DC Tom Posted April 28, 2010 Share Posted April 28, 2010 I should tell you: in addition to the five years at Ginnie, I spent a year investing in the foreclosure market, and my wife works for a title company. I pretty much know a hell of a lot about this ****, either directly or through marital intellectual osmosis. Consider the below friendly advice. ...Legal Fees -0 I will represent myself for cripes sake...most low budget property owners do so...so legal fees will be less than 8000 even if I evict half the people I put into the homes BAD move. Seriously. That is not a place you want to save money. Get a lawyer to write and review the contracts, or you will almost certainly get !@#$ed in the ass at some point. It's a cost...but a smart one; a risk mitigation cost. Which "risk mitigation" reminds me...what are your insurance costs? You are carrying property insurance. Liability too, I hope? Any requirement for renter's insurance? Flood insurance? (You should...cheap, and protects against very bad and expensive damage). Owner's title insurance (you should...cheap, and protects againes very bad and expensive title defects. Most people think it's a scam, or a waste of money - it really isn't.) Average Appraisal...and I'm getting them cheap because it's cash upfront for foreclosed houses that nobody wants...after estimated damages are repaired (none more than 10,000) on thier listed estimated costs...the market value is the appraised value of the home... Double your estimated damages. Again...been there, seen that. Foreclosures are as often as not trashed. Link to comment Share on other sites More sharing options...
Celtic_soulja Posted April 28, 2010 Author Share Posted April 28, 2010 I should tell you: in addition to the five years at Ginnie, I spent a year investing in the foreclosure market, and my wife works for a title company. I pretty much know a hell of a lot about this ****, either directly or through marital intellectual osmosis. Consider the below friendly advice. BAD move. Seriously. That is not a place you want to save money. Get a lawyer to write and review the contracts, or you will almost certainly get !@#$ed in the ass at some point. It's a cost...but a smart one; a risk mitigation cost. Which "risk mitigation" reminds me...what are your insurance costs? You are carrying property insurance. Liability too, I hope? Any requirement for renter's insurance? Flood insurance? (You should...cheap, and protects against very bad and expensive damage). Owner's title insurance (you should...cheap, and protects againes very bad and expensive title defects. Most people think it's a scam, or a waste of money - it really isn't.) Double your estimated damages. Again...been there, seen that. Foreclosures are as often as not trashed. Insurance depends...case by case basis for me...if I haven't invested more than 50k I'd rather take the loss and sell the lot to recoup losses of any real damage... I can see getting a lawyer to draw up the contracts...for a fair price and I do have someone that appraises homes...so I will not buy homes that are going to cost me 20,000 to repair unless they are well worth it...on top of, like I said 20,000 grand to repair for most is 10,000 for me becuase of my corporate connection with material suppliers and labor deals I will get from volunteers and CDC workers... Insurances are not my fortay, but I will at least contemplate insurance...though considering what I am investing in these properties I doubt it'll be worth it for me...considering that less than .0004 percent of houses experience being burned down per year...times that by 20 years and it's still a little less than one percent...even if I lose one house I invested 50k into...it beats the 255,000 per year in insurance costs if I insured all 85 properties... If they want insurance, they can pay for it...it won't be required though... Link to comment Share on other sites More sharing options...
DC Tom Posted April 28, 2010 Share Posted April 28, 2010 Insurance depends...case by case basis for me...if I haven't invested more than 50k I'd rather take the loss and sell the lot to recoup losses of any real damage... I can see getting a lawyer to draw up the contracts...for a fair price and I do have someone that appraises homes...so I will not buy homes that are going to cost me 20,000 to repair unless they are well worth it...on top of, like I said 20,000 grand to repair for most is 10,000 for me becuase of my corporate connection with material suppliers and labor deals I will get from volunteers and CDC workers... Insurances are not my fortay, but I will at least contemplate insurance...though considering what I am investing in these properties I doubt it'll be worth it for me...considering that less than .0004 percent of houses experience being burned down per year...times that by 20 years and it's still a little less than one percent...even if I lose one house I invested 50k into...it beats the 255,000 per year in insurance costs if I insured all 85 properties... If they want insurance, they can pay for it...it won't be required though... Insurance is not your FORTE ( )...yet you were trying to convince me and Magox yesterday that you were a financial authority because you used to sell it at Citi? Link to comment Share on other sites More sharing options...
