Ask tommy2 about Real Estate
 

The posts about RE flipping lead me to believe that I might have something to offer to the forum for once.

Me: 7 years of commercial development and redevelopment experience. Have a JD & Masters in Real Estate and Urban Economics FWIW.

Fire away...

Re: Ask tommy2 about Real Estate
 

How is your JD helpful in your profession? Do you practice real estate law or do you just do development?

Re: Ask tommy2 about Real Estate
 

It helps on two fronts: I feel very comfortable with contracts and I feel very comfortable talking to lawyers. Lawyers are great at identifying risks, but usually lousy at quantifying them. I am able to push back more readily because I know where they are coming from.

I do not practice and never have.

Re: Ask tommy2 about Real Estate
 

I keep hearing radio ads from some guy advertising free info on how to make $10k/month in real estate without any startup capital of your own. His ad doesn't sell anything up front but I'm guessing there's a $50-$100 packet o'fun waiting after the initial stuff. Can you shed any light on something like this?

Re: Ask tommy2 about Real Estate
 

Not specifically, but these are clearly a scam. RE is a capital intensive business and there is no way around it. Remember, even if you believe in a project or idea you have to sell a lender on the concept too. Most people think that this is much easier than it actually is.

Yes, flipping is real and people make money on it sometimes, but generally it is in an "up" market (think buying dot com stock in 1998). Talk to those guys in a flat or down market and they are usually are busto.

RE is a lucrative business, but not a layup.

Re: Ask tommy2 about Real Estate
 

My mom's trying to sell our lakefront home in a developing area in Michigan, however she believes the housing market's in a slump. Is this true? What are the timeframes for the market's fluctuations on average?

Re: Ask tommy2 about Real Estate
 

Tommy:

I am in the process of breaking up with my gf/fiance. ~16 months ago we bought a house together, actually she bought the house, I put down $5k, its in her name though etc. I want to buy it off of her. Because of non existant credit and being unemployed for 3 years I got my father who has terrific credit to agree to cosign a mortage with me. What kind of mortage should I go for/how good can I get it with the cosigner? Where should I go?

Re: Ask tommy2 about Real Estate
 

What would you say are the three most important things in real estate?

Re: Ask tommy2 about Real Estate
 

Is there a real estate bubble? If so, in your opinion when will it burst? (specifically west coast / Hawaii)

Re: Ask tommy2 about Real Estate
 

Housing has cooled off as you all know. That being said, most of the cooling is on the coasts. Baby boomers are driving up desirable lakefront properties all over the Midwest, but it isn't overnight. If you need $ now, the market isn't terrible for this kind of product. Get a broker who specializes in this to run some pricing models for your mom (be careful of the hard sell by the broker, though).

RE cycles vary, but we are clearly heading into a cooling period. Interest rates should increase or stay stable for at least the next 12 months.

Re: Ask tommy2 about Real Estate
 

Tough one...location x3?

Re: Ask tommy2 about Real Estate
 

Yes, there is a bubble, but it has been overstated by the media. It is concentrated in areas where heavy speculation and tight supply have existed. SoCal, San Diego, Miami, NYC, etc. In 2007 something like a trillion dollars in ARM (adjustable rate mortgages) reset (go higher). Lots of people are going to lose their homes and real estate investment properties.

Don't know about Hawaii specifically, but I would guess it is insulated somewhat. My understanding on that market is that there is very limited supply that is "affordable" for regular people--if you own something like this, demand will remain high.

Re: Ask tommy2 about Real Estate
 

What is your opinion on high rise condos in cities like Atlanta? Most I've looked at are 1bd / 1ba all glass walls @ 800sf with great location in the 210k range. How good/bad will these do over the next 7 years?

Re: Ask tommy2 about Real Estate
 

Vehn,

Your question is tough. I am not a banker or in the credit game. I would defer to others here. Sorry.

Re: Ask tommy2 about Real Estate
 

Condos are about to be hit hard in most major cities that have experienced the full effects of the housing boom...I am pretty sure ATL is in that category. Remember, RE development is a long tailed game--if I start to develop a project in 2004, I might not be building until 2007. This means that even in markets where there is a glut of product, more is coming. Developers run in packs and often share the same market reports (or use the same expert analysis to make decisions)--like a lot of things, last ones in get hurt. My advice? Wait 6 months til the market is even more flooded, then start picking through the rubble for a good deal.

Re: Ask tommy2 about Real Estate
 

Are there any essential books I need to read?

Re: Ask tommy2 about Real Estate
 

It depends on what you want to do and what your background is. Are you strong in excel? Do you have a construction background? Are you in it for a career or a second income? Give me a little more info. and I can be more helpful.

Re: Ask tommy2 about Real Estate
 

For flipping properties, is it absolutely necessary to be in a good market where you can sell it quickly?

I know it sounds so simple, but is it really?

I live in an area that is a good buyers market, but I believe it would be hard to resell or find tenants.

