SHELLY

Advertisement in Friday's WSJ for Absolute Auction of 7 Condos at Heron's Watch on May 19. (Selling Furnished.)

Copy reads: "Sales Regardless of Price, No Minimums, No Reserves"

Guess one can say it's shaping up to be an "Auction's Market."


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__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

bdc63

Got Link?

00seer00

Auctions are helping the market establish the bottom. People who want to buy land are still sitting on there hands, they don't want to over pay. A absolute Auction seems to set some price and establish new comps for similar properties. The more there are the faster the bottom will be established. Some properties are already below what they should be due to the fear of buying, some properties still have a way to go down. It takes some Faith in a good Auction company to have one in this market right now, some great deals will be had due to this. This is just what I see and I seldom right ( just ask my Wife ).

00seer00

Our land goes nex Saterday, PM me for a personal tour.
http://www.roebuckauctions.com/aucti....php?ID=137031

Smiling JOe

I disagree, 00seer00, about auctions setting the bottoms right now. Most of these auctions are not absolute, and sometimes when a seller has multiple units listed absolute, they are pulling the other six if they don't get bids they want on the first one. With all of this going on, they are not drawing many bidders to the auction steps. If sellers would realistically set their asking prices, buyers would show up, and I'm not talking about one or maybe two, like the recent auctions draw.

I think if these auctions want to get buyers in a down market, they need to do reverse auctions, starting at the listing price of comps and decreasing the price until the first guy raises his hand. That would cause a frienzy.

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SHELLY

Here you go: http://national-auction.com/default.aspx?id=1240

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__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

00seer00

So you are siding with my wife? Oh well, I did refer to Absolute Actions only. If someone pulls the property then it is not Absolute. The Absolute Auctions I have been to where 1 property per Auction, in each case the bidding did not start until they reached maybe 30% of what the property ended up selling for. We will have 3 lots going Absolute, there will be no pulling off of any lots if the first one does not go well. A 20 acre , 40 acre, and a 60 acre plat, will sell Absolute, regardless of price. Someone might get a extremely good deal if bidding does not go well. Word of these great deals will bring more and more buyers to other Absolute auctions. With more and more buyers, more and more Absolute Auctions for buyers to go to. This will all help form a bottom. I am often wrong, but this is how I see this one.

egrp

This will be interesting...i am very curious to see what these go for as i am very familiar with this development.

lowest one in MLS at around $185K...they rent for around $1K/month.

Lets do quick cash flow evaluation here...

$12,000 annual rental income

($2,640) HOA dues -- I'm pretty sure its around $220/month incl Insurance

($1,000) Transitional Vacancy and Repairs/Improvements

($1,500) RE Tax

$6,860 in annual operating income

Just breaking even, this will support a mortgage of $86K (7%, 30 yr)

So I guess around $90k would be a good price??!!

People think thats crazy, but seriously the residential rental vs for sale market is sooo out of whack...this may be an extreme example, but it goes to show you that good investments cash flow. I totally understand buying beach real estate because of the intagables (emotional aspect), but don't kid yourself that its an investment.

Smiling JOe

egrp,
Your numbers look fairly accurate, but remember to include the 10% buyer's auction premium.

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SHELLY

eg,

No, I think < $86K would be a good price.

Good number crunch...but wasted on investulators who wouldn't know cash flow from shinola.

BTW, is the "new airport" baked into that number too?

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__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

Smiling JOe

From looking at it from no other view than a cash flow, I would want to mark in a 10% annual return, so you could further reduce that purchase price, in order to have some positive cash flow better than CDs and MMs, not break even.

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spinDrAtl

I don't know anything about this particular property but there are some people out there who buy something just because they want to use it weeks or months at a time and then throw it into a rental pool or do it themselves just to bring in a little income.

Every buyer is not an investulator though some might like you to believe that.

SHELLY

Suffice to say, investulators are a dying breed.


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__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

flyforfun

EG, just remember that if you had purchased $1000.00 of Nortel stock one year ago, it would now be worth $49.00. With Enron, you would have had $16.50 left of the original $1000.00. With WorldCom, you would have had less than $5.00 left. If you had purchased $1000 of Delta Air Lines stock you would have about $49.00 left.

But, if you had purchased $1,000.00 worth of beer one year ago, drank all the beer, then turned in the cans for the aluminum recycling REFUND, you would have had approximately $214.00.

