Equity Builders and similar investments

[dnaumis]

Hello again,
Has anyone heard or purchased from Equity Builders or similar companies? They purchase large complexes of units (like townhomes) and sell them off individually to investors. They handle all the rentals and maintenance for a fee. It sounds like it could be somewhat profitable, and worry-free, but not sure. Any info or advice would be appreciated.
Thank you,
Debbie

 

[jarrettvaughan]

These companies can provide a great service adn a worry free investment but remember, there is always a cost involved. You will be paying a premium on your unit in order for them to make a profit. It would be the diffrence in buying wholesale versus retail.

Many of the these types of companies exsist for the uneducated investor. You may be able to be much more profitable purchasing on you own. I guess it really depends on your goals and what you are trying to achieve. Most likley, you will not learn a whole lot from the expereince but may have a safe and simple investment.

If you are interested, check out Platinum Properties Group and speak to Carlos. Very good company that offers a good service, all though i have never purchased from them.


QUOTE (dnaumis @ Aug 3 2008, 09:08 AM) Hello again,
Has anyone heard or purchased from Equity Builders or similar companies? They purchase large complexes of units (like townhomes) and sell them off individually to investors. They handle all the rentals and maintenance for a fee. It sounds like it could be somewhat profitable, and worry-free, but not sure. Any info or advice would be appreciated.
Thank you,
Debbie

 

[Thomas Beyer]

QUOTE (jarrettvaughan @ Aug 3 2008, 10:32 AM) These companies can provide a great service adn a worry free investment but remember, there is always a cost involved. You will be paying a premium on your unit in order for them to make a profit. It would be the diffrence in buying wholesale versus retail.

Many of the these types of companies exsist for the uneducated investor. You may be able to be much more profitable purchasing on you own. I guess it really depends on your goals and what you are trying to achieve. Most likley, you will not learn a whole lot from the expereince but may have a safe and simple investment.

not quite .. of course you can buy cheaper when buying wholesale .. but wholesale means: in BULK .. i.e. MANY MANY units which usually most investors can`t do when they start .. of course if you buy a whole building (say a 15, 18, 20, 21, 24 or 42 suiter) you pay less per unit than if you buy one.

We offer a similar product .. a cheap condo (from $110`s) with an optional rental pool .. a great way to get started for the investor who does not have the time or want to take the time to hunt for dozens or properties, find tenants, do all the work .. as real estate is very time consuming !

So, I would not call this investor "uneducated" I`d call him "time conscious" !

This is how I started over 12 years ago: with one rental pool condo I bought for $80,000 .. and it is a proven concept to build wealth - as the wealth is build through time by holding with positive or at least break even cash-flow until you sell. Of course it is better to buy the whole building, but that exceeds most investors cheque writing ability !

Or, you can hunt up and down the Top 10 towns for townhouses, or small older homes or single condos without a rental pool, spend about the same (or much more) per unit if you can find one and have a much harder time cash-flowing it and managing it. Real estate is not a slam dunk anymore .. much much research and much much time needs to be invested before purchase and even more after purchase once you own a unit .. so buying a rental pooled condo from a variety of firms is a great option to get started until you can buy "wholesale"

It is a great concept IF the price to rent ratio is right i.e. break even cash-flow @ about 75% to 80% leverage ..

 

[dnaumis]

Thanks - this may also be one way to own property in areas out of my region (Ontario) and diversify. I will check out both companies mentioned in your responses.

 

[EdRenkema]

I went to an Equity Builders seminar and was impressed with their program, however when I analyzed the numbers I found I could not get positive cash flow by purchasing via a HELOC. Oh yes they said but that is good for showing a write of on your taxes. Not my way of investing and I don`t have a lot of cash or hi income so I`m using the REIN system and plugging away.

 

[Thomas Beyer]

QUOTE (EdRenkema @ Aug 3 2008, 08:31 PM) I went to an Equity Builders seminar and was impressed with their program, however when I analyzed the numbers I found I could not get positive cash flow by purchasing via a HELOC. Oh yes they said but that is good for showing a write of on your taxes. Not my way of investing and I don`t have a lot of cash or hi income so I`m using the REIN system and plugging away.
If you assume a 75% to 80% mortgage on a condo (or house or townhouse) PLUS the rest via LOC at around prime it is VERY UNREALISTIC to expect positive cash-flow .. as you essentially are 100% leveraged !!

Getting break even cash-flow with 75% to 80% leverage is a tough stretch already !

==> Please show me a product or a market where this 100% leverage with positive cash-flow works using realistic expenses .. and I buy 10 !