This is why I have been so hesitant to get into RE.

Re: Ask tommy2 about Real Estate
 

Oh yeah, and for anyone interested...

This is an absolute must read website. It's like the 2+2 of Real Estate...

www.creonline.com

Re: Ask tommy2 about Real Estate
 

You're spot on about the glut. There are three new high rise condo developments that I know of that are just getting foundations started. So say I'm able to pick through and find a deal in a year or so, is it possible to get financing through the developer at a lower rate than mortgage banks are charging if interest rates are around 8% on a 20 year fixed?

Re: Ask tommy2 about Real Estate
 

There are so many other ways to get into RE than flipping. Honestly, I think this is one of the most dangerous RE plays out there. Even guys who are professional General Contractors lose more often than they win at this game. If I were just starting out, I'd go the syndication route. Get 10-20 people together who have 10-20K each and buy a small retail or light industrial building through an LLC. Keep your leverage reasonable (less than 75%) and you can make a ton of money if you are cautious and patient. Give your partners back small checks on a regular basis and maintain your integrity at all times. Others will flock to you to repeat.

Re: Ask tommy2 about Real Estate
 

I see you are in Chicago. I bought a condo in logan square 3 1/2 years ago. My wife and would like to buy a single family in the city hopefully in the same neighborhood. Would you go now or hold of until next year? Or even longer?

Thanks for any input.

Re: Ask tommy2 about Real Estate
 

There is about to be a glut of condo in Chicago. Things are better now than they will be next year for selling. Do you have a decent amount of equity built up? If so, I'd sell now and buy a SFR.

Re: Ask tommy2 about Real Estate
 

I will have between $60-80K + $40K in liquid funds. The only issue I have is that the houses (at least in my neighborhood) really seem inflated in the last 2 years. My only worry is I don't want to be the one who buys too high. Don't you think the rates will push the prices down? I would be fine with losing some on the condo next year especially if SFR's look like they may drop.

Re: Ask tommy2 about Real Estate
 

SFRs are still overpriced, but the gap between asking price and closing price is larger than most people realize. It is also growing. Don't be afraid to fire out some lowball offers.

You are trading dollars to some extent on your exchange, but condos are going to cool off faster than SFRs. One option--sell the condo, rent for 6 months and buy a SFR in 2007.

Re: Ask tommy2 about Real Estate
 

[ QUOTE ]
SFRs are still overpriced, but the gap between asking price and closing price is larger than most people realize. It is also growing. Don't be afraid to fire out some lowball offers.

[/ QUOTE ]

What qualifies as a lowball offer these days as a percentage of the asking price? Specifically in markets that are definitely buyer's markets?

Re: Ask tommy2 about Real Estate
 

15-18% below asking. Much lower than that will like be ignored.

Re: Ask tommy2 about Real Estate
 

I'm looking for a duplex/condex or 3 family house in the Worcester, MA area to invest in and rent out. Are there any specific things I should look out for during this venture?

Re: Ask tommy2 about Real Estate
 

I am looking to buy my first home in Portland, OR. There is approx a 30% chance that I will want to leave Portland in 2 years. 70% chance I will be there long term (5+ years). Do you think buying right now would be too much risk given my chance of leaving in 2 years?
Also, where can I find good info on the details of the local market and unbiased opinions about where the market is heading? Everything I see is put out by realtors who have an obvious incentive to paint a very rosy picture of the market.

Thanks.

Re: Ask tommy2 about Real Estate
 

[ QUOTE ]
Housing has cooled off as you all know. That being said, most of the cooling is on the coasts. Baby boomers are driving up desirable lakefront properties all over the Midwest, but it isn't overnight. If you need $ now, the market isn't terrible for this kind of product. Get a broker who specializes in this to run some pricing models for your mom (be careful of the hard sell by the broker, though).

RE cycles vary, but we are clearly heading into a cooling period. Interest rates should increase or stay stable for at least the next 12 months.

[/ QUOTE ]

Thanks for the response. How can she go about finding someone who specializes in lakefront properties? She's reaching the point where it's either sell ASAP or succumb to foreclosure. She's fine financially otherwise, (this may not make sense...but..) but we'd really like to liquidate the property as soon as possible. Any advice?

Re: Ask tommy2 about Real Estate
 

I'd buy. Breakeven period is usually 2-3 years, so worst case scenario you breakeven on a buy.

Hire a buyer broker (paid by the seller's broker in a commission split)--tell them up front you want to find a real good deal and want to see lots of units. A young agent will probably be more honest and more willing to shuttle you around than an older one.

Look also in the RE section of the local paper, especially on Sundays. Usually pretty good articles in there about the local market dynamics.

Re: Ask tommy2 about Real Estate
 

Google the name of the lake and something like "properties for sale". Broker names should pop up with the listings. Look for ads that make you interested and want to buy and call that agent. Alternatively, call the assesors office (where you pay your property taxes) and ask them for names of brokers for the lakefront properties. Agents are always sniffing around the tax rolls and plat maps.

