So.... you know what's going on. Now, what to do?

[randallg99]

see attached data and see the report attached.

what are your assumptions for the next 1-3 years?

and what are you doing about it?

 

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[MJ DeMarco]

see attached data and see the report attached.

what are your assumptions for the next 1-3 years?

Pain. Continued RE price declines. Continued dollar devalution.

and what are you doing about it?

Most of my investments are outside of the US in stronger economies with tighter fiscal policy.


I believe it will go worse -- just this month alone, I know two folks with great credit, decent jobs, and BOTH, are letting their homes go into foreclosure.

 

[hakrjak]

I'm feeling the frustration setting in over here... As someone who feels like he should be making a lot of money in this sideways market -- And who in reality is losing his shirt.

I'd say buy more Real Estate, but nobody has any money right now!!!! Even with great credit, you can't borrow at anything approaching a reasonable interest rate, unless you are sitting on a huge pile of cash, or want to live in the house -- and you own no other Real Estate....

You could have got some fantastic deals on houses during the Great Depression also, but again -- Nobody had any cash!!

Very frustrating.........

What am I doing at this point? Trying to pay down debts, and generate more monthly cashflow... I'm focussing on monthly income instead of "Net Worth" for awhile... Considering that most of my "Net Worth" is in Real Estate, and may not even be REAL...

Tough to swallow that everything I've worked to build in the last 10 years may be a mirage.....

- Hakrjak

 

[tbsells]

Very frustrating.........

What am I doing at this point? Trying to pay down debts, and generate more monthly cashflow... I'm focussing on monthly income instead of "Net Worth" for awhile... Considering that most of my "Net Worth" is in Real Estate, and may not even be REAL...

Tough to swallow that everything I've worked to build in the last 10 years may be a mirage.....

- Hakrjak

I'm feeling the same way. I'm trying to figure it out myself, but your approach makes sense.

I've always invested for net worth. My shopping list was pretty simple: decent house in decent area, house that was 25-30% below FMV, and/or a house that I could fairly easily make improvemnts to that would substantially increase value. As long as it broke even monthly or came close to break even, it was fine. I'm in it for the long run, and I make plenty of money to cover some payments or a little shortage in monthly cash flow. It was no big deal. That was my mentality for years. It worked well.

But, now I have about 20 rental units that used to be break even or close. Now, they are upside down on cash flow. Rents are down, taxes and insurance are up. Rents collected are way down. Today is Nov. 10 and I have collected more excuses than rent. I paid all my mortagages a couple days ago, but had to bring about $2500 over from the family account. Same thing last month. Its not even cold yet. It will get worse when tenants start burning $300 a month on gas or heating oil. Oh yeah, my job is commissioned sales in..........real estate. It was good for a long time, but not now. I'm not technically unemployed, but pretty close. Actually, I'd be better off if I were unemployed. Unemployment from what used to be a $150k job would probably be pretty good.

I guess the point is........all the rules changed in the middle of the game. The game is different now. What to do about it? I'm trying to sell my investor grade houses, but can't compete with the banks. I have even considered buying more at these depressed prices, but its tough to do when the ones I have are killing me.

I gotta go....will finish later.

 

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[MonTexan]

I guess the point is........all the rules changed in the middle of the game. The game is different now. What to do about it?

You're right about that. Fortunately, I have had a great relationship with a couple of small portfolio lenders that have allowed me to do cash-out refi's within a month of purchasing for the past 2 years. When nobody else could get a bank to talk to them, I was able to pull out all of my purchase and rehab money time and time again. Thankfully I didn't overleverage the houses and all are still cash flowing, but now my lenders are giving me the old "you're moving pretty quickly...." line. Obviously they're getting nervous.

I'm still feeling pretty good because most of my properties are on Section 8. When my tenants lose their jobs, I still get paid. And paid well, considering rents are softening and mine are all "locked in" at post-hurricane levels.