There, is a time to buy, and there is a time to sell.....now is the time to be buying RE at the beach cause it's not going to get any cheaper!

robertsondavies

Hey Fly For Funn.. the quote you just used, which was famously pasted to every inbox in the world, was from 2002-03 period when the stock market bottomed, not today. your quote mentions how $1000 would have evaporated with investments in the newsworthy blowup stocks of 2002 such as Nortel, Enron...

Not sure if you're now aware, but things have changed. If you had invested $1000 in a good number of stocks in February 2005 you would have $1500 or more in your account. Conversely if you had invested $1000 in SoWal Real Estate in February 2005, you would have about $500 in value (if it was truly marked to market) today- not including the cumulative impact of any negative cash flow which would exacerbate the above 50% drop. Individual experience may vary (i.e. some real estate may only be down 35% from the top, on a good day) -- , if you're lucky to find the small handful of buyers who think that there is no airport in the area currently)

it takes a lot of balloons to attract those buyers to your property, because even the gullible know what the onset of "Auctions" after years of no supply to sell, effectively means to the market here.

latr

SHELLY

Actually, FFF, you've got some pretty old stock market references you're using to make your point.

$1000 worth of NT purchased last year would be worth $900+change today...Enron and Worldcom were already history, so one couldn't buy their stocks a year ago....and finally, come April 30, $1,000 in Delta stock will be worth absolutely NOTHING since Delta will be flushing their old shareholders down the crapper when they emerge from BK.

I also think you're wrong about buying RE now too.

<P.S. And I'm not just saying this trying to get you to like me >


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__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

full time

"I also think you're wrong about buying RE now too."

Sorry FFF, I think Shelly might be right about this one. Had you bought a home last year at this time in Walton County, you could have purchased it for (on average) $500,000.00. This year, same time ......... $700,000.00. Oh well - there's always next year.

goofer44

Did I just miss something ???

spinDrAtl

This quote is just silly, IMO, in addition to being WAY out of date. You can always look back and handpick statistics to support anything you want. We all know about those colossal failures but there were stocks in that period that did okay. As others have pointed out, stocks overall are doing well right now but there are also those that are in the crapper.

There are also many people that are not being hurt in the slighest by this RE pricing pullback, though by saying that I am not dismissing the pain being felt by many who weren't part of the speculator crowd. The time to buy differs for an individual just as much as the time to change jobs or get married or any other decision to be made.

flyforfun

Two, three or four years ago...is not the point. My point is simply all market's change...that is RE or stocks. Stocks are much more unpredictable than RE because there is just to many variables. You can end up with worthless paper when you invest in stocks, and in RE, you at least have something you can sleep in, watch the sun set and have a cool one while the waves roll in. Unless you choose good mutual funds managed by experienced folks, small time investors get killed in stocks. Right now is a buyers market for RE in Sowal and if you don't take advantage of it, you will miss Florida's next RE market....and that is the bottom line.

spinDrAtl

Couple of points here: If someone is already invested in Florida real estate from before the bubble, they might not want additional exposure. If someone is a speculator, they never planned to sleep in it, etc. or even in the case where they have multiple properties for investment. Now if one is looking to buy a home to live in or a 2nd home to use, you may be correct.

Your statements regarding small time investors getting killed in stocks paint with too broad a brush. Some do, some don't. There are plenty of 'small time investors' who got destroyed in RE as well. Also, for anyone with multiple properties who is overexposed and cannot sell them (and there are many), being in RE instead of a worthless stock is not much solace for them. If they can't sell or cover the payments and carrying costs, they could lose their entire investment just like a stock. There are negative and positives to both. RE is very illiquid, unlike stocks. You can't set a stop loss or get out with a mouse click.

How many said that during the runup???? I'm not necessarily negative at all on RE, being an owner in Sowal, but your statements are way too general, IMO. If you can call the bottom with 100% accuracy, more power to you and pull the trigger.

Tell us - are you using leverage and buying everything you can? What are you buying and where? What kind of loan programs are you using? How much are you putting down? I for one would like as much information as I can get from those who know (seriously).

fisher

See posts on the real estate plunge thread--prices are getting cheaper by the month and have been for a couple of years now.

flyforfun

Just like stocks it takes cash....working for banks and mortgage companies is not part of my process. I sit back and let you guys/gals slam the market down and then I pay cash. People who over leverage themselves in RE market, just like stocks, go broke every day! However, the stock market is full of people who are experts in moving money from your pocket into theirs. Cheating, dishonesty and cooking the books is all ok until you get caught, and too few every get caught. Good attorney and a paid off jury will get the stock crooks back to the beach of bahama's or Mexico while one enjoys their large nest egg. If you have not experienced the pain of playing the stock market either you have been lucky or have time to play it full time. I prefer RE, and will take my chances at the black jack table in Vegas over the stock market any day!

