As you may have noticed, I don’t overtly pimp my own listings on this blog. This one, however, is worth a mention. This 5494 square foot, five-bedroom, custom home, located in an enclave of executive homes off Callahan Ranch Road adjacent to Montreux, is priced to sell at $182 per square foot, the absolute lowest price per square foot you’ll find for a home this size in Area 171 (up the Mount Rose Highway corridor all the way to St James).
The home enjoys unobstructed, sunny, Mount Rose views across the entire back of the house. Built in the mid-nineties, it features a traditional floor plan, great flow, large rooms, and a two-bedroom, attached, in-law apartment with separate entrance on the main floor, all on one acre with plenty of RV parking. The home has been freshly painted throughout and is offered for $1,000,000. Please call me for more info or a personal showing: 775 813 6752. pictures
Grand Wazoo
My current and latest theory is Allen Murray is derrick with a spell checker.
2sleepy
gosh some of you guys are combative…I don’t find the cat fights particularly entertaining and its sure not why I read this blog.
I’m not a real estate guru, or an investor. I’m just a homeowner who came to this blog after my husband saw it and said “when we sell our house we need to list it with Diane because she’s very web saavy and seems to really know what she’s doing”
When I posted here that I wanted to make some improvements to my home (all DIY stuff) but that I wanted to make sure it would appeal to potential buyers, Diane was nice enough to come to my house and evaulate my remodel ideas. She didn’t give me a pitch about listing the house, she just gave her honest opinion of what would and would not appeal to a buyer, I really appreciated her taking the time to do that.
As far as her ‘promoting’ her listings – well, I read alot of forums, one of them is gardenweb.com and everytime I go to that site I have to deal with horrible full page ads that pop-up blockers don’t block, but hey- the forums are good and I don’t expect anyone to provide content just for my entertainment.
Take a look around folks, where else in Reno is there a realtor who is willing to let us participate in an unmoderated discussion, much of which is nothing more than people taking cheap shots at realtors and lenders?
Lindie
“…Allen Murray is derrick with a spell checker.”
Priceless Grand Wazoo! You are becomg the KING of the one-liners on the blog.
derrick
Lindie you have become the trailor trash of the blog..
sorry I couldn’t help myself, Its just you seem so budget!
smarten
Allen Murray wrote: “I think this blog would be more interesting to most if we talked about other aspects besides the fact that the bubble has burst.”
Although I’m not so sure it would be more interesting, it might be more productive. And to this extent, I agree with him.
But please Allen; will you stop with the one man self congratulatories? Please don’t tell us how savvy you are and how the rest of us are in an inferior league because you have no clue. Remember, those who can do and those who can’t, talk about it (are you listening Derrick?).
O.K., so let’s go to the topic I thought you wanted to explore: how can we, as a real estate investors, make money in THIS Reno real estate market?
I submit we’re not going to make it buying a piece of land and acting as a developer because: the cost of land is too expensive; and by the time we end up paying for the build out, we will have lost money – the very predicament you’ve admitted you’re currently facing. Since there are a whole lot of very, very intelligent real estate developers out there who are losing their shirts in Reno, what makes you think you’re smarter [your 12 years of experience]?
And for the same reasons, we’re not going to make it buying some little two bedroom 1 bath home on a large lot in a good neighborhood and turning it into Diane’s “deal of the day.”
We’re also not going to make it [at least in the short run] counting on market appreciation because we seem to pretty much agree there’s not going to be any [at least in the short run]. Even if you can find “good buys” that haven’t made it onto the MLS, the carrying costs to wait out the market combined with high costs of sale guaranty you won’t make a killing.
We’re also not going to make it being a landlord because Reno’s a terrible place to be a residential real estate landlord unless you’re looking for big negative cash flow to offset other earned income [and having been a Bay Area landlord for longer than you’ve been an adult, I think I know a little bit about what I’m talking about].
So I submit for the group’s collective consideration, two ideas.
The first is to invest in junior deeds of trust. We only invest in those mortgages whose security we would be comfortable owning ourselves, and we only invest where the cushion of equity is at least 40% or more [because you simply can’t trust any appraisal]. There are a lot of homeowners in need of mortgage assistance and many more on the horizon as adjustable rates reset. As the traditional mortgage market dries up, a void is being created for investors like us.
And the beauty is that we’re banking on the loan going sour. So if we foreclose, we end up owning a property we want to own at a fraction of fmv. And we don’t have to finance our purchase; we get to take title “subject to” senior liens even if non-assumable.
And should someone outbid us at the foreclosure sale, then we end up getting a nice above 10% return on our investment.
My second idea is really an extension of the first. We’ve discussed before on this blog short sales and sold out junior lienholders.
