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dansimo

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Reply with quote  #1 
I just had a very odd experience with the REICA ( Real Estate Investment Club of Austin) message board concerning a few posts of mine on a thread.

I'd love to get some feedback from this board (where I do most of my posting) since I'm more familiar with our discourse styles and demeaners.
Perhaps I was just being the "ugly Cali" brushing the nerves of the congenial Texan the wrong way???
Or...???

Thanks for humoring me... and I hope you have fun reading this little drama and what I think is an odd take on my posts...

NOTE: I start with the moderator's email to me concerning the matter:

Date:         Sun, 27 Aug 2006 19:43:31 -0700 (PDT)
From:         "RE Investment Club of Austin"
Subject:         Your last Post on REICA
To:         dansimo@sbcglobal.net, austinrei@sbcglobal.net

Dan,
 
Your last post on REICA really upset Mr. Pape, the gentleman who is trying to flip and/or sell the house in Illinois.  He says that you were very unprofessional in your response along with a few other things that I will not mention here.  I did not allow this post to go out to the REICA group, but I somewhat agree with Mr. Pape, because you made some assumptions without facts to back them up.  For example, the roof repair estimate - just because the seller made the estimate doesn't mean that the facts and figures are incorrect.  Mr. Pape stated on a previous post that the figures were from the seller and he more or less said that it was up to the investor to verify the numbers.  Unless you have PERSONALLY had a roofer or a contractor check out the house for a repair estimate, you have no basis to challenge these numbers and it is certainly inappropriate to assume that this particular seller is a liar and call the deal bad because of it.  The seller may have had a professional give him/her a repair estimate and the numbers may be correct.  Also, I wouldn't use a Realtor to buy or sell ANY property unless I had to (I usually don't have to), so why assume that someone else would too?
 
I have sent Mr. Pape a copy of this message as a courtesy.  I will not allow any futher posts from either of you on this particular subject, as it is not in the interest of the REICA group to have two people argue over matters such as this.  I apoligize for any inconvenience this may cause either of you, but I must look to the best interests of the group as a whole.  If anyone else makes a post with an interest or a question on the deal in Illinois, I will certainly allow that and allow any questions to be answered.
 
Ken Goheen
Real Estate Investment Club of Austin



Original post:

Re: Does anyone here invest in others states, specifically the Chicago, IL area?
--- In REICA@yahoogroups.com, Allan Pape
wrote:
>
> If so then please read on...
>
> I have a lead in Plainfield that I am unable to do anything with as I am in Texas and do not have the desire to invest in IL currently. If you are in the market for a property that potentially has $60k in equity please contact me.
The asking price is $420k and per seller needs a roof (est. $10k) and exterior paint (est. $4k) with a resale value of $500k after this work. I would like a $5k assignment fee if you close on it please. It is located at 13262 Cathy Ln., Plainfield, IL. 60585-8421 in Will county and it is 3250sqft.
>


My initial reply:

On Fri, 25 Aug 2006 15:41:04 -0000, Dan Simonelli wrote:
> Without knowing more specifics, I'd say the numbers you give make this a bad deal. Even at your estimates, one would be buying around 90% of fmv!
And I think for such a large house, the $10k estimate for roof is sorely underguesstimated!
Same with the paint job.
>
To make this deal workable for value investing, the price needs to be more like $350k (which is about 70% of the proposed value after rehab). And that's still on the high end.
You always want to leave yourself room for
"underestimations"...
>
> Remember the adage: You make your profit when you buy!


--- In REICA@yahoogroups.com, Allan Pape
wrote:
>The repair estimates are the seller's and I do not know what the cost of a roof in IL runs so I'm just sharing what she gave me and leaving it to an investor that works in that area or has contacts in that area to do their homework. For a home that only needs a little paint and a roof a potential $60k profit is not bad. Wish I could locate something with numbers like this in Austin!
>
I do not disagree with you on the percentages that you have
laid out though; there are other calculations that can be used to determine if this would be a good deal for someone though...the other option would be for an end user to buy
> it and move in...or skip the roof (though there's nothing wrong with it at this time it's 18yrs old)...or skip all the work and let the new owner choose their own roof and paint. There are options that could still make this an attractive deal for the right person...it's just not right for me due to the location...and it's clearly not right for you based upon your own personal investing strategy. I just wanted to share the opportunity to see if it is right for anybody here.