Now that my bankers are slowing me down, I'm starting to rely more on private money. I've been using short term private money all along (not the classic hard money) and am now transitioning more to longer-term private money. Am selling my most recent property - first investment property I've ever sold - on owner financing for a nice premium with underlying private funds. I think this will be my exit strategy for all properties when I eventually decide to sell.

As for the future? Planning to continue to cultivate my relationships with private money folks. Turns out I'm pretty good at finding private money and both sides have been very happy...I'm able to do more deals and they're getting nice return. I think a solid balance sheet and good financial backing will open up a world of investment opportunities over the next couple years as the deleveraging cycle continues.

 

[Cat Man Du]

I guess the point is........all the rules changed in the middle of the game. The game is different now. What to do about it? I'm trying to sell my investor grade houses, but can't compete with the banks. I have even considered buying more at these depressed prices, but its tough to do when the ones I have are killing me.

I gotta go....will finish later.

Your only way out ---IS to buy more at these prices to off-set the older ones. It's like stock averaging.

 

[yveskleinsky]

I guess the point is........all the rules changed in the middle of the game. The game is different now. What to do about it? I'm trying to sell my investor grade houses, but can't compete with the banks. I have even considered buying more at these depressed prices, but its tough to do when the ones I have are killing me.

Not sure if this would work in your area or not, but can you get your rentals HUD certified and get HUD renters in there? I know there's issues with this, but at least the govt would be paying you and not the tenants. Just a thought. ...Hang in there.

 

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[randallg99]

I'm not letting any of my friends borrow any more money...

even facebook friends? lol

...Continued dollar devalution.
Most of my investments are outside of the US in stronger economies with tighter fiscal policy...

Much of my trading portfolio has shifted into Chinese stocks.... the liquidity and the amount of money the government has to stimulate their economy is mind numbing. I don't know about the dollar continuing to drop, though.... much of the 1st world is experiencing worse downturn than the US

I'm feeling the frustration setting in over here... As someone who feels like he should be making a lot of money in this sideways market -- And who in reality is losing his shirt.
...
Tough to swallow that everything I've worked to build in the last 10 years may be a mirage.....

we're in the same boat.

...all the rules changed in the middle of the game. The game is different now. What to do about it? ...

exactly my sentiment... hopefully we can figure out what to do.

...I think a solid balance sheet and good financial backing will open up a world of investment opportunities over the next couple years as the deleveraging cycle continues.

Corey I am glad you're doing well. you're doing all of the right things and having access to private equity funds now days is the best way to get deals done.

Your only way out ---IS to buy more at these prices to off-set the older ones. It's like stock averaging.

stock averaging is no good as most stocks who lose value will actually continue to lose value (Per O'Neill), but buying real estate at these prices is a good thing.

Not sure if this would work in your area or not, but can you get your rentals HUD certified and get HUD renters in there? I know there's issues with this, but at least the govt would be paying you and not the tenants. Just a thought. ...Hang in there.

great idea yves.


sorry to see and hear a couple of posts expressing pain during this downturn. But you're not alone: it's a very real and stressful time in my life and as a business owner and RE investor, I've been suffering for about 4 years now.

the purpose of the chart and the attachment was to shine light on the fact that there just may be a turn in economic conditions for the better. Many people/medium use the word "recovery" all too loosely, but a recovery is really not important to us investors as much as knowing when it's a good time to buy income producing assets.

Leading economic indicators in past recessionary periods appear to be much different today for a number of reasons which isn't important to this discussion. But what's important is having this knowledge and knowing what to do and when to do it.

forget the fact that the FDIC will itself need a bailout after holding bags of overvalued CRE from banks that were liquidated and that FNM is speculated to bleed $400bil before as written in today's wall street journal.... and forget about the dozens of other news stories and data points that continue to hammer nail after nail into the economy's coffin. And forget about the US dollar going to worth less than the paper/cotton its printed on (MJ, I think we're about to see a rising US$ vs most of the world currencies... but that's what makes markets) The irony is that these factors are not as important to us as they were in past cycles and even in the beginning of this down turn.