SHELLY

The operative word in your statement is "play," which rhymes with "excessive risk" and "speculation."

No risk and fraud to see in the RE sector folks...just keep moving long:

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A local home appraiser is alleging widespread mortgage fraud in Bakersfield’s housing market, accusing local real estate professionals of artificially inflating prices to generate illegal profits.

Appraiser Gary Crabtree said Friday he has alerted federal, state and local authorities to “suspicious” home sales in the Bakersfield area. But he said he believes what he has found is just the beginning.

“I think I’ve just scratched the surface,” Crabtree said. “I know there are other people in the real estate industry in Bakersfield that have knowledge of this. They are just not talking.”

After documenting 22 suspect cases in the last year, Crabtree said he has referred six of the strongest instances to the FBI, California Department of Real Estate and California Office of Real Estate Appraisers, and three to the Bakersfield Association of Realtors. He also has attempted to notify the lenders involved in each of the 22 cases.

Neither the FBI, Department of Real Estate or Office of Real Estate Appraisers would confirm Friday whether they have ongoing mortgage fraud investigations in Bakersfield. Crabtree stressed that he doesn’t have any firsthand knowledge of any investigations by the agencies.

The California Department of Real Estate receives between 8,000 and 10,000 complaints a year, spokesman Tom Pool said.

“We investigate any complaint that comes our way,” Pool said. “It is very likely some of those came from the Bakersfield area. But I can’t tell you how many of them are mortgage fraud.”

Crabtree and Bakersfield Association of Realtors President Ray Karpe said they believe questionable transactions make up a minority of local home sales.

“There are hundreds of really good, really qualified serious lenders and Realtors in town,” said Brynn Powers, vice president and general manager of Alliance Title’s Bakersfield office. “There are just a few that have found a way to get around the rules.”

Crabtree said some of the properties in question may have been “flipped” — purchased and sold for profit — by investors, real estate professionals or so-called straw man buyers whose identities and credit histories were used to secure loans. The cases include what Crabtree said appear to be fraudulently inflated sales prices and buyers purchasing properties with 100 percent financing.

Some buyers received money back at the close of escrow, Crabtree said, sometimes under the guise that the money would be used for installing amenities that were not installed, such as backyard landscaping.

Crabtree said he believes some real estate agents and brokers as well as lenders and appraisers may have taken part, while others were taken advantage of in the scheme.

Some of the properties have gone into foreclosure or received notices of default, Crabtree said, leaving lenders holding the bag.

“It has falsely inflated values,” Crabtree said. “Foreclosures will follow.”

Powers said a relative who earns about $10 an hour was approved for a $200,000 loan and asked to falsify documents to say he made more money.

“If anybody asks you to tell a lie or an untruth to get qualified for a loan, you shouldn’t do it,” Powers said. “If you have to tell a lie, don’t do it, even if you want the house real bad.”

Karpe confirmed that his organization received information from Crabtree, but said the potential wrongdoing falls outside the association’s policing authority. He said the Realtors association would wait to see if any punishment was handed down from higher authorities.

“Once some of the investigations go through and people get their just punishment, it will clean things up,” Karpe said. “But you are always going to have people pushing things. Most of the people in our business do good business, but a couple grab the headlines and it taints the whole industry. I don’t like it.”

The FBI estimates that mortgage fraud losses total between $1 billion and $4 billion a year.

“It is an epidemic,” said Ann Fulmer, vice president of industry relations for Interthinx, a company that provides mortgage fraud prevention and detection technology and risk management tools to banks and lenders. “We don’t have a ... handle on how big a problem it is because it is not reported by everyone. Lenders don’t always recognize it.

“I don’t think we have seen the worst of it yet.”

Fulmer, who has worked with federal and state regulatory and law enforcement agencies fighting mortgage fraud, said more mortgage fraud cases are coming to light.

“When the market was so hot and properties were appreciating quickly, it was more difficult to spot,” she said. “Because the market is slowing down, the fraud that happened in loans that originated in the last two years is like dead bodies rising to the surface.”

