patrick.net

E-man says

My partner and I just got approved on a short sale today for a small 4/2 SFH in El Sobrante for $220k. With 25% down, PITI is less than $1,200/month. We think it can be rented out for $2k/month. Nice area with predominantly Caucasian neighbors. We bought it because this deal just fell on our lap, and the numbers work. If things don't work out, we'll resell it for a profit. Eh...

That's great, congrats to you and PK.

Yes, 4/2 in that area goes for anywhere from 1,800-2,500. Your competition will be the newer homes in Hercules and country club on the bay side of the freeway. Most of those are built between 2001-2010 whereas yours are probably a little older and established.

2K area is the sweetspot for the demographic (middle class hispanic, caucasions, and southeast asians) (The established areas are most likely Causasians who have been there since the 70's) most will likely work in Oakland or even in the city. While 2,000 is the sweetspot, no one will pay more than 2,800 for rent no matter how big or grand the homes is. At that point, location matters. That demographic prefer Berkeley Hills, Walnut Creek, Lafayette.

80W approach is one of the worst commute in the country but most will exit @ EL Cerrito and park their cars to take BART to Oakland/San Francisco. There's also buses (air conditioned WI-FI buses thar runs every 20mins) that goes from Parking station to downtown directly. These buses use the carpool lane and much faster than driving. There's also casual carpool where you can randomly pick up people (or be picked up) and drop them off downtown. It's a crazy system but works and very popular in this area.

I generally prefer Hercules/El Sobrante over Concord for one simple reason. It is San Pablo Bay, 1 miles of homes and then the steep Hills. The building is pretty much done prospectivly based on natural limits.

E-man says

Con whom again?

C'mon E-man. Naive doesn't suit you.

I like E-man the guy "who just wants to see the world burn".

Case in point:
E-man says

That's all there is about RE. Leverage other people's money, leverage other people's knowledge, leverage other people's time, and leverage other people's credit. It's that simple.

If shit hit the fan, we walk away. Yes, we ruin our credit. We lose other people's money (the lenders), but we still have our cash and our knowledge. The beauty when shit hit the fan is that "cash is king." Then we take the cash and go for the next round. That's my investment model. :)

Goran_K says

E-man says

Con whom again?

C'mon E-man. Naive doesn't suit you.

I like E-man the guy "who just wants to see the world burn".

Case in point:

E-man says

That's all there is about RE. Leverage other people's money, leverage other people's knowledge, leverage other people's time, and leverage other people's credit. It's that simple.

If shit hit the fan, we walk away. Yes, we ruin our credit. We lose other people's money (the lenders), but we still have our cash and our knowledge. The beauty when shit hit the fan is that "cash is king." Then we take the cash and go for the next round. That's my investment model. :)

What's illegal about what I'm doing? Con man do illegal stuff. I don't. Big difference.

I think you misunderstand the term "con".

A con is simply an abuse of an entities "confidence", hence the the term "con man", a man who engages in cons. It's a misnomer to include "legality" as part of the definition of the word. Many "cons" are perfectly legal, though sometimes they become such a nuisance that laws are eventually put into place to prevent them.

Investors allocate capital with the expectation of a return, but also with the expectation and risk of potential loss. That's the most difficult aspect of being an investor, weighing potentials gains versus potential losses.

You have offloaded that risk by "conning" lending institutions into believing that you are a credit worthy individual who will pay them back. Had they known fully well that you wouldn't pay them back if your bets should go south, they would never have given you the money in the first place. But they did, and your lack of risk is based on the fact that you are more akin to a con man, not an investor. Because you have eliminated your risk by successfully conning the lending institution. There is no such thing as an investor who has no risk, hence, you are more closely related to a con man.

I hope that explanation clears things up.

Goran_K says

You have offloaded that risk by "conning" lending institutions into believing that you are a credit worthy individual who will pay them back. Had they known fully well that you wouldn't pay them back if your bets should go south, they would never have given you the money in the first place. But they did, and your lack of risk is based on the fact that you are more akin to a con man, not an investor. Because you have eliminated your risk by successfully conning the lending institution. There is no such thing as an investor who has no risk, hence, you are more closely related to a con man.

There's two sides to every transactions. A deal only happens if both sides are happy/agreeable with the terms.