These times are difficult indeed for everyone who've worked assembly lines up to middle managers at Bear Sterns who were accustomed to making quarter mil plus bonuses per year....but they're especially difficult for all of us here because none of us have been through a downturn this steep and long before and a fear of the unknown trumps above all other fears.

Ideally, when I look at the attached chart (the one embedded in the original post is covered up by an ad) I want to say: we are hitting bottom, or we're getting awfully close. It can still go down from here, but now there signs where it's at least leveling off. Regardless of politics or government intervention, there are indicators that the overall economy is poised to begin an upswing. Who knows? We may be in a tight credit period for another 10 years....

So- this got much wordier than I originally anticipated but we're all young enough here to make mistakes now. and to go for the jugular. A case in point, I bought my first rental single family property in 1998. Identical homes in the area are now going for the same price as they did 11 years ago. Except now the rents are approximately 30% higher while expenses are only about 10% higher. The cash on cash return is much better today.

I put in 10 offers in the past month but got no counter offers. However, the agents are calling me back with other sellers who haven't put their properties up for sale. Long story short, I am paying cash for these properties in the next few weeks.

Since many rules of the games have changed, who knows if inflation will drive up real estate pricing again, but in cycles past inflation drove pricing of assets higher which may not happen this year or next, but it will happen. Cycles come and go. Also, pent up demand for acquiring assets has to burst out once again, whether it's sometime this week or decade. So, it's not all doom and gloom and it's not the end of the world. Instead, it's the time to seriously think about how you want your portfolio to look in 10 years and when the best opportunity will be.

 

[Cat Man Du]

Originally Posted by Cat Man Du
Your only way out ---IS to buy more at these prices to off-set the older ones. It's like stock averaging.

stock averaging is no good as most stocks who lose value will actually continue to lose value (Per O'Neill), but buying real estate at these prices is a good thing.


Of course, I mean Real Estate at these LOW**** LOW prices!

 

[Russ H]

I guess the point is........all the rules changed in the middle of the game. The game is different now. What to do about it?

tbsells-

This is exactly why smart rich folks get richer, and those who thought they were smart, don't.

For years, the same question has been asked on these (and the rd.com) boards:

"What happens when things change? What do I do then?"

Answer: The rich roll w/the changes, and figure out how to profit from them.

This is survival of the fittest at its best-- those who have made allowances in their PLANS and who can REACT QUICKLY to the new rules, WIN.

For every person who got out of the markets last fall before they went ker-plop, there were MILLIONS of small time investors (mostly into mutual funds) who just rode that airplane right into the ground.

This is actually becoming a cycle-- many of the folks w/Mutual funds who lost big in the tech bubble lost again in this latest downturn.

And they'll keep on losing, if they keep doing the same thing.

So if you've all read this far, hoping I'm going to give you "THE ANSWER", well, sorry, I'm not.

I'm not one of the quick smart ones.

Our PLAN was to develop RE w/OPM. And we've done a pretty spectacular job of it.

But we need to figure out how to get our loans adjusted soon, or we're toast.

We've known that we were headed in this direction since Dec/Jan. And we made the decision to work our a**es off to finish the big B&B, so we'd be in a better bargaining position when we ran out of money.

And in less than 9 months, we completely gutted/remodeled a 10,000 square foot historic building. All new electrical, plumbing, HVAC, sprinklers, you name it. 14 newly tiled bathrooms. 16 fireplaces.

Got all of the sign-offs 2 weeks ago. And we had a bunch of folks stay in the new building this past weekend.

Feels good to be done! :banana:

So while we're heading into a cashflow negative time of year for us (typ now through Jan 15), we now have more to show for it than we did in January.

Time will tell if this was the right strategy. I honestly don't know if it was.

Stay tuned.

-Russ H.

 

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[hakrjak]

One thing I can add to my earlier comments is that those of us that are living by the ARM are going to die by the ARM if inflation really happens and shoots mortgage rates to 10%, as some are predicting. A lot has to happen for that to take place though... Stay tuned...

