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Apprecition Rates Nationwide – Thanks John

Home Forums General EHTrust/EHT Topics and Creative Real Estate Financing Apprecition Rates Nationwide – Thanks John

This topic contains 13 replies, has 0 voices, and was last updated by Avatar of bill_gatten bill_gatten 11 years, 6 months ago.

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  • #4519
    Avatar of bill_gatten
    bill_gatten
    Participant

    Thank John Acquisto for providing the following link.

    http://www.ofheo.gov/media/pdf/4q07hpi.pdf

    #24745
    Avatar of red12
    red12
    Member

    Bill,

    This post reminded me of something I’ve been meaning to ask. If we are depending on appreciation of the property in order for our deals to work, aren’t we setting ourselves up for the same “smack in the face” that the lenders are now getting? Obviously, for us we’re just out our “planned profit” not any actual cash of our own. How do we “adjust” our business model for this? Longer trust terms would help (hopefully) but is there any other way?

    Richard

    #24746
    Avatar of scott
    scott
    Member

    Bill is thinking,”If I can get a FREE house anywhere in the U.S.of A., I am going to target the up markets.”

    Here in Texas (AKA 2% land) many of us measure a transaction without appreciation since it adds up to loose change. :D

    #24747
    Avatar of red12
    red12
    Member

    @scott wrote:

    Bill is thinking,”If I can get a FREE house anywhere in the U.S.of A., I am going to target the up markets.”

    Here in Texas (AKA 2% land) many of us measure a transaction without appreciation since it adds up to loose change. :D

    Which means you need to get a MAV that is significantly below FMV to make any decent profit, correct?

    #24748
    Avatar of scott
    scott
    Member

    :arrow: CASHFLOW
    :arrow: 7 OTHER PROFIT CENTERS

    I admire that you have went hunting for deals earlier than most Narsonians, but don’t pass up that squirrel sandwich because you are hunting rabbit. :lol:

    Study all the profit centers and see what else will put food on your family.

    #24749
    Avatar of red12
    red12
    Member

    Other than “upfront” profits and monthly “spread” what other “profit centers” are there?

    #24750
    Avatar of scott
    scott
    Member

    :arrow: upfront from RB
    :arrow: upfront from SB
    :arrow: spread
    :arrow: monthly from SB
    :arrow: bumped equity
    :arrow: sell equity to another IB
    :arrow: tax lease
    :arrow: back end
    :arrow: :?: :oops: My memory banks are getting muddy.

    #24751
    Avatar of red12
    red12
    Member

    @scott wrote:

    :arrow: upfront from RB
    :arrow: upfront from SB
    :arrow: spread
    :arrow: monthly from SB
    :arrow: bumped equity
    :arrow: sell equity to another IB
    :arrow: tax lease
    :arrow: back end
    :arrow: :?: :oops: My memory banks are getting muddy.

    Upfront from SB? Not realistic in my (limited) experience
    Sell equity to another IB? Short term gain to increase cash flow?
    Tax lease? How does that benefit me? That’s the same as a regular deal but with NO payday at the end.
    Back end? That’s the part that I fear won’t exist at termination.

    That’s my point. If you can’t get enough up front and enough spread to make a living, what do you do? With the market like it is currently there very well may not be enough to cover your “bumped” equity either.

    Looks like I’ll be keeping my J.O.B. after all…. :(

    #24752
    Avatar of scott
    scott
    Member

    @Red12 wrote:

    That’s my point. If you can’t get enough up front and enough spread to make a living, what do you do? With the market like it is currently there very well may not be enough to cover your “bumped” equity either.

    Looks like I’ll be keeping my J.O.B. after all…. :(

    Try living off of ten deals.

    Last summer someone on the board was worried that if they get 40 trust over the next year or two that they would have all these depreciated houses. I posted I would love to have 40 upside down houses already in trusts. The RBs are highly likely to stay and the SBs are highly likely to extend the trust.