Crabtree said he began tracking the questionable transactions so he wouldn’t use them as comparable properties when doing appraisals.

Crabtree said word is out in local real estate circles that he has provided information to agencies about potential improprieties.

He said he has lost business as a result and others in the industry have stopped talking to him for fear of being implicated.

But he said he believes it is the right thing to do.

“I could have just let this gone on and not said anything to anyone,” Crabtree said. “But it is my responsibility as an ethical appraiser to report these cases of suspicious activity.”

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But that's Califorinia...it's not Florida??

The Federal Bureau of Investigation's recent Financial Crimes Report states that mortgage fraud is a "pervasive and growing" problem in the current market climate, especially in the Sunshine State. In fact, the report singles out Florida as one of the nation's top 10 hot spots for mortgage fraud, along with Georgia, South Carolina, Illinois, Missouri, Michigan, California, Nevada, Colorado and Utah.

__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

egrp

The advantage and risk of investing in real estate is leverage as opposed to stocks...even buying stocks on margin, much greater leveraged can be obtained in RE.

The little guy investing in stocks typically is only investing cash and can only lose the equity amt...RE on the other hand can be purchased with zero equity; however, the entire value of the asset is at risk.

Also...I'm sorry but you're not a RE investor if you buy in cash...it devistates returns.

Searcher

Not only can you leverage the purchase of RE but if you buy the right property, you can - through rent - use other people's money to pay down your obligation.

SHELLY

Not many properties purchased during the frenzy (and even the majority for sale on the market now) will produce positive cash flow from rental income.


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__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

Searcher

I couldn't agree more - egrp's breakdown in #7 above is a fair example. Im guessing that one should not buy resort property in SOWAL, or anywhere else with the expectation of positive cashflow.

SHELLY

Searcher,

It's not just about rentals in resort areas, although they are the worst.

I've been following a story on a RE "investors" message board for some time. The protagonist is "Jeff" who fancied himself a savvy RE investor...this portion of his story begins at the point the RE market is toppy:

(These comments are actual "cut and paste" comments...Folks, you can't make this stuff up!)

(May 05):
JEFF:I would LOVE to tell you about how my investments are doing. Sadly, in order to do that I would have to KNOW how my investments are doing. This is next to impossible given the fact that I have only been investing for roughly 3 months and I am a "buy and hold" strategy guy. I have just done the "buying" part and haven't yet done the "holding" part--not by a long shot. In fact, I have only closed on three homes. Many of my homes won't be built until the summer/fall, and at least 5 won't be built for a year. The advantage, of course, is that I won't be losing any money (due to negative cashflow, a distinct possibility, especially for the Florida homes) on these homes, but they will be appreciating all the same.

(AUG 9, 05)
JEFF: I currently only have ONE SFH that is in that range. I bought a home for 212k in SLC (Salt Lake City) that I am L/O for around $1600. This MORE than pays for my total expenses per month. I put 0% down. Even so, I recommend to others that they try to stay in the 150k range or under. No mater WHERE you are renting, this price range is MUCH more likely to cashflow!
This is different than my Cape Coral homes which have NOT closed yet. The price on them is ~240k. I expect to be ~$300-$500 down on them each month. I am willing to do this though, as each will probably be going up 10k a month on average (my guess). On paper, is seems as if they can sit empty and still be good investments (like Phoenix a few months ago?).

(AUG 18, 05)
JEFF: I give all the credit for identifying Cape Coral to Adiel Gorel. I had hardly even heard of Cape Coral when he (or was it Dani, his assistant) told me about it.
The great thing is that I bought THREE houses there (a lot for me!). Their total value is around 750k. So if they continue to go up at 45% a year (doubtful, but an interesting thought), I could make over 300k in one year! All this on about a ~9k investment. Am I missing something? This seems too good to possibly be true!
If this works out as I am imagining, I am definitely quitting my job. Oh, wait! I can't quit my job, I am unemployed...

