Hi TZ –

I am licensed… I carry E & O Insurance…I have never been named in a lawsuit…I have been doing this for over 10 years in the same location….I have always catered to investors and have a large international presence in FL and NY/NJ…..My blood type is Typo O Negative and I am handsome.     Feel free to reach out.  I only deal in SW Florida.  I have no personal interest in SE.  Good luck!

however to even VAGUELY talk about real estate you need to  be licensed.

I must have missed when Donald Trump, Robert Kayosaki, Steve Wynn, and others who seem intellectual in real estate got their real estate license. 

I am a real estate agent because to even play  in real estate you have to be.

Huh?  Why?  I spend a ton of time in NJ and FL and am in a marketplace where there are millionaires upon millionaires buying real estate and doing very very well with it.  They aren't licensed.  I have a guy who I am friends with in Jersey City NJ.  You would think he would hire me as his sales agent.  We get along, have the same business concepts, etc… But he does it alone, and I'm cool with that.  He's not licensed and he is probably top 10 in inventory owned as an individual in this area.  He never took a real estate course in his life.

I make very sure that if I am talking about property people are represented by a separate agent.

You mean a single agent.  You don't consider a transaction broker an honest way of going about things?  How about 2 people just having a "meeting of the minds" to make a deal.  Why does there have to be 2 separate single agents?  I see your point, but not necessary in my opinion.  Go back to the textbook when you became licensed.. What are the things they hammer into your brain?

1. A deal is made after a buyer and seller have a "meeting of the minds".  I believe that is verbatum.
2. One of the three types of representation as a sales associate is a "Transaction Broker".. This is the preferred way in all markets.  If you work for a big brokerage like a Coldwell Banker, Weichert, Century 21, there is a good chance that product could come from within your own company.  So, the solution is TRANSACTION BROKER.
3. A buyers / sellers market is defined as the real estate activity of sales volume resulting from a connection or disconnection between buyers and sellers. 

I only say this because it was in all 3 of my real estate books in NJ, NY, and FL.  I'm guessing most courses are similar.

I'm not trying to start a fight with you here.  But this is an education forum.  I have never pitched product here, maybe once accidentally   But I firmly believe that a buyer can make a deal with a wholesaler without single agency representation.  Ok, if someone is going to buy sight unseen, but I think that is stupid anyway.  I can speak for myself and for my clients.  We have made money and lost money on instinct.  I think a foreigner needs to visit the area, look at homes, speak to PM's about rental rates to verify them and vacancy rates and make a deal on their instinct.   

Emma,

I kinda stopped reading after you said stay away from wholesalers / flippers.  Technically, most wholesalers are flippers.  I am a wholesaler and I "flip" product and there are a lot of us out there, yes some ripoffs I have seen.  As a wholesaler, I'll take a loss on one property just to clear my books to earn it back the following week.  Something wrong with wholesaling?  Did you get ripped off or maybe you just don't have the funds to make it work?  I don't know but I've been successfully wholesaling for years and making money for myself and putting buyers into a position of equity and upside.  I also don't do warzones.

Our company has the capital and resources to buy in bulk.  We have a good relationship with a National Credit Union where we have been buying a lot of their bulk packages.  In most cases, we have to buy properties we don't even like just to get the bulk of what we do want.  It's a numbers game and profits here and losses there result in a net positive for my business.

Furthermore, I also have the funds to rehab the properties and allow the investor to hold off their closing until we place a tenant in the property at fair market rent done by a third party property management firm.  I have disclosed my formula for selling.  This is how it averages: 

Purchase price of A …. Rehab cost of B…. A + B x 8% = Profit………Profit + A + B = Net Sales Price.  Bad deal?  It's not.  I don't get 60% off on bulk purchases.  I don't even get 40% off.  I get about 20% off on most cases.  At the end of the day, my buyers pay about 8% under retail prices in an improving market. 

Your Zillow reference I also disagree with if I am understanding what you're saying.  A dominated investor – owned area under $80k would at least to me, be considered war zone or getting close to war zone….OR, Section 8…which I do like.  If you go to warzones like these, ie…Detroit, parts of Atlanta, parts of FL, etc… most homes ARE owned by investors because these areas NEED the rental stock where most people ARE renters.  Many have Section 8 vouchers.  Some have different subsidies.  I am an investor for the past 8 years in a high crime area in NJ.  All of my tenants are Section 8.  I bought cheap and get high rents.  Section 8 has increased rental rates over the years which increase the value of my property.  My entire street is almost entirely owned by LLC's or investors of some type.

