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Greg

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I thank MichaelR for suggesting the topic. Now can anyone answer the question?
reijoe

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Reply with quote  #2 
Buy really low. Sell low.

Try to predict any decrease in rents, and buy at a level that will still cash flow at those rents.

RonaldStarr

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Gregerator--CA-----------------

 

I've said it before, and I'll say it again.  There are two ways to make money with real estate that work in up markets, flat markets, and down markets.  One does not really even need to pay attention to price trends.  At least not much.

 

The first is positive cash flow rental properties held for the long term.  In general, leveraged positive cash flow long-hold rental properties make sense, as a subset of this category.

 

The second is real estate merchandising.  Buy properties for well below current market value and then resell for market value or near market value as soon as one can for a profit.  Well below market value usually means 80% or less of market value.  And reselling "as soon as one can" could mean a matter of hours, days, or a few months.  Typically one does it in less than six months.  If one is rehabbing and reselling at retail value, it might take 5-9 months, hopefully no more than that. 

 

Even if the real estate market is sliding down in value, there will be some buyers.  If  your property is one of the best values on the market, you will be selling soon.  And, if you bought enough below market value at the time you bought, you will be reselling for a profit, even if you are selling at 90-95% of current market value.  This is because declining real estate markets take at least a couple of years to slide to their low point.  The Los Angeles County depression of real estate values took place in about 1991-1996.  During that time, some properties slid as much as 30% in nominal values, or perhaps 40% in inflation-adjusted dollars.  So, about 60 months to lose about 40% in market value.  that is about 0.6% a month on average.  If you close on the resale at 6 months after buying a property, the market might be down about 3-4%.  If you paid only 75% of market value, there is still a big profit to pull in.

 

So, all the talk about what to do in a slow market?  Probably just wasted breath, in my view.  Either buy positive cash flow rental properties or else do real estate merchandising.   The latter can be successful even in Coastal California.  I remember about 20 months ago one sophisticated bargain-buyer writing to me saying he was still buying properties in Southern CA for about 50% of market dollar.  And that was in a very hot market.

 

Incidently, it is possible to buy long-term rental positive cash flow properties at bargain prices and make some instant appreciation plus the cash flow.  For instance, last year I bought a HUD house in OK for $12,012.  After closing and rehabbing costs, I had about $19.5K out of pocket.  I rent it out at $475/mo.  I thought--based on comparables--it was probably worth about $33-35K last October when I first rented it out.  Earlier this month my property manager, a real estate broker, said she thought it would sell for about $45K now.  "Prices have been going up lately," she reports.

 

Good Investing and Good Finding Topics to Discuss********Ron Starr*******

 

RonaldStarr

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REI Joe--CA or AZ-----------------

 

Gee, you said about the same thing I did.  And in a lot fewer words.  I guess that is why you got your post in before I did. 

 

Good Investing and Good Posting**********Ron Starr*********

 

HungryBear

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How about taking bearish positions on the lenders that are about to get hit with massive writeoffs?  Anyone else think Countrywide stock is likely to crash?

 

I prefer buying puts to selling short, because this could take a long time to play out and you don't want to get caught in a short squeeze.

 

If you are buying RE I would consider the following states: TN, AL, MS, LA, SC, NC and perhaps a few others.

 

I would avoid the following: CA, AZ, NV,FL, OR, WA, ID, NY, NJ, MA, FL, DC, VA, MD to name just a few.

 

mhobsche

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Listening to one of the real estate gurus, I think it was either Lisa Vander or Vera Jones-Cox, she said that EASTERN WA and Eastern OR were good stable markets, plus norther NV, Utah and Idaho. 

 

So who is looking for cash partners to do some investing in SoCal?  I'm still looking for a mentor or partner. I bring enthusiasm, ca$h, some training, good/great credit and done sitting on my butt.

 

Also, I have a rental property in Fort Worth, TX.  That place has always cash flowed well.  I've just been too ignorant to duplicate my success.  It was a former primary residence of my wife's and mine that we never sold.  Property there doesn't appreciate much ($94k in 1994, $140k today), but if you buy between Dallas and Fort Worth, there are a bunch of directions renters can go for jobs.  Been getting a couple of letters a month from investors there that are looking to buy me out (absentee owner marketing).  I've been turning the tables and calling to find out if they want more partners.  None have accepted so far, but worth trying.

 

-Mark, see you around the REA.


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Subcranium

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Reply with quote  #7 
>>Listening to one of the real estate gurus, I think it was either Lisa Vander or Vera Jones-Cox, she said that EASTERN WA and Eastern OR were good stable markets, plus norther NV, Utah and Idaho.


