exactly...and flipping when it is a buyers market doesnt seem like an opportunity to me; when there is so much inventory...buying on the way down isnt my idea of a good strategy...but then again..im just a little Cuban trying to bust a nut...let me get this str8t..a person which is motivated to sell is motivated to lower prices becuase he cant get what he is asking for or will have to wait way to long for his asking price...not a good "flipping" situation if you ask me. Id rather overpay for a house that is in demand than underpay for a house which is not; when it comes to "flipping" .
Tell your silly girl friend ( wife ? ) to chill out and learn the ropes first. Tell her to go get a job with a realtor and get an idea about the market before you spend your money on her every little whim and wishes. Better yet, drop her and stick to hookers. You'll find your life to be much more enjoyable and stress free.
I've been buying/selling/renting/fixingup/flipping real estate now for something like 30+ years. Now you tell me what I call flipping ain't flipping. Here's the bottom line my friend. I would never personally by a property for retail price, ever. I don't care what type of "market" it is. I would only buy a property at a discount. It's called making your profit going into the deal. Properties are bought at discount for a variety of reasons. Sometimes it's because the property is a "fixer-upper". Sometimes it's because the owner has to sell quick and doesn't have time to wait for the conventional process to take place. Whatever the reason, there are properties that sell at sharp discounts to fair market value. There are more of these during times like now. So you have a wider selection. Certainly you take into account certain cost factors: like holding costs for an extended period on the market, like selling at a discount yourself to move the property quick, etc etc. In other words, if you are a professional you know your market. El Cubano thinks it's a good strategy to play the "greater fool theory" with real estate. As it turns out this is a highly risky strategy, and one in which all kinds of people now find themselves holding the bag. If you happen to be the guy trying to flip when the market dries up...oh well. Again, I don't know anyone who has played this game for a long period of time who does anything but buy at discount. If it's a hot market you don't buy as much...that keeps you out of dangerous markets. OldTrader
I read your earlier post with interest and I agree the only way to make money in anything is to buy it below market. The questions I have for you is, would you buy a discounted property even when you think real estate prices may go lower in the future? Lets say you buy a house with "issues", do you prefer to do the re modeling and fixing yourself or do you use contract labor? How do I go about finding property below market value in the first place? my friends say most of them sell even before they get listed! Another thing I was thinking was investing in the foreclosure auctions that I forsee next few years, what are your thoughts with these. I have a few friends who invest heavily in American real estate. As far as I can tell very few areas are appreciating, Salt Lake city, Austin and Phoneix seem to be good right now because of fundamental economic growth reasons ( not hot money speculations like FL and ATL ). Would you suggest a wait and see approach or would you jump in right now with interest rates going higher in the forseeable future?
Great post again OldTrader, I appreciate it. A couple good questions on this other thread, esp how do you got about buying below market? That seems to be the first main ingredient of a successful flip. Thanks!
i only meant it in regards to "flipping" a house...buying a house at a discount when the market is hot is close to impossible..so you will most likely buy a house at a discount when??? thats me point ( when the market aint so hot )...for a longer term hold i couldnt agree with you more...but i am only speaking about "flipping"...and with all due respect Oldtimer i got much love for u...
One other question - how much is a good % off from market prices to be considered a good buy? I've seen 30-50% off, but curious to hear your thoughts OldTrader. Thanks!
OK...let me see if I can clarify something here, and then answer some of the other questions. When the market is "hot" it is very difficult to buy a "house" at a discount. Exactly right. I said that in my post. What that means is that when the market reaches it's peak, like it just did in some locales, you are probably going to be unable to buy property. Contrast this with El Cubano method of buying when things are "hot" at retail price. Using this method he might have bought a condo in Miami which he is now stuck with at a huge loss. Call it a "flip" if you choose, call what I do something else....makes no difference to me. But in the final analysis, I might at steep discounts which insure that I won't be losing money...you don't. Now, on to the discount. One of the things that people typically get confused about is buying at a steep discount. Obviously you cant go to the best neighborhood in town, in a hot market, and buy a pristine listing at a steep discount. In fact, in my method the focus is not on the "house" or property at all. What I focus on is the seller. The seller has to be extremely motivated in order for you to buy at a steep discount. Now, here's some motivations: foreclosure, especially as it nears the sale on the court house steps date. This seller cannot sell at all in a conventional form, because the process takes too long. The only way he's going to be able to sell is for cash. So one key to buying at steep discounts is to be able to buy for cash. Another motivated seller is a guy who doesn't have the dough to fix his property, and the property is not suitable for a retail buyer. Who can he sell to? No one can even get a loan on the property bacause the bank doesn't want the property as security for their loan. Again, he could sell for cash....but someone with cash is going to require a steep discount. Again, this isn't about finding any old house. This is about finding a guy who has to sell quickly, and cannot sell to a retail buyer. That means by definition that most properties are not going to meet YOUR requirements, because they won't be cheap enough. I determine the price I'm willing to pay by first determining what the property is worth today, after I have repaired. Now, some people use a formula....Ron LeGrand uses 70% of that value, minus all the repairs. I actually back out the profit I hope to make, and all the repairs, holding costs, selling costs, closing costs, etc. It's just a process of penciling out everything. Most of the time when I buy a property I'm going to buying well under 70% of it's final fixed up value. So again, this is not going to be that beautiful property in the best neighborhood that your wife likes. Although I have to say that in the early 90's you could buy million dollar property along the ocean in S. California for those kind of numbers. Anyone know the Coronado Hotel outside of San Diego. This hotel was flipped back in the late 1940's. Flipping has been around forever, and really just means you're turning a property over quickly. You can flip property that needs substantial repair. What you do is buy it and then resell to a guy who wants to rehab. You buy low, and sell somewhat higher. You don't make the repairs. You leave a big margin in the deal for the rehabber. OldTrader
in a hot market you cant get much of a discount and i could have bought 10 condos 3 years ago when the market was hot and sold them 6 months ago when the market was just starting to stall and made a fortune...you are assuming to many things in ur post...all im saying is this. in a hot market which is in no way easy to forcast u just buy and flip..thats all...just like when the market for stocks was hot you didnt didnt buy ebay at a discount or wait for motivated sellers you just bought and flipped...im notsaying anything you are saying is inccorect...i know you have way more knowledge in this area than me..im just seeing the "FLIPPING" concept much different than you are...yes had you bought the top of course you are going to get crushed..but had u waited and waited for a discount in a hot market you are also left with the option of not making a dime...again with all due respect..