Without my ARMs, I wouldn't be making badass cashflow and sitting on mortgages that are adjusted to 3.5% on average right now.

The trick is going to be knowing when to switch those ARMs to fixed rates before things get too out of control.... And then when property values might inflate, so I can dump the properties and take the "profits"... (Which won't really be profits if we have true inflation, because everything will just be more expensive... Like "profits" people are making on Gold right now...) Who knows, maybe the banks won't even allow us to refi by then... They'll just tighten up the credit even more, and take the houses -- knowing they can sell them at inflated prices.

It's always something.............

Cheers,

- Hakrjak

 

[Cat Man Du]

One thing I can add to my earlier comments is that those of us that are living by the ARM are going to die by the ARM if inflation really happens and shoots mortgage rates to 10%, as some are predicting. A lot has to happen for that to take place though... Stay tuned...

Without my ARMs, I wouldn't be making badass cashflow and sitting on mortgages that are adjusted to 3.5% on average right now.

The trick is going to be knowing when to switch those ARMs to fixed rates before things get too out of control.... And then when property values might inflate, so I can dump the properties and take the "profits"... (Which won't really be profits if we have true inflation, because everything will just be more expensive... Like "profits" people are making on Gold right now...) Who knows, maybe the banks won't even allow us to refi by then...

They'll just tighten up the credit even more, and take the houses -- knowing they can sell them at inflated prices.

It's always something.............

Cheers,

- Hakrjak

This is what I'm affraid of - The new rules for Re-Fi may be too stringent!:smx4:

 

[Cat Man Du]

tbsells-


So while we're heading into a cashflow negative time of year for us (typ now through Jan 15), we now have more to show for it than we did in January.

Time will tell if this was the right strategy. I honestly don't know if it was.

Stay tuned.

-Russ H.

Russ, I'm sure that you guys will be fine. If your marriage and sanity survived this re-hab .....it can withstand ANYTHING.

The foot-long sub story can be applied to your situation as well - I can see you ads - FALL SPECIAL - 50% off or pay for 1 and get second day FREE !

 

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[Russ H]

Thanks, Cat Man Du.

Q: Your screen name? Bob Seger fan, or ?

( I grew up in Dee-troit. Seger's band actually played at my high school prom, before they were famous-- 'cause the drummer went to school there)

-Russ H.

 

[Cat Man Du]

Thanks, Cat Man Du.

Q: Your screen name? Bob Seger fan, or ?

( I grew up in Dee-troit. Seger's band actually played at my high school prom, before they were famous-- 'cause the drummer went to school there)

-Russ H.

To use a quote from the past " I know nothing " and will admit to even less ! :smxF:

 

[unicon]

This economy is one for the ages in predicting the future!!!

The facts are that we are in a mass deleveraging which is healthy, however the government is printing and incurring debt at mind boggleing pace offsetting the deleveraging in the private sector.

Interest rates are so low that the dollar is being disrespected and losing value even though the middle class has less dollars. This is painful but the domestic economy has not yet felt the heat from the international economy (China) so the domestic economy is somewhat selfsupporting in this deleveraging. When and if the international economy disconnects with either a new reserve currency, no more lending to the US, buying US assets, or a combination of the above inflation would accelerate.

Even without a disconnect or decoupling the interest on the national debt is so large it is unsustainable at even low rates, therefore inflationary. These dollars are not going into the domestic economy. There is a speed in this accelerating the devaluation and respect for the dollar at the same time soaking dollars out of the domestic economy.

The above is pushing down assets especially without credit. Real Estate is the best indicator here. In the worst case senario it would be best to have assets free and clear and be self sustaining while this is all going on - independance of thought and action.

With the above Production or productive effort is not rewarded because costs are always upside down, so patience is the biggest asset.

To be on the right side of the turnaround or sanity, production will have to lead the way. Specualting on assets, gold, guns, interest rates, inflation, etc. is not an exact science in this enviornment as the opposite of what might happen could happen.

