Category: Investing

What kind of ‘Fixer Upper’ ROI is possible when we’re your Portfolio Brokerage Mentor?

March 20, 2017

How much can I make rehabbing homes?anibal-group-llc-realtynetworth.com-thenetworthlife_paul-ask-anything-appreciating-wealth-build

There are many different approaches. Are you in a high tax bracket and want appreciation, taxed and withdrawn at a future date (like retirement) and wish to accumulate rentals? Or, are you in a low tax bracket/ want maximum returns now/ hence ‘Flips’ make more sense? Looking at our charts, you’ll see cheaper homes are better suited for rentals, but all properties are usually better suited for ‘flipping’.

‘Flipping’ homes is not for the faint of heart, nor for a novice. The TV shows are for entertainment – turn them off. I’ve never watched even 1 episode and I’ve ‘flipped’ houses since 1981. Yes, I’ll be glad to share my entire portfolio results to date with you.

The vast majority of folks loose money on rehabs, making lots of cash for ‘wholesalers’. So how do I know when to use a professional ‘Portfolio Broker’ Mentor? (that would be us). Perhaps when said mentor has a track record going back to 1980 and will say “NO” more often then “MAYBE” OR “YES”.

Prefer ‘hands off’ approach? We ‘joint venture’ with clients – you bring $’s, I bring expertise, your principle comes out first, we split the balance at closing. (there is a formal agreement letter but that’s the short version).

For every property I recommend, there are about 25 that I tell the investor “NO” and then tell them why. I want this to be educational as well as profitable for you – it helps us both!
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Anibals-Realty-Net-Worth_2016_EOY_JV_ROI

If you click thru on the link below this photo, you can compare with last year EOY results. There has been some year over year appreciation.

  • In this market, this will plateau and makes these ripe for selling to reinvest a better part of proceeds.

Anibals-Realty-Net-Worth_2016_EOY_RENTALS_ROI

VIEW IN PDF:  Rental and Flips ROI Calculations – EOY16

Rental and Flips ROI Calculations – EOY15

Active client of ours? Request a copy of the below spreadsheet to compare your investments year to year & within your portfolio. This can assist in planning ‘which to keep’ vs ‘which to cut loose’.

  • Non-clients: ‘Remote in’ installation & setup available, or stop in – you don’t even need to bring your laptop.

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This is not an offer of a guaranteed return. Always do your due diligence before investing.

ROI Strategies for Real Estate ~ Cash now or cash later?

February 6, 2017

If you expect real estate should involve ROI, then there’s some basics to the outline.

  1. Acquisitions – some we have control, others not – e.g.: inheritance.
  2. Holding – short/ long/ entity/ self held/ purchase for child/ etc
  3. Approach: add value/ flip/ wholesale/ rent/ vacation/ family lease to/ residence with business inside

Most properties will be held for cash income OR appreciation. If you can get both, then neither will probably be optimal.

Regardless, upfront considerations must include:Anibal-Group-LLC-RealtyNetWorth-Senior_Services_woman-elder

  1. What you need from the property: income now or later (cash flow vs appreciation)
    • I look at these like ‘a job’ or
    • ‘retirement investment’
  2. I will invest more:
    • cash or
    • time & talent

So there will be many vehicles and considerations. SD IRAs, set up LLC, Corporation, etc. One of my favorite realizations is that PROFIT is usually made on the way into an investment in THE BUY. Further when you SELL, what can you/will you do with the funds ? Make sure you have another opportunity lined up if you liquidate a great rental. Make sense ?

‘Later’ is not the preferred time to plan.

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Rental house ROI & remodeling budgets

January 11, 2017

Jumping into investment real estate this year ? Good info with a Michigan Real Estate vacation cabin cottage for sale Anibal-Group-LLC-RealtyNetWorth All Over Michiganquick easy read, my basic criteria for useful information:

Here’s a huge oversimplification of the article links shown below:

ROI – your rent should be at least 1% of the purchase & set-up cost of your rental. e.g: You paid $85k to buy and rehab, it better rent for $850. Further, expect around 50% of the rent to be expenses (less if you have a mortgage).

My add to the thoughts: Annually evaluate your properties against each other AND against what else you could swap the lesser performing houses for. i.e: You can sell it for $200k/ it rents for $1250/mo., find another that will rent for the same that 1.costs less OR 2.costs the same but will rent for far more.

Renovations – Think practicality and ROI. Don’t go cheap for cheap sake and don’t over pay because its so snazzy. This is a business, not a glossy magazine.

