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Snarg
03-15-2007, 10:03 PM
In regards to making profit with the least ammount of pain, what is recomended, renting or flipping?

pyriel
03-15-2007, 11:12 PM
In regards to making profit with the least ammount of pain, what is recomended, renting or flipping?

Hello Snarg, long term, renting your unit out gives out the best gains. However, flipping is good for fast cash. If you want to maximize your tax gains and accumulating wealth, I would choose renting instead of flipping...

Pyriel

Tri-ing
03-15-2007, 11:41 PM
I had a rental for a couple of years now and it's not a comfortable ride. Of course living two states away makes it difficult to watch. If I was in the neighborhood I would probably like it a whole lot better. I've been lucky so far and have not had to spend any cash on repairs or upgrades and have had good tennants, but none for more than a year.

Pyriel has a couple of good points on fast cash vs. long term wealth. Of course if you can live in the rental for two years before selling you can avoid the capital gains tax, which is what I hope to do.

I've never flipped one so I really have no experience to share there...

Good luck.

Snarg
03-16-2007, 04:38 PM
renting your unit out gives out the best gains.
I do like the idea of long term gains however, I don't know how keen I am on having to deal with tennants. Should my wife and I decide on this direction, where would you recomend I start conducting research on things like landlord laws and anything else that pertains to rental properties...?

However, flipping is good for fast cash.
And another good point. Who doesn't like fast cash?

Another idea we have had is flipping one or two houses to get the capital to start long term renting. When it comes to flipping, is there a guru that you know of on these forums?


I had a rental for a couple of years now and it's not a comfortable ride.
I think, ultimatly, it is going to come down to our comfort level. Before we decide to do something like that I know I am going to have to do a good bit of research. Do you know where I could find some information on how to deal with poor renters?


I've been lucky so far and have not had to spend any cash on repairs or upgrades and have had good tennants, but none for more than a year.
And, knowing my luck, I'll end up with some terrible renters


Of course if you can live in the rental for two years before selling you can avoid the capital gains tax, which is what I hope to do.
Not a bad idea however, who knows what the housing market will be like in two years. I would hate to get stuck with a house that won't sell.

Tri-ing
03-19-2007, 10:59 PM
I do like the idea of long term gains however, I don't know how keen I am on having to deal with tennants. Should my wife and I decide on this direction, where would you recomend I start conducting research on things like landlord laws and anything else that pertains to rental properties...?

I think, ultimatly, it is going to come down to our comfort level. Before we decide to do something like that I know I am going to have to do a good bit of research. Do you know where I could find some information on how to deal with poor renters?


Not a bad idea however, who knows what the housing market will be like in two years. I would hate to get stuck with a house that won't sell.

I was clueless when I got started and actually bought the house intending to live in it. When a job fell through, I decided to rent. And since I was moving out of State, I did it the easy way: I found a property manager to handle it.

The rental laws vary from State to State. My rental is in California where laws tend to favor the renter. Another reason I found a property manager that had a good reputation in the local community. I have a friend that has lived in the community for many years and was able to point me in the right direction for my property manager. When I sat down and interviewed her (I recommend you do this face to face, I sat with 3 different property managers to get a good perspective of their experience, styles, and successes) she seemed to have the right experience and has done well for almost three years now.

Sorry I can't be more help in pointing you to the research, I haven't done any myself, left it all up to the property manager to handle. The rest is dumb luck.

James48843
03-20-2007, 07:54 AM
If you want to see what the real estate market COULD do, just check out Detroit.

Where I am, housing is crashing big time. Houses can be found for pennies. Literally.

http://news.yahoo.com/s/nm/20070319/ts_nm/usa_subprime_detroit_dc

weatherweenie
03-20-2007, 07:58 AM
If you want to see what the real estate market COULD do, just check out Detroit.

