Real Estate Crash thread

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Originally Posted by Benny Profane

Some like me have been waiting for it for 3 or 4 years, and many others are in various states of denial, either clueless or thinking the party is still on.

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This is getting stupid. I'll be happy to be the counterpoint to what you believe. It may just be a difference of location, but in that "3 or 4 years" that you've been waiting for a collapse I've made well over a half mil playing with Real Estate in my spare time. Now I'm really getting into it (mid boom in SLC, and pre-boom in another UT market). I'm about to flip a home in SLC with what could be close to a 200K profit in under 4 months. Keep preaching gloom and doom and I'll keep cashing the checks. :D

SLC doesn't count. As we all know, it's not like the rest of America. They are making white babies there faster than anywhere in the western world. Gotta put them somewhere.
But you guys are going to get stopped by the upcoming water crisis, not boom economics.

So what you are saying is that you gotta consider location when investing in real estate? Brilliant. I believe MD9 did quite a bit of dealings in Denver as well. But that doesn't count either because all the texans and californians are moving here? Real Estate, like any other market, swings between irrational exuberance and unjustified pessimism. Smart people take advantage of both ends of the spectrum by picking out the good deals from the bad in times when the herd is preaching doom and gloom.

Buy low and sell high in the right market?? Brilliant!

Well, it sounds like you aren't doing either. *shrug*

I'll take the stock market right now. Just as some predicted, that's where all that speculative money is rushing to.

MD9 has got talent in spades. But his comments show just how dislocated the real estate market currently is. 500K just dabbling in the market? 200K with two months of work?

I will say this - leverage is great, until it isn't.

Good for meatdrink. I hope it continues to go so well.

I have talked to two families in the last two days who needed to move for work and now are relocated and their old houses aren't selling. They can't lower their price because they can't afford to bring a check to closing. They are fucked.

Heh, I didn't mean to brag or anything, but all anybody was talking about speculation from "pros". I wanted to give actual numbers from a real person.

Most of my money was made in Denver and the neighborhood I bought in there continues to thrive. UT is going nuts as well. I finally got my RE license (don't know why I didn't get it sooner, something I'd recommend everyone do for their personal investing). It takes about 3 weeks and classes cost about $450 (here in UT). You'll make that back on your very first purchase. I saved 12K on a purchase immediately after starting classes. It's also good to see real sold prices and info rather than just list prices.

Here's why I like Real Estate. You make money in so many ways it's crazy. On my rentals I have a positive monthly cashflow of about $1200. Not a lot, but it doesn't suck either. Then all of the mortgages are on 15 year notes (meaning most of the money the tenants are paying to live there goes to me (paid equity) rather than paying interest. I make around 3K a month that way. So when you add those two up that's basically 50K a year with doing little work and the best thing is being on 15's they'll be paid off when I'm 40. 50K a year is like working a 9-5 all year long for $25 an hour. It's freaking easy to set this stuff up. I've always recommended Real Estate to all of my friends, but few have really gone after it.

So making the 50K a year has absolutely nothing to with appreciation. The market could be completely flat, you still make that money. Obviously appreciation doesn't suck at all, but that's just one way to make money. There are literally tons of ways to make money and home equity is more liquid than most other retirement plans. Anybody will give you a home equity line of credit or allow you to refinance and pull out some cash. When we built our loft in Denver I pulled equity out of another house to do so. It made that house go from a $200 a month positive cashflow to a negative $200 cashflow, BUT being able to build a whole new unit and rent it out pushed what was a $200 cashflow before into an $800 cashflow after combining the proceeds from both properties and now someone is buying yet another place for me.

Now let's talk about leverage. I buy a home for 200K. I put 5% down or 10K to get into the home. Home values in your area go up even a modest 5% (my 'hood in Denver and SLC have been pummeling that almost quarterly). You're not actually making a 5% return you're making a 100% return. You only brought 10K to the table and you've just made 10K in appreciation. You're making interest on other peoples money. No one's going to give you a huge loan to go play in the stock market and frankly I'd be scared shitless if I was in that situation.

Anywho. You can see that I believe in this stuff and it's worked extremely well for me. I'm 28, I work from home. I have time to chase any venture that looks exciting and profitable. I have time to spend with my family. I get to ski any day I want (60 pow days from Jan-Mar) last winter. I went out any day it was good.

Well anyway... I guess I'd feel guilty if I was out making cash by the boatloads and didn't clue my friends in (I've always tried to). truth is actually a partner with me in a couple of SLC properties and I know I've convinced other friends to buy homes who used to rent, but few have picked up on rentals or flips. I'm also teaching my little brother and sister all I can as well. They're helping with a flip right now and they'll probably use their proceeds to buy rentals in another market.

MD9, you sound familiar I think I have seen you on tv,

is this you?
http://www.cashflowgenerator.com/ima...ins100x122.jpg
and your bro?
http://www.cashflowgenerator.com/ima...ins100x122.jpg

But seriously, you kick ass. Way to make it happen.