My add to the thoughts: MANY. We’d need to sit down for this as each person, area, and property has different types of strengths and weaknesses. These need to be evaluated up-front BEFORE buying. I still believe that ‘the profit is made at the time of purchase’.

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Like Chip & Joanna Gaines of Fixer Upper, remember to seek wise counsel.

February 19, 2016

Investing in property ?Anibal-Group-LLC-RealtyNetWorth
Like Chip & Joanna Gaines of Fixer Upper, I recommend you seek wise counsel ‘and all these things shall be added unto you’ says Biblical scripture.

When there is more that 1 person as part of the buyer / seller / ownership  package, I take just as seriously the ‘non-financial aspects’ of the transaction. A move is a top stress item per every counseling material you read and study. Since its part of my business, I’ve studied family counseling materials for decades, taken counseling workshops (outside of my profession) and consumed countless hours of programming relating to, well, relating.

I think these kids have it right in the interview link. When the purpose is shared jointly and above either of you, the ‘team’ approach brings you together, not in competition with each other.

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Real estate auctions, can you trust them

February 16, 2016

Those flipping TV shows can’t be wrong, can they ? Oh my. If only customer/clients

realized they are buying a house, not a candy bar. (photos of actual house shown to client).

“If it was that easy…” right ? Here’s some of the better article excerpts I’ve found.

  • Property taxes, utility bills and assessments are sometimes not available at the time of auction or are not paid from the auction proceeds. These become the responsibility of the winning bidder. For example, water and sewer accounts for the property may be delinquent in the name of the previous owner and service may not be reconnected in some municipalities until the accounts are brought current.
  • Hubzu: One persons experience: “… I have been bidding for weeks on a distressed property and have gotten the same run around that others have posted on this forum. The photos they had listed were not current. I enlisted the help of a local agent and then drove over 500 miles to view it myself. It was in MUCH worse condition – no flooring , at least 1/3 of the drywall taken out, appliances in disrepair or gone, all interior doors and facings removed due to water heating flooding the unit while it was bank owned…”
  • One expert’s single word of advice for folks who dream of buying a foreclosed house at auction: “Don’t.”… “I caution anyone who isn’t in the (real estate) business: Buying (at auction) can be one of the worst decisions you’ll ever make,” says Jim Hamilton, a Realtor in Los Gatos, Calif. Another bit of counsel from Hamilton: If you want to buy foreclosures at auction, plan on making that your full-time job. If buying a house is like navigating an obstacle course, then buying a foreclosure is like crossing a minefield.

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The tale of 2 houses, aka: WHEN to cut bait.

February 15, 2016

This is the story of 2 types of investors and 2 types of investments. After reading, tell me if having a seasoned long term hands on skin-in-the-game professional in your back pocket is useful. Fair enough ?

2  types of Investor:823hubbard-flint-mi-1986

  1. Knows when to cut bait
  2. Holds on until value is all gone, damaging credit.

2 types of Investment:

  1. House still looks nice, area took a dump.
  2. Looked hideous, still does, but the area made it a good investment – in fact, there are brand new homes next door where there were abandoned inner city lots.3134birchrow-eastlansing-mi-1982-b
    • Point: Numbers dictate financial logic & help you know when to act.

I’ve had this one current client since opening my office over 3 decades ago.

Twice in that time I’ve issued ‘now is the time to buy’ alerts. I don’t do that lightly and I give reasons and research – AND put my money into said markets.

This one client did in fact pick up over a dozen investments in the 1st round. Then, as the area began to turn and he was invested ONLY in that local area and 1 property type, over a 5-10 yr period I begged him to bail before it was too late. Yep, didn’t do it.

Its not just a nationwide economy that affects these decisions, there are buy/sell opportunities all the time and many many local factors come in to play, more so local factors over statewide & nationwide in my opinion.

Welp, here’s some local info on the below ‘pretty house’ I owned in the same area.

Property Overviewfeedback_thinkAboutIt

  • Crime Rate: High
  • School Rating: D
  • Registered Offenders: 68 within 1 mile
  • Average Home Price: $24,000 within 1 mile (I sold for $15k more in 1988)
  • Foreclosures: 50 within 1 mile
  • Environmental Hazards: 24 within 1 mile

I’d bought, cleaned it up, made profits on renting for a couple years and in the 2nd year more so on selling it… waaaaay before the area took a dump. (my 1986 fence & rose bushes are still there).

ALL CURRENT PICTURES.

823hubbard-flint-mi-1986b

Below are current photos of THE most profitable house I ever had, AND the ugliest.

