If buying for flipping, you automatically think in terms of what the real FMV is and if desiring to resell at below market pricing, you MUST buy at below wholesale or at firesale prices.
In addition, with regular financing no longer available, you will need to hold the paper. If you need cash, you can sell the paper but because of the steep discounts,you could lose money on the transaction if you paid too much for the property. A discounted cash flow analysis will tell beforehand what you will get on the paper market and you can determine the purchase pricing up from that starting point.
I like property that is tax delinquent because so many owners are willing to give away their equity.
I posted a topic a month or so back about investing in Florida. In a nutshell, I want to make RE Investing my full-time career and be able to afford myself and my family a lucrative (but not outrageous lifestyle). I am intelligent and know I can make this work; however upon doing some thinking my gf and I have come to the realization that while we love Florida, we feel we would miss the seasons and the “nature” of more Northern states.
The main reason we were thinking FL was because of all of the available options for RE since it is going through such booming development 24/7 (for better or worse). Now we have taken a step back and realized that, down the road a little, a vacation home in FL coupled with us working for ourselves would allow us the best of both worlds (living in a more pristine state while being able to visit FL almost any time we wanted). So now it’s back to the drawing board as to where we want to live…
My question to you folks is this; what state(s) and cities would offer someone in investing the opportunity to make a nice living out of it? I understand you can make RE work wherever you are, however we are trying to look for “up and coming” cities/states that aren’t quite as saturated as FL. This morning so far I have thought about VA, NC, NY (however NOT NYC, one of the reasons we crossed FL off the list is we realized we still want somewhat of a home-town feel wherever we live, even if it is just a tiny feel). I want to live in a place where I can experience the seasons, fish in a stream, hike/camp the outdoors, etc… all while being able to make a nice living investing in RE.
I plan on doing mostly flips/rehabs (I’m good with fixing up things and plan to take that ability and run with it, plus my gf has a knack for being able to think of ways to make ugly/useless places gorgeous/more useful), perhaps some vacation rentals, but probably the bulk will be in renting with options to own. I’d like to build a nice size portfolio, as I said I want to be in this for the long-run, my gf and I are going to go at this together, as a team, and if it continues to grow maybe we can become tycoons!! haha Anyway, my main question is just, where do you feel I can accomplish all of my goals I have set out for myself? Thanks SO MUCH in advance!!
Re: Location Location? Which location… - Posted by Jack e
Posted by Jack e on September 05, 2008 at 14:13:11:
Everything you describe made me want to live in Florida and vist the other places when I want a change. That is the best of both worlds. Not that I think we need any more snow birds or others living in Florida, in fact quite the opposite. Florida is now just about at the bottom of the boom and there is little way to go but up. I am a firm believer in investing where you are living, it makes it much easier to know your area and being able to watch closely what you have. Florida has a small town appeal in a lot of places. As for the idea of a team with a partner, I would be careful. People fall out and partnership makes it difficult to resolve the assets. Good luck
Re: Location Location? Which location… - Posted by Eric in FL
Posted by Eric in FL on September 06, 2008 at 11:01:15:
Jack,
I do not agree with your thought that the Florida market is on it’s way up. I will still argue all day long that real estate is not a market but a geographic conditional situation. The overall problem in Florida, that will be here until these politicians can figure out where to steal from next is property taxes. I just received most of my assessments and although some of them were somewhat in the realm of possible most were not. It’s very easy to see that the state is petrified of not having the same budget that they created off the backs of property owners the last 5 years. Sit back and think if you were able to adjust your w-2 income 300% in 5 years just because. You did not come up with any new ideas, did not work more hours, or created a surplus of money. Instead, you were paid 300% more and you allocated yourself a new company car, a clothing allowance, and a country club membership. Well now the VP has seen this and told your boss cut his salary back and take away the country club membership. If government was run like a business this could never happen but in our Florida local municipalities it did and now they have to give a small amount back and they can’t do it. Watch as the millage rates start to be raised as they need to make ends meet for their ridiculous spending ways (like my new 28 million dollar government building). I am sorry for the rant but unless there is massive reform in regard to property taxes the real estate values will continue to fall until they reach the correct equilibrium. This has been the case in every cycle and will hold true again. We need to fire these idiots and start over.
than you are saying. Florida and any other high property tax area is a good choice if you are seeking flips. High property taxes are driving out many owners and some will give you a deal. This high tax and spend trend will continue until the revolution.
The problem is in finding good RTO prospects because a turnover of 25% should be expected. That means that you should have a bankroll to cover payments for 25% of your properties, at all times. Do not count on the option monies nor the security deposits to pay for the damages. In my experience, they seldom do. BTW, after 30 minutes of close questioning, a nationally known Sub To and RTO expert finally revealed to me that 25% is the amount of turnover he had with over 200 properties.
For up and coming areas, look to census, school and employment information. Look for areas that have rising populations, and where they are building schools and factories.
Re: I agree, but it’s worse. But Better… - Posted by Jack e
Posted by Jack e on September 07, 2008 at 14:30:47:
Well my property taxes have gone down this year and I see a recent article in the local paper that sales have increased 3%. You are probably correct that the down turn may not be over but these are a couple of good signs that I have not seen before and I think it may be time to at least start thinking of buying.
make correct judgments as to value, purchase price and exit strategy.
I have never paid more than 50% of FMV. The better deals come in bad markets. In FL, with foreclosures and high property taxes and hurricane damage being rampant, it should be easier to find a great deal than when markets are hot.
Nothing is more disheartening than hopes gone bad and investment dreams crushed.
Re: If your buying now, be sure to - Posted by Eric in FL
Posted by Eric in FL on September 08, 2008 at 06:32:32:
AJ,
Your statement is right on and I buy the same way you do at 50% FMV or less then hold it and rent it. The issue that is going to come our way was on the front page of the paper this morning. “Millage rates need to go up because of short fall”. I almost fell over. This is so ridiculous on every level that because values have dropped so much they need to find a way to create more revenue. WHAT DID THEY DO WITH ALL THE MONEY??? It never gets answered and as far as I am concerned a buy and hold strategy in a state that is so anti investor because of spending is not a place I need to be. Now, you can make money in any market or in any conditions and the buy and hold is not it. We can go over all the different ways but for my long term plan buying and holding real estate in good neighborhoods in a thing of the past. This will cause values to continue downward until it stops and the equilibrium takes place. When that will be who knows but I can tell you without the funny money mortgages and strictly real buyers the demand has dropped significantly. It will be very interesting.