Creative Financing...

[Nemesis]

I've been reading and reading about investing in real estate and real estate in general. There's NO WAY i will qualify for any loan from a bank. I'm a student I make jack [censored] and i have no one to co-sign with me. I DO however have some wealthy relatives. I am needing 90~ thousand or so. Currently I make about 1200 dollars a month working part time. The majority of my money goes to my rent, and my parents help with some living expenses. In 2 years i will be a pharmacist making at LEAST 90k/year more likely 100k. What would be a fair interest rate or deal to propose as an investment to my relatives. I was thinking something along the lines of i get 90k from you now and pay my "mortgage" to you. I pay 450 (this would improve my cashflow by about 150 bucks a month over rent). dollars a month for the next 2 years (until i graduate). After I get out of pharmacy school I can pay this off easily in 2 years MAX. My question i guess is what rate of return should I suggest. I feel that their risk in this "investment" is very nearly zero (basically an act of God would have to occur for me not to pay this money back on time). Should I say give me 90k now Ill give you 100k when I pay back, or should it be more in line with the 5-6% mortgage rates from the bank. How much % interest would it take for you to have 90k of cash that is just sitting arround before you take that 90k out of circulation for 4-5 years.

[Senor Choppy]

If I were a relative looking at this as a business opportunity and not as a favor to a family member, it would take a rate a lot higher than 10% for me to be excited about it, especially since you plan on paying off the loan early if all goes well.

The best thing for both parties is for you to ask what seems fair to them. This way you don't put them in the uncomfortable position of feeling obligated to take a huge risk and you probably end up with favorable terms anyway.

[HDPM]

First, I think you are playing with fire on a big loan from relatives. I have talked with relatives about partnering up in some real estate, but it would be a partnership. I am also hesitant to do it for other reasons the more I think about it.

Is this for a house for you? If so, it isn't really an investment. Yeah, I know z sez the best investment you can make is a house for you, and I sort of agree, but I view my own house as a consumer good that will hopefully hold value and provide some security. Anyway, if it is an investment that really makes sense, show them the numbers and maybe they'd want to jumo in.

As for me, it would depend on how I could secure my money. If you wanted a personal loan and I only had you to collect from, 25% would be the absolute minimum, but I wouldn't do it anyway. That is a potential relationship killer. I think you can go buy discounted notes secured by the real estate that would return 25%+ or something and be a nice secure impersonal deal.

It sounds sort of like you want the house and it costs 90K cash. If I were to do this as your relative, it could work since I would own the house. Probably I'd buy it and sell it to you on a contract. I'd do a zero down loan with a long amortization and a baloon payment. 450/mo sounds real low for payments even early on. On a contract with a baloon payment etc... I'd be looking for at least 8% now. Maybe more. I am a very beginner at real estate investing though. And I wouldn't feel real comfortable working out a weird deal so you could have a house 2 years earlier. Why not just wait until you have a little money?

[HDPM]

internet calculator shows 90 K principal at 8% on 30 year schedule is 660/mo. That doesn't include insurance of course.

[HDPM]

Play with an amortization calculator. Setting the interest on 90K at between 4 and 4.5% you get payments right in your ballpark on a 30 year scedule. A rich relative might buy the house and set up a balloon payment in a few years if they have money sitting around not doing much. Get lawyers involved if you actually do any deal. Make sure everybody is protected, ESPECIALLY because they are family.

[GeorgeF]

"In 2 years i will be a pharmacist making at LEAST 90k/year more likely 100k."

Wow that's alot for taking the pills out of the big bottle and putting them in the little bottle, then putting a label on the little bottle. This site puts the number a bit lower:

http://www.allied-physicians.com/salary_surveys/pharmacy-salaries.htm

I have noticed in Brooklyn pharmacies are opening up on every block. It seems to me that at some point there will be too many. My guess is that there will be a need to cut medical costs in the future and pharmacists are a likely target.

Check out US vs Canadian Salaries
US: US$64,000
http://www.payscale.com/salary-survey/vid-3314/fid-6886

Canada: US$45,000
http://www.payscale.com/salary-survey/aid-7597/raname-SALARY/fid-7031

I know there are laws that protect salary structures in the medical business. Got bad news for you auto steel ect workers thought the same thing.

" I'm a student I make jack "

Fix that problem first. Attend open houses if you like so you can see how your local market works.