Celtic_soulja Posted April 28, 2010 Author Share Posted April 28, 2010 Insurance is not your FORTE ( )...yet you were trying to convince me and Magox yesterday that you were a financial authority because you used to sell it at Citi? Yeah health and life...not property...and property IMO is a scam if you invested less than 50k don't you think?...exactly Link to comment Share on other sites More sharing options...
Celtic_soulja Posted April 28, 2010 Author Share Posted April 28, 2010 Wait till you hear my local government plans...you'll flip your wig!!!!!!!!!!!!!!!!!!!!!... Link to comment Share on other sites More sharing options...
Wacka Posted April 29, 2010 Share Posted April 29, 2010 How about testing for asbestos, lead-based paint, radon, etc. The banks require that and likely so will the govt entity. If you find some, and likely will (since this seems to be a slum, the buildings are very likely>30 years old) the remediation costs are up the wazoo! Link to comment Share on other sites More sharing options...
Celtic_soulja Posted April 29, 2010 Author Share Posted April 29, 2010 How about testing for asbestos, lead-based paint, radon, etc. The banks require that and likely so will the govt entity. If you find some, and likely will (since this seems to be a slum, the buildings are very likely>30 years old) the remediation costs are up the wazoo! I know enough about site remediation...and these foreclosures have nothing like that...maybe lead paint but no asbestos...and the removal isn't all that ridiculous...these buildings are pretty old...average home in the town was built in the 60s but...really its not that big of an issue considering most of these homes were foreclosed over the past five years meaning they were most likely updated already...and again, I have the workforce and materials to get it done without spending ridiculous sums of money, especially since I'm getting them at bargain prices Link to comment Share on other sites More sharing options...
KD in CA Posted April 29, 2010 Share Posted April 29, 2010 Average Appraisal...and I'm getting them cheap because it's cash upfront for foreclosed houses that nobody wants...after estimated damages are repaired (none more than 10,000) on thier listed estimated costs...the market value is the appraised value of the home... That's the average appraisal on houses no one wants? That you can get for $30-$50k? And before you've fixed them up? Doesn't make sense to me. Sounds more like you are selling houses worth $60k for $120k paid over 20 years. Which results in an inputed interest figure of about 8%. And that's probably still too low a rate considering the risk profile of your likely purchasers. btw...your initial investment figures don't quite add up. 85 houses @ $50k (even including repair) is $4.2MM. Your best case (which is always unlikely) would only get you half way there. Also would love to know what 'local funding' means. Is there a cost of capital? Free money from the Obama tree? Link to comment Share on other sites More sharing options...
KD in CA Posted April 29, 2010 Share Posted April 29, 2010 Yeah health and life...not property...and property IMO is a scam if you invested less than 50k don't you think?...exactly So.......your investors are cool with you not insuring the properties? What happens when one of your contractors falls off the roof during reconstruction and sues? Link to comment Share on other sites More sharing options...