Yeah, that's me. It's reason all the cliff photos look big. ;) Anyway, do what you will with the info, but I'd feel stupid if I just sat back didn't say anything.

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Originally Posted by meatdrink9

Here's why I like Real Estate. You make money in so many ways it's crazy. On my rentals I have a positive monthly cashflow of about $1200. Not a lot, but it doesn't suck either. Then all of the mortgages are on 15 year notes

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Okay. You are so lucky.
I remember the days when real estate rentals used to cash flow.
i would love to amass rental properties like I did once before, but in the market where I live, that (+ cashflow, particularly on a 15 yr amortization) has not been possible for over 5-7 years.

If only that were still the case.
Most markets are so hyper inflated these days that nothing cashflows.

Either rents are retardedly high or your market prices are still not that far out of whack.
Either way, SLC should fare better than most markets if there is a nationwide correction.

Congrats.
Me so jealous.

MD9....wanna loan me a couple bucks at 0% to get into a place in UT? ;)

Most all of the rentals got a renovation up front. So they wouldn't have rented for that price before I fixed them up. So I sunk time and money there. When I'm rennovating I'm pretty much all consumed (workaholic). Just look at home prices/mortgage rates/and comparable rents and do the math. I did buy one place that had a positive cashflow out of the gate with no remodel needed. Usually I buy shit holes at a steal to make this happen, but after a little love they work out.

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Originally Posted by seanyob

MD9....wanna loan me a couple bucks at 0% to get into a place in UT? ;)

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Heh, you could probably buy a place in Ogden with 3 grand down and have that be 10% of the cost of the home. Ogden sells for crazy cheap and IMO will boom before too long. You can easily buy for $30 a sq ft. there, but it's still ghetto (what I did in Denver and made the neighborhood nicer, actually lived there as well). It would be easy to make those places flow without much effort, but the real key is waiting until that gondola goes in and then sell. Just buy along the route. I'll be 1031ing most of my proceeds from the SLC flips that way. Soon there will be the first University in the US with a Gondola that goes right to the resort from the College. Students will be able to take a run through the park or whatever in between classes. That's going to pull a lot of new renters to town. The commuter train goes in next spring. I've been telling flyk to buy for as long as I can remember.

MD9....In all seriousness, have you ever thought of getting into the commercial market? All of the grwoth in the UT home market has to be complimented by commercial growth also. Thoughts?

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Originally Posted by meatdrink9

...but the real key is waiting until that gondola goes in and then sell. Just buy along the route. I'll be 1031ing most of my proceeds from the SLC flips that way. Soon there will be the first University in the US with a Gondola that goes right to the resort from the College. Students will be able to take a run through the park or whatever in between classes.

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You were telling me that recently and I have been researching it. Looks like a great opportunity for sure. Actually was presenting it to others in my family (the ones with $) and so far haven't met much resistance.

SF is just way overpriced and it sure would be nice to create some extra income. With my knowledge of framing, drywall, painting, and exterior systems, it sure wouldn't be terrible hard to fix something up.

OK, off to the Hustle & Snow premiere for some booze and porn! :FIREdevil

Thanks for sharing that MD9. Real Estate takes Balls, I wish I had some 10 yrs ago.

I think MD9 is in a great mkt for what he is doing, and the "sweat" equity he puts into it is alot of edge on things.

I love the 15 yr concept, gives it a real plan outside of just the appreciation.

Now where are my balls?

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Originally Posted by meatdrink9

Most all of the rentals got a renovation up front. So they wouldn't have rented for that price before I fixed them up. So I sunk time and money there. When I'm rennovating I'm pretty much all consumed (workaholic). Just look at home prices/mortgage rates/and comparable rents and do the math. I did buy one place that had a positive cashflow out of the gate with no remodel needed. Usually I buy shit holes at a steal to make this happen, but after a little love they work out.

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How much work goes into your fixer uppers? Any idea what it would cost for a construction company to do it?

Do you have a property manager or do you handle all that?

I'd enjoy learning the markets and searching for good places to buy, but that's about it. I don't like doing handi-work and I don't want to personally deal with renters.

If you were still in Denver, do you think you could handle buying places in Utah? ...or is it too difficult to do long-distance?

I've got balls of cast iron, where is my initial cash flow? ;)

Actually, we have a rental and the people are moving out next week. First renters in our first house. I am going in to make the bathroom a little nicer...can't decide if I should keep it or sell it. I am tempted to sell it and take my profits (probably around $30K in 18 months - I did a lot of work to make it nicer).

I can't decide what to do with that cash. I guess the smart thing to do would be to invest it in a couple of dumps and fix them up and get some positive cash flow. I could 1031 most of it that way instead of paying capital gains.

The problem is..we live in such a small market, it is hard to find the 'right' place to buy and fix up, since there just aren't that many places on the market that will have a positive cash flow after renovation.

Damn...balls, don't fail me now. :fm:

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Originally Posted by seanyob

MD9....In all seriousness, have you ever thought of getting into the commercial market? All of the grwoth in the UT home market has to be complimented by commercial growth also. Thoughts?