If I hold a second or third mortgage against a property; the holder of a senior mortgage[s] forecloses; and my security gets wiped out; the mortgagors’ obligation to me isn’t wiped out by the foreclosure; only the security is wiped out. That means I can recover my debt through a civil action.
As has been reported on this blog, many institutional lenders aren’t too smart when it comes to making junior loans against properties with no equity. So we look for these lenders [preferably when senior lienholders have already started foreclosure] with the expectation their security is going to be wiped out. These lenders would rather get something versus nothing since they’re not interested in debt collection.
Since we’re taking over the junior lienholder’s position, of course he/she/it is going to share the borrower[s’] loan applications, verification of income, assets, etc. Thus we only pull the trigger if the borrower[s] has other assets [like Guy’s client who put money down on another home and had to short sell his/her/their Reno property] we can rely upon to satisfy our note.
So I say you guys find the opportunities, do your due diligence and people like me will put up the cash.
Now it’s your turn Allen.
Reno Ignoramus
Smarten, I was hoping you were going to post your top 5 albums, but your post is a major improvement for this thread.
There was a man named Sidney Stern here in Reno back in the 80s who made quite a fortune doing what you are talking about. The practice of being a hard money lender making loans to people you hope will default has been around a long time and can be quite lucrative. Back in the 80s Nevada still had a usury law and so Mr. Stern had to get that changed. Once he was able to loan money on junior liens at 3-4% over prevailing rates, he made a killing. His business became known as Nevada First Thrift and was eventually bought out by a major bank.
The only challenge is to find properties where there is a 40% equity cushion in this market. People who are in trouble don’t have any equity cushion, let alone 40%. Most people who have a 40% cushion, aern’t really in that much trouble that they will deal with a hard money lender.
I wouldn’t say you are so much talking about “real estate investing” as you are talking about being a moneylender. But clearly your thinking is sound. Just finding the customers is the trick.
jf.sellsius
Great dialogue here. And I think everyone is respectful.
To the post– house pimping on a blog or street corner is fine by me, especially if I’m the seller and Diane is the pimp. Besides, you gotta go see the house to see if it is a deal or not. And what is a deal?— I think below the current market can be fairly called a deal. She didn’t say it was a steal. And even if it is a deal– you may see it and would rather puke than live there. Or you may love it and gladly pay (or even overpay if you had to). Heck, I’ve overpaid for a woman, I mean house, I really liked.
Anyway, love this blog. Love you too Diane. Happy pimping.
Allen Murray
Smarten, loaning money on real estate is exactly what I plan on doing in retirement. Would I be loaning money out in 2nd or 3rd position on SFR’s in the current Reno market, probably not. Like Reno Ignoramus said, it is much easier said than done. I would submit that loaning money at a 40%LTV is very rare in this or any market, and if somebody has 60% equity, they probably don’t need private money. Secondly, you suggest 2nd and 3rd position on your loan, to me that is very risky. Once the collateral is used up, what good is a civil judgment, that’s like bleeding water out of a rock? Believe me, most private money lenders that I know, currently have more money than they can safely place.
Most people cannot make money in this market, but like I said above, I make money on multifamily properties, properties I can acquire under market value, and properties that I can add value to. There are many full time invertors in this town with pockets full of cash in their pocket, and time to look around for the right deal. The successful days of the part time amateur real estate investor in Reno is over, much like the earlier stock market craze. It seems to me the amateurs are the ones who are getting hurt the worst, so if you are a pro, you know what to do, if you are an amateur, find something else to do.
Grand Wazoo
“There are many full time invertors in this town …”
derrick, you’re killing me here.
smarten
Mr. Murray wrote: I would submit that loaning money at a 40% LTV is very rare in this or any market…if somebody has 60% equity, they probably don’t need private money. Secondly, you suggest 2nd and 3rd position on your loan, to me that is very risky…I make money on multifamily properties, properties I can acquire under market value, and properties that I can add value to.”
Allen, I never said invest in d/ts with 40% LTVs. I said “cushions of equity” of 40%. That translates into 60% LTVs and they exist ALL OVER THE PLACE [in and out of Reno]! The person who purchased his/her house 5 or more years ago likely has a 40% cushion of equity. And he/she may want to secure a loan to pull equity out of his/her home for emergencies or upgrades and not be able to do so easily because of today’s mortgage market.
Are 2nd and 3rd d/ts “risky?” Sure [at least compared to 1st d/ts or a passbook bank acount]. But if they weren’t, every Tom, Dick, Harry and Derrick would be purchasing them and touting how savvy they were. You asked how can the real estate “pro” make money in THIS market and I gave you my take. And if all goes south you end up being a property owner of a property YOU actually want to own. And you were able to purchase it with built in financing as part of the deal, and at a 40% discount. So what’s the risk?