Sorry to point that out, but I am a wholesaler and I had to defend your comment.  Nothing wrong with you looking out for people, but there are tons of wholesalers who do very good business and have benefits more then those that are licensed.  I am also licensed in 3 states (FL, NJ, NY)  for the record. 

TZ:

That looks good on paper, but I am a huge skeptic on condos involving an HOA which they all have.  Furthermore, the one's I am most skeptical about are those built during the boom years.  The reason is because in most cases, these units were bought by speculative investors.  Most of them lost them in foreclosure and seems like there are some investors who bought from distress and is now trying to sell.  The problem I see with newer HOA's is their health status which can crush values.  I see it all the time in FL.  HOA's require reserves.  Reserves are required to finance if you are a primary homeowner.  Without reserves and a good rating, buildings will be held back from what their potential would be if the budget was better.

There are always maintenance issues with condo complexes.  There is reoccuring, and unforseen.  I will tell you that the president of the HOA won't pay for it.  It will come in HOA monthly increases to the unit owner. 

Like I said, seems good.. But be careful with the status of HOA's.  When was the HOA's most recent "Reserve Study".  If none have been done in the last 5 years, this is a MAJOR red flag.  A Reserve Study will include bringing in a specialist to estimate how much work will need to be done to a pool, elevator, sauna, clubhouse, and everything else in the common areas.  The specialist will estimate an amount and a healthy HOA will have a minimum of 65% in its reserve account for that specific year.  I have seen TONS of newer complexes have less then 10%.  Then…..they got crushed.

I am not a condo guy so please don't take this as a knock against your Miami Oaks.  I'm just saying that would be my only concern if there is plenty of inventory available.

WI:

The market is undoubtedly getting better, but I will say that there has been some skeptisism in some markets.  Why are investors buying?  High yields in cheap areas?  What do those cheap areas have to offer?  You are now an affordable housing investor.  Historically these are cash flow homes with high risk and very little hope for capital appreciation. 

Quick Story:  As most know, I am an avid New Jersey guy where I buy and sell as a wholesaler and a licensed commercial real estate agent.  I just sold 10 two-family homes in a package deal that was in a Court Appointed Receivership.  Homes need some work but all Section 8.  13% Net Yield which is outstanding in NJ.  I have written about Section 8 and how I believe you NEED section 8 in inferior areas.  This area I sold in is in the slums of Jersey City but you can throw a rock to New York City from it.  What does that mean for appreciation?  Very little, but the housing authority will consistently raise rental rate allowances for Section 8 tenants.  That is considered upside AND Cash Flow, but more emphasis on Cash Flow. 

My Point:  Domestic investors are migrating their investing dollars to higher priced real estate to where risk is minimized, but the "warzone" investors are seeing potential in or around major cities.  With the economy SLOWLY picking up steam, and a housing market that has hit bottom already, rental rates can only go up from here.  Yields will climb, prices will rise, then yields will drop.  That's what happened in FL and GA already.  Still good potential, but yields are dropping big time which is an indication of what is happening to prices going up.

I'm nomadic and I look for opportunity in 2 very different states since I know them well.  What's nice about my areas is that over the last 10 years, when one state is good, the other is not and vice versa.  For instance when the housing market finally imploded in NJ in 2007, everyone was rushing to buy in FL because prices were dirt cheap and cost of living was more affordable.  Now, FL and GA seem to have hit a stagnant point.  I think that is a good thing and still holds an opportunity to buy for LONG TERM potential. 

Yields are 8% in FL.  Deal with that or don't buy.  Yields will drop as prices continue to go up.  Rental rates are good where they are.  I don't see a change in rental rates for at least 18 months.  Those went up already and see good ratios when comparing local income.

Never met you Steve, but I will say that I like the way you stick to one specific area.  At least I only know about one of your areas which is my area of Ft. Myers.  The duplexes you are buying for those prices I am guessing are off Palm Bch or in Pine Manor.  Some call Pine Manor "Crime Manor" but as long as investors are aware what they are buying and the fact "you get what you pay for", I don't see anything wrong with buying.  It's not my preference, but that doesn't matter. 

I will say this:  I'm pretty sure I started the REO duplex buying program in Lehigh Acres back in 2009.  I was working with Synovus Bank and another local bank who I knew funded a bunch of these construction loans back in the boom era.  Since, those banks have liquidated all of their distress for the most part.  We were buying 2007 built duplexes for $43,000.  I wasn't paying any higher then $53,000 until early 2012 when the duplex concept became very popular and everyone and their grandmothers wanted one.  I represented a local investor who now owns about 100 of them and on paper (pro forma) I would re-sell at about $65,000 and still yield my buyer about 15%. 