(NOV 15, 05)
JEFF: My "worst" investment is no longer SLC (appreciation-wise)--OKC is now lowest at 11%. Of course, I am MAKING $100-$200 a month on fully rented houses in OKC, while my SLC house remains empty on the market at ~$1000 for a 220k house (no takers?).
Holding costs (i.e. vacancies) were WAY higher than I budgeted for (often 5k a month), and I have significantly cut into my cash reserves.
To the degree that my houses are typical of the areas they are in, and hence these NAR numbers are representative, I could be making a weighted average of a 23% return on ~2.8 million in RE (if current numbers hold). Somehow, I just don't think I will be that lucky--it just seems too good to be true--however, I don't see why I shouldn't make half that...In fact, if I don't lose these houses to foreclosure due to vacancies...I could eventually make a significant bundle.
As described above, I have contracts on 15 houses, but I have technically only closed on 9. I signed the papers on another one in ABQ tonight though, so should "own" 10 by the week's end. Of course, when this one closes I will be back up to 3 vacant, and will be losing about 4k a month. Such is life (MY life anyway). I should have budgeted for more vacancies...good thing my wife stopped me from buying more when she did or I would REALLY be in trouble!

(NOV 21, 05)
OTHER POSTER: Jeff I hope you have a ton of liquid cash on hand to payoff the negative cashflow your many purchases are going to lead to.

JEFF:I don't know what you would consider to be a "ton," but I do have what I consider to be significant cash reserves--as outlined elsewhere on this board. In addition, I have a pretty good HELOC to turn to in REAL emergencies. Though my reserves are currently lower than I projected, they seem adequate for the time-being--as long as I don't buy more
I am not embarrassed to say that negative cashflow is scary--even risky. I MAY run completely out of money in 2-3 years or less...but ALL investment is risky. In this case do the numbers not justify the risk? Where is the error?

(APR 4, 2006)
JEFF: Well, it is officially my one year anniversary of investing. It would of passed entirely unnoticed except for one thing.
On Monday I received a check from my first lender on my first house for $3000. It appears that there was an "overpayment" of escrow--in my favor.
I probably wouldn't of thought anything more about it...except that today I received another check for $1700 from my second lender on my second house! That's $4700 that I wasn't expecting (almost as good a surprise as my 27k tax refund...).

(*Shelly thinking out loud: "overpayment" = Mortgage Lender Cashback Kickback?)

POSTER: Wow, how did you get 27K back in taxes?

JEFF: That's easy, just follow these three steps.
Step 1--be stupid enough (or should I say have poor enough tax planning) to OVERPAY your taxes by 27k in advance through withholding. This is the most important step, without it step 3 becomes very difficult.
Step 2--start a business and be "bad" enough at it that you accumulate losses of 100k (or more?).
Step 3--Find a way to apply the 100k loses from your business to your w2 income and ask the IRS for your overpayment of 27k back.
Works for me...
If you are having difficulty getting large sums back from the government, perhaps you need to work on step 1...

FAST FORWARD: (JAN 1, 07)
JEFF: I am having difficulty renting two properties. One in ABQ (slow time of the year) and one in Cape Coral (too much competition or bad PM, I can't decide). These two houses alone are costing me ~3k a month. Ouch!
Can anyone connect me with someone in Cape Coral who can rent/LO my homes out?
My equity position is listed earlier in this thread--no significant changes. Basically I have turned a 198k equity position in my personal residence into a 300k to 500k equity position in 14 rental houses--plus the right to never pay Federal income tax again. This new equity position is currently costing me 3k a month, when I rent my houses it will only be costing me about 1k a month (or less?).Debt juggling is just fine, I have had to hit my "back up" cash reserves twice lately to cover vacancies--each time for 5k. Ouch. Without those darn vacancies I would be about break even...
Change in perspective or approach? I can say that I adamantly wish I hadn't bought any houses in Cape Coral! If only I would of known that they were going to be the worst performing.

(FEB 15, 07)
JEFF: I didn't really expect to, but admitting it anyway was hard. My three houses in Cape Coral are going to end up being HUGE mistakes...they have lost thousands of dollars in equity and are losing $1000 a month while I rent them. While all mistakes are mine, in my defense I was clearly the victim of some pretty unscrupulous "businessmen." The builder took over two years to build my house (ONE isn't even done YET!). Now normally that wouldn't be a problem on pre-construction, but according to the contract I signed as an absolute beginner I have to pay the construction interest while they sit on their butts. Dang. Also, these houses actually went UP 50k each in the first few months I owned them (if I coulda sold), but over the last year have lost greater than 50k. If the builder would of built on time, I could of made 100k or more. Also, the lender said I wouldn't have to re-qualify my construction to perm loan, but since the builder went over the 12 month period, I DID have to re-qualify and couldn't...so that cost me ANOTHER 10k (times 3). And so on...basically I am going to lose a LOT of money these negative cashflow houses...