It just happens the bank is willing to lend @75% loan to value ratio at a higher interest rate. The combination of the downpayment, interest rate, credit risk and banks lost opportunity plays a role in this. Unless there is fraud being involed, I'm sure the bank knows exactly the expected return from the transaction.

As a lender, the goal is to generate as much gross margin possible for as little risk possible thus net to an asset. Obviosuly, banks compete with other banks so they have to be in-line with others. As a lendee, the objective is the same, take the least risk possible at the lowest cost possible. The pount is, deals happen becasue it is a win-win not win-loss.

You can think like a Kindergardener and just say, cash or FU and live in secluded island doing evertthing yourself or you can treat yourself like a business and learn the nuance of finance and professional relationships. Different strokes for different folks.

My mom was the same way, cash or FU. Then she started seeing me and all my brothers going to Hawaii annually for free (free tickets and hotels at least) and now she is credit card or FU as well.

Half the people on this board think if you 'make money its wrong and you are a crook'.

I would say to these people: consider adopting capitalism.

These guys flipping houses are not crooks but actual job creators. carpet installers, painters, tile guys, ecrow people, termite inspectors, realtors, bank employees, federal employees at FHA,Fannie,Freddie - they all need a robust healthy market with high transaction volume or they dont get paid.

The governement is BEGGING PEOPLE to buy/rent/flip - that why rates are 3% on mortgages.

The fact tha eman has a 'credit partner' just means he is a deal finder and either takes a flat fee for a deal or he invests a bit of his cash or some other other equity sharing deal.

Its open to anyone. We can all hunt for deals every day if we want to. E-man should be applauded. I might partner with him if he were in los angeles. (1% CD rates is killing me!)

For El Sobrante, Pinole, or Hercules, the BART system doesn't really work out because there are generally NO PARKING SPACES left by the time we get there. El Cerrito has the safest BART station, but you have to walk 15 to 20 minutes after finding a parking spot in a zone without restricted parking. So most of us undoubtedly drive to the city and put up with 1.5 hours driving a 30-mile (for me) commute.

This area, with all its hills and views, is astonishingly beautiful. The hills of Hercules and Pinole seem to be a well-kept secret. The houses and lots are huge compared to El Cerrito and Albany, there are beautiful parks, people keep up their properties better than other East Bay towns, and the neighborhoods are quiet. El Sobrante seems a bit drab in comparison and has funky neighborhoods, stores, and people.

By the way, I don't think people would pay more than $2000 rent when mortgages are so much cheaper. I'm paying $1600 for a 4-bedroom house but got a good deal as a single female writer who does all the maintenance and minor fixes. The renters next door have paid $1800 for years, and I see homes advertised for $1700 to $2200.

PockyClipsNow says

Half the people on this board think if you 'make money its wrong and you are a crook'.

I would say to these people: consider adopting capitalism.

These guys flipping houses are not crooks but actual job creators. carpet installers, painters, tile guys, ecrow people, termite inspectors, realtors, bank employees, federal employees at FHA,Fannie,Freddie - they all need a robust healthy market with high transaction volume or they dont get paid.

The governement is BEGGING PEOPLE to buy/rent/flip - that why rates are 3% on mortgages.

The fact tha eman has a 'credit partner' just means he is a deal finder and either takes a flat fee for a deal or he invests a bit of his cash or some other other equity sharing deal.

Its open to anyone. We can all hunt for deals every day if we want to. E-man should be applauded. I might partner with him if he were in los angeles. (1% CD rates is killing me!)

E-Man is openly professing that he's Ok from walking away from his financial obligations and stiffing his creditors and you're making it sound like it's the second coming of Adam Smith?

Well, dipshit, I've got some news for you.

Just who the fuck do you think ends up paying the tab for all those writedowns?

This is the same crap that got us into this situation in the first place and all it's gonna cause is more misery and financial ruin.

AF and I are gonna have our sights on you when Cannibal Anarchy comes.

FBsux says: E-Man is openly professing that he's Ok from walking away from his financial obligations and stiffing his creditors and you're making it sound like it's the second coming of Adam Smith?

