Starting Out

Good morning people,

I have left my sales job and I am now finally ready to start this amazing new chapter of Real Estate. I want to eventually fix and flip but will start out by learning the ropes and doing some wholesaling. My question is this,

Should I set up a business, say Acme Property LLC before I do anything or is it not worth it when you are first just sending out marketing etc?

Are there any advantages/disadvantages to starting it as a proper business or just start out on the side?

I feel there is a lot to do and learn at the start and want to prioritize. Thank you for any advice or comments.

Starting out…

Alan,

I am scared for you, but congratulations and good luck. I am very conservative - I kept my full time JOB and did rental properties on the side until I completely replaced my income… I know a few people that took your approach - some did amazingly well, and some crashed and burned.

Many will disagree with me, but I suggest that, unless you already have a bunch of assets to protect, don’t spend too much time and money on entity formation, etc. You say you want to learn the ropes, and wholesale. Step 1 - start marketing, find a great deal, get a contract on it, and wholesale it for a profit. Why is that step 1? First, you need to find out right away, can I do this? Not everyone is cut out for it. If you are, then as soon as you get your feet wet, and figure out in what direction you are headed, then you can research entities, etc. Too many people spend too much time and energy spinning their wheels, and 2 years and several thousand dollars later realize R.E. is not for them. Find out the answer to that question first (is R.E. right for me?).

Best wishes,
Chris in FL

Alan,
I agree with Chris - don’t put the cart before the horse. Spend your time on finding a deal first, before you worry about entity creation.

A lot depends on your mentality. There are so many potential facets in real estate and ways to make profit. What are your strengths and what are you passionate about? What do you enjoy doing?

Try to match the type of investing with what you enjoy doing. You will have problems, regardless of how much you think you have it all planned out. There will be deals where you don’t make profit. There will be deals where you lose money. If you enjoy what you do, at least you’re having fun. You can then take that learning experience and build on it.

If you only do it for the money and have to work with your weaknesses, instead of your strengths, you will soon hate real estate.

I got into this because I enjoyed designing. So, rehabbing was something where I was able to use both sides of my brain: the right for the designing, the left to put the deal together. While I wanted to make profit, that was never my first reason for taking on a project. I spent years doing major rehabs of historic homes - deals that most investors passed by, because they were too much work. I loved seeing them change and turn from ‘yuck’ to ‘wow’. I made good profit, but if profit had been my main motivation, I would have never made it past all the unexpected problems that each deal brought. When you do 100 year old houses you simply don’t know exactly what you’re walking into.

Then I got into wholesaling vacant lots. I worked in a neighborhood that was mostly torn down 20 years ago and I really, really enjoyed doing the detective work to hunt down the present owners. When you’re dealing with a 100 y.o. black neighborhood in the South, you often deal with people that didn’t trust business people, like attorneys, who were mostly white. So, when people died they didn’t go through probate - just kept it in the family and children lived in it and then their children, but without tying up legal ends. I had so much fun trying to find clues, going through probate and marriage licenses and…and…and, trying to find the present owners. I then wholesaled it to builders, who had now re-discovered the neighborhood. I made money, yes, but I enjoyed doing it.

I only ever wholesaled 1 house in my life. I got into it because my attorney asked me for help, because his client had a 2nd on it and it was going into foreclosure. I really enjoyed dealing with the seller. I made all kinds of drawings on how I’d renovate it, what walls I’d take down etc. I then had my first auction and sold it to other investors. I made money, but I had a lot of fun and a lot of ‘firsts’.

I made some money in other ways in California and then bought homes sight-unseen in Atlanta, in the neighborhood where I had previously wholesaled the lots. I knew stuff there, that most people didn’t know, and thus had an advantage. I loved finding deals and I believed (and still believe) in the neighborhood. I know it will come back. There are so many changes happening with the Beltline in Atlanta and I can’t wait for it to blossom. In the meantime I have some great tenants, who are very appreciative of me as a landlord, and occasionally some scummy ones that take advantage. Oh, yeah, I am making profit, too.

Just some food for thought…Find your passion and then look what you want to do. Just from my perspective

I’m new to the REI community but man I can tell these 2 guys are giving some awesome feedback! ^^

Adam,
thank you…fyi, I’m missing a few things to actually be ‘one of the guys’ :wink:

[QUOTE=michaela-WA;890531]Adam,
thank you…fyi, I’m missing a few things to actually be ‘one of the guys’ ;-)[/QUOTE]

Well, maybe so… but I enjoyed reading your post and there was some helpful/encouraging info in there.

[QUOTE=michaela-WA;890531]Adam,
thank you…fyi, I’m missing a few things to actually be ‘one of the guys’ ;-)[/QUOTE]

Michaela

Nice to see your name pop up, I seldom get to this site and have just decided to put it back on my to do list recently.

If I remember right you went from Atlanta to Florida and then to the Bay Area which was my stomping grounds and I would have liked to have met you back then and had it on my to do list but life sent me to projects in So-Cal and Utah. I still intend to return to the Bay Area and make my wife happy. She started life in Berkeley and would like to end it in her beloved Berkeley Hills.

Just curious, saw the WA, are you in Washington State now?

Hi, Brian,
left SF to go back to Atlanta for a while, finish renovating my houses. Then I moved to Seattle, but couldn’t stand the rainy and overcast weather. After 6 months I was ready to curl up in the corner and die. So, I’ve been back in the bay area for the past 3 months.

Say ‘hi’ if you ever end up in the Berkeley Hills. They’re beautiful.

Michaela
ps: I can’t change my name on here, so I’m staying with -WA for now, instead of starting a 3rd account.