[sammybiker]

Replied in bold below.

-----

I'll probably think of some more later but had a few quick questions before I head out the door to work.

Do you try to keep all your properties in a single area either same street or same city or spread them out? Reason I ask is I can see how that makes sense, however at the same time I'd love to have one property in Chicago, another in South Carolina by my parents, etc. Maybe I go live in S Carolina for a year, get bored there rent that place out and move back to my Chicago place when between tenants. Debating if that would be smart to do or not though. I have all of my properties in the same general area, focusing mostly on an excellent local school district. One of my properties is outside this district, a little rougher area (C neighborhood) but nothing in the hood. I can use the same contractors for everything, same managers, same agents, they know the area very well, know me, know my properties. This is my niche and I’m going to exploit it as much as possible. When property prices come up (meaning people start buying again) to where I’m only making 10% ROI instead of 20%, I’ll just transition into flipping. But I’d like to keep everything in the same area. Right now, I’m split between two zip codes and one primary local school district.

You mentioned lowballing MLS and contacting home owners. Do you ever mess around with short sales and foreclosures? I hear shortsales are a complete waste as you get buyers playing games with no intention of selling just buying more time in house. Foreclosures I think is a quicker process. My home was a foreclosure though I'm still not super saavy on how to look for them and the process of buying them. I’ve submitted a couple of offers on short sales. They didn’t really go anywhere (as I found out 3 months later when the bank finally came back). No foreclosure auctions for me. As my volume picks up next year, I suspect I’ll get a little more involved. However, everyone hits those auctions. Not everyone hits the old lady that has a home down the street sitting empty as she moved out of state two years ago. Cash is king. Even with simple e-mail offers, I attach a screenshot of my bank account to let them know I’m serious.

As far as cash offers. Don't mean to get all up in your business but were you well funded going in or did you start slowly? I had my personal savings in addition to the funds that I liquidated out of my brokerage accounts as mentioned earlier in the thread. I have a solid career, working tons.

Reason I ask is I don't have a ton of cash, though plenty for downpayment even if 20% required. Should I focus on cheap properties like sketchier areas where I can pickup a house for 30k and rent it to some illegals in my neighboring city or should I focus on more expensive properties? There are some cheaper homes in a good school district near me but a deal would probably be 60k, more likely maybe 75k to 90k. I don’t have that kind of cash but could easily put down 20% if necessary. That’s the thing though…in my area, 30k homes are the homes in the PREMIUM areas. Not huge 2000 sq ft but small, 3br/1ba 900 sq ft homes with off-street parking but in the BEST local school district. Families scramble to get their kids anywhere in this school district. So 30k can buy you trouble free rentals. 20k and you’re into the C class neighborhoods (but not warzones!). You and I would live there if we had to do so. 10-15k are the warzones, areas I don’t like to drive through (but have) and areas that my partner wears his jacket & carries the .40 & 9mm.

You can also finance, yes. You’ll see your cash on cash returns skyrocket to 30%+ using leverage (and buying in good areas). I wouldn’t finance anything outside of my premium school district area.

Have you ever utilized those "investor financing" deals? Whats the deal with those, typically on properties that need some work they say only investors special investor financing no approval process. I'm guessing its basically a hard money loan at like 10% but was just curious if you've ever dealt with anything like that? I have not. I’ve utilized private money once (close friend) for bridge gap funding when I saw a sick deal I had to jump on. He was paid off the following month.

Are banks more hesitant to lend on an investment property than one I'll live in? Will I be expected to buy cash or can I get a mortgage just have to put more down payment down? Yes, primary residence will always be easier to obtain funding for. However, while I haven’t financed any properties yet, I have been pre-approved for the 30-40k properties in my premium area so…financing isn’t an issue (of course, based on income+credit+debts, etc)

[Lufty]

(05-15-2014 08:00 AM)jamaicabound Wrote:  

Are banks more hesitant to lend on an investment property than one I'll live in? Will I be expected to buy cash or can I get a mortgage just have to put more down payment down?

Banks are going to want you to have some skin in the game for investment properties and will likely require more than 20%. Think 40-50%.

