Richard
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First before you even think about buying the house have it check out, completely. The last thing you need is to open up a wall and find out some really bad is wrong with the house.
If the house is solid, and you're talking, new windows, doors, bathroom(s), kitchen, etc. then take out a pen and paper a figure out what the loan will cost over six years, (I'd use a fixed mortgage 15 years) that way you can see if you'd be money ahead by buy and fixing the house up and selling it verses renting. (current rent X 12 X 6 for $500 it's 36,000)
If the dollars are right, then ask yourself this, what are the odds I'd have to leave before year 6? Anything less then 90% rent.
OK the Dollars are right, and you're locked into a job for the next 6 years then make a low offer. At least $20K (or more) under what they're asking. They might take it. It easier to go up on an offer then go down.
Hoped it helped.
EDIT
When you're doing the numbers, figure out what you could sell the house for today, (after you fix it up) not six years from now. After all you don't really know what the market will be six years from now, only what it is now. |
Oliviaa
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Hi… Couple in Florida,
In several states in the US, I work with a group of 5 people and have people you trust and are making a go at it, and just about any project will be a success.
I have met many people with preconceived ideas of me when I started I was very young and everyone thought I was going to buy the properties with my mother or something. I've bought and sold up to eight properties in one year. And enjoy real estate very much, through ups and downs, there is money to be made.
I understand that you have heard and have seen a slow down in the market. Yes, the real estate market is down. But since I've been working real estate since the last big disaster, a real estate investor can learn from their mistakes and make money in a down market as well as a in a bull real estate market - (when everything is going up). For one, that is great that you are young and have learned to work together in real estate. There are many old people that make real estate sound real hard to do. It may be ...for them. But when you are younger and full of ideas and able to piece them together, real estate and fix ups are not burdensome. Analyzing a property is quick, easy and has great rewards...it depends on your personality - how you take it.
I'm going to list some steps, I'm not sure at what level of understanding you are at real estate, so I may over explain in some areas, just incase.
For example there is a place for sale in Midwestern state for $8,000, I’m wondering why so cheap…well there are fix ups needed to be done. But the comp prices are about $40,000 to $45,000 for this area. I find out that there are $10,000 worth of work from several different contractors that each don’t know each other, this is the average price. So the work and the property price would bring this place to $18,000 or $20,000 just incase, that I would spend total. Then if I fix it, turn around and sell this below the comp prices (this will ensure my property will be looked at), at about $39 and settle for $35 or higher, I will let the property go quickly, the buyers will be happy and so am I, $17 to $20,000 comes back to me. OR I can keep it, get a loan on it (an 80/20 loan) which is 36,000 in my pocket and rent it out for $400 a month. Doing this about 10 times will give you a constant income of $4000 per month, and keep others working. This is a good time since the market is down to do this, since people will need to sell their properties more than ever since yes, the market is down.
I have changed my search of properties after the properties that I was doing in the LA area have gotten a little high. They are still here, but a lot less and the house prices are leveling out. An example of what I used to do in LA is basically: I bought two triplex’s right next to each other for $335,000 each, we put the price to $350,000 each and I pulled out $15,000 from my loan at the time of closing. That gave me $30,000 to do work on the property; the comp value at that time was going at $350,000. I held them for one year, and sold them both for $465,000 at the beginning of the year. After every thing was done and people were paid out, I collected about $100,000. (KEEP YOUR RECIPTS and TRACK any MONEY GOING OUT, YOU CAN WRITE IT OFF ON YOUR TAXES. By doing this, you will collect when you close on the property and when you do your taxes, for the year you sold your property.) I use a TAX PRACTITIONER, to review the taxes that my CPA does. They (tax practitioner) have a higher license.
These are the steps that I take:
1)Do a quick comp on your future property. This will show you what the other houses that you are going to purchase is basically worth; compared to the houses that are similar to the one you are going to have. You’ll want the area to be priced higher than your fix up of course. It’s what you plan your property to be at.
2)Who really owns your property and get the info on it? You can sign up (usually for free) with a title company. They ask that if you do use them, please refer business to them. There is also property information for free for each property through the county. For LA it’s: http://assessormap.co.la.ca.us/mapping/viewer.asp
3) Check for the amount of expenses to fix it up- either by you, you and others, or other handmen/contractors. And generally look at the area, but this doesn’t really matter, the number's do, only in a slow market does the area matter at times. Since the market is getting slow, of course go for the better area, you'll get a good price, sometimes like a "not-so good" area in a sellers' market. My triplexes had one of the tenants shot and left for dead in front of his house. And a guy in wheel chair was burned alive a block over from my triplexes. You are still going to make a profit. You look at the area’s numbers of the properties for sale in the area, that’s what counts.
4)Get a mortgage loan before you talk to the agent, like through a bank or a mortgage broker. Or pay for your property outright, like the ones in the Midwest. Banks don’t usually lend on anything less than 30,000 or sometimes a little higher.
5)Go purchase, have patience, enjoy the people you meet, be fair, be friendly, and stick to your schedule and have guts. That is respected, and your plan will be too. Especially when you are going to do much of the work, don't micromanage your workers, but give them expected results, your workers will see that and will want to do work with you again on the next project. You will see when working with them, who can do what. Also, they will see the quality of work you want and expect, and then you can let them take over and you won’t have to be there as much. The path will already be laid out for them.
Stop once in a while, regroup, and take your breaks (vacation)when your project is done. Go somewhere, like Italy, for Real Estate Field Work to get ideas for your next project.
6)Don’t worry, just don’t lose sight of your goals. It can get messy, when you are in the pits yourself and doing some of the work. Put someone in charge of keeping the paper work. Just don’t put it in one place and plan to sort it later. Your paperwork is the other half to making a profit.
7)When and if you sell, start selling yourself, on craigslist.org or something like that, you can put it up on the MLS yourself for $500 or go through an agent, or even your mortgage broker sometimes will have a buyer ready, and ask whoever you work for a discount on your percentage, since you will be a return customer.
In Florida, check out www.realist.com - for comps.
Also in Florida, check out a mortgage broker Jack Homsey. Very good investor broker.
Hope this helps.
-Olivia
Business Owner
Investor
Consultant
Veridian Industries
8033 W. Sunset Blvd. #505
West Hollywood, CA 90046
olivia@veridianindustries.com |
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