(APRIL 25, 2007)
JEFF: Well...as many of you know I own three terrible houses in Cape Coral Florida. Through a series of misjudgments and being taken advantage of (and lied to), I am losing ~$1000 on month on each of these houses when they are rented. I am just sick about them and often cannot sleep--like now.
Anyway, what should I do?
I have been hitting my personal residence HELOC for the negatives, but can only take that so far. I would just like to "walk away" from these homes but of course I am too embarrassed to do that (so far) and I suspect it is not an option anyway...
What are my options? These houses appraised at ~315k (closed in last year) but might only sell for 230k right now. I owe 264k.

THE END?

__________________
But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

Searcher

WHAT? - 15 houses? Salt Lake City?, Cape Coral? ABQ? (where/what is that?)

Stupid is as stupid does. - Forrest Gump

Here are our rules - I know there are other ways to invest in RE but this works for us:

- Crunch Thy Numbers! - be conservative, be realistic
- Know Thy Neighborhood! - Know trends, know demographics, it also helps a lot to actually live where you are investing.
- Know Thy Renters! (before you buy) - Who is gonna want to live in your property? Are there lots of those type folks around? Do you want to deal with them every day?
- Keep Thy Hands On! - Do all your own management and as much maintenance as you can.
- Know Thyself! - Do you actually want to burn a nice Saturday showing an apartment to a bunch of strangers? How about fixing a toilet at 9:00 at night?
- Aviod the SFD! - Simple math, when you have a vacancy in a duplex, you only lose half the rent. Quad, even better. etc.
- Have Patience! - As we know, Real Estate goes in cycles. Plan up front to wait it out.
- Moderate Thy Expectations! - Don't expect to break even for two years. Break even is OK, profit is better. Unless you own a LOT of property, have low/no debt carry and/or are doing this full time, you won't make much money.

Shelly - I hope Jeff is OK. He sounds pretty bad there at the end. Keep us posted.

flyforfun

Egrp, you and Shelly both are amateurs....don't have a clue. Stick with investing in CD's...its safer.

egrp

buying real estate with cash is the same as CDs...hope this helps

...i can't speak for shelly, but u r rite i'm dummer than a bag of hammers

flyforfun

Shelly of course there is risk in RE for amateurs....absolutely there is. You need to stay out of it cause you don't know what you are doing. Stick with mutual funds and CD's. In the long run, RE on the beach does better than most. Sure this correction is been a tough one, and some people made some mistakes. However the longer you hang on to that piece of property, the more it will smell like roses. What is interesting to me is the positive spine you and your pals give stock investors, which I admit I am not cause there is just to many unpredictiable variables for me to be comfortable with. I don't trust 99% of the people in the investment advisor market who push stocks, mutual funds, etc.. But you know, I know more people who have lost their life savings in stocks than any other form of investing. The stock market is so volitale that if the President farts...stocks go down. Its almost a joke. People who make it their carreer watching the stock market 24 hours a day, do very well, but the rest...they become long term investments because short term they are a loss. Several years ago I had two friends who decided to quit practice and become "day traders"....within 14 months they were broke. Now some of the people who "play" the RE market down here really have some guts and take huge risks and their risk level is way outside my league. However, I would not call them stupid or foolish like I have seen you and others refer. I also don't like people who take advantage of people either it be real estate agents, brokers and mortgage companies. People who break the law need to go to jail in turkey!

spinDrAtl

For someone who seems 100% certain that now is the time to buy, you are talking in generalities and in circles. Give some specifics - what are you buying, where, how much? What return are you looking for on your cash purchases? Over what time frame? Educate us.

I've been buying RE and stocks for 20 years and both have cycles and both have crooks. I'm doing just fine in both.

fisher

U almostt haave it write that buyin real estate wit cash are the same as CD's (oer time ur returns will be bout the same). The problem wit ur comments are that investors princepl are vertully 100% safe in CD's in the short and long term. Howeer, investors princepl ain't not safe in RE. Levrage are for dummiiees.

rancid

- Aviod the SFD! - Simple math, when you have a vacancy in a duplex, you only lose half the rent. Quad, even better. etc.


I have a couple of SFD in Atl and am looking at a quadraplex. I am hesitant b/c of dealing with 4 renters and the greater likelihood of problems and vacancies due to added variable of multiple renters.
Do you not think it is better to have one renter taking the chance that the SFD may be vacant at times?