One way to get around this is to buy a duplex or 4 unit or whatever, and live in one of the units for at least a year. It will have to be your primary residence but that way you can get more traditional financing where the bank will cover 80%. After a year at that property say, in Chicago, you go to the bank and say :

"Hey it was really great living here but I'm thinking about moving to California, I've found a tenant for my spot in the duplex(triplex etc) so that cash flow is secure and I was thinking of buying another multi family property when I moved to SF, I've really enjoyed banking with you and would like to keep my business loyal."

At which point you go through the same bank get another loan still for 80% for a new property. You will have 2 very leveraged investments at that point so it would behoove you to live in the sort of areas that are likely to readily attract tenants but this method can provide a launching point for a real estate portfolio. Works well if you have a location independent business or have a reason to move around a lot (work, school). Although I don't see why it wouldn't work if you were living in the same city.

[sammybiker]

*For the record, I'm pre-qualified with my mortgage broker to purchase 30-50k range properties with only 20% down. This will vary bank to bank, broker to broker.

One benefit of purchasing cash is you generally get a discount and walk into instant equity gains. To date, I've purchased (and renovated) all of my properties for 65% of the bank appraised value. While getting paid awesome rents. These are of course unrealized, paper gains...but equity that I can pull out, borrow against, or just keep as a healthy margin. Making 15-20% on your money in rents AND making 35% instant (unrealized/paper) equity on your money is pretty sick.

[booshala]

(05-15-2014 07:07 AM)Brodiaga Wrote:  

(05-15-2014 01:10 AM)booshala Wrote:  

Although not as good as before lending club and prosper are p2p lending that gets pretty decent returns. Have to be on it and it always helps if you can write scripts to buy the loans you're looking for.

Have talked to Sammybiker and he seems to really know his stuff regarding the RE. I live in LA so I'm loath to get into real estate here, but it seems like he's got a great niche set up in the Midwest. Used to do some east coast properties but such a pain in the ass.

What do you mean by writing scripts? I am interested in p2p lending. Thought it was very straightforward.

The big institutional investors got into the game recently and they get first crack at 50% of the loans. The other 50% get released at a certain time (Wednesday morning or so) but you're competing with everyone else plus the institutional guys for the second half...

You can pick and choose by hand, but chances are that you're going to get crowded out of all of the good loans. Seems like most small guys who are serious about P2P have some sort of computer script that essentially buys loans as soon as they're released based on the conditions that they are looking for.

If you want to ease in, just put in a couple hundred bucks and try buying loans at $50 increments to get a feel for it.

[El Chinito loco]

(05-15-2014 10:52 AM)sammybiker Wrote:  

That’s the thing though…in my area, 30k homes are the homes in the PREMIUM areas. Not huge 2000 sq ft but small, 3br/1ba 900 sq ft homes with off-street parking but in the BEST local school district. Families scramble to get their kids anywhere in this school district. So 30k can buy you trouble free rentals. 20k and you’re into the C class neighborhoods (but not warzones!). You and I would live there if we had to do so. 10-15k are the warzones, areas I don’t like to drive through (but have) and areas that my partner wears his jacket & carries the .40 & 9mm.

Just curious but what state are you in? 30k hassle free single family residences certainly isn't the norm for most of the country. It sounds a bit like Detroit to me.

[Scuba_Instructor]

I was thinking the same. Here the UK the average property price (outside of London) is £254,000 ($426,672). The average property price in London is £458,000 ($769,353)!

http://www.telegraph.co.uk/finance/perso...itain.html

Getting a deposit for a single property in the UK is quite a feat for your average worker - average annual pay here is around £26,500.

We do have a Help to Buy Scheme where you need a 5% deposit and the Gov. lends the rest - but the terms are such that you won't make any money from it. All you're doing is lowering the cost of your long-term living expenses through not paying extortionate rent until you die.

I would argue that property as a route for investment is a) highly location-dependent b) needs correct timing and c) requires careful selection of the unit.

[jamaicabound]

(05-15-2014 01:06 PM)sammybiker Wrote:  

*For the record, I'm pre-qualified with my mortgage broker to purchase 30-50k range properties with only 20% down. This will vary bank to bank, broker to broker.

One benefit of purchasing cash is you generally get a discount and walk into instant equity gains. To date, I've purchased (and renovated) all of my properties for 65% of the bank appraised value. While getting paid awesome rents. These are of course unrealized, paper gains...but equity that I can pull out, borrow against, or just keep as a healthy margin. Making 15-20% on your money in rents AND making 35% instant (unrealized/paper) equity on your money is pretty sick.

