Ganja & Whooze:

The trick is to find a popular resort in an area with lower real estate values. For example, I was looking at a rental condo at the Westin Innisbrook Resort in Tarpon Springs, FL. Wonderful facilities, great golf, great restaurants, golf managed by Troon Golf, etc. They had some management problems in the last few years but seem to be straigtening them out. Last time I checked, you could get a studio condo for less than $50K and (assuming you would not carry a mortgage) would actually have a modest return based on rental income history.

When buying a vacation investment property associated with a resort/ski area/etc., keep your expectations real. My prime motivation for doing this is not making money, but rather offsetting costs that I normally would be spending with my family on vacations. For some people, the opportunity cost of tying up those funds with one location may be less desireable than a timeshare at a variety of properties. It's definitely a case-by-case basis.

Daniel2218

I think the only problem with rental
idea to me is: I can not find a property
that can generate positive income in
two years.

CACHE these properties ARE ALL OVER THE PLACE. If yo dont see them in your neighborhood, expand your horizons.....

I live in the SF Bay Area, one of the HARDEST places to get cashflow due to the exorbitant home prices...but just 100-200 miles away, in the Central Valley, are hundreds upon thousands of properties which can generate positive cash flow...

Dont keep your mind closed to focusing on just one area

One thing I don't see anyone mentioning here is closing costs. Besides having to have enough spare cash for the down payment & cosmetic improvements to make your potential rental property marketable you may end up shelling out quite a chunk in closing costs per property.

You can possibly avoid that by scouting for assumable properties. When I was stationed at Ft Polk (Louisiana) I got to know the owners of a large apartment complex that also managed a condo community & every time they caught a hint that one of the condo owners wanted to sell I was able to contact that owner & acquire the condo by assuming the current mortgage & paying a nominal $150 closing fee to a local attorney.

While I didn't find that owning rental properties actually turned a profit themselves they did allow us to save thousands every year on taxes and to charge off a LOT of things that actually went into our primary residence to the rentals.

When my husband's construction company started making in excess of a million dollars per year the only way to keep most of our net was to keep expanding our rental property ownership. Having been there & done that I would advise that being landlords is NOT the way to bring in wealth but it's the best way to preserve your wealth as your income grows.

And there are a thousand ways to make sure that each unit "needs" some maintenance every year. Just be sure to keep track by receipts of which unit supposedly got a "new" stove, carpet, or fridge etc.. and how often.

If you own the property long term though you will need to sell it at a break even or else take a blood bath on capital gains if you sell it for anything above it's residual value. The government allows depreciation but recoups it via capital gains at the end in other words unless you're careful.

I am thinking about the "foreclosure" property. It will
take some time and effort to go through the bidding in
the court, but I think it may be worth.

Has anyone tried it? Which is easier, A or B?
A: going through one foreclosure property
B: going through thirty regular property

Great post, MaxMojo. I would welcome any book references or other links you have on this...you just laid out more than I knew on the subject.

Great forum, people. I live in the Washington DC area and know that a lot of luxury condominiums are being built in certain sections of town that are undergoing economic revitalization.

I know there are unbuilt condos for sale right now, and all you need to do is put down a small deposit and close on the condos next year. Do any of you know of people that put deposits down and flip the condo/home a year later after closing? What is this tactic known as (besides "flipping" and what resources are there to investigate the pros/cons (books, websites, etc.)? Please comment and thanks.

Another excellent post, thanks MaxMojo. I'll look up those books.

Would be interested to hear your experiences/comments on how you financing your real estate deals.

I mentioned that I’m getting into creative real estae pretty much full time, and I thought I’d post a progress report every now and then, if the rest of you don’t mind some long rants.

As a bit of background info, my wife & I have bought, and still own, some income property. We bought most at pretty close to retail, but the Real Estate gods took pity on our ignorance and innocence and have blessed us with appreciation and strong rents. This has enabled me to take time off from my former life long career and focus on CRE for a while. I was pretty much burned out on the gig and a break looks good to me.

Well today my partner & I went out to the middle of nowhere and checked out the 300k property I mentioned in an earlier post. While we were driving in circles looking for the place, out in the middle of nowhere, we see two other cars, also lost. We talk to them and it’s the agent that I lined up and his client, who is looking for a large secluded place for her drug rehab house.