Re: Ask tommy2 about Real Estate
 

As an update to the real estate discussion we had about 3 months ago...

I am now seeing clear signs in the commercial real estate market that the commercial real estate market is showing a clear divergence between A&B product (which the REITs and institutions are still overpaying for) and C&D product which is changing dramatically. The spread between contract price and closing price is growing (meaning that retrading abounds) and the appraisers/lenders have tightened up a bunch.

What does this mean? For those of you thinking of putting your money into commercial real estate (strip centers, office buildings, even 4 flats or duplexs that are for investment purposes), be aware that the market is in a state of flux right now and that sellers are starting to panic. Keep your bids low and hold firm. More to come.

Cross posted in Finance and Investing

Re: Ask tommy2 about Real Estate
 

next year i will probably sell my house and will probably have around $100k in equity in it. what is the best way to leverage this into another home so i can maximize my next purchase?

my wife and i make a modest income and dont want our mortgage payment to increase dramatically. where should this $100k be used?

Re: Ask tommy2 about Real Estate
 

Tommy,

Really glad you posted this thread. I'm currently in DC (terribly overpriced), and will probably be moving back to the Chicago area in the next 2-3 years.

Any suggestions on the best neighborhoods to look at that still aren't too overpriced? I'd obviously prefer a townhome over a condo, but I'm probably priced out.

I miss chicago!

Re: Ask tommy2 about Real Estate
 

[ QUOTE ]
There are so many other ways to get into RE than flipping. Honestly, I think this is one of the most dangerous RE plays out there. Even guys who are professional General Contractors lose more often than they win at this game. If I were just starting out, I'd go the syndication route. Get 10-20 people together who have 10-20K each and buy a small retail or light industrial building through an LLC. Keep your leverage reasonable (less than 75%) and you can make a ton of money if you are cautious and patient. Give your partners back small checks on a regular basis and maintain your integrity at all times. Others will flock to you to repeat.

[/ QUOTE ]

could you explain this a bit more? or point me in the direction where i could find out more information.

also to note, your replies are hard to follow since youre not using quotes.

Re: Ask tommy2 about Real Estate
 

[ QUOTE ]
As an update to the real estate discussion we had about 3 months ago...

I am now seeing clear signs in the commercial real estate market that the commercial real estate market is showing a clear divergence between A&B product (which the REITs and institutions are still overpaying for) and C&D product which is changing dramatically. The spread between contract price and closing price is growing (meaning that retrading abounds) and the appraisers/lenders have tightened up a bunch.

What does this mean? For those of you thinking of putting your money into commercial real estate (strip centers, office buildings, even 4 flats or duplexs that are for investment purposes), be aware that the market is in a state of flux right now and that sellers are starting to panic. Keep your bids low and hold firm. More to come.

Cross posted in Finance and Investing

[/ QUOTE ]

Excellent follow up to your original thread!

Question: I have for a couple of years now sat on some cash waiting for "blood in the streets" with the intention of buying a few properties I have been interested in. I can either go 75% Commercial (office and retail) and 25% residential (condos in desirable locations which have taken a beating are my target) or the other way around. Any suggestions on the best split for my capital?

Re: Ask tommy2 about Real Estate
 

[ QUOTE ]
next year i will probably sell my house and will probably have around $100k in equity in it. what is the best way to leverage this into another home so i can maximize my next purchase?


my wife and i make a modest income and dont want our mortgage payment to increase dramatically. where should this $100k be used?

[/ QUOTE ]




Ever thought about buying a 4 flat (depending on where you live this might be more or less property for 100K down) and having other tenants subsidize your mortgage while you build wealth?

Re: Ask tommy2 about Real Estate
 

[ QUOTE ]
Tommy,

Really glad you posted this thread. I'm currently in DC (terribly overpriced), and will probably be moving back to the Chicago area in the next 2-3 years.

Any suggestions on the best neighborhoods to look at that still aren't too overpriced? I'd obviously prefer a townhome over a condo, but I'm probably priced out.

I miss chicago!

[/ QUOTE ]

I'm in commercial real estate, so I am not that clued in to residential stuff...but, I'd look at Logan Square as a starting point. Is it simply a case of economics? If so, there will be cheap condos all over Chicago in 2 years. Thousands of units are still coming on line into a market that is at best at equilibrium.

Re: Ask tommy2 about Real Estate
 

what is your advice for someone in college who wants to invest in RE once he gets out? (m taking finance and computer science in college, and will be out in 2 years. While Im in college I have no living expenses and plenty of free time.

When id' get out, id like to invest in some apartments, or flip some houses.

How would I gain experience? How would I gain capital to purchase the house/land.

Any other info I should know? I live in bay area btw. And dont plan investing in cali (in near future)