Made about 150% ROI every year  for 11 years with virtually no tenant turnover (1 for 7yrs, 1 for 4 yrs) + an additional 1000+% on my initial investment in the year of sale. Held: 11yrs, profit: $125-225/mo x 11yrs + $11000 at closing all for $1000k down payment and a few bucks for new kitchen cabinets and carpet.

  •  That tree in the front yard was 12 inches tall when I planted it in 1982.
  • Still has same kitchen I put in 30+ yrs ago after a gut and swap on my summer off from college at MSU. A bit shabbier now – well, a lot shabbier.

3134birchrow-eastlansing-mi-1982-b3134birchrow-eastlansing-mi-1982-e3134birchrow-eastlansing-mi-1982-g

Additional takeaways:

  • The immediate & local market dictates a ‘good’ investment and timing.
  • Investments are usually ‘cash now’ OR ‘appreciation for later’ RARELY BOTH.
    • The best ‘cash flow’ properties usually gain little/nothing/or are eventually abandon. Use these to live on.
    • The best ‘appreciation’ properties break even or have a small loss in ‘cash flow’ while held. Use these for retirement or other future savings.
    • ‘Appreciation’ properties are usually best at accumulating wealth.

If it was as easy as the TV shows, 94% of all investors would not loose money in real estate. If it was not a good investment, ‘the Donald’ would just be ‘Donald’, ‘Rich Dad/ Poor Dad’ would not be a book.

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She made a Million Dollars recycling homes – 35 years ago!

January 21, 2016

In the early 80’s I picked up a very honest yet motivational ‘how to’ book on real estate investment. In my senior year of college I was set to invest. I actually drove to NJ, looked up as many of these homes as I could, took pictures, and tried to take notes in my then ignorance. After reading the book I bought a shack for $17500, w/ $1000 down, gutted the kitchen and bath, and placed into service what was one of my most successful investments to date.

I’ve used these & other techniques I gleaned from my broker/investor dad, and have shared them with clients for 3 decades.

This slideshow requires JavaScript.

It comes down to humble work, patience, time value of money, and good mentors – I had my dad ! I keep a few copies of the book for clients I work with. Let me know if you’d like one.

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What is a Good Real Estate Market to Invest in ?

January 18, 2016

Finally, an article above Readers Digest but below Wall Street Journal – like as much as I do both periodicals. But as I’ve often said, ‘don’t get your financial advise from Woman’s Day and don’t get your cooking ideas from Forbes’.

The approach to real estate investing is not about jumping in or jumping out. Its not the sound bite on the 6 o’clock news. ‘You are NOT buying a candy bar’; this is your hard earned money you are investing so you can improve life a bit. This is the more in-depth approach I prefer to take. Having invested since my senior year in college, and being the son of a real estate broker who invested in 3 states and did quite well, I’ve bought, rehabbed, sublet, rented, built new, managed for self and others, and done it in about every kind of market and every season. As far as I’m concerned, as far as I’ve seen in the 34 yrs I’ve been at this, there is virtually always an opportunity in every market and at any time.

Sometimes its in a cash deal, sometimes its in the timing – time of year, sometimes equity and profit comes from improvements, other times subdividing land. Take a glance at the article or call me and we’ll chat further.

There are always questions you’ll want to ask yourself, eg:

  • What do I have more of, time or money?
  • Do I need cash now or want to save up for future period?
  • Am I in a tax bracket that would be a better fit for setting up a separate holding entity?

There are many more.

If you are working with a professional, make sure they ask you some in-depth questions BEFORE they help you spend your hard earned money.

Article Link:  http://e.house/archives/2593

In fact, read everything you can in this website and call me in the morning: http://e.house/

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Sample articles –

 

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Real Estate Investing ~ Wisdom in the counsel of many…

January 15, 2016

You already know from Solomon that there’s “Wisdom in the counsel of many…”, so don’t just take my word for it.Info-graphic-appreciating-wealth-build

Yes, even read the articles about why many think property is a terrible investment, but make sure you read the feedback postings at the bottom of those posts.

So on to that excerpted wisdom:

  • “…..One of the better ways to improve your wealth is to reduce your risk on the properties you purchase.This will allow you to buy lower-risk real estate, which hopefully will earn a fair amount of wealth for you over time.Go for these:

    1. Properties in very good shape

    Too many people buy fixer-uppers thinking they’ll add value by doing a renovation. Then they get mired in a much more expensive and time consuming property than they ever expected. More money into the property means lower ROI…Skip fixers and instead buy properties that are in as good shape as possible, which should get those rental checks coming into your bank account in as short a period as possible.

