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Real Estate Questions? Ask me here. Buying/Selling/Investing

taz

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The real estate market is insane and MOST of the people talking about it truly do not understand it and are only trying to get clicks up. I am a real estate Professional and absolute ADDICT when it comes to the business. Whether you are buying, selling, or investing, I am happy to provide as much assistance as I can and help point you in a positive direction. I am in the business and while I cannot provide DEAL SPECIFIC advice, unless you are in my state, I can gladly give you some tips. I handle residential real estate only. And while I do have some history with commercial, I am not an expert by any means and cannot do much to help in that area.
 

cuz

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Do you think the market will come down to where it was 2 years ago?
 

Wonton

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The real estate market is insane and MOST of the people talking about it truly do not understand it and are only trying to get clicks up. I am a real estate Professional and absolute ADDICT when it comes to the business. Whether you are buying, selling, or investing, I am happy to provide as much assistance as I can and help point you in a positive direction. I am in the business and while I cannot provide DEAL SPECIFIC advice, unless you are in my state, I can gladly give you some tips. I handle residential real estate only. And while I do have some history with commercial, I am not an expert by any means and cannot do much to help in that area.
Exactly
You see softening in the market ?

When do you anticipate the down turn will occur

I believe next year down turn will definitely be in fuller effect
Interest rates climbing , recession def even if only for 2 years will happen

This will allow prices to migrate to real price points
 
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taz

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Do you think the market will come down to where it was 2 years ago?
No. Pricing is advancing so far that even if we see a pullback, in the grand scheme, it is really not a serious drop. For example, a house for $300,000 in 2021 was selling for over $400,000 this year. And those offers are still driving prices up. So by the end of the year we could see comp values getting up as high as $435,000. If we do see a pullback of say, 10%, that house drops to roughly $390,000.
In a normal residential market you can expect on average about 7-10% per year on your home. Rough numbers.
So, using that metric, a $300,000 house should only be worth about $320-330,000 in a years time.
We would need to have a pullback of nearly 25% to reach that.
That is exceptionally unlikely to happen. Rates haven't gone high enough to push off the buyers and banks havent pulled back on approving underwriting. Appraisers are approving prices
Realistically, rates are really just not that high. The only seem high when compared to the easy money loan times of the last 2 years. But over the last 40yrs, rates are still very low.
 

taz

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Exactly
You see softening in the market ?

When do you anticipate the down turn will occur

I believe next year down turn will definitely be in fuller effect
Interest rates climbing , recession def even if only for 2 years will happen

This will allow prices to migrate to real price points
We are getting a softening in certain parts of the market. But it is all relative. For example, a nice move-in ready house right now will get list plus maybe 10%. However, a home that has been totally reno'd and is completed up to current standards and beautifully finished will get list plus as much as 30%
By that same token though, a house that is not fixed up and very dated and in need of work will get less than list in many cases with inspections being back on the table.
It is all relative to the house and the finishings.
 

Wonton

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We are getting a softening in certain parts of the market. But it is all relative. For example, a nice move-in ready house right now will get list plus maybe 10%. However, a home that has been totally reno'd and is completed up to current standards and beautifully finished will get list plus as much as 30%
By that same token though, a house that is not fixed up and very dated and in need of work will get less than list in many cases with inspections being back on the table.
It is all relative to the house and the finishings.
Good info

Thank you

All this is interesting should be nice to see it play out
 
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SL1CED

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The real estate market is insane and MOST of the people talking about it truly do not understand it and are only trying to get clicks up. I am a real estate Professional and absolute ADDICT when it comes to the business. Whether you are buying, selling, or investing, I am happy to provide as much assistance as I can and help point you in a positive direction. I am in the business and while I cannot provide DEAL SPECIFIC advice, unless you are in my state, I can gladly give you some tips. I handle residential real estate only. And while I do have some history with commercial, I am not an expert by any means and cannot do much to help in that area.

Alright let's talk. I'm going to be a bit selfish, and talk from my perspective but simply cause I need some guidance. When do you leverage?

