[PassedOut]

jjbrr, on May 12 2010, 09:35 PM, said:

These types of places will generally provide (sometimes substantial) negative cash flows for the first several years, but they will frequently experience enormous appreciation, sometimes doubling in value in ~5 years.

I think it's a sound strategy.

When I started (mid-1970s), the common wisdom (especially from sellers) was that you had to "feed" your income properties for a few years in the manner you describe in order to reap the rewards of appreciation later. I was never tempted by that, partly because I did not want to lose flexibility by choosing to tie up cash that way. For me, it was better to start the profits rolling in right away and realize the appreciation later as well.

Of course that meant that I had to look harder for each good buy, but good deals are always out there.

[jjbrr]

My roommate is closing on a duplex in Dallas next month. I'll be moving there to help manage the property. First hand experience with minimal risk seems like a good play.

[wyman]

Jeremy,

Since I know you're semi-active on 2+2, go to BFI and read the Ask Me Anything about RE Investing by spex x. It should be on the front page of BFI most of the time.

The thread is long, but well worth reading and rereading, even over a couple days.

-BW

[mike777]

jjbrr, on May 19 2010, 09:35 AM, said:

My roommate is closing on a duplex in Dallas next month. I'll be moving there to help manage the property. First hand experience with minimal risk seems like a good play.

1) what does manage mean?


2) i ASSUME YOU MAKE THIS UP ON THE GO...


3) WTF.... many make millions in real estate.......for sake of discussion you bet ...closer to bottom then closer to top.......win......go for it...


4) the muddle..middle never wins.......think... and go for it...or stop...

[jjbrr]

wyman, on May 19 2010, 09:57 PM, said:

Jeremy,

Since I know you're semi-active on 2+2, go to BFI and read the Ask Me Anything about RE Investing by spex x. It should be on the front page of BFI most of the time.

The thread is long, but well worth reading and rereading, even over a couple days.

-BW

Thanks for the link. I never even knew about BFI, but I found the thread and I'm excited to read it. I started skimming some of the first 5-10 posts and I'll assume the thread will get better if it's 5 stars. The OP is doing something very similar to what I want to do, except I plan to stay entirely away from the low-income housing in rough neighborhoods that seem to be his target market.

He definitely lost some credibility with me, though, when he said his primary strategy is to buy and hold, but then he says, "Potential growth and projected appreciation and stuff like that is all too esoteric for me."

I understand he's focusing on positive cash flows and first quarter ROIs, but it seems a bit short-sighted to me. He started the thread by saying REI is not all about location like everyone hears, but for some people (like those who can eat large negative cash flows until the property appreciates) location is a huge part of it. So I just hope he recognizes that he has a fine strategy, but it's not the only way to real estate success.

Obv a trailer park is less likely to experience demand appreciation than a beachfront home, so he doesn't have to worry about potential growth in that context. Trailer parks can be built pretty much anywhere; they stopped making beaches a long time ago.

Dallas is another area where demand appreciation isn't such a big thing. In that past decade or so, our appreciation has been one of the lowest in the country. The market is stable, though, so I'm certain his strategy would work here too.

I personally just don't want to deal with the extra risk associated with low income housing in dangerous neighborhoods. I admit I'd have a hard time bullying people into paying their rent on time, and I hate the idea of hiring a guard to help me pry money out of people's hands. That's not the type of landlord I aspire to be.

But anyway, I'll keep reading the whole thread when I'm not at work. I'm sure I'll learn a lot.

[wyman]

jjbrr, on May 20 2010, 09:36 AM, said:

I plan to stay entirely away from the low-income housing in rough neighborhoods that seem to be his target market.

I'll let you read the thread, but for completeness in here:

1) The OP owns at least one mobile home park and thinks that -- for people who aren't starting out with a ton of investment capital -- creating notes on mobile homes is one of the quickest ways to get a good cash flow going. If you create enough, sometimes (tough right now) you can package the notes and sell them to an investor. And as he looks hard at mobile home parks as investments as well, he's certainly biased toward them as an investment vehicle.

2) The OP definitely acknowledges that one can make money with appreciation, though his opinion is that this type of investing is riskier than buying cheap, cash-flowing, and improving the property.

3) I don't recall stories of OP collecting rent in tough neighborhoods. He does have some properties in worse areas, but he converted them to section 8. His rent checks arrive every month from the government with no hassle. He screens tenants hard and has rigid criteria for living in his buildings. Again, IIRC, he mentions having waiting lists to get into his apt buildings because they are some of the nicest section 8 housing out there, and he keeps them that way. He does not hesitate to evict.

Not exactly a slumlord iyam, but your concerns are duly noted. Feel free to PM him also, he's always been helpful when I had questions.

[jjbrr]

wyman, on May 20 2010, 10:17 AM, said:

3) I don't recall stories of OP collecting rent in tough neighborhoods. He does have some properties in worse areas, but he converted them to section 8. His rent checks arrive every month from the government with no hassle. He screens tenants hard and has rigid criteria for living in his buildings. Again, IIRC, he mentions having waiting lists to get into his apt buildings because they are some of the nicest section 8 housing out there, and he keeps them that way. He does not hesitate to evict.

I can see how this can be very successful. If he really has waiting lists, which I don't doubt, this is a great way to get steady income. I might have to look into this more.

[blackshoe]

One RE investor I spoke to back in the 80s told me off a conversation he had with a (then) 80 year old Japanese guy who at the time owned about half of Honolulu. The investor asked this guy for advice. He said "buy low". Investor said "you mean, buy low, sell high?" "No," was the reply, "buy low. Don't ever sell."