    2. Properties in moderately priced areas with good cash flows

    Real estate is all about location, location, location! The properties in the best locations (think beach areas, downtown, wealthy enclaves) generally have very negative cash flows, so those are the location, location, locations you want to avoid. The moderately priced properties in working-class areas are the real gems; they generally have the boring locations, but much better cash flows. Of course pencil out any deal with conservative rents and expenses, and go for beginning year cash on cash return of at least 4 to 6 percent, based on your conservative estimates.  (Ask to see my managed portfolio spreadsheet – it think these numbers seem low)

    3. Communities with HOAs in good financial, legal, operational shape

    There are many, many landmines in buying properties in common interest developments.

    4. Properties that come with decent credit quality tenants in place

    There is nothing better than buying a property with a decent tenant already in place. You get the security deposit and pro-rated rent, and you don’t have to go in and clean, paint, update or fix too many things in the unit. If you buy properties in areas that have decent credit quality tenants, that’s hopefully the type of tenant you will inherit. Also take a look at the current tenant’s lease, credit application and credit report, if you can, before you make the decision to purchase the property.

    5. Properties in low vacancy areas

    Vacant units get robbed, incur vandalism and don’t have any rent coming in to cover the bills. If you buy in places with really high vacancy, it might be months or years before you get the property rented out at a fair rental rate. So really think through buying properties in areas with many unoccupied units. Drive around at dinner time: No lights in a lot of neighborhood houses means no one is residing there, and you shouldn’t, either. (I agree with this and talk many folks out of property that requires a firearm to collect rents.)

    6. Properties you will own a long time (I’m more apt to evaluate every time a property is clean and comes vacant & take timing into play looking for what can be bought with the sale proceeds of existing investments. )

Full Article:

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The results are in …2015

January 9, 2016

So what can one actually expect when they purchase an ‘in-place’ real Image1estate investment ? Well here are actual numbers of the highest and lowest producing properties  that we’ve set up and mange for active client portfolios.

Clients, request a copy of the below spreadsheet to compare your investments against each other – it will assist in planning  ‘which to keep’ vs ‘which to cut loose’.  (Non-clients: available for a small fee) Installation and customization available from site or remotely.

FB_ad_cmpgn_2015.01.b

In pdf format BOY_Letter_RNW_2016_01_01_sideB

What about HUD homes ? Investor vs Owner Occupant

April 9, 2014

Often there are some seemingly good deals you may see either in the MLS ( Realtor.com ) or on HUDHomestore.com.

Sometimes they appear on one but not the other.

There are general guidelines:

  1. Most often the deed listed buyer must occupy for at at least 1 yr and cannot buy another for 2 yrs. subject to $250k fine and jail time.
  2. They are as is period. You pay to turn on/off utilities and rewinterize any plumbing inspection.
  3. Since they are as is – your min. $500 – 1000 deposit will not be returned.
  4. Bids are usually open for 10 days, then decided on daily for the next 5 days.
  5. At 15 days on market, there is a possibility for investors to bid.

For more reading: http://investfourmore.com/2013/04/06/owner-occupants-guide-to-purchasing-hud-homes/

 

Flipping profits more than triple from 2012

July 19, 2013

Here’s the bullet points:

  • Flipping is risky business.
  • Just two years ago during the January-to-June period, flippers lost an average of $13,206 per home. Last year they turned an average profit of just $5,321.
  • And although flipping continues to increase in the nation as a whole, activity dried up along with the bargains in 32 of the 100 markets that RealtyTrac examined…. like Las Vegas, Phoenix, Southern California and Atlanta
  • flippers continue to find big bargains in one state that was hit hard by the housing crisis: Out of the nation’s 15 most profitable metropolitan markets for home flipping, almost half were in Florida.

Yes we assist investors           http://AllOverUSA.com

Story:

http://homes.yahoo.com/blogs/spaces/flipping-profits-more-triple-2012-042258187.html

Institutional buyers are buying distressed properties,…gigantic hoards

April 5, 2013

……If you think rapidly rising home prices is a good trend, you might want to think again.

………….Institutional buyers are beating owner-occupied traditional home buyers to the market. With gigantic hoards of cash at their disposal they are buying distressed properties, mostly those in foreclosure or through lender facilitated short sales, one at a time and in bulk where they can.

  • …. Blackstone Group (BX) has already spent more than $3.5 billion to amass a portfolio of more than 16,000 single-family homes. Chairman, CEO and Co-Founder of Blackstone recently said the firm was spending about $100 million a week buying homes.
  • Silver Bay Realty Trust Corp (SBY) is a newly spun-off  real estate investment trust, shed from its REIT parent Two Harbors Investment Corp. (TWO), that owns 3400 homes and is adding to its inventory of purchased-to-rent properties.