 

[EdRenkema]

QUOTE (thomasbeyer2000 @ Aug 3 2008, 09:01 PM) If you assume a 75% to 80% mortgage on a condo (or house or townhouse) PLUS the rest via LOC at around prime it is VERY UNREALISTIC to expect positive cash-flow .. as you essentially are 100% leveraged !!

Getting break even cash-flow with 75% to 80% leverage is a tough stretch already !

==> Please show me a product or a market where this 100% leverage with positive cash-flow works using realistic expenses .. and I buy 10 !


My most recent purchase was a townhouse condo in Hamilton for $135K. My dnpayment was 20% or $27K plus $8K in renovations all from my HELOC. I rent for $1250 monthly.
Here is my costs breakdown monthly: LOC $135
Mtg $459
Condo $189
P. tax $150
bank chg $4
water heater $10
management @ 10%=$75
vacancy @ 3.5%= $43.50
I am managing this unit myself for now.
This unit is in a very well run complex with a healthy contingency fund and is about 1 km from the new Red Hill Parkway. I am closing on another in the same complex end of August, ($137K) an end unit backing onto a ravine, very quiet and picturesque. In this one my renovations will be 50% higher. There is few left in this price range as they are moving quickly due to increasing demand. Several other REIN members own more than one unit in the same complex.
I myself have met with the EDO in Hamilton and the infrastructure is being implemented and geared toward increasing sustainability and developement of technology based industries. New commercial sites, `shovel ready` as they call it are being implemented at a junction of several transportation routes.

As a rookie investor I may well be missing something but if I refer to the system REIN has taught me all the fundamentals are there.
If someone suddenly buys 10 of these units I will know who it was.

 

[GarthChapman]

QUOTE (EdRenkema @ Aug 4 2008, 06:21 AM) My most recent purchase was a tnhouse condo in E. Hamilton for $135K with 20% down plus $8 K in renos all from my HELOC. I rent for $1250 monthly. Monthly costs are:
LOC - $135
Mtg - $459
Condo- $189
P. tax- $150
w. heater- $10
bank chg - $4
vacancy 3.5% = $43.75
management 6%= $75
I am managing myself for now.
This unit is located 1 km from new Red Hill Parkway in a well run complex with a healthy contingency. I have met with Hamiton EDO and they were very helpful and enthusiastic. They are implementing sustainable `shovel ready` commercial sites at the juncture of several transportation routes.
As a rookie investor I may well be missing something, but if I refer to the system REIN has taught me all the fundamentals are there.
I someone suddenly buys 10 of these I will know who it is.

Ed, that looks pretty good all `round especially as you are 100% leveraged, but don`t forget about your monthly maintenance allowance. I really believe investors should treat this just like the vacancy allowance, and put that maintenance allowance money away each month into your reserves. As you know from experience the maintenance expenses come unevenly.

 

[Thomas Beyer]

QUOTE (EdRenkema @ Aug 4 2008, 07:11 AM) My most recent purchase was a townhouse condo in Hamilton for $135K. My dnpayment was 20% or $27K plus $8K in renovations all from my HELOC. I rent for $1250 monthly.
Here is my costs breakdown monthly: LOC $135
Mtg $459
Condo $189
P. tax $150
bank chg $4
water heater $10
management @ 10%=$75
vacancy @ 3.5%= $43.50
I am managing this unit myself for now.
This unit is in a very well run complex with a healthy contingency fund and is about 1 km from the new Red Hill Parkway. I am closing on another in the same complex end of August, ($137K) an end unit backing onto a ravine, very quiet and picturesque. In this one my renovations will be 50% higher. There is few left in this price range as they are moving quickly due to increasing demand. Several other REIN members own more than one unit in the same complex.
I myself have met with the EDO in Hamilton and the infrastructure is being implemented and geared toward increasing sustainability and developement of technology based industries. New commercial sites, `shovel ready` as they call it are being implemented at a junction of several transportation routes.

As a rookie investor I may well be missing something but if I refer to the system REIN has taught me all the fundamentals are there.
If someone suddenly buys 10 of these units I will know who it was.

looks like a fantastic deal .. keep buying !

 

[EdRenkema]

Garth I`m not sure what you mean by my reserves but any income coming from this property is staying in the account, once I have 2 months rent built up as a contingency I`ll consider paying down part of the LOC, unless of course I sell another property and pay it off in full - that is not looking very certain at this time.
Check my post on my sewer line disaster and you`ll see where my real concerns lie. Fortunately I have my HELOC split up in two parts as you suggested and I can keep my personal costs separated from my investment costs - thank you for that advice!