From: "Dan Simonelli"
Date: Sat Aug 26, 2006 8:39 am
Subject: Re: Does anyone here invest in others states, specifically the Chicago, IL. area        
       
"The repair estimates are the seller's", That's the first red flag!

"$60k profit" ??? That's not accurate...even if you don't do the roof and paint because the transaction costs for both buying and selling would be more than $20k, assuming you'd have to use realtors since it's out of state.

I was simply doing the basic, initial calculation and the numbers starting at $420k just don't make it worth while... for anyone interested in making their time worth the effort.

At $420k without doing the roof and paint, that's still 84%, based on assumed $500k fmv.
There's just not enough room to maneuver, plain and simple.

That's not to say this can't be a good deal assuming that it's a nice house on good property, but just not for $420k.
>
>


THE END!


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RonaldStarr

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Reply with quote  #2 

Dan Simonelli—CA-----------------

 

Well, it looks like pretty standard fare here on this website and another one that I post on which deals a lot with rehabbing and “flipping” properties.

 

I could see that you might have made it a little gentler by putting in such things as “in my view” or “it seems to me.”  And perhaps “I suppose different people have differing criteria for what makes a good purchase, but it seems to me that … .”

 

Now, the idea of needing to buy for no more than 70% of after repaired value minus costs for repairs figure is somewhat inappropriate for this property, in my view.  That is a rough rule of thumb which is most appropriate for properties in a price range of about $60-75K at the low end up to around $300-350K on the high end, I’d suggest.  When you get lower-priced properties you need to impose a minimum necessary absolute profit such as $12K, $15K, $20K, or whatever your choice may be.  At higher-priced properties it becomes increasingly difficult to buy properties at lower ratios of the after-repaired value—such as 70%--because the dollar amount is so high.  Sellers don’t like to “give away the store.”   When the discount works out to over $100K, then sellers just don’t much like the numbers. 

 

So, if one can actually make a $60K profit with this particular property it might well be considered a pretty good deal by some investors.  From the description given, the property should not take an great deal of time and effort to rehad and resell.


 

I did not feel that you remarks were particularly hostile, aggressive, insulting, challanging or similar.  However, I really like conflicting viewpoints when they are based on reality and one’s experience and not meant to impugn the opposing discussant’s character.

 

However, some people may feel that a more genteel manner of writing is more appropriate for their board.  I’ve never been to that board, as I recall, so can’t comment on their context.  Where I choose to post, I would not be upset with your comments and would not expect such a strong reaction from others as you got from their moderator.


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

 

dansimo

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Reply with quote  #3 
Thanks Ron...

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dantheman

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Reply with quote  #4 
Seems to me like that guy just needs to grow some thicker skin, especially in this business Or he is pi$$ed that your making his deal (and his $5K profit) look less rosy to other readers. I wouldn't worry too much about it! Happy investing to all!!
biophase

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Reply with quote  #5 

That house has been on the market for 79 days at $439k.  I don't know what he'd talking about because no house in that subdivision has sold for over $500k so I don't know where he got his comps.

 

I find it funny that this guy got it under contract for $420k, a mere 5% below market in this slow market.  The Chicago market is slow and Plainfield being 40 miles out is even slower.  The builders are still building in that area and offering great incentives.

 

I used to work in Plainfield ten years ago.  It was just farmland and I worked at the landfill there.  I remember seeing houses start popping up at $110k... I was at all the zoning hearings cause I had to defend the landfill. LOL All residents kept saying the landfill is bringing down my property values!  But noone would ever sell to me and their perceived lower property value.

 

oh if I were just smarter back then...  I should have been picking up new construction properties.

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