Cross Eastern OR off that list. I'm in Bend and it's a slow motion train wreck. Inventories are piling up. In my neighborhood there have been 11 houses for sale and nothing has sold for three months. Multiple price drops. 3 years of inventory over $1million. Inventory under 500k has double in a couple months.

There's a house for sale for every 37 residents! One of the highest ratios in the country.

Surrounding areas have appreciated even more. I'd say this is the last place to plunk down money now. It's been in the top 5 increase lists for the last few years.

Bend has the highest incrase of anywhere in the country over the last 30 years. Anywhere. According to census.
livinineurope

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Quote:
Originally Posted by mhobsche

Listening to one of the real estate gurus, I think it was either Lisa Vander or Vera Jones-Cox, she said that EASTERN WA and Eastern OR were good stable markets, plus norther NV, Utah and Idaho. 

 

So who is looking for cash partners to do some investing in SoCal?  I'm still looking for a mentor or partner. I bring enthusiasm, ca$h, some training, good/great credit and done sitting on my butt.

 

Also, I have a rental property in Fort Worth, TX.  That place has always cash flowed well.  I've just been too ignorant to duplicate my success.  It was a former primary residence of my wife's and mine that we never sold.  Property there doesn't appreciate much ($94k in 1994, $140k today), but if you buy between Dallas and Fort Worth, there are a bunch of directions renters can go for jobs.  Been getting a couple of letters a month from investors there that are looking to buy me out (absentee owner marketing).  I've been turning the tables and calling to find out if they want more partners.  None have accepted so far, but worth trying.

 

-Mark, see you around the REA.

Hungry bear i'd say you are spot on with your national assessment.

 

If you want cash flow property it' also here where I live in West Germany but I'm too cautious to buy here since it's short lived.  Lot's of americans do though.

 

Anyway see the housing tracker that came out today.. it looks as ugly as i've seen it yet.

 

 

 

Subcranium

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Reply with quote  #9 
I've heard a hot new topic is Americans buying in Mexico. I've also seen, lately, a lot of Canadian press articles saying, well, the US housing bubble is popping, but the Canadian market won't.
livinineurope

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Subcranium,

 

I've heard too many nightmares about buying in Mexico.  If you want south 'o' the border.. look at costa rica..  A lot of Military retirees go there.. they visited the country while in Panama and liked it enough to retire.

 

the place I would have looked at was New Zaealnd but their runup was worse than ours..

 

 

livinineurope

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Reply with quote  #11 

one more thing. Canada aka 98 would have been prime time to buy when our dollar was double their currency.. not now though.

RobertCampbell

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Reply with quote  #12 

 

LivinginEurope,

 

the place I would have looked at was New Zaealnd but their runup was worse than ours..

 

For the past 50 years, New Zealand has exhibited a history of fairly extreme boom and bust cycles in real estate.

 

I hear the bust is now developing.  Be patient.

 

Best wishes,

 

Robert Campbell

 

 

reijoe

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Reply with quote  #13 
Quote:
Originally Posted by RonaldStarr

REI Joe--CA or AZ-----------------

Gee, you said about the same thing I did. And in a lot fewer words. I guess that is why you got your post in before I did.

Good Investing and Good Posting**********Ron Starr*********



I'm stealing your thunder. That, or I've learned well

Oh, and you can add MI to the list ... perhaps CO as well in the coming months Now, if only I could actually get a deal done (I've had half a dozen decent leads, but nothing good enough to jump in on for my first one). Patience and persistence is key, I understand that. Hopefully I get a deal before I go broke on marketing.
RonaldStarr

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Reply with quote  #14 

ungry Bear—CA-----------

 

Your list looks similar to one I have created.  My advice is to buy where properties are low cost.  That means mainly in the Midwest and the SunBelt states, excluding CA, NV, and Western AZ.  Avoid the Northeast is a good first approximation, because the population center of the USA is going West and South.  However, the NE is ok if you really study what you are doing.  There are a lot of people there and lots of properties, so careful investors can probably do ok.

 

Subcranium—OR-------------

 

Thanks for the interesting facts about Bend, OR.  I was aware that prices there had skyrocketed, I just was not aware of how extreme that was.

 

I suspect that when people advicing to look at “Eastern Oregon,” they are not meaning Bend, which is typically considered to be “Central Oregon,” in my view.

 

For instance, Realtor dot com shows 71 SFRs for sale in Baker, OR, right now, 22 of which have an asking price of less than $100K.  The median asking price is just under $150K.

 

In LeGrande, 10 of 40 SFRs have asking prices of less than $100K, and the median asking price is $126K.