 

[GarthChapman]

QUOTE (EdRenkema @ Aug 4 2008, 10:24 AM) Garth I`m not sure what you mean by my reserves but any income coming from this property is staying in the account, once I have 2 months rent built up as a contingency I`ll consider paying down part of the LOC, unless of course I sell another property and pay it off in full - that is not looking very certain at this time.
Check my post on my sewer line disaster and you`ll see where my real concerns lie. Fortunately I have my HELOC split up in two parts as you suggested and I can keep my personal costs separated from my investment costs - thank you for that advice!


You are most welcome Ed, and thanks for the thanks!

What I mean by Reserves is what you are calling Contingency, and what REIN calls `Staying Power Fund`. My belief is that you should have enough to cover a vacancy as well as repairs that may arise at any time. I think that, for a property without undue vacancy issues/history and without much deferred maintenance, 2-3 months rent should work well as reserves.

 

[dnaumis]

Hi Ed, Is this th complex at the top of the mountain or bottom of the mountain? We have also been looking in Hamilton and some complexes are in pretty rough shape and prospective tenants don`t look too promising. Especially around that price range. Also, for $1250/month what kind of tenants did you get? Are they smokers? Pets? Kids? How many people? (I assume this is a 3 bdrm th with parking). We`re just starting out and going through the research. Good topics/ideas on usage of the HELOC. Thanks again, Debbie


QUOTE (EdRenkema @ Aug 4 2008, 09:21 AM) My most recent purchase was a tnhouse condo in E. Hamilton for $135K with 20% down plus $8 K in renos all from my HELOC. I rent for $1250 monthly. Monthly costs are:
LOC - $135
Mtg - $459
Condo- $189
P. tax- $150
w. heater- $10
bank chg - $4
vacancy 3.5% = $43.75
management 6%= $75
I am managing myself for now.
This unit is located 1 km from new Red Hill Parkway in a well run complex with a healthy contingency. I have met with Hamiton EDO and they were very helpful and enthusiastic. They are implementing sustainable `shovel ready` commercial sites at the juncture of several transportation routes.
As a rookie investor I may well be missing something, but if I refer to the system REIN has taught me all the fundamentals are there.
I someone suddenly buys 10 of these I will know who it is.

 

[EdRenkema]

Hi Debbie,This complex is below the escarpment in East Hamilton - almost St. Creek, `mountains` are found in British Columbia

I have one smoker who is committed to smoking outside of the unit, we`ll see how that works out. It is a 3 bdrm with parking and garage, 3 people total.
For these units those prices are getting quite scarce, keep looking-find a good realtor who knows the area and have a `pre-approval` discussion with your mortgage broker so you are ready to move quickly when an opportunity presents itself. Additionally you won`t be wasting the realtors time.
Good luck!

 

[dnaumis]

Thank you so much for the good advice and information!Debbie

QUOTE (EdRenkema @ Aug 5 2008, 11:51 AM) Hi Debbie,
This complex is below the escarpment in East Hamilton - almost St. Creek, `mountains` are found in British Columbia

I have one smoker who is committed to smoking outside of the unit, we`ll see how that works out. It is a 3 bdrm with parking and garage, 3 people total.
For these units those prices are getting quite scarce, keep looking-find a good realtor who knows the area and have a `pre-approval` discussion with your mortgage broker so you are ready to move quickly when an opportunity presents itself. Additionally you won`t be wasting the realtors time.
Good luck!

 

[Mecheng]

QUOTE (EdRenkema @ Aug 4 2008, 06:11 AM) My most recent purchase was a townhouse condo in Hamilton for $135K. My dnpayment was 20% or $27K plus $8K in renovations all from my HELOC. I rent for $1250 monthly.
Here is my costs breakdown monthly: LOC $135
Mtg $459
Condo $189
P. tax $150
bank chg $4
water heater $10
management @ 10%=$75
vacancy @ 3.5%= $43.50
I am managing this unit myself for now.
This unit is in a very well run complex with a healthy contingency fund and is about 1 km from the new Red Hill Parkway. I am closing on another in the same complex end of August, ($137K) an end unit backing onto a ravine, very quiet and picturesque. In this one my renovations will be 50% higher. There is few left in this price range as they are moving quickly due to increasing demand. Several other REIN members own more than one unit in the same complex.
I myself have met with the EDO in Hamilton and the infrastructure is being implemented and geared toward increasing sustainability and developement of technology based industries. New commercial sites, `shovel ready` as they call it are being implemented at a junction of several transportation routes.

