BobbyD: Coming "Terms" boom...?

Otherground
1

Hello BobbyD,

I've been gone for awhile and just peeked back in. It is great to have someone with your RE experience moderating this room. It also sounds like you are a fan of buying on terms as opposed to conventional financing.

I've been buying residential RE for awhile now - primarily SFRs in CA, but have recently picked up some properties in FL and in other areas where baby boomers seem to be heading, prices are lower, and appreciation seems to be solid.

In CA, affordability is getting a bit tenuous - 15% or so in the OC. 22% or less in LA. The percentage of people financing their purchases with ARMS is climbing ever higher. Rates are starting to climb but foreclosure rates are still fairly low. Lower than median priced housing still seems to be climbing a bit, but that sector always seems to be towards the back of the roller coaster.

Questions:

  1. I'm not sure what markets you invest in, but, in your opinion, when do you think we'll start seeing masses of people wanting out/upside down?

  2. Any markets that you think are undervalued and will continue to appreciate?

Thanks for your time.

2

Where in Florida are you buying? I'm looking at Hollywood right now, but I want to purchase at least a 10-15 unit building.

I would love to hear Bobby's take too. My local market is hot and there is no such thing as a good rental property these days...so I've been poking around other areas and trying to figure out what makes sense.

3

One of the areas I like is Riverview - suburb of Tampa. It's right off of the main freeway. The houses are still relatively cheap - $150k - $175k - and it is still a sleepy little suburb with some good development happening - new Publix, Home Depot, etc.

I understand the value of cashflow, but I am more interested in appreciation and finance-ability. Instead of creating more income with cashflow and subjecting it to taxation, my preference is to serially refi to the break-even point - borrow equity out - and take it tax-free. Also, the lenders I'm working with will loan 5% n/o/o on a SFR, allowing me maximum leverage, whereas with most commercial/apt lenders, you are generally looking at 20-25% down, or more, although some of that can be minimized with carrybacks.

A partner of mine, who has accumulated a fairly large portfolio of SFRs is now converting them, ala 1031 ex., to multiunits...

Everybody likes a different flavor...

4

Dratherbe,

(Sorry for the delay in responding...I have been taking some time off and getting ready for Christmas.)

I am flattered by your kind words but I really am no where close to being the RE guru on this forum. From what I have read, Iceberg Slim will tap me out every single time.

Nonetheless, I am happy to toss in my two cents worth.

"It also sounds like you are a fan of buying on terms as opposed to conventional financing."

I am really more of a fan of negotiating and finding/getting a good deal. I have put together a few "no money down" offers that were fairly creative only because I could not find another way to get it done. But I do love negotiating on anything!

"1. I'm not sure what markets you invest in, but, in your opinion, when do you think we'll start seeing masses of people wanting out/upside down?"

I live in Metro Atlanta and overall, this is a good market. I have owned property in Athens, GA which is a great place to own real estate.

I honestly don't follow other markets as I am not ambitious enough to own anything beyond a 30 minute drive. I have an equity position in a real estate investment group that buys older properties but all I have done is supply cash...no blood, sweat or tears.

  1. Any markets that you think are undervalued and will continue to appreciate?

Again, I don't have a good answer to this because I just don't follow anything beyond Atlanta. One exception I have been looking into is pre-construction sales in the Florida Panhandle. I have one client who has had a fair amount of success there.

He buys into condo developments as they start and sells once the project is complete. One deal he shared with me was he bought a unit, pre-construction, held it for 18 months and sold it after the project was complete and made $140,000 on an out of pocket cash investment of $18,000.

Sorry I was much help on this one guys.

Merry Christmas!

Bobby "D"