I can definately attest to this. I was looking at short sales and foreclosures. After never hearing back or getting beat out on short sales I gave up on those. I think these days you get idiots with no intention of selling telling the bank they want a short sale just to buy more time in the house. They have no intention of selling and I believe they have to approve the offer so they just say no to everything wasting the banks time and the buyers time.

Foreclosures though trickier than regular sales I think are pretty smooth as your only dealing with the bank and they want to get rid of that property. As far as cash being king like you said though, I bet you I got beat out on about a dozen properties by this investor. I would offer like 63k, and he would offer like 38k and he would get them all because cash is king no mortgage to faull through. This is especially relevant with FHA loans as most foreclosures have some work needed or some small stupid issue that will not allow you to get the property and the banks don't want to fix anything even if its putting a GFI outlet by a sink. Would cost them like $50 to get another 25k for the property but they aren't in the business of fixing properties. I finally go ta place, basically the realtor felt bad for me and essentially told me what this investors offer was who had been beating me out on everything and told me where I needed to be to get the place.

[jamaicabound]

(05-16-2014 05:00 AM)El Chinito loco Wrote:  

(05-15-2014 10:52 AM)sammybiker Wrote:  

That’s the thing though…in my area, 30k homes are the homes in the PREMIUM areas. Not huge 2000 sq ft but small, 3br/1ba 900 sq ft homes with off-street parking but in the BEST local school district. Families scramble to get their kids anywhere in this school district. So 30k can buy you trouble free rentals. 20k and you’re into the C class neighborhoods (but not warzones!). You and I would live there if we had to do so. 10-15k are the warzones, areas I don’t like to drive through (but have) and areas that my partner wears his jacket & carries the .40 & 9mm.

Just curious but what state are you in? 30k hassle free single family residences certainly isn't the norm for most of the country. It sounds a bit like Detroit to me.

I have no idea where sammy is but there's plenty of areas in the country with cheap housing, my parents just moved into south carolina and in Charleston it's really strange, you have like 800k houses next to 30k shacks and the neighborhood is fine. Heck even in Texas and other areas things can be cheap. I'm in CHicago burbs which is super expensive for some unknown reason to me as its not that great a place to live but that said there's some really nice well known burbs with great school districts, oftentimes a neighboring city is poo poo'd by the people who live in say...Naperville, Barrington, Oakbrook, etc for anyone familiar with the area but oftentimes the neighboring city has border areas in same school district.

In my particular area we have one of the top schhool districts in the country, if you want to be in the nice city couple hundred grand, if you dont mind being in the neighboring city which is still nice just not as presitigous for lack of a better word your kdis still filter into the same school district and you can pick up a duplex for like 60k on a good deal.

There's areas near me where alot of people would call sketchy but in all honesty are perfectly safe just like mostly hispanic or something but all nice families. You can probably pick up properties for about 30k there, nice historic properties, brick, nice woodwork on stairs, fireplace matels, etc.

As for the college route as some have mentioned in this and other posts, I love that idea. In Chicagoland area you have North Illinois University. This is farily close to Chicago so you could probably pick up cheap college housing and still have it be relatively close to check in on. Cheaper housing is going to be at schools further out of the way like Western Illinois or Eastern Illinois can probably pick up houses for like 30k and rent to kids for say if you got a 4 bedroom house, 250 a kid conservatively speaking so $1,000 a month. YOu could easily use their money to probably triple up on the mortage and have it paid off in a couple years. Downside is you have a 3-4 hour drive to show tenants or make fixes unless you have someone on the ground there. Other plusses I think college kids are willing to live in a dumpy place and are less likely to complain about small issues especially if your lax on rules like no kegs and stuff. I remember on of my houses had no warm water in the shower for the entire year I lived there, that was just how it was didn't bother complaining lol. That said the landlord didn't mess with us, we'd have kegs and nitrus tanks every Fridya night and afterhours parties saturdays. sometimes we'd collect money and shutdown the street, have bands or speakers in the street and would just resolve to pay the fines whatever we got. Oh college i miss it.