As a rookie investor I may well be missing something but if I refer to the system REIN has taught me all the fundamentals are there.
If someone suddenly buys 10 of these units I will know who it was.

I`ve been looking in Barrie and KW where rents are a little lower then $1250 and properties are a little higher then $135K. It has been tough finding anything that is positive cash flow using my LOC for the down payment. In most cases it`s around negative $100 a month.
We have the personal income to fund that but I know your only suppose to buy neutral or positive cash flow properties. However, my mortgage planner tells me most properties he did in Alberta last year were negative cash flow but in appreciation markets it ca still be profitable.
So my question is can we consider Barrie and KW in Ontario enough of an appreciation market too take on a negative cash flow property? Any thoughts or comments would be helpful.

 

[EdRenkema]

QUOTE (Mecheng @ Aug 8 2008, 09:59 AM) I`ve been looking in Barrie and KW where rents are a little lower then $1250 and properties are a little higher then $135K. It has been tough finding anything that is positive cash flow using my LOC for the down payment. In most cases it`s around negative $100 a month.
We have the personal income to fund that but I know your only suppose to buy neutral or positive cash flow properties. However, my mortgage planner tells me most properties he did in Alberta last year were negative cash flow but in appreciation markets it ca still be profitable.
So my question is can we consider Barrie and KW in Ontario enough of an appreciation market too take on a negative cash flow property? Any thoughts or comments would be helpful.


Barrie and KW are solid markets but I wouldn`t invest based soley on that, do you research on properties and neighbourhoods. Better yet find a good realtor who understands investing and will filter a lot of negative cash flow properties out. Also think about what type of properties you want to buy, duplexes and triplexes will cashflow better.

 

[Mecheng]

QUOTE (EdRenkema @ Aug 8 2008, 12:13 PM) Barrie and KW are solid markets but I wouldn`t invest based soley on that, do you research on properties and neighbourhoods. Better yet find a good realtor who understands investing and will filter a lot of negative cash flow properties out. Also think about what type of properties you want to buy, duplexes and triplexes will cashflow better.

Thanks for the replay ED.

I really expected this post to create a lot more controversy then that. Does nobody have any comments on negative cash flow properties in appreciation markets?

Is there any other posts you could point me to on this topic?

 

[ekisielewski]

QUOTE (Mecheng @ Aug 8 2008, 09:59 AM) I`ve been looking in Barrie and KW where rents are a little lower then $1250 and properties are a little higher then $135K. It has been tough finding anything that is positive cash flow using my LOC for the down payment. In most cases it`s around negative $100 a month.
We have the personal income to fund that but I know your only suppose to buy neutral or positive cash flow properties. However, my mortgage planner tells me most properties he did in Alberta last year were negative cash flow but in appreciation markets it ca still be profitable.
So my question is can we consider Barrie and KW in Ontario enough of an appreciation market too take on a negative cash flow property? Any thoughts or comments would be helpful.


Hello: It is quite difficult to find positive chashflow properties when you are using 100% financing. It took me a while to grasp this concept. All other factors being equal whether you get positive or negative cashflow depends on the financing you are using. Therefore, when running the numbers assume you are using your own money for the downpayment in order to compare apples to apples. Then ad the cost of the LOC.
Elisabet

 

[ekisielewski]

QUOTE (dnaumis @ Aug 3 2008, 09:08 AM) Hello again,
Has anyone heard or purchased from Equity Builders or similar companies? They purchase large complexes of units (like townhomes) and sell them off individually to investors. They handle all the rentals and maintenance for a fee. It sounds like it could be somewhat profitable, and worry-free, but not sure. Any info or advice would be appreciated.
Thank you,
Debbie


Hi Debbie: I have purchased 3 properties in the last 3 years from Equity Builders. If you would like details please contact me directly.
Regards
Elisabet Kisielewski

 

[DonCampbell]

Let me wade in with my take on the subject...

I would not touch a negative cash flow property (defined by me as over $100/month negative in my Property Analyzer Form) in any market conditions as this is a great way to financial ruin when the market takes a breath. Buying only on the hope that the equity takes off is not investing it is pure speculation. The freedom comes from the passive income the properties will eventually provide in the coming 3 - 5 years after I normalize the rents (i.e increase) and the expense (i.e. decrease).

Remember Warren Buffet`s quote: "You can always see who`s been swimming naked when the tide goes out" The people swimming naked are the equity increase speculators.