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  #41  
Old 11-26-2007, 12:44 PM
spex x spex x is offline
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Default Re: Real Estate people: I want to buy a house, advice?

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spex, what kind of experience do you have w/ apartments? from your posts (which are usually very informative) ive only seen you mention residential w/ the exception of the mobile home park you were considering. im curious about your commercial experience.

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I own about 50 apartment units, two mobile home parks and a few scattered single families and duplexes. I'm currently trying to sell off everything and only focus on mobile home parks. I'm also looking for self storage facilities and developing a manufactured home subdivision (slowly). In the past I've also owned warehouses, commercial retail space, etc. I have limited experience buying and selling commercial and residential real estate paper.

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one reason i ask my friend is a commercial real estate broker and runs his own biz. we've talked about going in on a deal together down the road. initially we spoke about a small apartment but he tends to think there's better money in storage units.

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I'd agree with your friend, there is money in storage units. Of course, there is money in apartments and other residential investments as well. I don't currently own storage, but my impression is that its less management hassle than apartments and such.

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he says the best deals he's seen in the biz are on a small place w/ extra land and high vacancy rate, build extra units and lower vacancy rate and sell. timeline would be 1-2 years. any thoughts or experience w/ this?

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Yes, I'd agree with this assessment. The ideal RE find, IMO, is a great property that has been managed poorly. Extra land is all the better. Since commerical property is valued based on income, it can sometimes be pretty easy to buy a poorly managed property cheap, bring it up to its full potential, then resell it after a few years of operation.

Generally for these properties there is some phycial rehab and capital improvements that must be made in order to get the place in order. So you either gotta get great flexible financing or have the cash avaiable to put the deal together.
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  #42  
Old 11-26-2007, 01:10 PM
spex x spex x is offline
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Default Re: Real Estate people: I want to buy a house, advice?

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Spex,

One of the things that is freaking me out is the increasing vacancy rates in PHX. I am worried about all these failed flips being dumped on the rental market and forcing rents lower. Are you renting units right now and if so do rents look like they are softening to you?

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Yes, I'm renting units now, both apartments, single family homes, and mobile homes. Its really hard for me to say if rents are softening. I focus exclusively on very low-end properties, catering to Section 8 tenants and young families. In short, I rent to poor people, and there always seems to be enough to fill my rentals.

While I focus on poor people, I also provide the BEST low income housing in my area by far. I'm not cheap and I keep the properties in nice condition. So I tend to attract the best quality tenants in the market segment I'm after.

Basically what I'm saying is that other landlords might be experiencing higher vacancy rates than I am and I'm not aware of it. On the other hand, I'm pretty plugged into the RE investor community around here and I haven't as of yet heard much complaining.

I think that the wait vs. buy now debate depends a lot on the situation of the person buying and the market in which they're looking. If you want to buy for your own personal use, maybe you could wait a year or whatever and see what happens.

You could also maybe get into a favorable lease/option situation from a motivated seller where a significant portion of the rent goes toward the purchase price. If when the time comes, the option is in the money, you buy. If not, you allow the option to expire and you're not out anything more than the rent you would've paid anyway plus whatever option money was paid (usually 3% of the purchase price).

IMO, a good deal will alleviate all your worries about potential problems with a property. If you're worried about high vacancy, just factor that into the value of the property and don't offer as much. For EVERY property there is a price at which that property is a good deal. Its up to us to decide our price given the market that we're shopping in. If you look hard enough for long enough, sooner or later you'll find a property that fits your general criteria.

Edit: I'll add that the increased vacancy rates might not necessarily add up to difficulty renting your specific property. It depends on the market segment that you're after. I don't know the PHX market, but my guess is that the vast majority of the foreclosures are in the higher end homes as that seems to be where lots of the speculation has been taking place.

Obviously, high end homes rent for lots of money. Most people who can spend lots of money on housing would rather buy than rent unless they have a compelling reason to rent. The people who rent their housing do not, as a rule, have lots of money.

At the same time, there are lots of people getting foreclosed on. Of couse, given their financial situation they can't afford high rents either. So they have to downgrade and rent a house that is more affordable.

In my estimation you've got all the lower/middle income renters from before the housing crisis PLUS all the potential renters that are losing homes. They're all competing for the lower/middle rent-level homes and apartments.

In sum, there might be a significant undersupply of lower/middle income rentals even while the vacancy rate is increasing. All the high-end homes are getting turing into rentals but there aren't many why can afford them, so they sit unrented and all the time more and more and more are becoming available.
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  #43  
Old 11-26-2007, 02:16 PM
spex x spex x is offline
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Default Re: Real Estate people: I want to buy a house, advice?

[ QUOTE ]

he says the best deals he's seen in the biz are on a small place w/ extra land and high vacancy rate, build extra units and lower vacancy rate and sell. timeline would be 1-2 years. any thoughts or experience w/ this?