[anonymous123]

jamaicabound Wrote: I was however thinking about maybe getting into a new product to sell and have a lead into something which may be good, basically along the niche or straight razor shaving, aftershaves, etc. I imagine pretty high markups though I havn't looked into it that well yet.

Gringuito reply: Your best risk adjusted return by orders of magnitude would be doing this.

++++++++++++++++++
I'm shocked how few people picked up on this response. Setting aside bits and pieces in a 401k in the stock market is never going to get you there. Forget what your finance professor says. There is a lot of wisdom in that one sentence reply from Gringuito.

If you want to get from "here" to "there", you need an "event". Gringuito is trying to point out that you should be seeking an endeavor that will create "an event". If you get just one of these, on a risk adjusted return basis you will be better off by orders of magnitude.

[sammybiker]

Ohio.

(05-16-2014 05:00 AM)El Chinito loco Wrote:  

(05-15-2014 10:52 AM)sammybiker Wrote:  

That’s the thing though…in my area, 30k homes are the homes in the PREMIUM areas. Not huge 2000 sq ft but small, 3br/1ba 900 sq ft homes with off-street parking but in the BEST local school district. Families scramble to get their kids anywhere in this school district. So 30k can buy you trouble free rentals. 20k and you’re into the C class neighborhoods (but not warzones!). You and I would live there if we had to do so. 10-15k are the warzones, areas I don’t like to drive through (but have) and areas that my partner wears his jacket & carries the .40 & 9mm.

Just curious but what state are you in? 30k hassle free single family residences certainly isn't the norm for most of the country. It sounds a bit like Detroit to me.

[jamaicabound]

(05-16-2014 09:59 AM)anonymous123 Wrote:  

jamaicabound Wrote: I was however thinking about maybe getting into a new product to sell and have a lead into something which may be good, basically along the niche or straight razor shaving, aftershaves, etc. I imagine pretty high markups though I havn't looked into it that well yet.

Gringuito reply: Your best risk adjusted return by orders of magnitude would be doing this.

++++++++++++++++++
I'm shocked how few people picked up on this response. Setting aside bits and pieces in a 401k in the stock market is never going to get you there. Forget what your finance professor says. There is a lot of wisdom in that one sentence reply from Gringuito.

If you want to get from "here" to "there", you need an "event". Gringuito is trying to point out that you should be seeking an endeavor that will create "an event". If you get just one of these, on a risk adjusted return basis you will be better off by orders of magnitude.

Yeah, something I'm looking into. Basically the product is an aftershave, not sure how many guys wear aftershave or if its older men but I think the whole straight razor shaving movement may be making it more popular. The product is all natural and has apprently really gotten some traction with alot of the youtube gusy and bloggers who are in this niche. Kind of just fell into the opportunity, was buying a boat, guy I was buying it from mentioned he was self employed, we started talking ecommerce and he's not in the markets I would sell in. That said it's a total departure from teh products I'm currently selling and I could see this being more successful if I had a youtube channel or blog or something about mens fashion or mens hygene or shaving. None the less I think margins may be good so something I'm looking into. All in all though I'm looking to invest not really expand my business so that is crating more work for myself even if there is more upside and I already have my hands pretty full with what I'm doing.

[jamaicabound]

(05-16-2014 09:59 AM)anonymous123 Wrote:  

jamaicabound Wrote: I was however thinking about maybe getting into a new product to sell and have a lead into something which may be good, basically along the niche or straight razor shaving, aftershaves, etc. I imagine pretty high markups though I havn't looked into it that well yet.

Gringuito reply: Your best risk adjusted return by orders of magnitude would be doing this.

++++++++++++++++++
I'm shocked how few people picked up on this response. Setting aside bits and pieces in a 401k in the stock market is never going to get you there. Forget what your finance professor says. There is a lot of wisdom in that one sentence reply from Gringuito.

If you want to get from "here" to "there", you need an "event". Gringuito is trying to point out that you should be seeking an endeavor that will create "an event". If you get just one of these, on a risk adjusted return basis you will be better off by orders of magnitude.