I'm thinking of pursuing low-end properties that are structurally up to date(hvac, water heater, roof, pier & beam, plumbing, electrical, etc.) in cities that do not have a not high cost of living--if anything a low one-- that are going to cash flow. And when doing that, leveraging 30-60% paying cash for the difference but having enough cash for 100% of the property for vacancies, repairs, etc. All under a LLC, even if it means a hard lender.

My fear for not leveraging is opportunity cost for property 2, 3, and forward in a quicker time span if i feel the opportunity arises and need the quick & ready cash. My fear for leveraging is just like any fear of occurring debt. Rates aside, that stuff will subside in 2-5 years & can re-fi. I'm looking to do this more so actively in 10-15 months not today.

Second question, what are your thoughts on such locations? I know a lot of people want to go after areas that have already been saturated, I'm thinking lesser known areas that are easily accessible(major airports), similar climates, but offer affordable living so this may be a draw for future generations(Greenville, Columbia, Fayetteville, San Antonio, but also Cleveland, Detroit, Indianapolis, Minneapolis).
 
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akajavman

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Only problem with San Antonio Austin area is water! Not enough and is becoming a major problem! Just saying!
 

juggy38

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I want to buy small properties, and set it up for furnished living for travel medical professionals in these small towns without much opportunities of places to stay.

If you could realistically get $1,200 a month for a furnished 2 bedroom duplex or small house, what amount of investment should I try to stay under? Like…how much could I pay and make a profit,
 

taz

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Alright let's talk. I'm going to be a bit selfish, and talk from my perspective but simply cause I need some guidance. When do you leverage?

I'm thinking of pursuing low-end properties that are structurally up to date(hvac, water heater, roof, pier & beam, plumbing, electrical, etc.) in cities that do not have a not high cost of living--if anything a low one-- that are going to cash flow. And when doing that, leveraging 30-60% paying cash for the difference but having enough cash for 100% of the property for vacancies, repairs, etc. All under a LLC, even if it means a hard lender.

My fear for not leveraging is opportunity cost for property 2, 3, and forward in a quicker time span if i feel the opportunity arises and need the quick & ready cash. My fear for leveraging is just like any fear of occurring debt. Rates aside, that stuff will subside in 2-5 years & can re-fi. I'm looking to do this more so actively in 10-15 months not today.

Second question, what are your thoughts on such locations? I know a lot of people want to go after areas that have already been saturated, I'm thinking lesser known areas that are easily accessible(major airports), similar climates, but offer affordable living so this may be a draw for future generations(Greenville, Columbia, Fayetteville, San Antonio, but also Cleveland, Detroit, Indianapolis, Minneapolis).
Leverage can get you very wealthy very fast. But it can also absolutely crush you with very little advance notice or ability to get your positions changed before the smack. I always suggest staying away from hard money if you can help it. I just have not found many that have terms that are reasonable or conducive to your personal growth. The whole idea of hard money is for wealthy guys to take advantage of challenged investors by setting them up for a one sided victory. That is why almost every investor in the business stops using hard money the very instant they possibly can.
In terms of specific solutions or suggestions, I would be totally off base trying to suggest something for you right now since the market is in transition and you are considering a holdout period of us to 15 months. Anything I tell you today could be very misleading and I do not want to do that. When you do decide you are starting to want to go in that direction I am 100% willing to give you any suggestions or information that I have to help.
As for the markets, i would recommend you instead look for areas that offer things that are more in line with your specific goals.
For example,if you are looking for flip style properties then you want to focus on growth communities where housing is way below need. You want to be within an area that has high levels of well paying jobs, a stable local economy, low crime rate and very high school ranking scores. Because you need to have buyers who can pay top dollar and you want to appeal to stronger demographics.
If you are looking instead for buy and hold type properties to grow your portfolio then you need to focus on areas where JOBS (not necessarily careers, but jobs) are plentiful and colleges are close by. You want to be in markets where taxes are low for investor owners. You want to look for areas that offer more lifestyle type things like bars, restaurants, parks, shopping, activities. Strong community type areas. Because your end user is different than in flipping.
Target your market to your goals. Then get very dialed in on that.
 

taz

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I want to buy small properties, and set it up for furnished living for travel medical professionals in these small towns without much opportunities of places to stay.