Production and Patience are the only two concepts one can count on without gambling. Holding on to existing income producing assets in a very conserative debt to value ratio can still be expensive as taxes go up in this holding period.

My own portfolio is at approximately 15% debt to value ratio in Real Estate. This debt is fixed and limited to around 700k to take advantage of at least some future inflation however this is woofully underleveraged when inflation hits.

Likewise sitting on too much cash will also be severly harmed by future inflation. So in my mind I am missing out on what could triple my networth overnight if I were to borrow more money to invest in RE taking advantage of this downturn.

So is this bad or good? I have been on the side of patience and have had capital gains in this current year of around $150,000 tax free (from casualty losses) not including operating income. This is because of being prepared for those losses, however any future gains would now be taxable. These are one of the many benefits of real estate combined with businesses losses carryovers. Although I have had a very successful year economically this does not reflect the dangers out there.

My position has been conservative in that I have holding power and if cash plummets in value I can use it to pay off debt to get a guaranteed return. The other side of the coin is that a smart planner does not wish to be illiquid.

If one were to believe assets will go down in value before inflation hits one would be patient. If inflation hits overnight one would kick themselves for not buying all the appreciating assets with maximum leverage they could.

Being a cash flow investor who does not trust the stock market for controlled leveraged returns that can be made in real estate at current timing, the only productive thing I can do now is continue to invest in my existing inventory maximizing dollar value for money and look patiently for each new real estate investment producing cash flow with certainty one can throw in inventory.

Patience and Production are the optimum straight line in this environment.

If one was to speculate one would bet on inflation in the future but must have holding power to realize the gain. However when inflation hits and interest rates go up assets will take another nose dive.

This is very complex with all the ins and outs but the world stands aside for true production which is also the most educational path!!!

 

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[hakrjak]

Being a cash flow investor who does not trust the stock market for controlled leveraged returns that can be made in real estate at current timing, the only productive thing I can do now is continue to invest in my existing inventory maximizing dollar value for money and look patiently for each new real estate investment producing cash flow with certainty one can throw in inventory.

I like this... a return to quality... During the boom years when everybody is making millions on capital gains -- It's impossible to contain your excitement and sit on the sidelines... But if you have a cashflowing portfolio as the foundation for your business -- It will carry you boringly through the exuberant times, and conservatively through the down times....

- Hakrjak

 

[EasyMoney_in_NC]

Considering that most of my "Net Worth" is in Real Estate, and may not even be REAL...

Tough to swallow that everything I've worked to build in the last 10 years may be a mirage.....


Man, if that doesn't sum things up, I don't know what does. My gravy train is over too. Have 2 that I've been sitting on for months and can't (nor want to) give them away. Really worried for the first time in 14 years! GL on your end!

 

[Cat Man Du]

Considering that most of my "Net Worth" is in Real Estate, and may not even be REAL...

Tough to swallow that everything I've worked to build in the last 10 years may be a mirage.....




Man, if that doesn't sum things up, I don't know what does. My gravy train is over too. Have 2 that I've been sitting on for months and can't (nor want to) give them away. Really worried for the first time in 14 years! GL on your end!

It's OK Easy - just fire up the Porsche for a nice drive on the NC twisties!!!

 

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[EasyMoney_in_NC]

Would love to but its on my lift waiting for me to finish replacing its wheel bearings up front. And I've not been motivated to continue my 914 project car so its up in the air next to the 993:bgh:

Need to get out of my funk and get back to focusing on motivating myself to kick A and take names, just been such a struggle lately (during these crazy economic times). Everyone here has made feel better knowing I'm not the only one though.......maybe there's hope yet
I need to come up with my "dollar cheeseburger" idea when it comes to this rental gig. Came up with one in my other business, just never had to put any effort into renting homes........like shooting ducks in a bucket of water. These days I can't hit the side of a barn with a 10' pole!

edit:

well today (4th) I got one of my places rented!!! And found out another was coming vacant Monday ::bgh: but thats okay. The rented one was one of my more expensive ones to carry. The one coming vacant/the cheapest and I get rid of crack heads.
As a tid bit, I'll let everyone know....
I offered the property with 1 free month and free yard maintenance (on Craigslist and on my website and for more than I've ever rented it for!). The free month caught the new tenant's eye and we agree'd to split it over 12 months. So I get more than I used to rent it for and all I have to do is a little yard work (no big deal).
I decided to bump my other property thats been sitting, back up to $100 more than I used to get with the same terms.....hoping to do it again! The little crack house I may just sit on for a while if this next one goes quick. We'll see......