Where I am, housing is crashing big time. Houses can be found for pennies. Literally.

http://news.yahoo.com/s/nm/20070319/ts_nm/usa_subprime_detroit_dc

Read that article yesterday.

Very sad, and very scary!

pyriel
03-20-2007, 12:21 PM
We need to be cautious with our investments. Educate yourself and start up small before you jumped into RE investments. This will be my advice to anyone that would like to try RE. I have a friend that I grew up with that now lives in California. He bought a fixer upper last year for 575k and pumped in about 200k to renovate it. From what I gathered, financing for 575k is for interest pmt only. I believe he also leveraged his home my taking out equity loans. I saw the house last year when I passed by over there. However, the house, up to this point of time is still in the market. I'm not sure if anyone is paying attention on what is going on in RE within the country and CA is currently on a slump.

A real estate agent friend of mine had informed me that they are seeing Hawaii to be next and their slump might start happening late of this year or sometime next year. This means that there might be buying opportunities out there sometime soon. I am also seeing a slow down in RE rentals in Guam and truly believe that we might be seeing some slowdown sometime next year. There are so many specualations about the marines coming to Guam but those will not materialize until about 3-5 years from now. I'm just glad that my target market is still strong for my rental properties (Section 8).

Given these facts, I strongly believe that now is the time to start raising cash. I am still closing on a property on Monday but had informed my RE agent that I am backing out from my position to purchase a 260k brand new house which is supposed to be completed at the end of this year.

Please always educate yourself and ensure that you know what you are doing before you go into RE investments. It can be lucrative but it can also be unforgiving.

Snarg
03-24-2007, 03:57 PM
When a job fell through, I decided to rent. And since I was moving out of State, I did it the easy way: I found a property manager to handle it.
How much does a property manager cost you? If the manager represents a larger company, do you still interview the individual?

Without a manager, how do you deal with reluctant renters? Anyone happen to have a handy link to rental laws in Washington state?

Thank you for all of the information already provided.

ChemEng
03-24-2007, 04:17 PM
All this talk about short term-vs-long term investing without any talk about risk exposure?

Comparing the potential dollar returns between the 2 without accounting something for risk isnt looking apples to apples...

Snarg
03-24-2007, 05:05 PM
All this talk about short term-vs-long term investing without any talk about risk exposure?

Comparing the potential dollar returns between the 2 without accounting something for risk isnt looking apples to apples...
By all means, educate me kind sir.

ChemEng
03-24-2007, 10:20 PM
Let me start by saying that Im not a real estate expert. I have had several graduate finance classes though, so that is where my comment is stemming from.

The idea is that youcnat just look at the potential returns of 2 investments without incorporating some measure of the different levels of risk between the 2 investments. Make sense?

If not consider this scenario between 2 investment options: 1 investment offers a potential 100% return. The second option offers a potential of only 5% return for the same period. Which one would you choose?


The answer is that you cant really tell given those data points. If the 100% return comes from a short investment at the roulette wheel, then the additional risk involved with the investment should also be considered when evaluated the 2 options. Likewise, if the risk is approximately the same between the same 2 options, then it would *probably* make the most sense to maximize the percent return.

The way that I read your question is to make a recommendation between staying in an investment long term versus staying in it short term. Now even if they offer the same positive cash flows, you have to account for the additional risk that is associated in staying in the investment longer.

Using the analogy from above, would you use the roulette investment option that offers a potential $10k return over some other option that offers the same potential $10k return for the same seed money and less risk? Probably not.

Given the housing situation you provide, there is risk that is associated with staying in the property long. The potential of going periods without renters, the potential of the house's value dropping significantly, the potential for the maintenance/repair cost of the house to exceed what profit you are making, et al.

To accurately compare the choices, you need to consider your tolerance for risk given the additional length of time you will be in the investment and then adjust the cash flows appropriately to compensate for taking on the additional risk.

If this doesnt make sense, let me know.

