Down payment vs reitrement fund - PeachParts Mercedes-Benz Forum

tbomachines · #1 03-20-2013, 10:38 PM

Quote:

Originally Posted by Hatterasguy

Oh that's a bunch of crap, I'm making a lot of money doing lots of things with houses. Sure some houses you overpay just to live in because they are nice, but those are not investments; no different than buying a car or boat. Just a financial trophy/reward.

Waiting for natural appreciation is a fools errand and not investing, its called speculating. Speculators don't make money in RE, they get burned. (note I have done some good old fashion land speculation, and got lucky and made a killing doing it. But its gambling so don't do it with money you can't afford to burn)

Their is a massive difference between speculation and investing.

This is what I would recommend the OP do, its proper RE investing and right now is a FANTASTIC time to do it. But time is running out, interest rates are still low, but all the good deals are getting bought up!

For this example I'm going to use a real house I looked at yesterday and would buy if I had the spare money for a flip. This is the kind of house you can buy in just about any city:

Its bank owned and they are asking $136k for it now. Lets just say you paid $136k for it. Now it needs $50k worth of work, but if your young and handy you can DIY it all and probably cut that number to $25k-$30k.

Renovated I'd list it for $259k, and take the first good offer over $250k that came along.

So you would have at most say $190k into it, and at TODAY's market prices have $60k in equity in it. Never buy real estate unless you are getting paid equity when you sign on the line and close. Your money is made when you BUY not when you sell, or over 20 years. Will some houses appreciate in the next 20 years? Probably but who knows, I can't see the future and no one else can. So you have to base your purchases on a known factor, which is today's FMV.

Now an enterprising first time buyer could mortgage this baby out, say at $150k, which would cost you $1200ish a month all in. If said buyer wanted to move on they could get at least $2k in rent for it. So its cash flow positive TODAY if you wanted to rent it.

This is how real estate is done properly, this is what the OP should look for in his town.

Great advice, but harder in practice!

spdrun · #2 03-20-2013, 10:41 PM

Quote:

Originally Posted by tbomachines

Great advice, but harder in practice!

Not really, especially if you can get a Fannie Mae/Homepath renovation loan.

tbomachines · #3 03-20-2013, 10:46 PM

Quote:

Originally Posted by spdrun

Not really, especially if you can get a Fannie Mae/Homepath renovation loan.

True, the place I live in now is a testament to that. I am looking to basically do what Hattie just mentioned, with bank foreclosures. I may just be intimidated by the paperwork. Also a bit concerned at estimating my DIY ability - I can likely do all wall/plumbing/electrical work to code but that's about it. Still 8-12 moths off buying my first place though.

spdrun · #4 03-20-2013, 10:53 PM

Quote:

Originally Posted by tbomachines

True, the place I live in now is a testament to that. I am looking to basically do what Hattie just mentioned, with bank foreclosures. I may just be intimidated by the paperwork. Also a bit concerned at estimating my DIY ability - I can likely do all wall/plumbing/electrical work to code but that's about it. Still 8-12 moths off buying my first place though.

Why wait a year? I can't speak to PA, but prices in NJ are pretty much at a nadir now.

tbomachines · #5 03-20-2013, 10:58 PM

Quote:

Originally Posted by spdrun

Why wait a year? I can't speak to PA, but prices in NJ are pretty much at a nadir now.

Down payment. I'm only 25 so I don't have a huge amount of cash in savings I can play around with. Past downpayment it's easy.

spdrun · #6 03-20-2013, 11:01 PM

Quote:

Originally Posted by tbomachines

Down payment. I'm only 25 so I don't have a huge amount of cash in savings I can play around with. Past downpayment it's easy.

Either find some old lizard who's selling because he's tired of life and wants to move to Miami, and thus might be willing to hold paper. Or look for estate sales where the dearly departed's family are 500 miles away and might be willing to do the same for a year.

Hatterasguy · #7 03-21-2013, 10:15 PM

Quote:

Originally Posted by spdrun

Either find some old lizard who's selling because he's tired of life and wants to move to Miami, and thus might be willing to hold paper. Or look for estate sales where the dearly departed's family are 500 miles away and might be willing to do the same for a year.

Yeah that's the best way to do it, I just got an offer accepted on an estate where the family lives a million miles away and doesn't care.

I have been having good luck recently with bank owned properties they just want to get rid of. I closed on one today where they owed $189kish, and that's what it was listed for. House was flooded and needs to be demolished. I got it for $72k..bank took a nice loss. Foreclosure auctions which in my state take place on Saturdays are pretty much a total waste of time. I haven't been to one in 4 years, I'd rather be out in my boat. You have to wait for the bank to buy it, ruin the house for awhile and choke on it for a year. Good deals need to season a bit.

Most banks are dumb as can be so they let perfectly good houses sit vacant with the utilities cut off for a couple years letting everything freeze and leak. I love these because they scare away all the first time buyers and the people shopping with mortgages. Most banks won't invest a cent into a house to keep it up, they just rather take a big loss.

Simpler=Better · #8 03-22-2013, 11:55 AM

Quote:

Originally Posted by tbomachines

Down payment. I'm only 25 so I don't have a huge amount of cash in savings I can play around with. Past downpayment it's easy.

Yup this right here.

Hatty, how complex is the foreclosure work for a first time buyer? I'm not afraid of moderate repairs (like you mentioned) so long as the timber in the house isn't rotted out.

Hatterasguy · #9 03-22-2013, 03:34 PM

Buying a foreclosure is no different than any other property. In my state CT you go to the auction and have to outbid the bank which is stupid since they always owe more than its worth. You have to bring a check for 10% of the minimum bid which is the mortgage amount. None refundable, close in 30 days, etc.

The best way to do it is to buy from a bank, and other than once in awhile having to fill out some different forms its no different than buying a house from anyone else. Most bank owned properties are listed on the MLS like anything else.

Either way you need to get your mortgage pre approval before you start looking. No agent worth anything will show you houses without one.

Hatterasguy · #10 03-21-2013, 10:24 PM

Quote:

Originally Posted by tbomachines

True, the place I live in now is a testament to that. I am looking to basically do what Hattie just mentioned, with bank foreclosures. I may just be intimidated by the paperwork. Also a bit concerned at estimating my DIY ability - I can likely do all wall/plumbing/electrical work to code but that's about it. Still 8-12 moths off buying my first place though.

Don't let the paperwork or manual work scare you. Houses can only be so scary.

The stuff that's going to cost you are title problems, and big stuff like foundation or sewer work.

Interior stuff isn't a big deal, you can get a crew right in to gut a house down to the studs for pretty cheap, than just start fresh.

Go make some insulting offers, if you don't have a down payment look for older people who will consider owner financing for a bit. You would be amazed at the ones who would.

Hatterasguy · #11 03-21-2013, 10:12 PM

Quote:

Originally Posted by tbomachines

Great advice, but harder in practice!

If it was easy everyone would do it.

How many hours and effort do you have to work to earn $60k at a job?

Generating a return takes a lot of effort. I spent years building up the connections, experience and finances to be able to bang out deals like that.