EXTREMELY FRUSTRATED - What Are Your Thoughts?
Hello all,
Here's a quick syopsis of my situation. I know everyone from the experienced to the newbie might have an opinion. I would truly value everyones', so please respond with even the simplest thoughts.
For years, I was a typical "paralysis by analysis" personality. I studied and dreamed for years about investing. Something always came up, whether grad school, work, relocation, whatever.
My wife and I recently celebrated getting rid of these excuses by making our first investment. NOW, here's something critical to know. We live in S. Florida. Palm beach county/Broward county area. We bought a new construction in a FAST growing area. 3/2.5 TH. Supposed to be done in Aug. We're ecstatic.
Anyhow, here's the question: We are not looking to reinvent the wheel. I know the formulas vary. There's plenty of ways to make $$ (flipping, wholesale, rehab, etc.). Our goal is to build our cash reserves to a point, by saving our own $, flipping new construction, rehabbing, etc.. where we can then afford to hold on to properties for rent. PROBLEM IS, it seems to us that after studying this part of FL the past few years, property values are out of control. Has anyone else experienced this? Inventory is scarce. EVERYONE and their mother is an investor. My concern is, I know the golden rule (according to some) is to not go outside, say, a 45 minute drive, b/c then the property one buys are not easily managable.
THOUGHTS? We're definitely not moving any time soon. We love it here. That said, we don't want to let this stop us.
Thanks so much in advance. Your life experiences and thoughts would be GREATLY appreciated!
Same thing Happend in Mass, Our house was built in 2001 for 225ish. My family moved in for 450 in 2003! Its beginning to stablize, and will go down, but its just a gross spike that happens in every market
[addsig]
This is the most basic rule of all. If you are doing what everyone else is doing you can expect to not make much money.
Buy something different. If houses are too highly priced look at commercial. If you cannot find something close find a partner someplace else.
If real estate doesn't work look at the stock market.
Look at what you have to invest (money, good credit, time, resources) and figure out a deal that uses those things most efficiently.
Look at what you don't have that you need. Find a partner which has those things.
Mark
I have encountered the same situation here in Southern California. Inventory is not scarce, it is over-priced. I have had to leave my are to do most of my investing. I do my investing in Las Vegas, Nevada – Phoenix, Arizona and Northern California.
I use Property Management Companies to care for my investments. I pay a monthly fee (usually lower than market) with a bonus based on the annual rents collected. This creates an incentive to report all rents received and to keep my houses rented.
If everyone there is investing in real estate, how are they going about doing it? Why are they beating you to the punch? Look for a strategy that is not as easy, that not everyone will know how to utilize as easily.
I would venture to say that most of these investors are simply buying property and renting them out. Plain vanilla investing. If so, why not get good at short sales and such and flip the properties to those plain vanilla investors. Just keep doing that over and over until the market starts to cool off...then start renting out to people when the profit potential on a flip is not as high.
If people in your area ARE doing shorts and flips and more advanced things, then simply work harder at beating them to the deals. If you have to, go to the courhouse every morning when they open to check the lis pendens list.
I myself would not consider going outside of my area, because it is harder to have a grasp on what FMV's are when you aren't as familiar with the area. It is sort of like the old adage of investing in stocks...."only invest in what you know about" dont go investing in tech if you have no idea what is going on in the industry.
That is just my two cents. Hope this helps some.
THANK YOU ALL SOOOOO MUCH FOR YOUR THOUGHTS.
I have done much reflection, and am going to put a gameplan in place that will allow my wife and I to take advantage of the correction that seems sure to come.
I am quite confidant that the opportunities right now lie with the commercial side - particularly larger mutli-unit rentals. Unfortunately, that takes cash/resources, so I need to do my homework and be better prepared.
Thanks again for all your thoughtful comments. BEST OF LUCK!
I read that last yr was the best appreciaton in homes ever. I am not sure what will happen to our rei prices though. You have the beach and you have the intercoastal. There is just so much land . Of course they are building the highrises by the water. I think if you can get good price you acn make some good money. Some people are going further and further north- to see what they can get by the ocean.Since your looking to flip I dont know that the 45 minutes rule means much.
#1 Congrats on taking the first step, scary for the inexperienced particularly in our S. FL market.
#2 Property values are "out of control" as you say, here anyway. And very inconsistent even within the same small communities, as you study them you will see what I mean.
#3 Inventory: There are deals EVERYWHERE, you just have to be very focusssed in the beginning. Try to find a type of property & type of Sales tactic- that you are comfortable working with, that falls in line with any financial limitations you may currently have, & that will realistically help you reach your ultimate goals. Be able to Plan each deal all the way through to your "exit" from the first time you see the property (you should always have multiple exit options / back-up plan on a property) , & then be prepared for any problems that might come up. DONT RUSH IT...Learn as much as you can from others.
Oh Yea...
#4 Dont worry about the distance! I'm in Coconut Ck as you see. And I am working alot in PortSL. 1 hour and 15 mins. Try 3 hours a day driving time. Who cares!!!!!!
