly matter who’s is better? (if one can be)
Re: JPiper - My investment philosophy against yours - Posted by JSmith
Posted by JSmith on May 23, 1999 at 14:29:49:
I appreciate the compliment about being a young bull, my wife and grandkids would appreciate the reference.
I hope to be able to clear your mind about something. When I go after a discounted deal, I literally have at least 30 separate buyers all pre-qualified waiting for me to find them something. GOOD AS CASH. When I go after a discounted deal, my private lenders (equity lender - or as you might call them hard money lenders) will close in 24 hours if necessary. GOOD AS CASH. When I go after a discounted deal, I have separate note creators and buyers who will fund the deal no questions asked. GOOD AS CASH.
How am I limited?
How am I only doing something 1 way?
I have given you 3 separate but powerful strategies without getting a personal loan that could later ruin everything. I could easily go on.
Are you surprised that I make as low as $2k on some deals on an assignment? Are you surprised that I make as low as $16k on some deals on a flip? How many buys and holds would you have to do to make $16k on one deal. What is this working stuff like a Realtor that I keep reading?
Here’s my response:::: You have to find a deal just like I do. You have to analyze just like I do. You have to write a contract just like I do. You have to take control just like I do (in your case a personal loan - 2 over prime). You have to do repairs, if any, just like I do. The only difference is you market to rent, I market to sell. The big difference is I make money, you do not (oh yes, if everything goes as planned over 15-20 years, been there - done that). So, who is really working? My worries and anxieties are over, yours has just begun! Besides, you have 4-6 personal loans that you borrowed 2 over prime for to pay, I do not.
You certainly do not need to be embarrased for me. My friends and I take our huge profits and reinvest in single family to multi family loans that compound yearly with very low LTV. You see, I am already retired, I do not need to use my own personal cash or credit, Neither should you.
Real Players understand the big picture. Real Players understand the hype. Real Players understand the mathematics and statistics. Anytime you believe that getting personal loans, using your own cash, using Land Trusts, trying to get around a due on sale clause, play straw buyers with HUD, play Donald Trump in the single family homes industry, and all of this so you can play big investor, YOU SIR, are missing the big picture.
I do not believe what I have written is the only way. I have not even started to open up our strategies. If you are making money with personal loans, great. I choose not to when it is totally unnecessary.
PS Your reference to money talks and bull—t walks, my bull—t is taking my entire family including grandkids to Australia for 2 weeks via 2 weeks in Hawaii once school is out. While you are messing around waiting for appreciation and your cash flow to increase, my money that I did not borrow 2 over prime for is working 24 hours a day 7 days a week.
Re: JPiper - My investment philosophy against yours - Posted by Matthew Chan
Posted by Matthew Chan on May 23, 1999 at 13:11:07:
You got my attention! I can see that I have a lot to learn (and want to learn) at your workshop! This is going to be great fun having the power to get more cash!
I would hate to get on your bad side!
Yes SIR! - Posted by Bill K. (AZ)
Posted by Bill K. (AZ) on May 23, 1999 at 12:27:33:
Whew! Ed, my main man. You’re on fire!
Does it have anything to do with the fact that you won at “Cash Flow” last night?
Congratulations! And, thanks for the post. I LOVED it!
Bill K. (AZ)
Re: JPiper - My investment philosophy against yours - Posted by Bill Gatten
Posted by Bill Gatten on May 23, 1999 at 19:12:16:
Mr. Smith, you’re a doo doo head!
I just bought Australia (except for Tasmania) and have an option on the Eastern shore of Hawaii. Though, I must admit, I’m still working on Saturdays and Sundays for a while to pay for it.
In all seriousness, please take the comments here in as good a spirit as possible. Maybe you didn’t mean to, but you’ve hit some pretty esteemed institutions in the solr plexus with you post (seemed a little confrontational). Don’t attack us (directly) any more than you have to; and know that I (among many who just haven’t said so) personally admire anyone who has bought and sold as much property as you have…I haven’t come even close (and I’m even older than you are… I burp dust).
That’s where Your Wrong - Posted by David Alexander
Posted by David Alexander on May 23, 1999 at 16:41:26:
A large majority of the people on this site buy only to sell. We buy and then sell to create paper, get out money back for phenominal yields, and a large portion of those yields or Infinite because none of our money is in the deal. The difference I see is that you sell to wholesale buyers and then lend out wholesale. I personally sell to retail, the money I lend out is also at retail, to the point that if I have a 2k left in a deal my yields are gemerally 100% plus where your yields are 15-18% I think you said.
You need to read further, a large portion of everyone here is of the buy and sell, create paper, etc.
Which is all you are doing.
You flip and take cash, then make a new loan and create paper at 15-18% yields.
Your Arrogance is astounding, and you should at least pay attention to who and what you are talking to before throwing stones. I’ll be honest, making 2k on a deal might have it’s place as long as I didn’t have to make more than a 3 phone calls to do it. But, for me I can lend my money out, by buying a Mh for 2k, reselling for 10k plus and get 100% plus returns, not to mention that I then look for someone like you loaning money out at 15-18% to put against the note and get my cash back out immediately.
Seems to me your missing the Big Picture.
Re: JPiper - My investment philosophy against yours - Posted by hkCA
Posted by hkCA on May 23, 1999 at 14:49:33:
Sounds like you’re about the same age as Mr. Piper. I wonder how your financial statements compare. My bet would be on him.