Archive for the ‘cash flow’ Category

property tax protests in austin tx travis county

August 22, 2011

Every year I protest my property tax valuations and almost every year it is time well spent. It allows me to learn something new about how my property is valued and what other property is valued at surrounding my property and is a general adventure in dealing with people.

So this year I started out with the commercial stuff. I sat down with the same guy that I talked to last year. He remembered that I had my son with me last year but this year I happened to have to go on his birthday so he did not come along (“his loss :)” just kidding son ). I asked for my property to be reduced about 15% from where the county had them appraised at. After showing him my p&l for the year he agreed to get me to a value about 7.5% lower then where the county was at. I decided that it was a good enough return and took his offer and our conversation was almost over. He began to work up the settlement and I began to pick his brain. Well it turns out that the county has produced some very important information which is used to determine property values.

One of those reports is a CAP RATE report for apartment transactions for the prior year. This report contains cap rates for sales that took place for the prior year catorgorized by the age of the complex. It can be used to determine value for your particular property and for those around you. Here is why I was surprised by the report: I was surprised because of how low the cap rates were! Or by how high the values were. For example there was a transaction on a building built in 1973 and it had a 7% cap rate. if you had a 20 unit building that was generating a 100K Net Operating Income you could in theory sell it for a prices of 100K/7%= $1,428,571.


Working backward:
If a unit was renting for about 675 per month with a 5% vacancy and the expenses averaged about 35% of revenue after the vacancy you generate a 100K net operating income.
For those of you who don’t know 7% is LOW. My first student loan interest rate was at 8%. I remember when FHA loans were are 8%. So for an older building to sell at a 7% Capitalization Rate is a really low number and a high value.
Say for example that 7% is a fluke and If you used a 8.5 rate the value would be 1,176,470 ! Which is still out of this world! I did not think that our market was that hot! Boy was I surprised!

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Calpers finally gets it..

January 29, 2011

The wall street journal has an article about CALPERS changing thier real estate strategy.   From real estate private equity to CASHFLOW.

http://online.wsj.com/article/SB10001424052748704013604576104470130722678.html

Do you have some cashflow in your portfolio?   There certainly is a place for some flips, rehabs, etc but cashflow is where you make money long term in real estate.   Do you need to discuss your real estate goals with a professional real estate investor?   Call me…(512) 782-8982 or email me.

7910 Rosenberry for sale $175,000 or trade or something creative!

January 12, 2011

What can a real estate trade look like.    I purposed a trade for a 4-plex on a street where I own several other properties.

The house shown above is for sale or trade.    What is a real estate trade?   Most people can only think in terms of cash from a lender to a seller for real estate transactions but in fact Trading something of value for real estate happens all the time just not as frequent as a cash sale does.   There are lots of things that would stop a trade from happening.   Like realtors who want some cash and can only think of one way to get it.   From the seller’s proceeds!     Most banks want to turn over there money and write new mortgages so they like to get paid off when sellers sale property especially if thrcan loan that money out at higher rages of interest.   Most sellers like to get loans out of thier names when they sell a property and dont want the hassel of keeping up with a property or potentially taking it back from a buyers who did not pay the mortgage or having to catch up on the mortgage when a seller fell behind.    These are just a few of the things that need to be addressed when you trade a property but nevertheless trades still happen.   Why?

Sometimes there are things more important then cash!   Like what you say?   Getting out of ownership of a property.   Out of ownership of a property is just that no longer wanting to own a property.   There are not property problems just ownership problems.   There are times when not owning a property is better then owning it.   Divorse, death, cash short falls, balloon payments comming due, increases in interest rates and payments, etc etc etc.

A trade is not for everyone there are some people with no equity who need to just get a cash sell and be done.   And there is always a cash price that every property will sell for.   The sellers may not always like that cash price but there is a price nevertheless.   When I first purposed my trade the sellers did not like the idea!    In fact they rejected the ideal all together.   However after they took time to analyze the market and the property in particular they realized that maybe just maybe a trade may be in thier best interest in the long run today.   

If the mortgage market continues to deny access to real estate investors with more than 10 properties then there will always be a market for trades.   If we see a double dip in property prices and another increase in the supply of available properties there will be a market for trading properties.  

Does a trade require an appraisal?  NO, only two people need to agree on the properties value; the seller and the buyer.   Does the property need to have outside consultants evaluate or approve of the condition, marketability, or use of the property.  NO only the seller and the buyer.   In some ways trading a property can be easier than a cash sell and faster.   

Lastly, lots of people are familiar with the 1031 exchange rules.   A trade is an exchange and may qualify for a 1031 exchange depending upon the particulars of the trade.   the 1031 exchange rules are modeled off of concept of the trade.

The 4-plex shown above is similar to one that I would like to trade the house for.

Offer on a foreclosure in Austin

January 9, 2011

This week I made an offer on a foreclosed property this week.  It was listed for 69K but I only wanted to offer 45 to 50K.  Why such a low offer on an already reduced priced house?    The house originally had a loan on it for over 133K and I only wanted to offer 45 to 50K b/c of the foundation issues that will require a foundation repair and will forever impair the salability of the house.   In addition the plumbing will most likely require some repair if not today sometime in the near future b/c of the foundation work that is needed.    Can this house be financed today?    AS is?   NO WAY that is why it is not work the 69K that the bank is asking.   This house will require cash and cash always requires a discount to the list price or asking price or the true value of the house.   AS they say CASH is KING! or as I like to say Ron’s rule # 3458921 to making your self a better real estate investor:   ”

“Remember the golden rule:  HE who has the GOLD (in this case CASH) makes the rules.”

