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Entrepreneurs' unusual tactic: Buying up homes by hundreds
The Pittsburgh Post-Gazette ^ | Saturday, March 05, 2005 | James R. Hagerty, The Wall Street Journal

Posted on 03/05/2005 8:05:02 AM PST by Willie Green

TRENTON, N.J. -- Many people agonize for months before deciding to buy a house. Jonas P. Lee is more decisive: He often buys several in a day.

This year, the 38-year-old Mr. Lee says he plans to buy more than 1,000 homes for Redbrick Partners LP, a New York firm he runs with the help of an MIT economist to invest in single-family rental property. What millions of mom-and-pop landlords do locally, Redbrick is trying to do on a grander scale.

Mr. Lee, a former Web entrepreneur who grew up in New York's posh Westchester County, doesn't see much value in most suburbs at today's lofty prices. Instead, he is buying in working-class neighborhoods in such cities as Baltimore, Philadelphia and Trenton. Even there, however, he is running into tough competition from people determined to cash in on America's decade-long housing boom.

(Excerpt) Read more at post-gazette.com ...


TOPICS: Business/Economy; Culture/Society
KEYWORDS: debt; housing; housingbubble; realestate; slumlords
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Comment #61 Removed by Moderator

To: sinanju; Willie Green

LOL !!!
An attorney friend of mine peddled a couple of short stories I wrote and now he sees himself as a "literary agent", and he's bugging me for something else. I was hoping someone had something for me to 'coast off of'.
But keep me in mind.
Great thread Willie!


62 posted on 03/05/2005 4:50:00 PM PST by investigateworld (Another California Refugee in Oregon)
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To: wardaddy
Hey, you want to short a company with 24% return on equity trading at a PE of 11, you are free to do so. I'll pass.

As for their vulnerability to a downturn, of course it would hurt their business. But they run off their inventory of houses with 6 months in ordinary times. If that doubles, so what? This isn't a power plant or office building type thing, where the asset only comes back to you over 25 or 30 years. Do they own land, sure, but typically they hold it under options to buy until they are ready to sell units. They have something like $4 billion principle value in land options they can exercise or pass on. Lots of developers go in hock up to their eyeballs at the top of hot real estate markets, and go bust. I just don't expect them to be one of them (remotely).

As for what I do, these days I am a research analyst for a software company that does science and technology stuff (math, formal modeling tools, etc). In the nineties I did practical finance, as an investment advisor. I got clients out before the bubble popped and left finance for scientific software. (REITs were part of the cash-out strategy for some of them). Before that I was in grad school.

63 posted on 03/05/2005 5:09:20 PM PST by JasonC
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To: Willie Green

the tax code should be structured to discourage speculation in residential real estate. this kind of stuff drives prices up for people who actually need to live someplace. its just fueling the real estate bubble.


64 posted on 03/05/2005 5:11:13 PM PST by oceanview
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To: Reeses

this is true. except that when RE goes, it will take the banking system with it, as well as freddie and fannie.


65 posted on 03/05/2005 5:12:10 PM PST by oceanview
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To: investigateworld
In my 'mean and lean' days I dabbled in fixer-uppers for a fast turn, but never found prices that allowed me to hold the property, service the mortgage and not be negative cash flow. What was I doing wrong?

Using a "fast turn" instead of a "buy and hold" strategy regardless of the negative cash flow.

Our 1983-bought $117,000 San Diego property was in negative cash flow the entire time we paid the 15 year mortgage until the mortgage was paid off 9 years into the loan.

Now, that property spits out $1,400 per month in rental income and is worth about $400,000.

My only regret is that I did not "buy and hold" ten more just like it.

66 posted on 03/05/2005 5:23:11 PM PST by Polybius
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To: Polybius
Dittos with the regrets, but in those days it was "old whiskey, slow horses and fast women, alimony, child support (in reverse order)

Ahhh the memories (AH the pain!)
67 posted on 03/05/2005 5:37:44 PM PST by investigateworld (Another California Refugee in Oregon)
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To: oceanview
"the tax code should be structured to discourage speculation in residential real estate. this kind of stuff drives prices up for people who actually need to live someplace. its just fueling the real estate bubble..."

Yes, of course, let us get the government involved, they always make things better...

< /sarcasm >

68 posted on 03/05/2005 6:24:39 PM PST by Mad Dawgg (French: old Europe word meaning surrender)
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To: JasonC

You sound purty smart.

Thanks for sharing.


69 posted on 03/05/2005 7:11:33 PM PST by wardaddy (I don't think Muslims are good for America....just a gut instinct thing.)
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To: Mad Dawgg

the 1986 tax reform did exactly that regarding the tax treatment of real estate - Reagan passed that.


70 posted on 03/05/2005 7:15:40 PM PST by oceanview
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To: bluefish

I think that buying home is about buying home. If you love the home, then it's well worth it.

Of course, we live in California and just made half a million on our last home. We were there 13 years.

The only problem is if the bubble bursts, and my hubby loses his job at the same time. Hopefully, that won't happen. It didn't happen with our last home. However, it didn't make any money for the first 5 years. If our new home levels out now, we would have already broken even on our investment. If it goes up, then we'll be making more money.


71 posted on 03/05/2005 7:21:39 PM PST by luckystarmom
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To: All

Ok... so the way I see it, after reading and reading in this forum- is that most if not all of you agree that real estate is a GOOD investment, but not for everyone.
So then, my question, and the reason I've surfed on over and found this site is this: We are seeking to relocate to Arizona, buy land and build... we own a home in California that we are paying a mtg on. Is it smarter (I guess this separates everyone here) to sell said property and reinvest starting fresh etc. or is it better to RENT out our home in California, let it pay for itself (we hope) and be in debt while we start over...? Any takers on this question? Appreciate any input.


72 posted on 03/19/2005 12:14:35 AM PST by Angel22b
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