 

[EasyMoney_in_NC]

edit to last nights post above ^^^^^^^^

 

[unicon]

Aside from the straight line approach of Production and Patience as a sure way of growth in this enviornment the key is to avoid and overplay on inflation or a similiar gamble. Getting ahead means we are builders and searchers adding one step in front of the other with what we can control. Control comes before leverage.

The private sector is deleveraging and the public sector is leveraging the entire American economy and even exporting inflation to the rest of the world. Further the government and public sector is not building on anything and is ignorant and has no real control except that of a bully or parasite. The backbone of freedom was built on property ownership and this is the best vehicle to counter this at least domestically. It is the only control one really has in a "Conflict of Interest" enviornment. Real Estate is not only somewhat protected but something you can build on, no matter what size you are.

Slow can be fast and small can be big in putting yourself in a position to take advantage of your next deal - the ultimate Paradigm Shift. This is protecting your freedom.

This clarity of thought can take you to the next step. The weakness in this enviornment is the whole private sector, what you have to realize is that this is pushing property down and we have yet to see and interest rate increase which would flush out more.

Adopt a "Zero Based Spending" approach that opens up a whole new world to those who have never thought of its existence, it is even a more powerful concept in this enviornment of contraction. This means is if you are a builder and a searcher you can start building on a base of Zero. You CAN get a property for nothing or have ZERO spent on its acquisition. You can fix buildings that are assessed at $100,000 in damage for close to zero or factually $10,000 or 10%. Grade yourself on a whole different level. You can cut expenses to zero not just 50% or 90% (you only get a B for that one). Forget what the system tells you, become a numbers guy or gal, talk is cheap- digging out real numbers takes work. You cannot even accomplish anything unless you open up the possibility of its existence. I personnally inject this thought process into everyone who work with me. The foundation of "Zero Based Spending" is that the world steps aside for production.

What do you think the Detroit Silverdome is worth??? The Detroit Lion football team no longer play there because they built a new stadium in 2002 but it cost $55 million to build. This economy can be an asset to you - anyone and I mean anyone in this forum could have bought the Silver Dome which sold a month ago. How close to Zero did it sell for??? Do you think you could get it for nothing down???

Well it sold for some thing like $538,000 that is less that some people's house in this forum. You would not get an "A" for buying this maybe a "B+" because you didnt get it for zero. You would get an A+ if they paid you to take it for $500K!!!

Now that these new possibilities are in you head they are also a REALITY.

I look at every deal and property I want as if they are just holding it for me until I am ready to pick it up, I did not consult the bank, I did not consult the broker, I did not get permission from my mother, I did not consult Obama, this is a constitutional right to own property.

Ideally I want to spend Zero on acquisiton, Zero in taxes, Zero in upkeep, Zero on expenses. Now let me hear from all those about the impossible!!!

Obama and the backwards thinking of overregulating, overcontrolling, and mismanagement of politicians has contributed to a window of property actually approaching Zero at breakneck speed - this is a true opportunity for a fastlane student. You can control one property and make it your baby for almost nothing, cultivate it at the speed you can handle adding to it, beautifying it, creating demand for it, creating income from it, this becomes your backbone and your strength. When you control it know it intimately, that education will give you built-in visibility that you have earned (Production) that will make you do better on the next one. You are moving forward one step in front of the other - Slow becomes Fast - because what you have learned is of substance.