Here is a like to some info on the house from my website and the MLS:   Customer Full – Residential

There were a few other offers on the house so we will see what happens with this offer.

If you would like to know more about how, why, when, where, and how to make great real estate investmtents please email me and lets discuss your overall plan and how real estate fits into it and what types of things would work best for your investment style. 512-782-8982 in my office number.

Austins Affordable Housing needs

November 30, 2010

I recently read an interesting article in Realty Line Newspaper (www.realtylineonline.com)   The article was analyzing austins affordable housing needs.   It was written by David Tandy of Gracy Title.   The article was highlights one of Austins Austins affordable housing not-for-profit organizations “Foundation Communities (http://www.foundcom.org/)” and their efforts to assist those who need affordable housing.   

Please check out the article attached to this post as a pdf and go to foundations communities website and support a not-forprofit organizaiton by giving back to those less fortunate this christmas season!   Follow the link: austin affordable housing

Owner Financing in Texas

July 5, 2010

From the Texas Association of Realtors:

“Many of us have been very concerned about the implementation of federal legislation known as the SAFE Act that would severely limit an individual’s ability to seller finance their property in Texas.

We are working on numerous regulatory and legislative solutions to this affront to private-property owners, and have some good news to report. At our urging, the chief regulator over the SAFE Act in Texas, the commissioner of the Texas Department of Savings and Mortgage Lending, has taken significant steps to allow Texas property owners to continue to seller finance up to five transactions in a 12-month period.

More specifically, the commissioner has delayed the implementation of the SAFE Act requirement for licensure in seller-financed transactions in Texas until August 31. This will give us time to implement regulatory and legislative changes during the coming months. For now it is important for you to know that the long-standing law of allowing a Texas seller to finance up to five transactions in a consecutive 12-month period is still in effect and the Texas Association of REALTORS® will continue to work at the federal and state level to see that this is a permanent solution.

Finally, this action would not have happened if not for the thousands of Texas REALTORS® who participated in our grassroots efforts to correct this abuse to private-property owners in Texas.”

 

Thank God in Texas we are still free to sell our homes anyway we choose ((at least 5 per year))

How Does If Feel To Fill Up An Apartment Complex In 45 Days

May 10, 2010

How Does If Feel To Fill Up An Apartment Complex In 45 Days
Exhausting! Exhilarating all at the same time

In the last 45days or so we have rented 27 apartments evicted 2 people and re-rented their units bought. 6+8 refrigerators and need to buy more, 13 stoves and microwaves fixed countless plumbing leaks, fired 1 employee and hired 4 more, cut so much brush the city is looking at the property and wondering when will he stop. We have aggravated a neighbor and pleased them in the same day. One neighbor is so pleased with the work going on a the property that he said we could cut some brush on the property line and he would pay to have it hauled off! We have also Disposed of 2 dead cats, Gotten 1 bad check, and Taken 100’s of calls. I am tired! I am excited at the same time.

property tax values decreasing in Austin?

April 19, 2010

Can it be true? Will we see a drop in what property owners owe the Tax man in Austin TX? According to the Austin American Statesman we should see a 5.3% drop in tax values in our lovely city. What does that mean to revenues for the City, County and School districts? Big trouble! Thats what!
http://www.statesman.com/business/travis-property-values-face-first-drop-since-2003-545370.html is the link to the full story in the paper. We will have to wait and see what this does to the tax rate and how that will effect the interested parties and their perspective budgets!

The End of a good thing

January 12, 2010

Today an investment fund that I manage is scheduled to recieve the last payment on an owner financed house that was sold a couple of years ago.    The deal was a good short term deal and it paid for the most part like clockwork!   I hate to see it go, but alas the end is the end or so it seems.

The house was an older manufactured home that was purchased for $7,000 and was sold  for $15,000 with a 9.24% interest rate.   The return on investment is what will be missed the most.   A whopping 43% per year!!   That is 43% with no leverage (debt to make payments on).   If only we could create a hundred of these!   Whoa!   Just imagine the return that can be generated by doing volume  in these types of investments.     Ok now I know you are saying yea yea yea but that does not exist!   Have you ever seen a Manufactured Home community (MHC) with 75 to 200 spaces?   With a MHC you could reasonable do the kind of volume that will allow you to retire very quickly!!!   With just a meager return on the land involved in the MHC you  get an opportunity to earn 40%+ annual returns on the homes that will occupy those lots.   Do you know what the downside is?   If not call me at 512-689-6742 and I will share it with you.

Are you thinking long term about appreciation?

January 9, 2010

check out the blog post by the bawldguy!   http://www.bawldguy.com/how-to-quadruple-your-money-with-no-appreciation/

He is laying out the conservative analysis of a 5 year, no appreciation, property performance.   In other words what would our situation look like if you bought a property that did not appreciate but all the returns you received were modest (small) cashflow and debt reduction.   He then stretched it out a little further and discussed what your situation would look like if you paid off this property in a short 16 years.   Go take a read of his analysis it is good.   Call me at 512-689-6742 if you want to discuss how to make this situation your worse case scenario in a real estate  investment.


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