I get what your saying and I totally agree however my current biz which is on track to do 2.5 mill in sales was started with $368. I'm not looking to sink huge sums of money into something, I feel like if I want to build something I can do it with a modest sum of money. Looking more of an investment for bigger money and start a new company or launch a new product with a smaller sum of money. that is unless some great opportunity comes along. My partner has a lot of experience in the restaurant industry so potentially maybe open a restaurant if I'm going to sink alot of money into something, toherwise most either consulting or ecommerce stuff doesn't require a ton of startup capial for what I'd be looking to do.

[anonymous123]

Jamaicabound - I think you are one of the few that sees what I was trying to point out. I used your quote because Gringuito's reply would be incomplete without it.

Most people want to point you in the direction of the stock market in response to your question. If you aren't going to go ahead and start something new...then the sammybiker approach I think is a great play. (although this appears to be his primary business, I don't think there is anything stopping you from doing what sammybiker is doing on the side...and, also has the potential to create an "event" at exit).

[sammybiker]

*Just chiming in, I work 80hrs a week outside the country while managing the properties. I do have the advantage of being able to travel quite a bit and make a point to check on my team and properties every few months.

Jamaica, my properties are about a four hour drive from you. I have a buddy who also invests in my area that lives in Chicago and manages them from there (w/professional property management in place of course)

[jamaicabound]

(05-16-2014 01:31 PM)sammybiker Wrote:  

*Just chiming in, I work 80hrs a week outside the country while managing the properties. I do have the advantage of being able to travel quite a bit and make a point to check on my team and properties every few months.

Jamaica, my properties are about a four hour drive from you. I have a buddy who also invests in my area that lives in Chicago and manages them from there (w/professional property management in place of course)

Hey, really appreciate all your advice and knowledge. I'm looking for property management companies currently and havn't been impressed with anyone I've spoken with. I currently only have one property but looking to buy 2-3 more in the next year. Anywhere from Pislen in Chicago all the way out to say Lisle, Naperville, Aurora, Villa Park, Lombard area. If you happen to know any good ones in this area you would recommend I'd love to know. If so shoot me a pm.

[DVY]

I like WU right now, but def plow money back into your biz unless you want to go full-scale like sammybiker.

I def wouldnt.

I've focused on increasing my day job income/day (hourly) and also launching a side speciality biz that matches w/my day job. I've been considering getting into MMJ RE (warehousing, industrials, etc) but still undecided on that. Returns would be sick tho- 100% Cash-on-cash return, 150% ROE w/a cash-out clause guaranteeing a 125-150% ROA in 3-5 years. Just currently undecided on legality aspects.

[TopPanda]

I've been making a steady 8% a year or so on my pension by investing in high yielding funds.

I snap up anything that pays 10%+, like the UK in 2009 or Europe in 2011.

There's not so much around like this now as markets are toppy but I've been putting a fair bit of cash into P2P lenders and paying down my mortgage.

And yes, residential property is good. Stick to decent towns with strong rental demand. Small places are incredibly easy to let. My 2 bedder in the UK goes in less than a fortnight each time the tenants move out.

[davidvs]

I have written a few web pages to pass along my investment skills.
http://davidvs.net/hobbies/index.shtml#Investing

Those pages explain how I pick mostly winners.

Enjoy!

[paulstein]

An economist whose views I think are really solid recommends these two model portfolios. If I had money (which I don't) I would probably do something that looked like one of these. Note he recommends holding quite a bit of cash. I believe that to be sensible because you want to be liquid when opportunities come up:

WEALTH PROTECTION BALANCED PORTFOLIO

50% in US Government Money Market Funds (See note 1)

5% in SPDR S&P 500 (Symbol: SPY)

15% in the iSIlver Trust (Symbol:SLV)

10% in Market Vectors Gold Miners (Symbol: GDX)

10% in the iPath Goldman Sachs Commodity Index Total Return Index (Symbol: GSP)

10% in the DB Commodity Index Tracking Fund (Symbol DBC)



RISK TOLERANT AGGRESSIVE PORTFOLIO

38.5% in US Government Money Market Funds (See note 1)

15% Market Vectors Junior Gold Miners ETF (Symbol GDXJ)

5% SPDR Homebuilders ETF (Symbol XHB)

5% Physical Palladium Shares ETF (SymbolALL)

5% iShares MSCI EMU ETF (Symbol:EZU)

1.5% iShares MSCI Russia Capped ETF (Symbol: ERUS)

10% Call Options on iShares Silver Trust (Symbol:SLV) (Note 2)