(I hope this wasnt too wordy. The beers from the evening are kicking in full effect now and the gears in my head are moving a bit too freely.)

Snarg
03-25-2007, 05:02 AM
ChemEng - I understand what you are saying and thank you for your input. I don't think I was looking at financial gains/losses with my original question. My main concern was, basically, which one would be less of a pain in the ass.

Tri-ing
03-26-2007, 10:39 AM
How much does a property manager cost you? If the manager represents a larger company, do you still interview the individual?

Without a manager, how do you deal with reluctant renters? Anyone happen to have a handy link to rental laws in Washington state?

Thank you for all of the information already provided.


My property manager takes 10% of the monthly rental fee. Good incentive for her to keep the place rented. She writes the rental agreement, finds the renters, takes care of security deposits, walk through inspections, etc. I receive a check monthly and pay the guy that takes care of the lawn (but she would probably take care of that, I already had it set up before I signed a contract with her).

I'm sure it can be done without a property manager, but haven't done it myself. I would recommend you interview the company or company representative and get some references that you can talk with as well.

Good luck.

GUCHI
03-26-2007, 01:11 PM
can anyone shed some light!!!!

i have a house i'm flipping renovations r complete and i'm trying to sell it myself to try and save on realtor commision 6% fees. the house has only beeen completed for about 3 weeeks, so i'm trying to capture the Spring sale period. does anyone know how beneficial it is to list with an agency vs. owner selling ???????? i really would like to give it some time and try to sell on my own. what can ya'll tell me ???

malyla
03-26-2007, 01:54 PM
Selling on your own can be rewarding but requires a lot of time. Getting a realtor will cost you 3-6% of the selling price but cuts down on the frustration and stress of selling a house (this is assuming you find an agent that really works for you and with whom you get along with).

Even if you sell yourself, you may get a buyer who has an agent which means you are paying 3% to the buyer's agent. You could request 'no agents' on the sale which may limit your buyer base.

I have sold a house without a seller's agent but I did pay the buyer's agent 3%. I recommend listing with MLS through 'ForSaleByOwner' or 21st century realty.

http://www.forsalebyowner.com/
http://www.c21clickit.com/

It was a lot of work and the open houses were not fun (that's why people use a realtor) but I learned a lot.

Ultimately, the house sold when a neighbor let a friend of theirs know it was for sale. The friend's of my neighbor bought it.

Signs are available at Home Depot and Lowes. Get the house in showing condition (Ikia showroom). Talk to your neighbors. Show the house with plenty of signs directing people to the house. Set a price that will sell.

Good luck.
Malyla

GUCHI
03-26-2007, 02:14 PM
malyla
i did not realize u still pay 3% for the buyers agent, i thought the buyer covered that exspense ??? we had a sign made which read Buy Me with a phone number. we also had a open house and sent them out to many realtors. and u know what not 1 realtor showed for the open house. i think it must be an unwritten rule that if homeowners don't list with the realtors they don't participate. we r willing to pay an agent 2% for bringing us a buyer. we thought about sending the realtors that info. what do u think

malyla
03-26-2007, 03:05 PM
i did not realize u still pay 3% for the buyers agent, i thought the buyer covered that exspense

Well, the buyer's agent commission comes out of your profits. Say you ask for $200,000 and the buyer agrees (unusual, expect a counter at a lower price), then you get $200,000 - 3%. If the buyer wants closing cost assistance (usually $3K-$5K), then you get $200,000 - 3% - $3K (or whatever the closing cost assistance is). Closing cost do not cover the agent fees.

This is a buyer's market (the beginning of a 6-9 year cycle) which means you should be prepared to pay some closing cost assistance. You could request that the buyer's agent take less than 3%, but that will happen only in extreme cases (the buyer must have the house, but you asked for no agent fees, so the buyer cancels their contract with the realtor - messy, or the buyer agrees to pay the fee from their own pocket - odds are extremely high against this happening).