 

Good Posting and Good Figuring It All Out**********Ron Starr********

mrvincent

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Reply with quote  #15 

Another option is to do nothing except build a cash position. Wait for the Housing Crash and Credit Bubble to play themselves out.

By fall of 2007 when a buyer walks into a real estate office they will be treated like Gods. You will then have your pick of the litter. Slowly start buying props in prime areas that can turn a profit. Plan on holding for 10 years in anticipation of the next up cycle.

 

I would suggest looking at resort areas during that time (end of 2007) as a play on the retiring baby boomers. Yes, I think San Diego would be the place to invest in.

 

PS: Only buy props that you can afford 20% down with a 30 yr fixed rate mortgage. The days of flipping are gone forever.

 

mad_tiger

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Reply with quote  #16 
"The days of flipping are gone forever."

HA!  Real Estate cycles are like locusts.  They seem to come around every 17 years.  1999 was the beginning of the last flip cycle so I would guess by 2016 flipping once again will be back in style and oh-so-chic.

Subcranium

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Reply with quote  #17 
>>I suspect that when people advicing to look at “Eastern Oregon,” they are not meaning Bend, which is typically considered to be “Central Oregon,” in my view.

You could be right. I forgot there was anything East of Bend. :->
mrvincent

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mad tiger, my bad for using the word "forever". My point is however, that making money in real estate will now have to be done the old fashioned way.

mad_tiger

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Reply with quote  #19 
"Another option is to do nothing except build a cash position. Wait for the Housing Crash and Credit Bubble to play themselves out."

Excellent advice.  Even if the "crash" ends up being more of a "thud" the deals likely are going to get better over the next couple of years.
mad_tiger

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Reply with quote  #20 
"mad tiger, my bad for using the word "forever". My point is however, that making money in real estate will now have to be done the old fashioned way."


Point taken!
Subcranium

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Reply with quote  #21 
>>Eastern Oregon is a geographical term that is generally taken to mean the area of the state of Oregon east of the Cascade Range, save the region around the Dalles and sometimes Klamath County. The area around Bend is often considered to be Central Oregon rather than Eastern Oregon, but those in the Willamette Valley would tend to disagree as they tend to view anything past the Cascade Range as Eastern Oregon, similar to the way Australians lump everything west of the Great Dividing Range into the Outback.

That's from Wikipedia. Before Bend I lived in Eugene, and considered Bend Eastern Oregon. Certainly bend considers itself Central, though.
duane1x

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Subcranium I guess you won't be doing this deal then

 

http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1309171

Subcranium

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Uh, no. I wish them luck, though.
mike

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Reply with quote  #24 
Quote:
Originally Posted by HungryBear

How about taking bearish positions on the lenders that are about to get hit with massive writeoffs?  Anyone else think Countrywide stock is likely to crash?

 

I prefer buying puts to selling short, because this could take a long time to play out and you don't want to get caught in a short squeeze.

 

 

Yea i think the homebuilders took it first, now the lenders are starting to get hit. It's really about time. I'm trying to phase out my homebuilder puts and move to lender puts. The lenders appear to have more room to fall right now.

 

The big thing i would watch for and that i am very concerned about is a merger and acquisition wave. The homebuilders are getting so apparently "cheap" that they might start acquiring each other and/or the value guys may start getting in there and really rally them up. Even though the homebuilders and lender fundi's will deteriorate more we have to watchout for other market angles that could cause the positions to move against us.

 

Of course the analogy of a short squeeze is expiration of the puts before the stocks moved your way. That's why i'm playing Jan07 or Mar07 at the earliest. Of course these options don't always move directly with the stock since they are a little out of the money and too far out.

 

Mike

 

biophase

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Reply with quote  #25 
Quote:
Originally Posted by mrvincent

Another option is to do nothing except build a cash position. Wait for the Housing Crash and Credit Bubble to play themselves out.

 

Anybody else find this hard to do?

 

It was easy for me to sit and home and do absolutely nothing when my properties were going up $10k a month.  I'd even drive around and look at properties once in a while.

 

Now I feel like a loser sitting at home while properties are going down and I'm not even going out looking at anything while my cash is making 5%.  I spent the first 8 months of this year watching TV all day. []

reijoe

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Reply with quote  #26 
biophase, I wish I had that kind of time to work on investments and to learn new investment strategies. Since you have the time to spare, learn new techniques. Study tax sales, tax liens, probate, or anything else. Did you know that prior to 2006, the Michigan tax lien process allowed you to collect 15% interest the first year and 50% interest each year after that? Talk about nice returns. Unfortunately (or fortunately depending on how you look at it), they eliminated the tax lien process and now only do tax deeds. There are other places that have fairly good returns on tax liens though. And if you do your homework right, the tax liens can be a very safe investment.
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