…but conceivably…. the first-in money will try and create a floor and push prices higher to sell out as high as possible……

story

10 Rental Home package coming to market

January 30, 2013

Not formally listed/ not in MLS, here’s a ready to go set of rental homes in good condition with a long history of care and occupancy. Contact for showing and cash flow information.

REAL ESTATE DEPRECIATION
Acquired Rented for:

 Taxes
yr.mo
FLINT ADDRESS RENTAL Portfolio —— ——
149 Linsey Flint Aug-87
3368 Springvalley o/s Apr-88
2715 Eaton Pl Flint Jul-88
2814 Eaton Pl Flint Feb-88
3030 McCollum o/s Feb-89
2814 Gibson Flint Nov-89
3062 Raywood o/s Feb-90
1131 Fulsom Flint Jul-90
2908 Eaton Pl Flint Feb-91
1489 Maria o/s Apr-93
——
======

Investment Landlording Concerns

January 16, 2013

You want to invest but are afraid you won’t get paid. You also realize that a lawsuit against that mean `ol landlord can make the most honest look for ways to sue. Enter the Self Directed IRA.

Lets summarize:

Concerns:

  1. Not get paid
  2. Lawsuit lightening rod
Strategies:
  1. Have prospective tenant get a Section 8 commitment before purchasing investment
    • &/or make offer on property subject to expected tenant getting Sec 8 approval – works with non foreclosure properties.
  2. Invest not as individual but as SD IRA / LLC holding title: actions would potentially be limited to the insurance policy related to that property –
    • Make sure you do not manage the property during occupancy of tenant or when they are home or tell them all the wonderful things you preformed on the property, then liability may be added to you as the one who built the steps

     

Want to learn more ?

  • Take a look at our Pinterest area for visual charts etc.
  • There is more info on our SD IRA page and FreeRent101.com sister site.
  • Consider attending a local SD IRA event – we’ll attend with you if you wish.
  • Give us a call. We’ll chat by phone &/or meet informally.

Michigan Right to Work – I smell appreciation

December 20, 2012

For us left in MI, here’s some sobering stats and realities. Per the Wall Street Journal:Anibal Group LLC RealtyNetWorth.com real estate broker Fenton Linden Hartland Lakefront Investments Consulting Management Tax

“Between 1980 and 2011, total employment in right-to-work states grew by 71%, .. in non-right-to-work states … 32%. .. in Michigan … 14% during that time…. inflation-adjusted compensation grew 12% in right-to-work states, but just 3% in the others….

…the bill he signed into law on Tuesday is “pro-worker,” …does not change any aspect of collective bargaining other than preventing employees from getting fired for choosing not to join or remain in a union and pay union dues or agency fees, which may go toward political causes they don’t support. Options are of course part of the reason America was formed, in contrast with communist & socialist economies.

The good news ? MI just became a RTW state – as such, we are now in competition for importing businesses & workers to fill new jobs. This should bring buyers where we’ve had sellers for so long. Those that are against this new law I can’t really agree with, to wit: “Collective bargaining still exists … workers are of course free to organize….”

[MI is the only state to loose population in the last 10 yrs…. the statistics go on and are overwhelming in their conclusion ….so what is this guy thinking >]    “…Democratic Rep. Doug Geiss threatened: “There will be blood. . . . There will be repercussions.”

http://online.wsj.com/article/SB10001424127887323981504578175263199214992.html

Secrets of House Flippers

December 5, 2012

To help pay for my way thru college, I had to learn to invest in property in my junior year. Here’s an article with some merits based on my years of rehab/reuse/renting out.

…. According to RealtyTrac.com, an online marketplace of foreclosed properties, investors flipped close to 100,000 homes in the first half of the year, making almost $30,000 per flip, on average.

  1. Assemble a team of experts.
  2. Look for potential.
  3. Do the math.
  4. Design for buyers, not yourself.

Related link: How We Made A Million Dollars Recycling Great Old Houses [Sam Weir, Mary Weir]

Real Estate May Be The Buying Opportunity of the Decade

November 14, 2012
INVESTMENTS ROI ~ COMPARE PROPERTIES

After you read the below article I posted in 2012, jump on forward to this:

Investing: then and now

March 29, 2018

 

… so said Time mag back in July 2011. Click here to check their logic.

I wouldn’t have called out the buyers quite so quick, but now I’m bullish on buying. Why now ? Here’s a couple Detroit area articles showing recent price movements.

BTW, nationally, the big increases are right now happening in the areas that took the biggest hits….no surprise in that, to wit: Miami, Detroit, Arizona, LasVegas…etc.