If E-man walks immediately after closing (or anytime before refinancing) he loses his $55k downpayment. If he walks after refinancing (takes all the cash out but maintains 75% LTV if the house appraises at $300k) that is the banks fault for not appropriately valuing the property (and as a rental, the income stream). No one has been conned. Everyone needs to calm down.

Helloeeze says

If you take that same 50K in put it in a low cost, diversified fund, like, say Wellesley Income Fund, you will make about the same (or more) over a ten-year period by just sitting on your bum and doing nothing.

I couldn't agree more. I think from that standpoint of risk/reward/effort, investing in a broad market bond fund or high yield bond fund is much better proposition than rental real estate. Heck, even REIT fund is better.

kpinna says

By the way, I don't think people would pay more than $2000 rent when mortgages are so much cheaper. I'm paying $1600 for a 4-bedroom house but got a good deal as a single female writer who does all the maintenance and minor fixes. The renters next door have paid $1800 for years, and I see homes advertised for $1700 to $2200.

kpinna,

Thanks for the heads up. Like I said, we don't know much about the area. I guess we'll find out the hard way. :)

Helloeeze says

If you take that same 50K in put it in a low cost, diversified fund, like, say Wellesley Income Fund, you will make about the same (or more) over a ten-year period by just sitting on your bum and doing nothing.

Helloeeze,

Thanks for engaging in a civil debate rather than speaking with emotion like some others. Our intention is to pull out all or most of our money after 1 year. By then, we're no longer having any investment in that house. The PITI will be less than $1,500/month, and the tenant is paying down the mortgage over $300/month.

With the net positive cashflow, we intend to buy mREITs, which are paying 12% to 15% dividend annually. That's what we have in mind at the moment, but things might change. How do you think that stacks up against your mutual fund investment?

Also, 4.125% to 4.25% no points no costs on the loan. Home is in move-in condition, but we will likely put some lipstick on that pig.

I was taught that there is no right way; there is no wrong way; there is always a better way to invest or do things. I'm still trying to figure out the "better" way to put food on the table for my family. It hasn't been easy, but I'm trying my best. I don't know what I don't know wouldn't you agree?

Cheers.

Darrell In Phoenix says

E-man says

We pick up a property for $220k. It's worth $300k.

No. It's worth $220k. Exactly what you paid for it.

You're absolutely correct. I can't argue with you there.

Facebooksux says

E-Man is openly professing that he's Ok from walking away from his financial obligations and stiffing his creditors and you're making it sound like it's the second coming of Adam Smith?

Well, dipshit, I've got some news for you.

Just who the fuck do you think ends up paying the tab for all those writedowns?

This is the same crap that got us into this situation in the first place and all it's gonna cause is more misery and financial ruin.

AF and I are gonna have our sights on you when Cannibal Anarchy comes.

I have to look out for the best interest of my family. If SHTF like some of you is envisioning, I have more things to worry about than keeping those depreciating assets. I pay taxes too so I guess I'm screwing myself over too. I guess it's not worth discussing with you if you don't understand how risk and reward work.

Bay Area,

If you're interested on how to seek out these deals, shoot me an email and I will share with you my approach.

PockyClipsNow says

Half the people on this board think if you 'make money its wrong and you are a crook'.

This reminds me of what Mitt Romney said yesterday and I'm paraphrasing here. People are apologizing for their success rather than celebrate it. I guess the guy has been attacked by the media for his success so it's time to strike back. ;o)

Squatting in East CoCo says

Lots of houses for sale in El Sobrante.

Squatting,

I just went on Redfin, and there are 14 SFHs that are active on the market. Like I said above, I don't know anything about the area. My partner and I can get slaughter on this deal, but we have a back up plan going in. So fingers crossed.

E-man says

This reminds me of what Mitt Romney said yesterday and I'm paraphrasing here. People are apologizing for their success rather than celebrate it. I guess the guy has been attacked by the media for his success so it's time to strike back. ;o)

Learn from your victory. Prosper from your failure.

Speaking of Romney, I was watching Eastwood's speech and I could relate. Everyone's got an invisible rabbit friend. Frank and Harvey are common names for invisible rabbits but Eastwood's got one named Obama. I once got a perfect score on my math test with the help of my invisible rabbit friend. Everyone knows that one thing rabbits really like to do is to multiply. That and sit invisibly in chairs and telling people to go F themselves. Now back to our regular scheduled programming...

