5 ms·

My point isn't that my friend got a crazy good deal. My point is that arbitraging 12% rental income against a 5% mortgage rate is so easy right now you can do i

by istari 16y ago

My point isn't that my friend got a crazy good deal. My point is that arbitraging 12% rental income against a 5% mortgage rate is so easy right now you can do it by buying right off the MLS at market rates, in one of the most expensive(price to rent wise) cities in the US. The original poster was moaning about how hard it was in TODAY's environment to make money off of several million dollars in cash(!). I wanted to provide a counterpoint to that attitude.

Eliezer 16y ago
If what you say is true, why is all this free money still lying around? Is there some systematic reason for why hedge funds don't do it, or why too few people bid on courthouse auctions?
- istari 16y ago
  It's not free at all. Buying a rental property off the MLS means you have to manage it, and is like starting a small business. This is fairly safe to do even for beginners, and is a good way to leverage a few tens of thousands and a good credit rating. Buying at courthouse auctions is a completely different ball game, and requires you to 1. pay all cash(this eliminates 99% of competitors) 2. research title and liens on the property(if you screw up you might end up buying the second mortgage instead of the first and lose everything) 3. estimate the market price without being inside 4. be there on weekday mornings 5. have strong intestinal fortitude. 6. have heard about them in the first place and have taken the trouble to learn the system. The above are why you can get discounts of 30% or more off of market price. Properties need to be individually researched, fixed up and resold. Someone has to physically go attend the auction. It's MUCH too messy for hedge funds. It's ideal for individuals, or groups of individuals, with cash and local knowledge. More and more people are showing up at my local auction, and good deals are getting harder to find. Are you in California? Go to your local county courthouse at 10AM on a weekday and look for a circle of homeless looking people holding large cashier's checks. Depending on the state, it might be once a month on a designated weekend. Let me know if you want more info. Stop reading HN and get back to work on chapter 35.
  - noname123 16y ago
    Thank you for providing detailed and concrete information about how to go about buying foreclosure properties at courthouse auctions. I admire people who are confident/kind enough to share inside information about their business to the public, as opposed to most people on HN who just engage in self-congratulatory circle-jerk. You have a good day, sir.
  - 7d9bf2471be6f39 16y ago
    I would like more info. I am in the position to invest on this scale and the idea of being a landlord is not too scary to me (actually sounds kinda fun in a twisted way). Some questions off the top of my head: - What attributes constitute a good rental property? - Is it ever worth it to hire a manager? - How often do you have to visit the property? I live in SF but I understand being a landlord here is difficult due to renter protection. If I were to buy a property in an outlying area, how often would I need to visit it? I'd also like to take some extended travel in the future. Would being a landlord get in the way of that? - What else should I be thinking about? Thanks!
    - istari 16y ago
      Right a mortgage is 5% or so. So around 0.5% per month, roughly. Rule of thumb #1 for rental properties is that if it can get 1% of its total value in rent per month in rent, you can get positive cash flow. 1.5% is worth your time. 2% is what you want to aim for. Rule of thumb #2 is that the crappier the property, the easier it is to get a higher % of rent vs price. Multifamilies are in general more profitable to rent than single families. Don't hire a manager when you're starting out. Do it yourself, invest close to home. SF is too expensive, anyways. Everyone has their own comfort level trading off profit vs crappiness of neighborhood. I'm drawn towards slums, myself. Richmond/Concord has some nice cheap properties, is close, and has good rents. Oakland is even cheaper but slummier. The default first step would be to fire up realtor.com and craigslist, and compare prices versus rents. Start with the cheapest single and multi families in Richmond, Concord, and Oakland. How much cash do you have? This is important since it defines your options. Join bigger pockets, it's a great forum with lots of pros. Always try to buy below the market price set by the MLS. You can get away, but you'd need to get someone trustworthy on call to take care of emergencies. Shoot me an email at foreclosurevision dot com, once I know exactly what you're looking for I can offer more targeted advice.

by istari 16y ago

Eliezer 16y ago

If what you say is true, why is all this free money still lying around? Is there some systematic reason for why hedge funds don't do it, or why too few people bid on courthouse auctions?

istari 16y ago
It's not free at all. Buying a rental property off the MLS means you have to manage it, and is like starting a small business. This is fairly safe to do even for beginners, and is a good way to leverage a few tens of thousands and a good credit rating. Buying at courthouse auctions is a completely different ball game, and requires you to 1. pay all cash(this eliminates 99% of competitors) 2. research title and liens on the property(if you screw up you might end up buying the second mortgage instead of the first and lose everything) 3. estimate the market price without being inside 4. be there on weekday mornings 5. have strong intestinal fortitude. 6. have heard about them in the first place and have taken the trouble to learn the system. The above are why you can get discounts of 30% or more off of market price. Properties need to be individually researched, fixed up and resold. Someone has to physically go attend the auction. It's MUCH too messy for hedge funds. It's ideal for individuals, or groups of individuals, with cash and local knowledge. More and more people are showing up at my local auction, and good deals are getting harder to find. Are you in California? Go to your local county courthouse at 10AM on a weekday and look for a circle of homeless looking people holding large cashier's checks. Depending on the state, it might be once a month on a designated weekend. Let me know if you want more info. Stop reading HN and get back to work on chapter 35.
- noname123 16y ago
  Thank you for providing detailed and concrete information about how to go about buying foreclosure properties at courthouse auctions. I admire people who are confident/kind enough to share inside information about their business to the public, as opposed to most people on HN who just engage in self-congratulatory circle-jerk. You have a good day, sir.
- 7d9bf2471be6f39 16y ago
  I would like more info. I am in the position to invest on this scale and the idea of being a landlord is not too scary to me (actually sounds kinda fun in a twisted way). Some questions off the top of my head: - What attributes constitute a good rental property? - Is it ever worth it to hire a manager? - How often do you have to visit the property? I live in SF but I understand being a landlord here is difficult due to renter protection. If I were to buy a property in an outlying area, how often would I need to visit it? I'd also like to take some extended travel in the future. Would being a landlord get in the way of that? - What else should I be thinking about? Thanks!
  - istari 16y ago
    Right a mortgage is 5% or so. So around 0.5% per month, roughly. Rule of thumb #1 for rental properties is that if it can get 1% of its total value in rent per month in rent, you can get positive cash flow. 1.5% is worth your time. 2% is what you want to aim for. Rule of thumb #2 is that the crappier the property, the easier it is to get a higher % of rent vs price. Multifamilies are in general more profitable to rent than single families. Don't hire a manager when you're starting out. Do it yourself, invest close to home. SF is too expensive, anyways. Everyone has their own comfort level trading off profit vs crappiness of neighborhood. I'm drawn towards slums, myself. Richmond/Concord has some nice cheap properties, is close, and has good rents. Oakland is even cheaper but slummier. The default first step would be to fire up realtor.com and craigslist, and compare prices versus rents. Start with the cheapest single and multi families in Richmond, Concord, and Oakland. How much cash do you have? This is important since it defines your options. Join bigger pockets, it's a great forum with lots of pros. Always try to buy below the market price set by the MLS. You can get away, but you'd need to get someone trustworthy on call to take care of emergencies. Shoot me an email at foreclosurevision dot com, once I know exactly what you're looking for I can offer more targeted advice.