Come full circle, I have charted my investors ROI year over year since to calculate ACTUAL yields.  I think I mentioned this in another thread on this forum, but even though 15% was on pro forma, investors were netting 8-10%.  I figured the actual stats would be different but you have to quantify that when buying in a high risk area.  Still 8-10% is a good return, but I have not sold duplexes in Lehigh for awhile since prices have skyrocketed.  Today's pro forma ROI is 12% and actual could drop as low as 6-7%.  For that potential yield, I am staying out of the higher risk areas.

I am curious as to how yields are comparing from pro forma to actuals in your area.  REO duplexes in Lehigh are history.  They are all now re-sales being offered from mid $80's to $110,000.  In hindsight, I wish I would have held onto more of them!  My banks would allow me to assign so I laid out no money so I can't complain. 

Helpful hint to those looking to spend a bit more…Look for multi-family properties with 5+ units.  You can buy for $25k – $45k per unit.  Good ROI and good upside potential.  Forget loans though if you are foreign national.  Need cash. 

1. Avoid properties with a walkscore of less than 50 (please refer to http://www.walkscore.com):

Walkscore is simply a gauge of how urban your neighborhood is and the more metro you are the better, per this website.  That said, if you look at scores 50+ on Walkscore, ie…NYC, Hoboken, NJ, Miami, FL, Los Angeles, CA, etc… you will easily exceed everything you state below and price yourself out if you are looking for cheap properties..  These are actual urban cities with huge demand where prices easily eclipse 200k.  Domestic investors like buying in these areas and are content with 5-6% returns.   Prices too high, rents not enough to justify most people on this forum's interest in cheap properties / high returns.  If you look for future upside, then good.  Not a good gauge though for foreign investors especially on this forum who look for cheap properties.  In my opinion, if I used Walkscore, I would gauge a higher score on my future upside and speculation.  Cash flow will be minimal in 50+ scoring markets. 

Stay clear of properties in areas with more than twice the national average rate of crime

Ok, I agree.  Never been a fan of war zones.  Problem is, most metro cities rate twice as high as the national average.  Not a good gauge if you ask me.

Only buy properties less than 30 years old

Where are you buying?  Florida?  Vegas? Arizona?  Yes, definately possible. 

Avoid properties with HOA like the plague. Or pay a maximum of 5% of the monthly rental value for HOA dues

So if your condo rents for $1,000, according to your theory you would pay no more then $50 per month?  I have never ever heard of a good condo complex that is stable charging this low.  In fact, this would raise a huge red flag.  Healthy HOA's would charge about $200 to $300 per month in healthy neighborhoods with rental rates around $1,000.  You have to account for their reserves to fix things, insurance, common areas, landscaping..  I mean if you are paying this, clearly you don't want the responsibility of taking care of these chores yourself.  That's why you pay an HOA.  I do not agree with your 5% theory.  I'd say if you aren't paying about 20% of your monthly rental value to HOA dues, the HOA is either not healthy or could be problematic in the future. 

Monthly rental value must be at least 2% of the purchase price (eg $40,000 purchase price with an $800 monthly rental value)

Investors used this theory during the peak and it still didn't work.

Don’t buy anything with more than 2.5% annual property taxes of the purchase price

What Alex said.

Tony,
I don't do much Section 8 in Florida although I know quite a bit about it.  I've heard good and bad, but more on the good side.  Section 8 has come a long way with newer regulations and Housing Authority rules. 

I wrote an article on Section 8 about a year or more ago for my New Jersey business.  It's all similar but could shed some light on what is involved.  I believe the cap for a 3 bedroom in NW Cape Coral is $1,080 but don't quote me.  This amount would be the combined tenant payment + government subsidy. 

http://www.newjerseyrealestateguys.com/blog/nj-section-8-investing/

Couldn't have put it better myself Jay.  I have been looking for the right words on how to describe Texas but this hits the nail on the head.  For the last 2 years, I am more favorable on Replacement cost.  It is one of the bigger reasons I like improving markets of Florida.  Example:  I just sold a 4 home package to one of my Indonesian investors.  Their average price for their home was $105,000, and rented at $1,250 a month…  City water / sewer in and paid (no assessments), great area of Cape Coral with thriving business, blah blah… Investor had an appraisal done and also bought insurance.  Appraisal replacement cost came in at $190k and insurance was $215k. 

I agree that the property is not worth that yet, but right now, builders cannot compete with prices.  There is plenty of room for upside and I cannot stress UPSIDE enough when looking at current US real estate. 

Now I know what article to send my clients when they ask what advantage FL has over TX.  Instead of shrugging my shoulders and replying "we have tourism", I will print out this article for them