Just looked at 4 houses that are across from a 3 unit I own that I was not even looking for (someone just mentioned a possible deal) these even shocked me as they previously sold for 150k range. The prices were 29k, 51k, 75k, respectively listed properties from foreclosures. Even these as comparables to each other knock down the values even more, this was just yesturday and "I" was shocked as an experienced investor.

Then I went back to basics in my own mind because you ask yourself what is wrong? With the neighborhood? The global economy? Etc. The answer is intrinsically nothing as I have a 3 unit across the street bringing in $2000 per month. Further being a student of ZERO based spending and looking at a house for $29,000 this is getting close to zero and that is the furthest it can drop. Low end property rentals are powerful stuff even before speaking of its altruistic constitutional protection.

Incompetance by those in power is destroying dollar value of everything at break neck speed however property that has mass appeal utilitarian and asthetically wise will always have intrinsic value, that is why it was the center of constitutional freedom granted to its citizens. They will take away your gold before they take your house.

To test the validity of a concept properly always take it to its extreme. In this case you dont have to do much testing because the govt is going to the extreme for you with all its backward thinking.

 

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[randallg99]

now, what to do....

there's enough bitching and moaning and disecting and analyzing everywhere you look in the media, all over the TV, Internet, Newspapers, Zines, etc...

This is the place to discuss action. And when to take it.

at the start of this thread, I really wanted to try to emphasize that there is an opportunity. A very large opportunity. When you look at that chart and view the attachment in the initial post, there's something to be said about the real estate market as a whole. There's action to be taken.

we are in the bottom levels of the real estate market. Are we at the very bottom? or are we at these levels for decades? I don't know, I don't think so, but that part does not matter at this juncture.

Income producing real estate is found in abundance these days. This is what matters. And as long as deflationary pressures continue, these values will be around. But who knows when Fed starts jacking the rates and then these deals start disappearing?

I haven't ventured into any commercial real estate deals yet because I don't see as much distress in that arena as I do in the residential sector.

While I am in no rush to buy up some properties, I am buying 2 of them this month whose values were 140k during peak and are now at 40k. The comps in the area are in mid 80's. Even selling these properties in mid 70s, way under market values, I will net net 20k (after some fix up).

To maximize returns, financing these kinds of properties is out of the question. Lenders are frowning upon "fixer uppers" and they assess higher rates and fees thus impeding good returns.

There are about 30+/- properties in distress in this one concentrated neighborhood where I have several properties already. Keep in mind that this is a lower end neighborhood but a solid working class (it's not gang war, there's no graffiti on walls, etc) so the liklihood of flipping the properties is not as probable as just a couple of years ago.

So, plan B is to hold and rent them out. Double digit cap rates. cash on cash returns that haven't been seen in decades. My cash is limied so I'll only be able to buy a handful of these.

Plan A= buy six and sell to conservatively net 120k
Plan B= buy six and rent, netting conservatively cash flow 30k per year

good luck to all of us.

 

[EasyMoney_in_NC]

I don't think the pain is over in the RE market yet. There is still supposed to be a second wave of mortgages that will reset (ARM's) that will cause the second foreclosure wave and further price reductions. Personally I don't think now is the time to buy, we haven't seen the end. The bottom will be after the fallout of the above.
I think we are seeing the beginnings of a major paradigm shift. This not just a little recessionary blip, this one goes right to the very basics. I believe we are going to be in this funk for 10 years +/-. The question is, now that the rules of lending has changed, have the rules of owning/selling/renting changed?
"Everyone has to live somewhere" used to be my motto to validate what I do. But what if the end is not here and people have to do like they did in the 30's and shack up together since they have low paying/no job?
Its going to be critical in the next year IMO to watch very carefully what happens in the economy and not be to quick to act in haste just because one feels like they "have to" do something. Sometimes the best "something" is nothing at all. Making your money on the "buy" not the sell may get a bit harder to do in the near future.

With vacancy times increasing for me and RE prices dropping, I, who am usually excited about looking at "good deals" am not even bothering to busy myself with thinking about looking. The bottom is not here.....

Just my opinions, GL with your ventures