If you could realistically get $1,200 a month for a furnished 2 bedroom duplex or small house, what amount of investment should I try to stay under? Like…how much could I pay and make a profit,
I am going to give you some VERY ROUGH numbers to use as a template. But remember that every deal is different and depending on several variables, your needs and numbers could be very different.
BUT, you generally want to hit a range of .75-1.0 to your purchase price every month for a return. What I mean is this:

If you find a property for $300,000, you need to have a MONTHLY RENT RATE of $2250 (300,000x.75%) to $3000 (300,000x1.0%), or higher.

Again, this is a general rule of thumb for a beginning investor looking at single property or duplex style property. Things change when you go over 4doors on a single property.
Your profit is depending on so many factors that I would suggest you and I set up a live phone call so I can give you a more thorough explanation. If you ever want to do that, shoot me a PM and we can arrange that. I could write a 20 paragraph response on what it takes and how you become profitable and it would just be too long.
Profit is up to you and how you measure it. If you consider profit the difference between your mortgage and your rent payment, that is one metric. But if you consider profit the difference between your investment, ongoing expenses, and incoming cash, then that is a very different number.
On an investment property right now you are looking at a likely mortgage cost of about 8% mortgage (many lenders charge at least 1 point higher than standard mortgage rate for investments). So at 8% you will be paying 7.34 per 1000 borrowed, not including taxes.
So let's do some math. On a $300,000 property you will need 25% down for investment (very typical requirement for novice investors), so that puts you at a mortgage of $225,000. So you will have $225 thousands to borrow. Or $225 x $7.34 for mortgage. That gives you a raw mortgage of $1651.50. If you are in a reasonable tax area of $4000/yr, that adds another $333 per month for a total of $1984.50.
Your rental at $1200 will be a loss of $784.50/mo (not counting any other fees, HOA/condo charges, etc)

If we guesstimate $4000/yr in taxes ($333/mo) and we use your $1200 as the number to work with (1200-333 = $867) then you need to have a mortgage NO HIGHER than ($834 divided by $7.34=$118) $118,000 or a total of $157,333 when you factor you are putting 25% down up front. ($118,000/75%). Even at that number, you are in a relative breakeven with rent to expenses.

I hope that makes sense and I am very very sorry for being so long winded. I just wanted to give you as much information as possible given the question.
 

juggy38

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Oct 28, 2008
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I am going to give you some VERY ROUGH numbers to use as a template. But remember that every deal is different and depending on several variables, your needs and numbers could be very different.
BUT, you generally want to hit a range of .75-1.0 to your purchase price every month for a return. What I mean is this:

If you find a property for $300,000, you need to have a MONTHLY RENT RATE of $2250 (300,000x.75%) to $3000 (300,000x1.0%), or higher.

Again, this is a general rule of thumb for a beginning investor looking at single property or duplex style property. Things change when you go over 4doors on a single property.
Your profit is depending on so many factors that I would suggest you and I set up a live phone call so I can give you a more thorough explanation. If you ever want to do that, shoot me a PM and we can arrange that. I could write a 20 paragraph response on what it takes and how you become profitable and it would just be too long.
Profit is up to you and how you measure it. If you consider profit the difference between your mortgage and your rent payment, that is one metric. But if you consider profit the difference between your investment, ongoing expenses, and incoming cash, then that is a very different number.
On an investment property right now you are looking at a likely mortgage cost of about 8% mortgage (many lenders charge at least 1 point higher than standard mortgage rate for investments). So at 8% you will be paying 7.34 per 1000 borrowed, not including taxes.
So let's do some math. On a $300,000 property you will need 25% down for investment (very typical requirement for novice investors), so that puts you at a mortgage of $225,000. So you will have $225 thousands to borrow. Or $225 x $7.34 for mortgage. That gives you a raw mortgage of $1651.50. If you are in a reasonable tax area of $4000/yr, that adds another $333 per month for a total of $1984.50.
Your rental at $1200 will be a loss of $784.50/mo (not counting any other fees, HOA/condo charges, etc)

If we guesstimate $4000/yr in taxes ($333/mo) and we use your $1200 as the number to work with (1200-333 = $867) then you need to have a mortgage NO HIGHER than ($834 divided by $7.34=$118) $118,000 or a total of $157,333 when you factor you are putting 25% down up front. ($118,000/75%). Even at that number, you are in a relative breakeven with rent to expenses.