Searcher

Where we live/invest, it is a challenge to even find a SFD that will cashflow. The prices for a decent property are just too high. We find that for the same purchase price, we can get enough rent with multifamily homes to make it work. And yes, the other side of the coin is that you are dealing with more renters, more applainces, more toilets, etc..

For us, the more units we have rented, the less pressure we feel when one is vacant. Before we rent, we try to get each property up to a standard that will attract good tenants and require less day-to-day maintenance.

Smiling JOe

Another advantage to a quadplex over sfd is that it is easier to slightly raise the rent of four slightly to cover costs like increased taxes or insurance, rather than placing all of that burden on one rentor. You also have an advantage of dividing the cost of the land by four, lowering you land cost per unit, when compared to a similar parcel with only a single family detached home.

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flyforfun

Spine doc, its all a matter of how aggressive you want to be in RE at the beach. You do good in stocks cause you follow it closely and probably do not depend on others to provide you with advice. I don't have that kind of time to watch the ticker tape, be that analytical and read the news and shift through the BS. Unless you have a good finacial adviser you can trust, then its a little easier.

Regarding RE down on the coast. There are lots of good buys but you first need a RE agent who works sowal full time (not part time or as a hobby), been there several years, has access to comps for 15+ yrs. and knows your comfort/risk/goals level. He/She should know contractors, zoning, good vs bad lenders, etc.. I don't buy anything that is not water front or view or not in a large development. Those properties always rebounds first when there is a slump and climb the highest in a good market. I also don't buy condo's that don't have onsite management. I choose not to be involved in several deals at once, so I cherry pick. I also like properties that need repair work that I can do myself. I like RE that is in need of redecorating or a new coat of paint. Otherwise, find a contractor who has been down there for 10+ years for larger stuff and has not lost his license a dozen times (use myflorida.com). I like to find properties who need to sell vs those who don't. If you don't need to sell, now is not the time to do it. I am not into flipping..it's just to risky for me but if I was going to do it, I would buy in the fall and be out of it by June. I like property that I can pay cash for, fix up, rent for a couple of years, take the depreciation and then sale when I can double my investment (which normally is within 5 years). Shelly gives all the negative national news and tries to apply it here at sowal. Unfortunately some of it applies, but not all. This market is different and that is why I prefer it over any other RE in the country. Considering what I am buying...I am cherry picking and don't want competition. As much as I like "fixer-uppers" they are hard to come by at the moment. I think anything on the south side of the bay and east of destin is a good buy especially if its within 5 miles of Seaside. Of course anything within walking distance to Seaside, has a pool is going to be a winner and I believe you can say the same about Rosemary. Now folks who purchased in the middle of the forest, outside a development, well they have a long term investment. If you are looking to retire within next few years and don't want water front, you need to look at Eden's Landing. Just a short drive to the bay or beach, zone x and price is right for the property. The developer has been in sowal for a while, has a long record of quality construction and its going to be a "green community". It's more affordable than the high end developments but has a good vision and worth the risk of buying into it. Regarding slowness of this recovery...that blame lies with the county commissioners who continue to bend over and allow for over development, have not adequately addressed the tax issue or the beach issues. In fact, they may have already killed the golden goose who laid the gold egg.

egrp

Your strategy of paying cash then renting a few years and selling only works in an environment of pretty good appreciation.

The upfront cash basically negates the return on a couple years of cash flow and the transaction costs will eat up profits if sold within 5 yrs in a period of normal appreciation (~2%).

The do-it-yourself fixer upper part of strategy is sound as is tax ad of depr.

In this environment I wouldn't want to count on substancial appreciation within 5 years to make an investment successful. Right now I'd make sure it cash flowed and I'd leverage it as high as possible to achieve decent returns on that cash flow...that being said that type of deal is rarely available in todays residential real estate mkt and is the main reason why i think more pain is in store for the housing mkt.

SHELLY

I got some insider information that Pres Bush farted today--and the Dow (again) closed on a record high!! We must be having a correction...or at least a soft landing.


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But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

Smiling JOe

So Shelly, did you predict this new high back in 1999 when the stocks took the tumble and everyone freaked out? Were you buying out the people who were selling? That recovery seems fairly strong. Wonder if the same could be in store for the real estate market???

Of course the flip side to the Dow, the Nasdaq, has yet to see that strong recovery with new highs.