The most important rule in selling a house is "People MUST see it".
Option one: Put out a lot of signs with arrows, directions, phone numbers so that weekend lookers (buyers driving around the neighborhood on a sunny weekend) will see that you have a house for sale. If you are having an open house then you may get the weekenders to look at it and maybe they will tell their agent to put an offer on it. It is rare that buyers will not have an agent as buying a house requires the resources that realtors have (mortgage broker info, inspectors, attorneys, etc...)
Option two: Get the house listed on MLS. It costs about $500 to list it through the websites I listed (there are other sites that will list it as well).
Listing on MLS allows the realtor to see it when they do a search for their client. More possible buyers are likely to see the specifications of your house than weekend drivers. This may lead to a showing by the buyers agent with their clients of your property.

However, if all the houses sold without a sellers agent, then the realtors will lose half their income. This does not cause the realtor to go out of their way to sell your house to their buyer. What usually happens is that the buyer sees the house and tells their agent about it.

So, get it listed on MLS and get some signs out, but don't expect buyers agents to sell your house for you.

Good luck.
Malyla

GUCHI
03-26-2007, 03:35 PM
thanks for the info. it sounds like listing in the MLS is worth the $$$$$

malyla
03-26-2007, 03:40 PM
thanks for the info. it sounds like listing in the MLS is worth the $$$$$

Worth every penny. As a buyer, I can search the MLS sites myself and see the agent-listed and for-sale-by-owner listings. It will give you much more visibility.

M.

GUCHI
03-27-2007, 07:12 AM
i don't understand why i would have to pay the 3% to the buyers agent when i had nothing to do with getting the agent. wouldn't that exspense be paid by the buyer, since the agent is representing the buyer ????

malyla
03-27-2007, 11:51 AM
That's how the buyer's agent gets paid. I also resented 'giving' my money to pay for the buyer's agent but that is the way the system is set up. You can ask that no buyer's agent be involved or price the house so that the 3% is included.

Good Luck
M.

wv-girl
03-27-2007, 01:13 PM
That's how the buyer's agent gets paid. I also resented 'giving' my money to pay for the buyer's agent but that is the way the system is set up. You can ask that no buyer's agent be involved or price the house so that the 3% is included.

Good Luck
M.

So true. I too resented sharing the wealth(mine) but they tell you that they won't show your house - or if you find the buyer yourself and they already have an agent - they will tell you that they will discourage the buyer from buying your house. They make it easy for the buyers to get in-- it's the getting out that bites.

GUCHI
03-27-2007, 03:06 PM
that is so wrong !!! i feel like i'm being strong armed by the agent. i thought by selling on my own I would avoid any realtor fees, thanks for enlightening me. have you all flipped some in the past and are you still doing it ???

offtrack
03-27-2007, 04:53 PM
"i don't understand why i would have to pay the 3% to the buyers agent when i had nothing to do with getting the agent. wouldn't that exspense be paid by the buyer, since the agent is representing the buyer ????"



To Clarify: You don't HAVE to pay buyer's agent by law. You would make an agreement to do this with the buyer's agent to order to move your house to his client in which case you should price your house accordingly, factoring the percentage. I sold one home offering a flat fee to the cobroker. I sold another with no cobroker. In what might be a slowing market in your area, I doubt you'll find many agents who will quibble over fee vs. % when they need a paycheck.I suggest you familiarize yourself with other properties that sold in the direct area of your house to get an idea of your houses's worth. Also factor the market trend in your area. Some markets are still on the upswing. Others are almost in freefall. Try and value your property realistically according to its desirability. Don't overjudge the value of your house.Then you can better judge whether it would profit you to actually use a broker. A desirable well priced house in a good market area would be worth FSBOing IMO. Change any one of the criteria and I'd use an agent. If I'm going to take a loss and the area rental market is strong I'd go that way. I'd also look at the potential of holding the financing in a market where credit mught be tightening. Sub-primers aren't all bad risk and will still be shut out if credit is tightened. You might be able to move the house and do someone a favor that otherwise would be shut out. Last give some thought to gimmicks. In a tightening market you might need to get creative to move that house.

