Search This Blog

Wednesday, November 20, 2013

F.E.A.R.

False Evidence Appearing Real - That is what I was told the acronym F.E.A.R. stands for. I think fear drives people to do, or not to do, a lot more than the desire to achieve success. Let's look at a few examples;

I invest primarily in California. To the outside observer, one would think I either -
     A) have tons of liquid cash or
     B) I don't know what I'm doing and missing much better opportunities out of state.

I disagree on both points. The median home price in the county in California where I invest, at the time of this blog post, stands at $225,000. My average rental in this market comes in at about $1,200. On the numbers, at face value, I couldn't possibly get a decent return paying $225,000 for a $1,200 income stream.

As an investor, it is my job to seek out opportunity and what I am looking for is an undervalued property in a solid rental market. It takes time and energy, and I rarely 'find' a great deal. What I do find is a property owner who has both equity and motivation that I can work with to create a good deal. I also don't look at property priced around the median value. My typical rental property has a market value in the $125K~$200K range and if I have to pay all cash, I'm buying that property for $70K~$120K. I finance them through a local hard money lender using their long term rental program. Those loans have a 9.9% interest rate, but the APR comes in at closer to 18%. And they still cash flow. Right here in California.

Many of my associates are taking packages of those financed houses and refinancing them through local lenders using their LLC or C corp. They get 30 year amortization, due in 15, with interest rates around 5%.


3 comments:

  1. Aaron,

    This is not only informative but extremely motivational and a breath of fresh air. As a resident in the Los Angeles area, with no REI experience, it's so difficult to find supportive individuals. It seems like every other person is saying, "you live where? Oh you won't get anywhere there, go elsewhere". I'd like to be optimistic and learn in my own backyard so to speak so thank you for your post.

    I first saw you on BiggerPockets and this just solidified a common ground we share. I am heading over to add you as a colleague right after this. I look forward to your other material.

    Best wishes,
    Jonathan Jimenez

    ReplyDelete
  2. Great blog post indeed!! As a new investor I've found here provided each views quite motivational... To improve my investment consideration sense this type of information is very effective. Thanks.

    ReplyDelete
  3. Real estate investors are playing a big role in our financial and residential sector. Real estate investors are now feeling relax and easy for having hard money lenders. Because now, they can investing in a real estate project without using their own money.

    ReplyDelete