I am making two more deals tomorrow on property in PSL and W. Palm. One w/motivated-distressed Seller no money down 20% below market, I will carry as a rental.
The other purchase @ 94K . 4 month sales report / CMA for the area returns nothing less than 125-130 range, and High side is 160-180K Average 155K Resale.
Obviously you can see that I am working the low end of S/F market here. I have partners that have been after me to invest in more expensive properties in nicer areas. The market here will demand that anyway eventually as the "low end" 75K-125K properties all but disappear. By my estimate it shouldnt be more than a couple of years the way things are going.
SG
You hit the nail on the head! I'm here in Hollywood and as you've seen, everyone and their mother is an investor. No lie, I went to a restaurant the other day and the chef handed me his business card. On one side it said the name of the restaurant, and on the other side it said "We Buy Hoses Cash". So, as you can see, there may be an abnormal amount of "Investors" in the market, but my instinct tells me not too many of them do it full time or have much experience. If your only looking to do 1 or 2 rehab deals a year then part time is all you need. If your looking to retire then it takes a lot more work. Whenever there are an abundance of "Investors" in the market it makes for a great opportunity to Wholesale deals. You can also make a killing with Preconstruction, but be prepared to be out of pocket about 20K for at least a year.
As far as the prices in the market are concerned, to me they are about 25% inflated. But, you also have to consider the fact that the baby boomers are getting ready to retire and they're all coming here to do that. The thing that concerns me most with the prices is that salaries have not increased exponentially with the real estate markets prices, so it's making houses unaffordable. This also creates a great opportunity for people to overfinance themselves and create a huge market for SUB2 deals. I guess my point is whatever the adversity is there are alternatives. Nothing is ever as easy as it seems and it always takes more work then expected. All in all it's more than possible, you'll just have to out work and out wit the competition. If you have access to cash and want to make HUUUGGGE Money, and want to get properties with 40% equity in them, then become a Hard Money lender and watch all the "Investors" default and hand over their properties.
I would suggest u read "Unlimited Real Estate Profit" by Marc Stehan Garrison, MBA, and Paula Tripp-Garisrron, $15.95 at u'r local book store. They offer a new prospective on outside u'r backyard, etc. Seems to fit u'r senario perfectly. Good luck!!!!!
Thanks, everyone. Your messages and kind thoughts are exactly why I come to this site. Sometimes, it just helps to have a sounding board. I appreciate your comments. Gives me a lot to think about.
Kind regards,
Steven
this is April 2004. You are in a very interesting spike upward climbing market . It is classic. Shades of history, does it never change? I read my grandfathers notes for 1927 to 1929 when the market dumped. Very similar.
Nobody could afford a house just too much money so you lived in rather ratty apartment houses. Tenements. But in keeping with how we lived back in those days not too bad. Most of the rain was kept out and if you could climb two flights of stair you could find a communal toilet.
Then 1929 and the interesting times of the early 30's. Rents plunged. Many many accumulators of properties were upside down.
Great game played in those days. You took over the properties and the so called equity was covered by second mortgages, or trust deeds at very little, if any interest. Try 40 to 50 years on an amortization schedule. Who did these terrible things? Why the Real Estate Investors of that day. Talk about Simon Legree zipping over the ice cubes.
We rented a three bedroom 2 bath apartment upstiars and downstairs in Beverly Hills for $35 a month. Move in pay one month and the next two were www.free.Of course we moved every three months and did it all over again. Hate to tell you how much it was prior to the crash of 1929. So the smarties made sweetheart deals and accumulated properties, based on the super cheap PMTD's that all those nice people had to take back. You know the ones that bought on the top of the peak.
Nothing changes, here we go again.
I am now watching second and third flip flops on prior foreclosed properties. Interesting most of the last time buyers are from overseas. Soooo we watch. Wish I was younger cause there should be enormous opportunities upcoming.
Of course it is all fun, Lucius 8-) 8-)
I'm from NY and people are pulling #'s out of the sky here. 2 brownstones on the same block can ask between $500k & $2mil....& are in need of work!
I'm a small business owner, so I had to invest outside of NY to build up enough cash flow to do what I wanted in my hometown (construction & rehab). I decided to expand my business by assembling out of state teams in "landlord friendly" states to handle all aspects of the process (purchase, financing, management, mail handling, gov't programs, et al) for the out of state investor.
In doing so I have met some great real estate professionals (contractors, realtors, prop managers, investors, attorneys, mtg bankers & brokers). While many will say, stick close to home, I found there was opportunity in chaos. I've become more knowlegeable about other markets, which makes me/my business more valuable to others. The key to building wealth is having multiple income streams. In my case, it comes from REI, consulting & public speaking.
Thanks, Learntherules.
I agree, going outside of my area is something I have been thinking about more and more. I, too, am from NY originally. I lived in Manhattan for five years. I know EXACTLY what you mean when you speak of those brownstones. Unreal.
Getting back to areas outside where I live, my problem with pursuing that is time and money. I don't currently have the resources to travel far and put the effort into establishing real estate opportunities.