Why buying a property with 15% Equity Sucks!

So I'm listening to a Webinar today at work and had to share this with you guys. Basically, Real Estate Investment Companies are wholesaling properties (selling you their contracts for a fee), hoping to get investors, such as yourselves, jumping at their properties that typically have only 15% Equity. The crazy part is they believe this is a successful strategy.

Now this may be a good thing for some, and the strategy may be paying off for these guys. Personally I find this hard to believe. The market is rough right now and smart investors know this is a buyer's market. In order to satiate their craving for cheap deals, you have to buy right in order to sell competitively. This sounds cliche' but I'll give you an example that is almost a staple in our company for how we do business:

-We typically will not wholesale any property that, with acquisition & rehab costs combined, won't leave the investor with at least 30% under market value.

Now that's a win-win strategy. Investors continue to buy from us religiously, and we don't get stuck holding onto properties for too long. I almost get the sense that were we to target properties that would end up yielding the investor (our client) only 15% equity, we would not be doing too well.

Think about this next time your about to purchase an investment property. Are you really getting a good the best deal?

--Keep your eyes out for an upcoming post on why buying at Sherrif's Sale could be the biggest mistake of your investing career.

What in the world is Section 8? And how can you use it to your advantage?

So I had interesting conversation with a potential client today and it went something like this:

Client: Tom, could you send me some more info on the property I saw on craigslist.org?

Tom: Sure, no problem? Are you investing by yourself or with partners?

Client: No, it's just me and my wife. I have the cash, good credit, but not really interested in taking any mortgages.

Tom: Have you signed up to be a Section 8 approved landlord? Just wondering.

Client: No, I've heard of that though. But how do you do it?

I cannot begin to explain how many times a day I hear this from investors. To be fair, some of the more savvy ones have heard of this and are using it effectively to generate positive cash flow, with the majority of the rent coming in every month guaranteed from the government. Still, there remains too many would-be savvy real-estate investors who are missing out on a potentially useful asset in their portfolio.

[Note: Section 8 Housing in not meant for everyone, and this is definitely not to say that it is always best to use]

Section 8 Housing Choice Voucher program is a government run program that allows low-income residents to find affordable housing while also helping out the private sector, i.e. you! The tenant is required to pay a small portion of their income to the rent and the rest is covered by Uncle Sam. It offers guaranteed income to landlords without the hassle of chasing after tenants for each month's rent.

So anyways here is the link I would recommend checking out to get a lot of information on what is now knows as the Housing Choice Voucher program, formerly knows as Section 8

It looks like you need to attend a landlord briefing first, and from there you register for the Institute of Real Estate Management course, which is on a Saturday ($200 approx.) before you can register as an HCV-Landlord affiliate and begin renting to Section 8 tenants

Regardless of whether you end up actually renting to any Section 8 tenants, going to this briefing (and possibly even the course) could help you in networking with other investors, and just learning more about programs that exist.

LaSalle University area Stone Twin

***SOLD - Sharon Hill Investment Property

Great investment property in the Sharon Hill, PA area, near the airport.

Shell Property - North Philadelphia

This one definitely needs work, as you can see. However, if you have experience with this level of work and understand the Temple University area and how it is expanding, you will see the value in this property.