GUCHI
03-29-2007, 08:12 AM
offtrack
you brought up some very good points. a local realtor told me that the house market here in or area is selling homes. you mentioned gimmicks, we are considering having a realtors after hour to give them a chance to see the house and let them know we are willing to pay 2-3% for them to bring us a buyer. the house has only been completed for 3weeks now and we have had 1 open house the 1st week with a good turnout. can you offer any other gimmicks that might be useful ? i would rather not rent, since the profits from the sale would fund the next flip.

thanks

offtrack
03-29-2007, 09:46 AM
I can't be much help. I'd check Zillow if they have info on your area to see the prices homes sold for in the immediate area. http://www.zillow.com/
I'd have a couple of the realtors come in and see where they'd price the house. I'd check the market trends in your area. Yahoo realty can give you a rough idea but you might want to probe further. http://realestate.yahoo.com
Also I'd check for any nearby foreclosures. They have a negative impact on values of nearby homes and need to be factored. I'd check to see if my house were priced in the ideal market range for majority of buyers in the area. For example in my market, houses valued between $130K and $180K are scarce while the market is bulging a bit with houses priced higher and lower and that is mainly because of what the the majority can readily afford based on the local economy. From all of the above I'd try to find an attractive value for the house.

But again IMO everything is dependent on the location and overall appeal of the home. Is it waterview or in a highly desirable neighborhood? Is your area attracting migrating buyers or losing them?
If prices were sharply dropping in my area I'd consider dumping unless my property were one that I thought would hold appeal through any overall market decline.

Getting back to gimmicks I can offer none that would help you in your immediate needs, except the standard where you would make the house as nice and homey looking as possible. I'm retired and computer savvy so my last three homes have been purchased because I bought them after initially seeing them and researching the area through the internet. http://www.realtor.com and I browse the homes listed frequently. Also hit http://www.realtytrac.com/ for foreclosure and bank owned info. I think they have a free trial.
Now what I meant by gimmicks was based on what might happen if the you think you might get stuck with your house. And that would range through anything from finding a nice family for a fair lease to own deal (not the gouging type) to giving a promising younger family member a head start by pricing the house below market and taking the loss. :)

pyriel
03-30-2007, 05:33 AM
Good discussions. FSBO or for sale by owner does not have to pay for any commission fees. Yes, part of the closing cost might have to paid but that is an agreement that is made between buyer and seller. So, if you dont agree then you dont have to pay.

Agent working for the buyer must be paid by the buyer. Agent working for the seller must be paid by the seller. I can see some agent working for the buyer trying to strong arm the seller, telling them that they will not show the house to their potential buyer. If you agree to give up 3% then that is your perogative. If not, then you have no obligation to pay them at all unless you sign a contract with them.

Good luck people.

Pyriel

GUCHI
03-30-2007, 07:49 AM
P
thanks for clarifying that question. at this point still FSBO, but don't want to waste time during this crucial selling period. thinking about listing with an agent.

Snarg
03-31-2007, 10:25 PM
GUCI - Please let me know how it worked out. FSBO is something I was thinking about but it sounds like it may be more trouble then it is worth.

As far as renting goes, what type of liability am I looking at? What type of insurance should I look for? For a rental agreement, do you make up your own or are there pre-made ones I could use? Would it be wise to get the advice of a lawyer?

To further my education on this whole thing, I have been thinking of getting a few certifications. Please let me know if I would be wasting my time/money on any of these:

Home inspector. I thought of doing this for a couple reasons. It would help me when looking at potential purchases and I would not have to hire one when I go to buy. Also, I could use the certification to make a bit of money on the side.

