Menu
Cart 0

John T. Reed’s news blog

What it really takes to make a profit in real estate rehab

Posted by John T. Reed on

Let’s say you want to buy a duplex and make a $20K profit on rehab. What does that mean you have to do? You have to pay transaction costs when you buy. Valuepeguin-com says 3% to 5%. Call it 4%. You also have to pay the rehab costs. You also have to pay the selling transaction costs. Zillow says 8% to 10%. Call it 9%. If the property is vacant while you are doing the rehab, you also must pay the carrying costs—mortgage payments and operating expenses like taxes, insurance, etc. Finally, there is your profit which we already said...

Read more →

The main profit in real estate may be the transaction costs. Avoid them.

Posted by John T. Reed on

WSJ article yesterday about tech companies buying home and flipping them. . They call these companies IBuyers. They include Zillow Group. Opendoor Technologies, and Offerpad. . I generally did not understand the article. But I only have 52 years in the business and have only written 21 books on real estate investment and thousands of articles about it. . One part I DID understand: “IBuyers have been clear that their businesses are built mostly to make money off ancillary services such as mortgage, title insurance, and escrow, rather than on home transactions themselves.” . When I recently wrote my principal...

Read more →

Tenants make it harder for you to get rich

Posted by John T. Reed on

The dominant way of thinking about real estate investing on the Reddit real estate investing subgroup is collecting duplexes and triplexes. The purpose is increasing your net worth. Some want to live solely off property cash flow, but that takes millions of equity, so it’s really just another way to say you are trying to increase your net worth. I used to think that. I was wrong. The correct way to achieve that goal is to buy your principal residence that you occupy as your home. When you can afford to buy a 20% or more valuable home, sell the first one and buy the...

Read more →

Home versus rental property expenses

Posted by John T. Reed on

If you buy a principal residence—a home that you live in—you are limited by your income and down payment money. Those two decide the price home you can afford. Can you buy a higher-priced duplex where you live in one and rent the other out? In other words, does the rent you get on the other unit give you greater income so you can qualify for a higher-priced duplex than the home you bought without a tenant. Let’s not forget that you need more down payment money to buy the higher-priced duplex. If you put that more down payment money on...

Read more →

Which is better for building wealth: principal residence or rental property—RISK

Posted by John T. Reed on

There is a general belief that you can build net worth faster by investing in rental properties (apartments) than by simply buying your home and moving up to a more expensive one when your financial situation improves. Is that correct? Maybe not. It is a multifaceted matter involving risk and reward as well as lifestyle. Risk All investments have risks. It is a finite list.  Risk Home Rental property overbuilding yes, generally visible nine months to a year in advance via permits approved and housing starts stats same as home casualty (fire, flood) covered by homeowners insurance covered by rental...

Read more →