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SHELLY

Actually, I didn't get into the "Dot.com Frenzy, the "Tech Wreck" or the "Averaging Down Hype" that followed...nor was I into Beanie Babies or Pre-construction Condos. I am risk averse by nature (except during an occassional jaunt to Vegas) and therefore fascinated by the folks who, damning fundamentals, throw caution to the wind and chase the next big investment du jour. I'm guessing next up will be Private Equity.

Real estate markets, by nature, take a heck of a lot longer to trudge through their cylce (from peak, to trough, to peak) than just one or two "off" years. Having said that, from what I've read, the NAR stated that 2006 was the Third Highest Sales Year on Record! And they're saying that 2007 is shaping up to be the 4th Highest...so apparently, regardless of the news about the excessive inventory supply and stubborn buyers and sellers, RE is doing pretty damn good--no? So I imagine it hasn't troughed yet.

By the way, NASDAQ topped at 5048 in March 2000....a little over 7 years later (even after the last "bull market years") it is still down 97%. I have an acquaintence who JUST THIS YEAR sold off a bunch of NAS-JUNK he'd been holding since 1999.

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But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

Smiling JOe

By this statement, you are saying that it is down to 151 from the high at 5048. Is that really what you mean?

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SHELLY

WHOA! Flashback to my days at Arthur Anderson!

(needs a 97% boost)

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But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

00seer00

Re: Having a Auction ( Results )
The 120 Acres sold Absolute at 2,500 per acre +10% buyer fee= 2,750 per acre.

We did not get a reasonable offer on the rest. That is a great buy for the buyer, it was at the very bottom of the range of what we thought it might sell for. If there are any buyers for the rest, let me know. We will be listing the property later next week.

Pirate

How would a loan create a better investment in a flat market? Leverage eats up cash flow.

Smiling JOe

Litter on the "Scenic Highway"

Opposite side of this sign are two used cars for sale. This sign appears to be located on the edge of the right of way and State Forest. I've seen a couple of more around town. I know these people want to sell their condos, and I see other signs of all sorts illegally placed along the right of way, posted by others who want to sell their things too. It seems that that it is more important for people to advertise than it is to keep our area from looking like billboard row. I know that businesses get fined for sign ordinance violations, but it doesn't seem to also apply to these roadside signs which are not placed on the owner's property. I can understand these people maybe putting the signs out on auction day, so that any attendees will know the location, but I would hope that anyone planning to buy at the auction would know where the property is located. Let's try to have a little more respect for area.

Attached Images

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SHELLY

FLORIDA STATE WILD FLOWERS

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But hey...Top Ramen tastes a whole lot better when you eat it off of a Granite Countertop. (Mr & Mrs Too Much Homebuyer)

Florida State Flower

Searcher

The short answer is that it depends on what you buy.

Say you and I each have $100,000 to invest. You buy a single property and pay $100,000 cash. I buy 10 identical properties and put 10% down on each. I get great terms from my lender and my note on each property is $500/month. (I know, I know - just follow me - this is for illustrative purposes only and we're ALSO going to ignore all other expenses for this illustration.)

If these 11 properties rent for $500/month, you make $500/month and I break even (but I'm killing myself managing 10 properties).

BUT - if they rent for $1000/month, you make $1000 and I make $5000 - so I'm starting to feel better about all my hard work. Somewhere between $500 and $1000 is a tipping point.

I know that you asked about a flat market but markets always come back eventually and I can be patient, even at break-even, because the renters are paying the note. If the market appreciates a modest 5% over the next X-years, my equity has increased by $50,000 while yours has increased by only $5000.

All that said, if you can afford to pay cash for resort property in SOWAL, you don't need my advice.

Pirate

I should apologize for being sarcastic but I wasn't really asking. Leveraging like that is just asking for trouble in my opinion. What if the market slips further and renters shy away from the area? I still have 90k and the asset and you have lost 100k and might lose 10 properties. The risk factor goes up by more than the leverage percentage. If you have the million in the bank anyway why let someone else take away all of your appreciation with a loan? 5% apprciation is close to historic norms. If you don't have the cash why not buy 1 property and roll cashflow into more properties? Is there a tipping point when the market goes down? RE is cyclical and prices/rents don't always go up. 95-100 percent loans contributed greatly to the explosion in prices in the area everyone complains about. Think of how careful people would be if it was all their money going towards that investment. I prefer cash but leverage is smart at smaller percentages to make deals with fantastic returns work. I feel it shouldn't be used to make mediocre deals turn higher cash flow. A beach rental rarely falls into the first category.