Eventually we find the property, and I get out and ask the agent to wait a few minutes while we go inside, I did this so we could talk to the person who has the contract and her agent, who were already at the place waiting for us.

I say hello and quickly asked the agent, a young guy, what he thought the place would fetch, with a quick, quick sale. He said 500k if we could wait to sell right, and 475k with a quick sale. We then hustle him out and tell him we’ll call him later.

We had figured out earlier that the place would cost around 380k fixed up and carried for 4 months, so the numbers looked good. We then approached the contract holder and told her that we were bringing in a potential buyer, and if that person ended up buying the place we would probably pay a $25k finders fee, that sounded fine to her. We then called down and had the agent and buyer look through the place.

They came up and spent a good 30 minutes looking around. During that time we also check out the place. It was an incredibly poorly built place. Actually it was framed well, but the finish was unbelievably bad. It looks like they built out the walls and then ran out of money and let their 5 year old kid finish all the trim work, doors, floor covering, and plumbing with whatever scrap materials they could find in the local dump.

We were working with a 52k fix-it estimate, and that’s probably what it would cost. With that you would get a nice property with killer views, but it would still have a few rough edges.

The broker and his client left without any indication of what they were thinking.

Just then a husband & wife Realtor team that I had contacted earlier showed up. They looked around and said that even fixed up the place might not fetch $400k. They pointed out some negatives (like the badly rutted, steep, dirt access road) and then showed us sales sheets on some recent comps. All three of them were cherry mini-mansions and went for mid-400’s to mid-600’s.

In the end we felt that the $400k estimate was probably closer to the mark. We then told the contract holder that we were going to pass on the deal. She half-seriously offered us $4k just to call the various parties to try and kill the deal.

It turns out they only have $1000 at risk, a good sum to them, but losing it shouldn’t inflict a fatal financial wound.

It’s possible that the kid is correct and we walked away from 70K+ in net profit, but it just isn’t worth my time, energy, and financial risk to find out.

What lessons did I learn? Identify a market and learn it cold, stay close to home, and don’t order the garlic chicken at The Golden Wok restaurant.

But seriously it was good to get out in the world and talk deals. My partner & I were going over the possible angles on our drive, the very, very, long drive, and it’s good to stretch the brain and have the deal details, jargon, formulas, and concepts become second nature. Also talking to the agents as a real estate investor and potential seller, as opposed to just a buyer, was interesting. We pretended like we knew what we were doing, and they treated us like adults.

It all adds to our body of knowledge, and that’s a good thing.

Tomorrow we’re going to a few scheduled auctions; we’re not going with cash, just window-shopping. Then it’s a few weeks off as we attend to family festivities. Well actually I’m going to Buffalo, so how festive can that be? Actually my in-laws have an internet connection so I’ll be able to spend time here at FW! I’m also brining a copy of MS Access and I’ll spend hours trying to figure out how it works so we can use it with the foreclosure data we’ve subscribed to. The service comes with a proprietary database reader, but it’s very buggy and doesn’t work with our printer. Gee, spending my holiday in Buffalo pretending like I know squat about database stuff, Feliz Navidad!

<< 1. Does it work well to have partner? >>

Currently my “partner” & I are sharing some marketing expenses and providing support for each other. When a deal comes along we’ll decide how to partner at that time depending on the deal details. For instance we probably will not partner on any long term holding properties, but may combine funds in order to purchase at a foreclosure sale.

I should note that partnerships are a very dangerous condition legally and liability-wise. Furthermore you and another can legally become a partnership without that being your intent.

We will probably structure any future partner deals as a joint venture between our separate corporations.

<< 2. Were you buyer's agent or seller's agent? >>

I am not a licensed real estate agent or broker, so I was acting as neither. I would have characterized my participation as being an “investment consultant.” In hindsight what we did was very foolish, it was a situation where had any kind of deal been established, any injured party could have claimed that what we had was a “partnership”. And as previously mentioned that is a very risky business entity. Arguably the most dangerous entity, short of a criminal conspiracy.

Of course here it would be wise to note that I am not an attorney either.