Ask tommy2 about Real Estate

[tommy2]

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Hi Tommy,

My uncle/aunt bought a 500 acre ranch near Salida Colorado. They then subdivided it into 30 acre mini ranches, added in roads and utilities, and sold off the lots for huge profit. In todays market is this still a viable investment strategy, and if so what are some of the issues involved in finding the right property/location/profit potential. And what are some good ways to raise capital for a project like this.

Thx.. BB

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The best ways to make money are...

Buy liquor by the bottle, and sell it by the shot,
Or land by the acre, and sell it by the lot.

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Good stuff.

[tommy2]

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what is an approximate buy price percentage for foreclosed properties (relative to similar re in the same area)? and the average build up costs to bring it within spec? i know this question has a lot of dependencies, but i'm trying to establish a gap between buying legitimate vs. foreclosures.

are there resources available to identify foreclosures since they aren't the kind to be listed in the mls site. will this be a cold calling the banks effort?

and finally what is your feeling about foreclosure rates on the coasts specifically Cali and the NE? sharp increase? seeing as how the bubble has primarily effected these areas.

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http://news.yahoo.com/s/nm/20070329/...foreclosure_dc

[fuzzwonder]

mucho gracias

[tommy2]

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mucho gracias

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By the way, I consider this to be THE story to watch as far as interest rates and macro RE stuff:

http://www.globalresearch.ca/index.p...articleId=5039

[Jesse Kidd]

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This can (and is) done in every city in the US. This is the standard non-stitutional, but professional, way to be a real estate investor. Many, many of the high flyers have partners in such a syndicated format, they just choose not to mention them.

Not sure about your second question. If you are in the RE game the big $$$ comes as you go up the learning and relationship curves. The first deal (and probably the first few deals) won't be home runs unless you get lucky. Way too many sharks in the ocean. But, as you get known as a serious player and (maybe more importantly) a good RE operator, more and more RE oportunities will come your way.

What does it mean to be a good RE operator. Basically, your two groups of clients (investors and tenants) are happy. Investors want the returns they were promised (and probably more--its all about a) finding the right kind of investors (patient and realistic) and b) managing (then exceeding) expectations. Project a 12% return if you think you can do 13-15% reasonably. Tenants want to be left alone, not nickled and dimed, and have you keep the property in good condition without spending too much of their money (if they are paying for the Common Area Maintenance--CAM and/or taxes).

Being a good operator is as important or more important than being savvy at finding opportunities and creating your financing stack.

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Thank you for the thread. I have always been intrigued by real estate, and have a quick question. If you're looking at a property that will earn 13% per year as described above, are you better off simply going the stock market route if you can beat the 13% average yearly rate? I realize that is a big "if", but assuming it is doable in the market, are there any other factors (less volatility seems to be a plus) that would make the real estate route a better option?

Jesse

[tommy2]

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This can (and is) done in every city in the US. This is the standard non-stitutional, but professional, way to be a real estate investor. Many, many of the high flyers have partners in such a syndicated format, they just choose not to mention them.

Not sure about your second question. If you are in the RE game the big $$$ comes as you go up the learning and relationship curves. The first deal (and probably the first few deals) won't be home runs unless you get lucky. Way too many sharks in the ocean. But, as you get known as a serious player and (maybe more importantly) a good RE operator, more and more RE oportunities will come your way.

What does it mean to be a good RE operator. Basically, your two groups of clients (investors and tenants) are happy. Investors want the returns they were promised (and probably more--its all about a) finding the right kind of investors (patient and realistic) and b) managing (then exceeding) expectations. Project a 12% return if you think you can do 13-15% reasonably. Tenants want to be left alone, not nickled and dimed, and have you keep the property in good condition without spending too much of their money (if they are paying for the Common Area Maintenance--CAM and/or taxes).

Being a good operator is as important or more important than being savvy at finding opportunities and creating your financing stack.

[/ QUOTE ]

Thank you for the thread. I have always been intrigued by real estate, and have a quick question. If you're looking at a property that will earn 13% per year as described above, are you better off simply going the stock market route if you can beat the 13% average yearly rate? I realize that is a big "if", but assuming it is doable in the market, are there any other factors (less volatility seems to be a plus) that would make the real estate route a better option?

Jesse

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Better? No. In fact its probably not equal because real estate is illiquid. One difference to think about is that I am unaware of many stocks that have a 13% dividend. If your RE return is cash on cash, you are taking that $ off the table, which reduces your risk. Me, I like real gains better than paper gains.