10% Put Options on iShares China Large-Cap (FXI) (See note 2)

10% Put options on iShares 20+ Year Treasury Bond (TLT) (see note 2)

[From Vegas to Tokyo]

Moving off what paulstien has said, those are some really solid balanced portfolios for the long run. Anyone who wants to grow their wealth a little faster than the pace of inflation is going to be killing it with the wealth protection portfolio. Only thing I would caution people about is in the relative short term is to watch those US Gov't Money Market Funds, as you can't expect rates to stay this low for much longer. Already the values of bonds are through the roof, and the spreads between US Gov't bonds and junk is so slim with investors trying to seek greater returns in bonds, so be weary of that. Obviously, rates could stay low and the value of US Gov't bonds could keep climbing but I'm starting to see a tipping point in the market. Of course, if they stay this low for much longer, people will start to worry about inflation and jump into Silver, Gold, and commodities.

Also, pay attention to your options, and learn about them first. A good way to lose 20% of your account is to fuck around with options while not really knowing what they are.

[iknowexactly]

(05-14-2014 06:51 PM)jamaicabound Wrote:  

Also, the poster who owns houses knows a lot, as I said I live in a university town, the mngmt companies all do credit checks and screen for eviction histories,
If you dont' mind my asking what do you pay for property management?

I may not have made myself clear. I'm PAYING all you landlord leeches ( just kidding) , because I don't have enough cash and am too lazy to get a steady mortgage getting job.

I'm just explaining how I pay and pay forever, and how I see the company that manages the buildings and calls the plumber. Oh and also the blinds company. It's not rocket science.

10% is nothing if they take the calls in the middle of the hight while you're humping a Filipina in Davao. What's the point of being rich if you still have to worry about money?

It should be so you can do whatever you want and not even THINK about money...

[_DC_]

Per stock market investing:

A random walk down wall street is a seminal book on investing. http://www.amazon.com/Random-Walk-Down-W...all+street

The gist is that the best hedge fund managers are lucky via simple odds. E.g. if you have 100 managers in the simplest case the first year roughly 50 managers "win" (beat the overall market) and 50 "lose". The next year 25 are two year winners, and so on until naturally you will have a few managers out of the hundred who have outpreformed the market for a hot streak of 6-7 years. Naturally with all managers, you will have much more than 100 and wilder, longer, and more profitable streaks from a few, just through simple probability. These "stock geniuses" get all the press. There is only an insignificant correlation between a "win" one year and a "win" the following year.

The author believes in efficient market theory which basically states that at any given time the stock price is an accurate reflection of all the public perception of a stock (all factors are already accounted for, and even insider information will quickly leak and be reflected in the price).

The main takeaway is that all the data suggests index funds are the way to go (also bc they require almost zero oversight) and the ONLY significant indicator of return is RISK. Basically the bigger your balls (and distance from retirement) the bigger on average your return will be. Im not sure if it was this book or another, but basically most people are majorly risk-adverse. A study was done with a game of winning money on a wager of pure luck. The chances were 50/50 that the money would be won. Almost nobody would wager $100 with 50/50 chance to double to $200. I was shocked to hear that it would take up to $300 for the average person to risk the $100.

This floored me bc I am very risk tolerant (id probably just do it for any edge like $205). I think the study may be flawed though and should have scaled the wager for higher income individuals (Id def think twice about wagering $1000 for a 50/50 chance at $2050).

Ive got my retirement funds in a riskier index (S&P completion index that I don't touch) to assure a relatively stable growth). Any other savings I put in my "gambling fund" where I will put 30-50% of my savings in one stock for a small chance at big money. The only stock I had money in last week was up 70%. You can never dream for that return in an index, but it is super risky and can tank between trading sessions on news.

Per the risky "gambling fund" stocks, I look for oversold stocks that plunge on bad news. The Efficient market theory doesn't account for emotion, greed, and panic which are more prevalent on risky penny stocks. Basically if you have a 50% plunge based on actual perception of value (eff. market theory) you will also have a domino effect solely based on stop loss orders (this is esp. effective if the stock had a steady recent climb and people protect their gains). These stop losses flood the market with sell orders, which drive the stock down further, triggering more stop losses.

This post was def a ramble, hopefully someone gets some use out of it haha