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I don't know much about it, but when my ad buddy and I finally buy an office in SLC I'm sure we'll only be using a small portion of the building and leasing the rest. I'd have a ton to learn there, but from what I hear it is going off. I know a couple of guys who deal in commercial and they're wealthy to say the least (but they've doing it for 10+ years).

Commercial is even more location dependent than residential. Seriously - a few blocks can make a huge difference.

my father in law sank all his Corporate retirement money into Comm. RE. He did well, but there were many bumps. His #1 piece of advice - try to envision the renters needs first and foremost. Don't buy something merely because you think it's cool.

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Originally Posted by shmerham

How much work goes into your fixer uppers? Any idea what it would cost for a construction company to do it?

Do you have a property manager or do you handle all that?

I'd enjoy learning the markets and searching for good places to buy, but that's about it. I don't like doing handi-work and I don't want to personally deal with renters.

If you were still in Denver, do you think you could handle buying places in Utah? ...or is it too difficult to do long-distance?

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Usually a fair amount of work. Again, I'm buying places for dirt cheap and there's a reason they're so cheap. I also buy places that have a lot going for them, but isn't necessarily obvious...hardwood under carpet, brick under plaster... etc. That stuff takes some time to finish, but is pretty well dirt cheap to do so. I refinished two floors of my Denver home (crazy pimp) for ~11K, but I did all the work. I hired out the basement project (~1000 sq ft from almost scratch, new kitchen, bathroom, laundry, dug out 4 feet, new concrete) and pitched in a fair amount. That ran about 33K. But I already owned the land and had 5 foot basement waiting to be excavated. If I were to stay in Denver I would've bought up more of that block and done the exact same thing with the other houses (same build). The hood was selling for about 150 a sq ft at the time and adding 1000 sq ft for just over 30K would mean huge profits if sold and would help the area I had already invested in with rentals.

Once I get a little bigger I'll hand of the property management aspect, but for now I don't mind the occasional phone call. Sometimes it sucks, but the places I rent end-up being fairly high-end when all is said and done so you tend to attract a certain type of client that's a little more established. Most of my renters meet me for the first time and are confused since I look like I'm 18. I explain to them how it all works. The last two, one-year leases that ended had both couples buying homes of their own. Pretty cool. They also both bought in the area's I'd invested.

It could work buying properties from a distance, but I'd be looking for something other than fixers. You've sort of got to be there to make that happen (at least the way I've done it). In SLC I've had a really hard time hiring any contractors to do anything. They know things are booming and they know what their work will mean to your home. Most every bid I've had has been completely out of hand (may also be I'm working in a spendy zipcode). So I've found myself doing A LOT more work myself as I know what this stuff should typically cost. It's unfortunate. I'd like to hire more work out, but haven't had much luck. I usually get at least 5 bids anytime I spec a job. That is the downside with this hot market. Most contractors are getting these crazy prices as well (in SLC anyway).

I do occasionally haul my little bro to Denver to help with up-keep and inspections (usually twice a year). But it's all a write-off and we usually time it with a concert or something else fun. You could potentially invest from afar, but I'd make sure you've done your homework and plan to visit occasionally. But again, as a skier, visiting UT isn't such a bad thing and it is a write-off.

Balls are right. The first few times we bought places I had to convince my wife (even my parents) that I wasn't crazy. Each time I was at that closing table or writing an offer I felt like I could be getting myself into huge trouble. After enough successes I was just about laughing (coming out of my skin excited) at the latest closing (Inspector Gadget will verify this). I was so excited. You just have to trust that you've done your research. Most all of it is common sense. I guess it's a little like jumping off a cliff.

I'll post the results of how the flips went when all is said and done. I will admit they're taking longer than I'd thought, but that's mainly due to not being able to hire out much of the work and having to learn new trades. I just called 5 different roofers for estimates and only 1 has had the guy who does estimates call me back for an appointment. I make it very clear in the call that I do lots of remodels (could be repeat business) and it still doesn't matter.

MD9: The little dwarf pictures got me thinking: years and years ago, my dad, who did very well in the oilfield in the busts and the booms, and with nothing but his own uneducated, backwoods self confidence, always said, "if it's such a great idea, why are you telling me about it?" I'm glad you apparently do well at a young age, and I don't know you from Adam and I hope you continue to do even better. Seriously, I wish you the best. But you've got the schtick down so well and are so intent on telling us how, at 25, you've got it all figured out, that I, at 46, who has (in my own mind) not figured it out but has done awfully goddamn well at a few other things, just has to think "man, you are headed for a fall." I'm not into swingin' dicks here, or comparing accomplishments, but, nobody has it figured out, and if they do, they're not going to spew it all over a message board. The most successful people I know, and I know a bunch of them, would never in million years, spell out to strangers on a message board how they're just raking it in. You can take what you want from this, but when you're dropping dollar figures and strutting around, you might want to take a break, because something big and unforeseen is eventually heading your way. Trust me. And when the word "leverage" starts to appear, the storm clouds are gathering. Not raining on your parade, just passing on a bit of old, but successful, greaybeard wisdom. Best of luck.