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

How much can I make rehabbing homes?Info-graphic-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 Are you in a high tax bracket and want appreciation, taxed and withdrawn at a future date (like retirement) and wish to accumulate rentals?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!

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.


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

Rental house ROI & remodeling budgets

Jumping into investment real estate this year ? Good info with a quick easy read, my basic Anibal-Group-LLC-RealtyNetWorthcriteria 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’.



Real estate auctions, can you trust them

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.

More info:



Real Estate Investing ~ Wisdom in the counsel of many…

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:

http://www.businessinsider.com/six-types-of-property-to-pursue-2012-10




 

The results are in … EOY 2015 ‘Fixer Upper’ Return On Investment

So what can one actually expect when they purchase an ‘in-place’ real Image1estate investment ? Well here are numbers from picked & rehabbed properties we’ve set up and mange for an active portfolio client.

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.

Anibal Affiliates Inc Realty Net Worth Fixer Upper results for 2015

In pdf format BOY_Letter_RNW_2016_01_01_sideB

NEXT YR 2016 results



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

Investment Landlording Concerns

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.

Investment ideas

We started a new board on our Pinterest page:

https://pinterest.com/realtynetworth/i-spy-investments/

Our new quick reference area – for the visual folks.

income property: a late-in-life retirement plan

“Income property can be an important bridge to retirement for those without quite enough to retire in the traditional sense,” says J. Camarda, a real estate investor, Certified Financial Planner, and Chief Investment Officer of Jacksonville, Fla.-based Camarda Wealth Advisors. Because real estate is such an inefficient market, it’s possible to find awesome bargains with a very high return on investment, Camarda says. And if you can manage the property yourself, you can collect more income.

Well, speaking from 2 generations of experience, I must agree. Dad helped put us through college with his investment properties that we would work on in the summer. When I got to college, I didn’t have enough funds to pay for the final year tuition, room and board. So I found a small house, cleaned it up over summer with a bathroom/kitchen gutting, and let 2 roommates pay 100% of my room cost. I held that for 10 years after graduation making a monthly income and having a nice equity build paycheck at the eventual sale. What did I do with the funds ?…bought local rentals for a new income stream closer to home. 30 yrs and some 50+ tenants later I can recommend this strategy if you have a mentor you can call on from time to time. ( ps, we’re available ! )

Feature article link

additional resources:

http://www.hgtv.com/income-property/show/index.html

 

WSJ articles. Ask me why the last 8 months have had price increases in SE MI.

Here is a look at real-estate news in Monday’s WSJ:

Wall Street Keys On Landlord Business: Some of the biggest names on Wall Street are lining up to become landlords to cash-strapped Americans by bidding on pools of foreclosed properties being sold by Fannie Mae.

Housing Bulls Aren’t So Far Out on a Limb: Proclaiming a recovery in the housing market isn’t for the faint of heart.

Investors Are Looking to Buy Homes by the Thousands

…….The big investors are wooed by what they see as a vast opportunity. There are close to 650,000 foreclosed properties sitting on the books of lenders, according to RealtyTrac, a data provider. An additional 710,000 are in the foreclosure process, and according to the Mortgage Bankers Association, about 3.25 million borrowers are delinquent on their loans and in danger of losing their homes.

With so many families displaced from their homes by foreclosure, rental demand is rising. Others who might previously have bought are now unable to qualify for loans. ……..  more

Related story:

Now is a great time to invest in a rental – MSN Real Estate

realestate.msn.com/article.aspx?cp-documentid=23972039

If you’re thinking about investing in a rental property, experts say low home prices combined with low interest rates make this the best time in years to become a landlord. 5 specific tips