Celtic_soulja Posted April 29, 2010 Author Share Posted April 29, 2010 That's the average appraisal on houses no one wants? That you can get for $30-$50k? And before you've fixed them up? Doesn't make sense to me. Sounds more like you are selling houses worth $60k for $120k paid over 20 years. Which results in an inputed interest figure of about 8%. And that's probably still too low a rate considering the risk profile of your likely purchasers. btw...your initial investment figures don't quite add up. 85 houses @ $50k (even including repair) is $4.2MM. Your best case (which is always unlikely) would only get you half way there. Also would love to know what 'local funding' means. Is there a cost of capital? Free money from the Obama tree? The local funding is from the city...not the Obama tree...although I will shake every tree possible...and at ten percent investment of the city over two years will be 3.4 M after the first year it will be 1.2 M income added to that figure works out to just over your 4.2 and that is not including the fundraising, state, and federal money that may or may not be available..it's a two year pay in and then a twenty year payback to the city...and all of the houses are not 50k there are some that are 20k there are some that are 30k and so on...there are a couple that are 12k...at any rate...the cost of capital is about 10% if I get it from the city...but with the increase in sales from 12k-50k buying to 120k selling will MORE than cover expenses considering I am not looking to make any kind of BIG profits... Also, the appraisal and list prices are so widely seperated because these are foreclosed homes that the banks are just trying to recoup what is still owed on the property, not what they are worth... Link to comment Share on other sites More sharing options...
Celtic_soulja Posted April 29, 2010 Author Share Posted April 29, 2010 So.......your investors are cool with you not insuring the properties? What happens when one of your contractors falls off the roof during reconstruction and sues? I'm not using some big ticket contractors number one...I'm using my own people...so I would be suing myself...number two, property insurance versus insurance to cover my workers are two different things Link to comment Share on other sites More sharing options...
PushthePile Posted April 29, 2010 Share Posted April 29, 2010 I'm not using some big ticket contractors number one...I'm using my own people...so I would be suing myself...number two, property insurance versus insurance to cover my workers are two different things No workman's compensation? Big ticket contractor or volunteer buddy, a broken back is a broken back. Who would cover this cost or the legal fees for a lawsuit? Link to comment Share on other sites More sharing options...
DC Tom Posted April 29, 2010 Share Posted April 29, 2010 I'm not using some big ticket contractors number one...I'm using my own people...so I would be suing myself...number two, property insurance versus insurance to cover my workers are two different things Yep, that's a blanket liability policy vs. a homeowner's policy (vs. title or flood insurance). But your blanket condemnation of property insurance as a "scam" below $50k is ridiculous, particularly given what you're trying to do. Insurance is for risk mitigation; the fact that you dismiss it out of hand as a scam so readily is a huge red flag indicating that you haven't done even the barest minimimu of risk assessment in your planning. I mean...what if one of your properties burns down and someone dies? How are you covering your exposure to that liability? Particularly after you're sued for managing sub-standard rental property (which, true or not, you probably would be)? I'm actually not trying to discourage you. But a sound business plan of this type needs to consider these factors, not just dismiss them. You have an idea...not a plan, particularly if you haven't even done a half-assed risk analysis (which you obviously haven't). Link to comment Share on other sites More sharing options...
KD in CA Posted April 29, 2010 Share Posted April 29, 2010 Also, the appraisal and list prices are so widely seperated because these are foreclosed homes that the banks are just trying to recoup what is still owed on the property, not what they are worth... That's a load of crap; an underwater house being sold for $30k is not worth 4X that amount. And the fact is, you are not selling it for $120k because that price includes inputed interest over time. You can't just pretend that the concept of time value of money doesn't apply. I get the scam -- you want to fool ignorant people into thinking they are getting an 'interest free' house and you support it with a bogus appraisal. But you don't need to try to sell it here. Link to comment Share on other sites More sharing options...
Celtic_soulja Posted April 29, 2010 Author Share Posted April 29, 2010 First...again they are my people...not some outside contractors...and you can get insurance FOR THE WORKERS that will cover it...not property insurance...it's 120,000 per year for a half million in coverage for the workers...oooooooh...that's gonna make me go broke for sure... And who the hell said ANYTHING about underwater houses????...I'm not going to NO to start this up pally...these are ridiculous accusations...ridiculous... and yes, foreclosed homes sell for BELOW MARKET VALUE everyday nationwide dude...use your brain before you open your mouth Link to comment Share on other sites More sharing options...