I hope that makes sense and I am very very sorry for being so long winded. I just wanted to give you as much information as possible given the question.

Damn brother, that was awesome! And I’ll for sure DM you.

And I was being very conservative with $1,200. The places I stay 2 bedroom are closer to 1,400-1,600 furnished and close to local hospitals.
 
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SL1CED

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Leverage can get you very wealthy very fast. But it can also absolutely crush you with very little advance notice or ability to get your positions changed before the smack. I always suggest staying away from hard money if you can help it. I just have not found many that have terms that are reasonable or conducive to your personal growth. The whole idea of hard money is for wealthy guys to take advantage of challenged investors by setting them up for a one sided victory. That is why almost every investor in the business stops using hard money the very instant they possibly can.
In terms of specific solutions or suggestions, I would be totally off base trying to suggest something for you right now since the market is in transition and you are considering a holdout period of us to 15 months. Anything I tell you today could be very misleading and I do not want to do that. When you do decide you are starting to want to go in that direction I am 100% willing to give you any suggestions or information that I have to help.
As for the markets, i would recommend you instead look for areas that offer things that are more in line with your specific goals.
For example,if you are looking for flip style properties then you want to focus on growth communities where housing is way below need. You want to be within an area that has high levels of well paying jobs, a stable local economy, low crime rate and very high school ranking scores. Because you need to have buyers who can pay top dollar and you want to appeal to stronger demographics.
If you are looking instead for buy and hold type properties to grow your portfolio then you need to focus on areas where JOBS (not necessarily careers, but jobs) are plentiful and colleges are close by. You want to be in markets where taxes are low for investor owners. You want to look for areas that offer more lifestyle type things like bars, restaurants, parks, shopping, activities. Strong community type areas. Because your end user is different than in flipping.
Target your market to your goals. Then get very dialed in on that.

Fair points. But curious how much cash do you think you need for say a $300k investment property. All the cash details from downpayment, reserves, closing costs, LLC costs, itty bitty fees in and in between?

My math is the following

Downpayment(min 25%): $75,000
Closing Costs: $9,000(4% of mortgage value)
LLC Fees: $1,250
Reserves: $9,000(6 months of estimated rent at 1,500)
Extra Reserves: $10,000(for capex, repairs, etc.)
Management Fee: $1,500(1 month's rent)

Just under $106,000. Is that about right you think?
 

taz

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You are pretty close actually. Closing costs are relative to the market and how the contract gets written (ie transfer taxes equally shared between parties, or seller paying all transfer, or buying paying all transfer) as well as the amount (in my area we are 2% transfer tax, or 1% per side, but in Philly it is 2.139% each side). Also, depending on your loan officer they may run you at lesser origination fees like dropping it from $1200 down to $500 for repeat business. Little things like that. But it adds up.
Also, when you close is very important. And this goes across the board for EVERYONE!!!

ALWAYS CLOSE ON YOUR HOUSE/PROPERTY IN THE FIRST 7 DAYS OF THE MONTH!!!!!!!! Never close at the end. It is a long explanation so I will hold that for later.

Forget management fees for your first 2 years while you get your feet wet and learn your property. I always recommend that investors first run their own properties and then if they find that they cant do it, then hire it out and farm it out with the right agreement in place. But you should not be having a management company until you are beyond 5 doors and your total input time exceeds 20hrs a week.

I think you can set it up for under $100,000 but not too much.
 

SL1CED

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You are pretty close actually. Closing costs are relative to the market and how the contract gets written (ie transfer taxes equally shared between parties, or seller paying all transfer, or buying paying all transfer) as well as the amount (in my area we are 2% transfer tax, or 1% per side, but in Philly it is 2.139% each side). Also, depending on your loan officer they may run you at lesser origination fees like dropping it from $1200 down to $500 for repeat business. Little things like that. But it adds up.
Also, when you close is very important. And this goes across the board for EVERYONE!!!

ALWAYS CLOSE ON YOUR HOUSE/PROPERTY IN THE FIRST 7 DAYS OF THE MONTH!!!!!!!! Never close at the end. It is a long explanation so I will hold that for later.