Home apprasier. It would help me to set a realistic value on my home.

Realtor. It seemed like a good idea :)

Thank you for all the help and advice I have gotten so far.

pyriel
04-01-2007, 05:44 PM
Many FSBO set unrealistic price when they sell their properties. Make sure you know the market before you do this. Setting unrealistic price will keep your property in the market for a long time and will cost you money in the long run.

Don't mess with insurance. Make sure you are insured (they are tax deductible). Get a regular insurance and add liability insurance with it if you are to have it rented.

Waste of money. Read books and do your homework. Practice makes perfect. I can now walk into a house and a have a ballpark estimate on how much it will cost me to renovate it. It took time but I learned from experience.

Home inspector. A must before you buy. I'd rather lose $500 and walk away out of a deal than to purchase a property that will cost ten of thousands of dollars to fix. This is also a good tool to bring to bargaining table to lower down the purchase price. Same principle when you are selling. It is better to know what to expect when the buyer tells you what is wrong with your property and try to low ball you.

Home apprasier. This is time sensitive and varies within different areas. Here in Guam, appraisal is good for six months. Dont waste your money unless you are ready to sell. Again, the goal here is to not set unrealistic price on your property.

Realtor. Whether they are good or not depends on the realtor. Some are aggressive and some are lame. If you do it yourself, find out where you can advertise and make sure it is noticeable. I see so many ads in newspaper with a 2 liner. This doesn't make sense to me. Putting up a sign in front of your property is not enough. Have an open house. Set the place up by fixing it up. You can even offer the buyer that if he/she works with you that you can both bypass the realotors and and give him/her the 3% discount (you keep the other 3%). Get noticed.

P

Gilligan
04-03-2007, 03:26 AM
How much does a property manager cost you?
10% is the norm around here.


Should my wife and I decide on this direction, where would you recomend I start conducting research on things like landlord laws and anything else that pertains to rental properties...?


http://www.hud.gov/local/index.cfm?state=wa&topic=renting

http://www.atg.wa.gov/ConsumerIssues/Landlord-Tenant.aspx

Gilligan
04-03-2007, 04:03 AM
I have done a couple of FSBO sales several years ago. On the last home that I sold, I waited until it was vacant and cleaned including steam cleaning the carpets. I placed a 2 foot by 3 foot “House For Sale” sign in the front yard with my phone number, I placed an info tube on the sign and filled it with fliers that I typed up. I also placed a full color flyer on the inside of the front window in case all of the flyers in the tube disappeared. I pulled back all the curtains so potential buyers could window shop. I placed a small classified ad in the homes for sale section of the local paper that said something like. “3/2 Brick, half acre lot, $75,000. 1234 Main st.” That’s all I put, I didn’t put the phone number because I had so many calls from my other FSBO asking the same questions over and over. I only placed the address in the ad so the buyers could drive by and see if they liked it or not. They could get my phone number off the sign or the flyer. Within a month after placing it for sale, I showed it about 4 times and sold it for $74,000 with the agreement that we would split the closing cost. A local title company handled the closing ( in some states its called a settlement) which cost us about $800 a piece. Now looking back on this now I wish that I would of held on to this house and rented it out, its probably worth about $150,000 today.

Now, one of the quickest closings I had was a foreclosure that I bought from an out of state bank. My wife and I paid cash for the house so the closing cost were very low, I think it was about $300 for our part. We only had to sign about 3 places and we spent less than 5 minutes in the title office.

I am not planning on selling anymore properties(doing the Birchtree buy and hold) but if I did sell a house, I would probably go ahead and list it with a realtor. As a real estate investor, I search the local paper, look for for sale signs, scan the real estate magazines, search the MLS and I even have a broker email me property listings that he knows fits my criteria, sometimes before they even appear on the MLS. One real estate co I know of charges $2,995 flat fee for listing and selling a property. Even though listing a property cost you 6%, it can be well worth it.