And although you may have been able to make money on multi-family properties and other properties you were able to add value to in the PAST, for the reasons I outlined, you CAN’T now [at least not in Reno]. Heck, you’ve admitted you can’t even recover your out-of-pocket below market value cost you put into your personal residence [a property you’ve “added value” to], let alone an above-market return on your investment. And insofar as making money as a landlord, let me recount two real world episodes for yoru consideration.
Saturday morning I visited my Reno Citibank. A fellow walked in and told the cashier he needed to make a cash withdrawal because he had to pay his rent. The cashier asked how much was his rent? He answered $275 [and the cashier didn’t even comment how cheap that was].
Last month I was getting a haircut and my haircutter struck up a conversation. She recounted how she had moved from Truckee about 5 years ago just before the big Lake Tahoe real estate boom. She was now a renter of a duplex [a multi-family property] in a newly developed portion of the City [sorry, I don’t know my local geograpahy but it was an area to the north of the City and east of Somersett] and her rent was $475/month.
Now I’m not suggesting your multi-family rental properties only generate $275 or $475/month in rental income but where I come from, you CAN’T find ANY rental for under $K/month [I know, because I own the cheapest rental in the City – a 300 square foot studio cottage (is this something you and your family could live in?)]. If you want to make money as a landlord Allen, you need to pick a different city!
So let’s see, a 20-unit apartment building; average monthly rents [assuming 0% vacancies] of $500/unit; a fmv at 8-1/2 times yearly gross earnings of $850K? Where exactly do these properties exist Allen?
Allen Murray
Smarten,
I’m glad we are finally having some meaningful discussion here. I just came back today from a 3 unit building that a friend was looking at, they wanted my opinion. The property was grossing $3800 mo, sales price was $480K, 2 blocks from university. They wanted to know what I would charge to convert the basement to a 4th unit. Landlord paid all utilities to the tune of $500mo, but still a pretty good deal. I sold a 3 unit nearby last November to an investor in SF for $480K that was grossing $2850mo…about a 6 cap. Their deal was better.
Secondly, if you must know…I have about $850K into my $1.2m residence. When I say I won’t make any money, I’m talking about my usual $15-20% markup. Please don’t assume what you don’t know, you’re a lawyer aren’t you? I say good luck, with your private lending, its a great idea in concept, keep us posted, I think you will find it very hard to implement. Nobody makes trust deeds with the intent of having to repo the property, especially in 2nd and 3rd position. The people with 40% equity in their properties are the smart ones that didn’t turn their house into a charge account and most likely don’t need to borrow private money at a higher rate than the banks. If you aren’t charging more than the banks 6.5%, it isn’t worth the risk, last I checked, CD’s were running 5-5.5%. My private lender used to be one of the cheaper guys around at 10%, and I had a hard time spending his money for him.
Grand Wazoo….I’m guessing by your comment that you don’t believe there are many full time investors here???? You obviously haven’t been out bid lately by someone with a pocket full of cash. All I can say is that you obviously aren’t in the same game I’m playing in.
Grand Wazoo
Allen – you seem to be wound a bit tight. My previous comment was merely noting you used the word “invertors” instead of “investors”. Given the number of real estate deals in Reno that are upside down (inverted) I thought this was hilarious!
You’re not inverted just a bit yourself, are you?
Allen Murray
Wazoo, you aren’t the first to say that I’m wound a bit tight, maybe you’re right. Its hard to have an opinion on this board without getting beaten up, so maybe I’m a bit defensive,… plus I still have Playa dust in my eyes……..cheers!
smarten
Allen Murray wrote: “If you must know…I have about $850K into my $1.2M residence.”
Guess what Allen? Your $1.2M residence is probably only a $850K residence and you’re in denial. Or stated differently, Diane probably declined to list your home because you’re really not a seller – you’ll only sell if you get your price. If not, because you don’t have to sell, you won’t.
And BTW, in a previous post I thought you indicated you’d be willing to sell your personal residence for just your out-of-pocket cost BEFORE your usual and customary 15%-20% profit. That was the only reason I indicated an interest in possibly purchasing it.
Now that I realize you’re just like every other Tom, Dick and Harry seller who’s living in the clouds, I’m not interested. If I wanted to pay retail [and aren’t you the one who stated you never buy retail?], there are thousands of properties out there to choose from! Sorry.
Allen Murray
Smarten…I take your opinion with a grain of salt. You seem somewhat educated and seem to mostly know what you are talking about. Again you are assuming too much, I thought in law school they teach you not to do that without the facts. Tell me what makes you an expert? You never seem to back your B.S. with real world experience, just theory. Only time will tell who is right. I’ll keep you posted.
Zwely
I think It a fabulous house but,Internal beauty of house is decoration..so decorate it with different accessories from home decor at CouponAlbum with great discount..
Grand Wazoo
Heads up – the last posting was some subtle drive-by spam.
Elsa Stout
hi
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good luck