Holding Company

[steven.ruddell]

Its about 12:00 at night and I can't sleep. I just came up with a good idea. The real estate market is going to drop about 25% by 2008 in the Treasure Valley Area. My dad is the source on this. He is considered one of the best appraisers in the North West. Also, foreclosures are at an all time high. This drop is going to cause a correction and the market will climb back up. This is what I am proposing. It just hit me, I know its been done but I just don't know how so I want to throw this out here

• Create a real estate holding LLC
• Get a loan from the bank and purchase a foreclosure (I've heard that you have to pay cash or tie it up with an option)
• The market will be good for renting, rent it out at a price that the property will pay for itself (think it is called amortization)
• Sell when the market climbs again
• Buy bigger properties (1031 Tax Exchange) to avoid paying taxes on the capital gains after loan is payed off and move money into another real estate investment

Just throwing it out there. Love to hear your opinions.

[DrMoney]

Hm. Ya this has been done, and I dont think its a bad idea, renting is always a little profitable, but you need multiple properties to actually aquire a good income/profit.

[steven.ruddell]

I want the properties to pay for themselves, then sell them and move my money into larger properties. Then start looking for residual income.

[Zoxak]

This is the typical pattern for a Real Estate Investor. Your plan isn't really 'fleshed out', but the underlying fundamentals are there. I feel the key for this to succeed is to find a good property selling for cheap. One that when all things considered, will give you a positive net income when you rent it out. This in contrast to 'money sinks', which are properties that have negative net income, but owners keep anyway so that the overall price of the property appreciates over time.

A lot of new real estate players don't do enough research, and grab a house or condo that looks cheap, but produces negative net income (because they don't know how to renovate or whatever). Since your dad seems very familiar with real estate, this shouldn't be a real problem. I think it would be a very profitable venture if you can pull it off right.