Forget management fees for your first 2 years while you get your feet wet and learn your property. I always recommend that investors first run their own properties and then if they find that they cant do it, then hire it out and farm it out with the right agreement in place. But you should not be having a management company until you are beyond 5 doors and your total input time exceeds 20hrs a week.

I think you can set it up for under $100,000 but not too much.

Save a month's worth of payment?

Property management becomes a prospect because I may not buy locally.
 

AiaVqsa

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That sounds about right to me. I would say you could probably get away with a little less in reserves since you can always dip into your extra reserves if needed, but it's always better to be safe than sorry. As for the management fee, it really depends on how hands-on you want to be with your property. If you're okay with dealing with tenants and repairs yourself, you could probably get away with a lower management fee. But if you want to be completely hands-off, you might need to pay a higher fee. For example, I worked with the experts from https://grupoecoquintas.com/ that found me a great property with "with all-inclusive" but with a fair management fee.
 

SL1CED

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You are pretty close actually. Closing costs are relative to the market and how the contract gets written (ie transfer taxes equally shared between parties, or seller paying all transfer, or buying paying all transfer) as well as the amount (in my area we are 2% transfer tax, or 1% per side, but in Philly it is 2.139% each side). Also, depending on your loan officer they may run you at lesser origination fees like dropping it from $1200 down to $500 for repeat business. Little things like that. But it adds up.
Also, when you close is very important. And this goes across the board for EVERYONE!!!

ALWAYS CLOSE ON YOUR HOUSE/PROPERTY IN THE FIRST 7 DAYS OF THE MONTH!!!!!!!! Never close at the end. It is a long explanation so I will hold that for later.

Forget management fees for your first 2 years while you get your feet wet and learn your property. I always recommend that investors first run their own properties and then if they find that they cant do it, then hire it out and farm it out with the right agreement in place. But you should not be having a management company until you are beyond 5 doors and your total input time exceeds 20hrs a week.

I think you can set it up for under $100,000 but not too much.

You ever transfer mortgage to a LLC, and if so, any issues with due on sale clause?
 

UnholyAlliance

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You ever transfer mortgage to a LLC, and if so, any issues with due on sale clause?
Most likely you will have to get a new mortgage in the LLC's name should that happen but you may be able to get a refinance with your existing lender if your LLC has an established credit history. That clause you should look for in your mortgage documents and perhaps get advice from an attorney before you consider transferring an existing mortgage on a property to an LLC as you may also be required to sign an agreement to guarantee the mortgage personally.
 

pesty4077

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Big difference with real estate in other countries. Here in Romania, I didn't need a real estate agent. I just hired a lawyer for 500 euros to make sure all paperwork is in order legally. All those fees like closing costs, you don't see here. The only other fees were a notary and translator, which was dirt cheap. My property taxes are about 100 euros and this is a new 3 bedroom house. You be surprised what you get for your money here, but I noticed real estate is going up.
 

SL1CED

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Big difference with real estate in other countries. Here in Romania, I didn't need a real estate agent. I just hired a lawyer for 500 euros to make sure all paperwork is in order legally. All those fees like closing costs, you don't see here. The only other fees were a notary and translator, which was dirt cheap. My property taxes are about 100 euros and this is a new 3 bedroom house. You be surprised what you get for your money here, but I noticed real estate is going up.

Finite asset in a growing demand space, it's going to almost go up generally speaking. As for Romania versus other countries, my only fear owning property out of country is surveillance of it and government seizures. Not that, that couldn't happen in USA I think it would be far less likely than any other country.
Most likely you will have to get a new mortgage in the LLC's name should that happen but you may be able to get a refinance with your existing lender if your LLC has an established credit history. That clause you should look for in your mortgage documents and perhaps get advice from an attorney before you consider transferring an existing mortgage on a property to an LLC as you may also be required to sign an agreement to guarantee the mortgage personally.

I can transfer a mortgage under my name to my LLC's name through a quitclaim deed. It's just the bank's options to call on the due on sale provision. I just don't know how likely that is. I've heard it very rarely happens, but as we are in a higher interest rate environment a bank may be more likely and as we come out of it, the price of the house should go so up that may make it even more likely. I've heard only Wells Fargo is adamant about it, others don't care as you pay.
 

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