E-Man,

I think you are doing great investing in real estate now. Aren't we all try to beat the system and want to become financial independent?

I would love to learn from you. I'm currently looking properties in Las Vegas. If possible, can we discuss further via email?

Thanks.

Finally a very simple question I can answer, Richmond will offer the greatest monetary reward over time.

To enjoy life now and advance your spiritual wealth, Southern Marin, Berkeley, and the Marina, San Mateo for some.

I know this place is a bit well, no other way to say it, loopy and wacked out at times I presume it is the nature of the beast. However, I must say I have a real serious problem with this title "Where would you invest in Northern California today with the highest return?" or these greedy fucking phrases like "money reward."

In my opinion it is precisely THAT bullshite mentality (which I trans. as: make that buck find that hidden buck in that property and milk it,) that I feel got the country and real estate in the fucking economic mess it is in right now.

Wow. Richmond California. Why not throw West Oakland in the mix too?

Ah yes, Richmond Real Estate. Part of my portfolio. Or at least, the part of Richmond that belongs to CVX. It's a nice position with a positive cash flow (15% federal rate at least for time being) , steady increase in valuation keeping ahead of inflation. No tenants to depend on. Legal liability buffered by the overall massive size of the corporate parent. Hyper liquidity, sub-leasable, and yes, for folks like eman, leverage-able. Wash rules are fairly liberal, providing opportunity for tax-managing some loss positions.

But its kind of humility to be a small fish in a big pond of a billion or so shares. If I were a coveting kind of person, well maybe something like shares is too intangible for my personal values. And then I don't have the opportunity to attach "Lord" (as in LandLord) to my identity.

Several possible future outcomes could make Richmond the highest return.
1) Gentrification - Old mellow hippies move in
2) Legalizing Marijuana - reduces violent crime
3) Chevron plant modification, or closure - creates jobs or makes a great new park
4) Ufo disclosure - Quick commute to future StarFleet headquarters

Darrell In Phoenix says

E-man says

We pick up a property for $220k. It's worth $300k.

No. It's worth $220k. Exactly what you paid for it.

This thread is another example of the lunacy. Untill people realise a house is not an investment or a money making machine the shite will never end.

B.A.C.A.H. says

Ah yes, Richmond Real Estate. Part of my portfolio. Or at least, the part of Richmond that belongs to CVX. It's a nice position with a positive cash flow (15% federal rate at least for time being) , steady increase in valuation keeping ahead of inflation. No tenants to depend on. Legal liability buffered by the overall massive size of the corporate parent. Hyper liquidity, sub-leasable, and yes, for folks like eman, leverage-able. Wash rules are fairly liberal, providing opportunity for tax-managing some loss positions.

But its kind of humility to be a small fish in a big pond of a billion or so shares. If I were a coveting kind of person, well maybe something like shares is too intangible for my personal values. And then I don't have the opportunity to attach "Lord" (as in LandLord) to my identity.

CRINGE I hate to inform you the language of your post is so robotic, so fucking corporate it just makes me want to BARF.

Facebooksux says

Well, dipshit, I've got some news for you.

Just who the fuck do you think ends up paying the tab for all those writedowns?

This is the same crap that got us into this situation in the first place and all it's gonna cause is more misery and financial ruin.

They will learn the hard way. It all comes back ten fold.

PockyClipsNow says

Half the people on this board think if you 'make money its wrong and you are a crook'.

I would say to these people: consider adopting capitalism.

No what half the people are against here is not making money they are against making money by hook "or by CROOK" as in causing society economic harm by making money anyway shape or form. Making money takes two routes. The routes being criticised here are those doing "whatever it takes and screwing whomever" just to make a BUCK ...that is both unethical and wrong. As when someone takes out major debt they cannot afford just to fuel their "I am rich" fantasies, when they know they cannot pay it off if their gamble hits the fan, and without responsibility or ethics knows damn well they plan to walk on that debt if all goes bust. I as a tax payer am paying for their shite.

So as regards your half-arse statement of
"Half the people on this board think if you 'make money its wrong and you are a crook'. I would say to these people: consider adopting capitalism."

I would say you are full of shite (ban me Patrick for insults I don't give a fuck because half of these people turn my stomach.)