    Post script: I have chosen to wave the red and black battleflags. I hope you are not choosing the white flag of surrender.

    #24753
    Avatar of red12
    red12
    Member

    With just a little appreciation I figured I could make it pretty well with just 12 deals a year after they started maturing. I don’t know what “flag” to wave! I don’t want to quit but Real Estate is kicking my ass right now on the “flipping” side so I’m pretty negative on the whole thing.

    Long story short, my house that I bought at 61% LTV (including repairs) sits unfinished after the General Contractor went “belly-up”. Of course, he did this AFTER he used up all of the bank’s money and another $10k of mine. So I have a house that’s 95% complete and I’m working 12-14 hours a day on it, when I’m not at my “regular” 12 hour rotating shift J.O.B. As it stands, I haven’t had a “day off” in nearly 60 days.

    In between, I’m trying to answer calls and e-mails and get SBs and RBs together. I’ve got two deals done and several other NEO’s waiting for me to find RBs. I’ve got to reconfigure my plan and see just how many I’d need to make it with ZERO return on the back end.

    #24754
    Avatar of dbhenderson
    dbhenderson
    Member

    It takes less than 2.5% appeciation to make the NEHT work and pay out all the stipulated expenses. I do not believe that over 3 years any RE in the US won’t appreciate that much. And even if it doesn’t you can always extend the trust until it does.

    Quit being so negative and start making NEO offers every day.

    #24755
    Avatar of bill_gatten
    bill_gatten
    Participant

    @Red12 wrote:

    @scott wrote:
    :arrow: Upfront from SB? Not realistic in my (limited) experience
    Sell equity to another IB? Short term gain to increase cash flow?
    Tax lease? How does that benefit me? That’s the same as a regular deal but with NO payday at the end.
    Back end? That’s the part that I fear won’t exist at termination.

    That’s my point. If you can’t get enough up front and enough spread to make a living, what do you do? With the market like it is currently there very well may not be enough to cover your “bumped” equity either.

    Looks like I’ll be keeping my J.O.B. after all…. :(

    Red. Red. Red. I’m afraid you’re right. If you can’t find sellers willing to pay you to unload their unwanted and burdensome properties in this marekt, you are indeed looking for love in all the wrong places and need to keep that J.O.B. (as much as I don’t want you to). And as far as investors giving you money every month (or up front) to buffer your positive cash flow…hey, I can give you about thousand names tomorrow (including moi…which means “me” in French talk).

    And in Texas (even Texas) if you get a property for $250,000 that’s worth $300,000, and bump the equity to $315K, I’d say that you made big bucks on day-one…wouldn’t you?

    And if you don’t want these deals after you put RB’s in them, call me and I’ll happily pay you (though not a lot) for all you can bring…but so would anyone else with half a brain (no offense Pasquini)

      Beginning equity
      Bumped equity
      Seller discount of FMV
      Up front cash from seller
      Up front cash from buyer
      Up front cash from investor
      Positive cash flow from buyer
      Positive cash flow from seller
      Positive cash flow from investor
      Equity build-up from principal reduction
      “Sale” of income tax benefits
      Appreciation
      Packaging for resale
      Elimination of management costs
      Elimination of vacancies
      Freedom from the “T’s” (i.e., tenants, toilets, trash, trouble, tribulation and tired-out (albeit frequently titillating, if not truthful) tales of woe)

    And how does one benefit from a tax lease? I’ll answer with a question:

    If you can get 200% more rent while saving the tenant money every month, which would you rather do at the end of the term…give the tenant the house, or keep it and all of its equity and do another tax lease…and then another…and another…?

    Get with it. dudes and dude-esses…there is gold in them hills out there!

    This is the best market for US you’ll see for a while. The only thing stopping buyers is the inability to buy; that which is stopping sellers is the inability to get buyers…so…simple…we get the buyer and take those unwanted houses and stick them together, and move on to the next deal.