[administrator]

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This can (and is) done in every city in the US. This is the standard non-stitutional, but professional, way to be a real estate investor. Many, many of the high flyers have partners in such a syndicated format, they just choose not to mention them.

Not sure about your second question. If you are in the RE game the big $$$ comes as you go up the learning and relationship curves. The first deal (and probably the first few deals) won't be home runs unless you get lucky. Way too many sharks in the ocean. But, as you get known as a serious player and (maybe more importantly) a good RE operator, more and more RE oportunities will come your way.

What does it mean to be a good RE operator. Basically, your two groups of clients (investors and tenants) are happy. Investors want the returns they were promised (and probably more--its all about a) finding the right kind of investors (patient and realistic) and b) managing (then exceeding) expectations. Project a 12% return if you think you can do 13-15% reasonably. Tenants want to be left alone, not nickled and dimed, and have you keep the property in good condition without spending too much of their money (if they are paying for the Common Area Maintenance--CAM and/or taxes).

Being a good operator is as important or more important than being savvy at finding opportunities and creating your financing stack.

[/ QUOTE ]

Thank you for the thread. I have always been intrigued by real estate, and have a quick question. If you're looking at a property that will earn 13% per year as described above, are you better off simply going the stock market route if you can beat the 13% average yearly rate? I realize that is a big "if", but assuming it is doable in the market, are there any other factors (less volatility seems to be a plus) that would make the real estate route a better option?

Jesse

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The tax benefits from investing in real estate are fairly attractive.

[tommy2]

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This can (and is) done in every city in the US. This is the standard non-stitutional, but professional, way to be a real estate investor. Many, many of the high flyers have partners in such a syndicated format, they just choose not to mention them.

Not sure about your second question. If you are in the RE game the big $$$ comes as you go up the learning and relationship curves. The first deal (and probably the first few deals) won't be home runs unless you get lucky. Way too many sharks in the ocean. But, as you get known as a serious player and (maybe more importantly) a good RE operator, more and more RE oportunities will come your way.

What does it mean to be a good RE operator. Basically, your two groups of clients (investors and tenants) are happy. Investors want the returns they were promised (and probably more--its all about a) finding the right kind of investors (patient and realistic) and b) managing (then exceeding) expectations. Project a 12% return if you think you can do 13-15% reasonably. Tenants want to be left alone, not nickled and dimed, and have you keep the property in good condition without spending too much of their money (if they are paying for the Common Area Maintenance--CAM and/or taxes).

Being a good operator is as important or more important than being savvy at finding opportunities and creating your financing stack.

[/ QUOTE ]

Thank you for the thread. I have always been intrigued by real estate, and have a quick question. If you're looking at a property that will earn 13% per year as described above, are you better off simply going the stock market route if you can beat the 13% average yearly rate? I realize that is a big "if", but assuming it is doable in the market, are there any other factors (less volatility seems to be a plus) that would make the real estate route a better option?

Jesse

[/ QUOTE ]

The tax benefits from investing in real estate are fairly attractive.

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This is true. I spend most of my day doing every analysis above the tax line (because we have 100's of investors, each one with different tax preferences) so I often don't jump right to this. Good point.

[casey_brick]

tommy,

My wife and I will be buying our first home in a few months. We have saved $250k, and plan on buying a fixer upper in that price range. My question is are we better off paying cash for the property and then getting home equity loan for remodel, or putting down $150k mortgage balance and use cash for remodel?

[MasterLJ]

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tommy,

My wife and I will be buying our first home in a few months. We have saved $250k, and plan on buying a fixer upper in that price range. My question is are we better off paying cash for the property and then getting home equity loan for remodel, or putting down $150k mortgage balance and use cash for remodel?

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Why pay interest when you have the funds?

FWIW, I personally think that with $250K in liquid assets you can diversify your holdings. Buy an investment property, invest, etc. Not sure why you feel the need to pay cash for a house. But if you're itching to, don't pay interest when you have the cash, unless you can do something that yields better returns on the difference (which remodeling is not one of).

Also, be aware that in most cases remodeling has negative returns. This means you should only do it for your family's happiness and enjoyment, not as any sort of investment. In CA I believe the only profitable remodels are bathrooms and kitchens. Off the top of my head the return is about 8% on average.