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I was reading over this again and I realized that I left out something in my earlier response. The only issue that I can see with this strategy is the 1 to 2 year timeline. Most serious investors that I know like to see at least 3 to 5 years of operating information before they commit to buying. Banks also like to see at least 3 to 5 years. Thats not a hard and fast rule, but generally its the case.

Also, commercial properties generally sit on the market for some time before getting purchased. Obviously that depends on the cap rate that you're offering, the property, your market, etc. But they don't normally sell quickly unless you're offering a significant discount. So say you buy 20 units cheap, build 20 more units, and get within striking distance of a resonable vacancy rate. That property could sit for sale for 9 or 12 months under NORMAL conditions. If banks are being stingy, it'll take longer. If your friend is a commercial broker, he'll know better than me how long it'll take to sell the property.

In any case, 1 to 2 years to buy a property, renovate, build additional units, get them filled, and get the property sold is highly optimistic IMO. Hell, 2 years is optimistic, 1 year is downright impossible. I mean, you'll be working with city governments, neighborhood associations, requesting zoning changes possibly, etc. I'd guess that 3 years for this project would be a safe minimum depending on what kind of units you're building and your exit strategy.
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  #44  
Old 11-26-2007, 03:58 PM
dknightx dknightx is offline
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Default Re: Real Estate people: I want to buy a house, advice?

From what i've heard is that the housing market in the seattle/bellevue area is still going up (while the rest of the country is going down). First, is this true? Second, if it is, then would it be a good idea to purchase a high-rise condo in the bustling and super-fast growing downtown bellevue?
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  #45  
Old 11-26-2007, 04:19 PM
bwana devil bwana devil is offline
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Default Re: Real Estate people: I want to buy a house, advice?

spex, good insight. thanks.

i thought one year may be too optimistic but thought two years was realistic. i'll consider a longer time line with the comments you made.
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  #46  
Old 11-26-2007, 06:04 PM
prohornblower prohornblower is offline
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Default Re: Real Estate people: I want to buy a house, advice?

[ QUOTE ]
From what i've heard is that the housing market in the seattle/bellevue area is still going up (while the rest of the country is going down). First, is this true? Second, if it is, then would it be a good idea to purchase a high-rise condo in the bustling and super-fast growing downtown bellevue?

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I'm not sure if it's true or not, but if it is, lol at buying into that market right now. Major lol. Terrible idea.
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  #47  
Old 11-26-2007, 06:21 PM
dknightx dknightx is offline
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Default Re: Real Estate people: I want to buy a house, advice?

[ QUOTE ]
[ QUOTE ]
From what i've heard is that the housing market in the seattle/bellevue area is still going up (while the rest of the country is going down). First, is this true? Second, if it is, then would it be a good idea to purchase a high-rise condo in the bustling and super-fast growing downtown bellevue?

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I'm not sure if it's true or not, but if it is, lol at buying into that market right now. Major lol. Terrible idea.

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why is it a bad idea if the market is still growing in that area?

so what should i do instead then? rent for a few years until the market stabilizes?
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  #48  
Old 11-26-2007, 08:45 PM
prohornblower prohornblower is offline
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Default Re: Real Estate people: I want to buy a house, advice?

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
From what i've heard is that the housing market in the seattle/bellevue area is still going up (while the rest of the country is going down). First, is this true? Second, if it is, then would it be a good idea to purchase a high-rise condo in the bustling and super-fast growing downtown bellevue?

[/ QUOTE ]

I'm not sure if it's true or not, but if it is, lol at buying into that market right now. Major lol. Terrible idea.

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why is it a bad idea if the market is still growing in that area?

so what should i do instead then? rent for a few years until the market stabilizes?

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Because that market is already way overpriced as it is and you're telling me it keeps getting worse. I'd assume you can't treat Seattle like it's in a vacuum. Take a look at what is happening across the board (across the US). Prices are plumetting. I can't predict the future, but my intuition tells me that if Seattle is still doing well, it may be a matter of time before the same happens there.

But hopefully some of the other smarter folks will chime in here. I don't know much about RE. You may want to rent and save. Take a look at the cost of renting vs. the cost of owning in the areas of which you speak. (Bellevue, etc.)
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  #49  
Old 11-26-2007, 08:51 PM
maxtower maxtower is offline
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Default Re: Real Estate people: I want to buy a house, advice?

If you can buy the Seattle place cheaper than renting its a good deal. If not, then you're in a bubble. Its that easy.
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  #50  
Old 11-26-2007, 10:02 PM
scotchnrocks scotchnrocks is offline
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Default Re: Real Estate people: I want to buy a house, advice?

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If you can buy the Seattle place cheaper than renting its a good deal. If not, then you're in a bubble. Its that easy.

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It's probably never going to be cheaper to own that to rent over the first few years in a desirable location, even in a buyer's market.
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