Chef Jim Posted April 29, 2010 Share Posted April 29, 2010 The local funding is from the city...not the Obama tree...although I will shake every tree possible...and at ten percent investment of the city over two years will be 3.4 M after the first year it will be 1.2 M income added to that figure works out to just over your 4.2 and that is not including the fundraising, state, and federal money that may or may not be available..it's a two year pay in and then a twenty year payback to the city...and all of the houses are not 50k there are some that are 20k there are some that are 30k and so on...there are a couple that are 12k...at any rate...the cost of capital is about 10% if I get it from the city...but with the increase in sales from 12k-50k buying to 120k selling will MORE than cover expenses considering I am not looking to make any kind of BIG profits... Also, the appraisal and list prices are so widely seperated because these are foreclosed homes that the banks are just trying to recoup what is still owed on the property, not what they are worth... Now I know why our country is so !@#$ed up. Our government is handing $2m to an idiot who runs his business plan by a bunch of yahoos on a message board. Yes, this is a great idea. Link to comment Share on other sites More sharing options...
Booster4324 Posted April 29, 2010 Share Posted April 29, 2010 Now I know why our country is so !@#$ed up. Our government is handing $2m to an idiot who runs his business plan by a bunch of yahoos on a message board. Yes, this is a great idea. Please, he is light years ahead of Congress. Not an endorsement btw. Link to comment Share on other sites More sharing options...
Celtic_soulja Posted April 29, 2010 Author Share Posted April 29, 2010 Now I know why our country is so !@#$ed up. Our government is handing $2m to an idiot who runs his business plan by a bunch of yahoos on a message board. Yes, this is a great idea. If I used a business plan that you guys devised...jeez...I'd just be another heartless banker that didn't care about the inner city or the working class...so it's not exactly designed by these "yahoos" on a message board...I just like to see what kind of arguments are out there...like...oooh you can't find property selling below market value ...or what happens if a guy falls off the roof ...because I don't have property insurance, I'm toast lol...or even better, you're screwing them guys that couldn't get financing and can't afford the monthly bill if they could, you're giving them property at a value they could sell and recoup all thier money they invested into the property...I'm such an evil scoundrel and it isn't YOUR government that's handing me 2 million...realistically NO government is HANDING me the 2 million, they are getting a return on that money AND increasing the over all value of the city...AND increasing tax revenue...but it's OUR government...not YOUR tax dollars...I don't want a DIME from YOU chef...the 5,000 you pay in taxes won't come anywhere near me if I can help it...Super baller like you can think of way better ways to spend your money than helping people own homes Link to comment Share on other sites More sharing options...
KD in CA Posted April 29, 2010 Share Posted April 29, 2010 First...again they are my people...not some outside contractors...and you can get insurance FOR THE WORKERS that will cover it...not property insurance...it's 120,000 per year for a half million in coverage for the workers...oooooooh...that's gonna make me go broke for sure... You're paying $120,000 for a $500,000 WC policy? Boy, what a savvy businessman, this venture can't possibly fail! And who the hell said ANYTHING about underwater houses????...I'm not going to NO to start this up pally...these are ridiculous accusations...ridiculous... and yes, foreclosed homes sell for BELOW MARKET VALUE everyday nationwide dude...use your brain before you open your mouth You don't really understand what the term "market value" means, do you? Not surprising, since you don't understand the concept of 'interest' either. Your houses aren't worth $120k, no matter how you frame your scam. Link to comment Share on other sites More sharing options...
Celtic_soulja Posted April 29, 2010 Author Share Posted April 29, 2010 You're paying $120,000 for a $500,000 WC policy? Boy, what a savvy businessman, this venture can't possibly fail! You don't really understand what the term "market value" means, do you? Not surprising, since you don't understand the concept of 'interest' either. Your houses aren't worth $120k, no matter how you frame your scam. Have you ever dealt in foreclosures?...and it's not WC because they suck...it's a private insurer and it covers EVERYTHING without a hassle...that's the top what it pays out for injuries...if they sued for like 1mil it wouldn't cover...but if three workers got hurt each for 200,000 they would be covered...do you understand now? Link to comment Share on other sites More sharing options...
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