    Not to be rude or condescending, but the term I use for people who don’t understand this market and how to capitialize on it is: “People who don’t understand this market and how to capitialize on it “

    Bill

    #24756
    Avatar of red12
    red12
    Member

    Bill,

    I’m a huge fan of your program and I’m using it daily. I’ve gotten 10 signed NEOs since Jan. 1. Two of these properties are what I would consider the upper-end of my market (over $450k) and I actually expect them to be tax leases if they move at all. 200% rent? I’ve never seen you or anyone else here suggest that figure before.

    How do you get a seller, who can’t sell their house traditionally, and who obviously can’t afford to keep the house, do give you cash that they don’t have? If it’s a listed property, they usually are planning to pay the commission from the proceeds of the sale.

    Your example in Texas is what I was suggesting in my earlier post. Instead of being “full price” offer people. It seems to me that we need to be getting the biggest discount from FMV that we can negotiate. Correct?

    I understand that this market is workable, I just need to know the best adjustments to make for it. Looks like we may need more quantity to make up for the lack of back end paydays….

    Your further input is greatly appreciated, Mr. Gatten.

    #24757
    Avatar of sstanton
    sstanton
    Member

    Dave, there are many areas that are depreciating right now. My old nieghborhood in So. Cal. went from 425K in 2005 to 300K now and still dropping, though there are signs of slowing. Had my Rb not bailed last year, they would not be able to purchase the home today. It may take several years before it recovers to that point. Now this area, like parts of florida, are perhaps the extreme, but you need to look at it.

    Red is complaining about dropping prices in his area, but they increased this last quarter by over 5%, the last year was flat, so there had been some short term drops, and over the last 5 years around 52% increase. I don’t believe a down turn in his area would be bad and possibly recover in a few years. (My opinion only, you live there, Red, and would know better.)

    Red, keep in mind that a full price offer is not offering the asking price. It is the price you are willing to offer base on the market conditions in your area.

    Bill, 200% more rent for a tax lease. Would not that more like 20%? That is the number I have come up with for a tax lease.

    Stu

    #24758
    Avatar of bill_gatten
    bill_gatten
    Participant

    Richard, you are right in much of what you say, but do remember that old adage: “When a finger is pointed to the stars, only a fool studies the finger.”

    When people are broke, that’s when they have to pay more for everything. But a guy who is broke today won’t always be that way, and/or he/she may have other assets to pay with or borrow against.

    Remember that if you are not the best option, then they never needed you in the first place. You have to establish with them early-on that if they do anything other than what you are suggesting it will costs them much more and be loaded with myriad more downsides (and if you can’t say that in total truth and honesty, they don’t need you, and you should walk-away).

    Take a car. Take a cow. Take payments (secured by something), or get a co-signor to secure your prospect’s performance with a house or an article of personalty.

    What I’m trying to get across so deperatey here, is that when the market turns, its power doesn’t stop or even wan…it merely travels like a locomotive in a different direction, which means that you have to operate in a different direction. Forget about what someone can pay today and figure out what they might have tomorrow. If You can’t reach a conclusion in this area that fits your prospect and you…simply go get the next one.

    Thank about it this way: When people file for bankruptcy, they have to go to an attorney, right? The reason they’re filing is because they have no money, right? Attorneys don’t work for free, right? Attorneys who handle bankruptcies make a lot of money in the process, right? HOW? If the poor guy could afford an attorney he wouldn’t be filing bankruptcy! He’s broke!

    The way they “get’er done” and make a living is by explaining to the client what the consequences will be if the client doesn’t work out a suitable method of payment…that’s all. Like I said, people who are broke pay more for everything than anyone else, and will always find a way and do whatever it takes to get out of a quandary. And if they don’t recognize their quandary, then you are not doing what I taught you…(sometimes you just have to slap the crap out of ‘em).

    Bill

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