[Nemesis]

I have no idea where the numbers in the allied-health thing came from, but my parents are both pharmacists. My mom is making 115k/year as a pharmacy director (management). My dad was making 85k/year 1 year ago before he opened his own store. Already after just one year of being open there's positive cash flow (albeit small). In the south i'd say BOTTOM sallaries are 80k right now. Every year that goes by more pharmacy jobs are opening than pharmacists are graduating. There will probably be a trend to cut healthcare costs, but unless the government takes over (socialized medicine) then pharmacy isn't likely to be the place to take the hit. The number of prescriptions being filled is projected to double every 8 years or so for the forseeable future, thanks to baby boomers and increase recognition of disease states and attempts to manage them. Also people living longer means people taking more medication.... new pharmacy's are popping up on every corner because they are insanely profitable. Average profit/ prescription at my dad's store is 10-12 dollars. Lots of CVS/Walgreens etc. average 400 a day 7 days a week. 1.5 mil a year profit from prescriptions only. Without any over the counter sales. If the government stays out of healthcare then i feel that the money will be there for the next 50 years at least.

*edit* some of my figures may be slightly off, but they are all CLOSE to accurate and i have read them in different articles in pharmacy magazines, and in school

[GeorgeF]

The growth in medical expenses in the US are not sustainable. For example when a company outsources a programing job to India, that company may really be outsourcing the medical care, policing, fire protection, ect.

I believe you will face one of two challenges in the future:
1) Pharmacists will have to realize the full value of their educations (HS+4yrs college+post graduate) by perscribing drugs (as they do in some countries) not just fulfilling perscriptions. I see no reason that mild anti depressents, valium, and antibiotics cannot be perscribed by a pharmacist after a cursory examination. Doctors spend about 10 min. or less to prescribe these things. In this case I believe you will be able to earn the money you claim you can.

2) As the job of fulfilling perscriptions can be automated to the point that someone with a high school + 2 yrs technical school can do it 100k/yr people will be replaced by 30k/yr people (in the US or by outsourcing). The only thing stoping this now is government regulations. Government regulations can change and if things get bad enough they will.

I am also not exagerating about the number of pharmacies in Brooklyn. Partially due to immigration of educated people (Russians mostly) I see pharmacies opening up everywhere including people subleting space in dollar discount type stores. Nothing scares them, not national chains, not long time private drug stors. It is really amazing to watch. There really is nothing stopping them from moving to where you live.

Please do not be offended but I do not see any reason why the typical Pharmacist is paid more than $40k other than government regulations. Either Pharmacists will have to do more, or be paid less. I suggest you plan for both possible futures.

As to you investment program I suggest that for you first 5 years you concentrate on maximizing your career and then worry about what to do with your income.

[Nemesis]

I take no offense at the things you say, and in fact I find them very interesting. I agree that pharmacists will be required to do more in the future... i think that's a good thing. It's why i'm going to school. I will be a doctor of pharmacy when i graduate. We are trained to be the experts on drugs just like an oncologist is a specialist in cancer. You'd be shocked how little M.D.s know about what they're prescribing to their patients. Combine patients seeing multiple doctors and all that i mentioned previously and i feel pharmacy has a long future of 6 figure incomes. The government regulations do help boost salaries, but an average pharmacist probably SAVES the american healthcare system at least the cost of their salaries 5 times over. If an average medication error caused by a doctor not knowing what he's prescribing puts a patient in the intensive care unit for 5 days that's 50 thousand dollars or so that was saved for the insurance companies/ medicare/ medicade. A pharmacist easily finds 10 of these a year working in a regular retail setting. I agree that healthcare costs are outrageous it's by no means a pharmacist's fault, but as you suggest i'm afraid the public could it out on us. I want to be a pharmacist for about 10 years before i have my assets built to a point i can live off their income. I think it's easily doable makign 100k a year and living on a modest portion while investing the rest. I will have no student loans when i graduate which is huge.

[Nemesis]

Ok... anybody have other ideas. The place i've found is gonna cost me arround 800 a month and can rent for 1k or i can live there. Anyway... i don't fully understand what assumption is? anybody explain that to me. ALso, is there any real estate board similar to 2+2?

[Ray Zee]

start by looking for houses for sale with owner financing. you do not need any credit for these unless the owner insists but that doesnt happen much. then you only need the down payment you agree upon with the owner. he will be flexible as he wants to sell. you will do much better this way than to deal with relatives. unless you need to get the down from them.
or get a house that has a loan that is assumable. usually it is one that was originally finacved by owner. you just step in and make the payments. no qualifing needed. still you have to have the down payment. sometimes you can get the seller to carry a second mortgage so you have little to put down.
some houses that have govt. loans on them are assumable with no qualifing needed.
it is easy and i have done these things many times. although i like to buy for cash as i get the best price.

[GeorgeF]

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