Posted by HR on March 08, 2001 at 21:52:49:
Jeff,
Look to get these questions answered so we can talk about them over a beer at the convention. Till then,
HR
Calling HR!! - Posted by jr
Posted by jr on February 16, 2001 at 11:41:49:
I have been reading archived posts for over a month now, and HR I have found your posts to be extremely informative. I was wondering if you could give me a nudge in the right direction. I live in a city with very high (and rising, I suspect) real estate prices, and rentals do not seem to support these prices. I see no “vendor motivated” indications in the classifieds. I have contacted a CCIM certified agent who knows what I’m looking for and says even within 30 miles prices are high and there isn’t anything available for my purposes. It’s a seller’s market, and am beginning to think I may have to look out of town. Am I missing something? By the way if anyone else has a comment please dive in - I suspect most who visit this site respect HR’s opinion and understand why I called on him!
Re: Calling HR!! - Posted by HR
Posted by HR on February 16, 2001 at 19:06:37:
JR,
I’m happy to help… if I can. Help me with some info, if you will:
- Where do you live?
- What’s the population size, mean income, mean house price, etc.
- Are their any “bad” or lower price areas of town? Where are they? How far away are they?
- Do you have a reia group in town? Find this out before posting back. Not sure? Check www.nareia.com; call if need be because their list isn’t current.
- How much cash do you have to work with? Credit? Good, bad, ugly? Do you know what your fico score is?
This info will help us determine if you are indeed missing something.
Also, as far as the ccim goes right now, don’t worry about him/her. CCIM’s have a certain training, and it’s buying property the old fashioned way: 20% down, etc. In my experience, they aren’t very creative. Other’s milage may vary. So don’t listen to the ccim. They don’t know anything useful.
Let’s see what we can discover to get you started in the right direction…
HR
Re: Calling HR!! - Posted by Jeff in MKE
Posted by Jeff in MKE on February 21, 2001 at 19:42:24:
Hi HR,
Can you help me?
I have all the answers to your questions.
- Where do you live?Milwaukee, Wisconsin
- What’s the population size, mean income, mean house price, etc.
Population size in my county is 933,000,income is about $45,000.00 per household.
Mean house price is about $125,000.00 - Are their any “bad” or lower price areas of town? Where are they? How far away are they?
Yes to both questions.
Bad area would be the inner city (been known to be a warzone) the lower priced areas wouold be the south side and northwest side of town.
I live less then 30 minutes from all these areas. - Do you have a reia group in town? Find this out before posting back. Not sure? Check www.nareia.com; call if need be because their list isn’t current.
No I haven’t found a REIA group in my city,the closest one is about 7 hours north of where I live. - How much cash do you have to work with? Credit? Good, bad, ugly? Do you know what your fico score is?
I have about $20,000.00 to maybe about $25,000.00 to start with.
My credit is A-1
My FICO score was 782 in October of last year when i applied for my home loan.
I hope you can help me.
I was hoping to do at least one deal before the convention.
I think all I need is just a good kick in the pants to get going.
I still feel handcuffed by the fear of failure.
Thanks to all of you in advance for your help.
I think your a great bunch.
Jeff in MKE
Jeff, you got it made!!! - Posted by HR
Posted by HR on February 21, 2001 at 21:15:23:
Jeff,
These are great numbers!!! You hit the jackpot, buddy! No kidding.
Let’s look at your numbers. First, your personal numbers: you got GREAT credit (which means you can borrow investment funds easily); it doesn’t sound like you have any investment properties (which means your debt ratios are probably low. Are they? Do you have a lot of credit card debt?); And you have cash!!! Ohhhhhhh weeeee… you don’t know how good you got it, yet.
First bit of advice: don’t do a deal before the convention. Read the books I’ve recommended in the past, read all the posts here, come with some extra cash to buy courses at the convention, and put yourself in a position to take off after the convention. Don’t rush the deal; better to wait than wander in the wrong direction. You got too much going for you to blow it.
Your town in perfect. The numbers on Milwaukee are great; there is a lot of money to be made in the sub 100k market, which is where you are. Not having a reia group is a real liability; I suspect you may have one – it’s a large city. Let’s check on that. Email me so I can give you a reference on this.
Finally, what area of rei interests you? Flips? Rehabs? Lease options? What is your day job? How much time can you devote a week to this?
Please post this info here so others can benefit, too.
HR
Calling HR, Part II - Posted by HR
Posted by HR on February 24, 2001 at 20:39:17:
(note: Jeff posted this above, and I thought it would be good to have it on the original thread for anyone now, or in the future (archive search) that may follow this thread. I have cut and pasted Jeff’s post, but used my name and address above instead of his, since I have technically made this post and not him. These words and concerns, though, are his, not mine).
Hi HR,
It’s great that my numbers panned out.
Ok and now to answer your questions.
1)Investment properties?
No I don’t own any to this point yet.
2) my debt ratios,credit card debt?
I’m looking at about $8000.00 in credit card debt.
When I went for my home loan the banker told me my net worth was a little over $91,000.00 but it should be more with the purchase of my home.Stats on the house:
purchase price: $68,995
Mortgage balance: $54,900
Appraised Value: $79,800
I’m not sure if this will mean anything though.
We have alot of houses here in the sub 100K area.
In fact the wife and I missed out on a nice all brick duplex with 3 bedrooms up and down for $59,900 asking and the rents were sitting at $525.00 per unit.
But the handcuffs of fear of failure costed me that one.
3)My local REIA group?
Could you help me try to find one in my area,I haven’t been able to locate one.
you can E-Mail the reference to CREFAN@cs.com
4) The area of REI that interests us?
The 2 biggest areas of investing in this area is 1) buy and hold,we have a huge amount of 2,3,and 4 unit rental properties in these target areas.
I’m not real comfortable with the single family buy and hold rentals for the fact that it’s all or nothing.(no renter,no income)
2)Rehabs are really HOT here Wisconsin does not have tax leins so the county will seize the property and sell it for back taxes here but you find most if not all of these in the inner city or “warzones” if you will.
And you will find alot foreclosures here(thats how I bought my house)
3) I believe wholesaleing fixer uppers to other investers does well here too.
For me I feel most comfortable with buy and hold of small multi-family buildings.(2 and 4 family)
But I want to work my way into doing rehabs and flipping them over in my near future.
4) My day job?
Yuck,must you bring that up? (LOL)
I work for an airline catering company.
I start work at 3:30am till about 2:00 pm.
I have about 3 to 4 hours a day to put in to this for now but hopefully more as time goes on(ie. no more overtime)
I hope this answers all your questions,HR.
If you need to know anything else just ask.
And thanks for all your help,
Jeff in MKE
More great information… - Posted by HR
Posted by HR on February 25, 2001 at 07:14:21:
Jeff,
You just keep piling on good info again and again. I’m not kidding: You are extremely well poised to do very well as a rei. Let’s look at your personal situation and start crafting it into a business plan…
-
The fact that you don’t have any investment properties yet is good. It won’t lower your debt ratios. Do you know what I mean by debt ratios, debt to income, fico score, etc?
-
Let’s turn the 8k in cc debt into a plus. Let’s help you make some quick cash over the next 6 months so you can not only eliminate this, but also then have the borrowing power off these ccs in the future. More on this below.
-
You have 25k in equity in your home. You need access to that. I want you to call all the banks in your area and see who has the best deal on a home equity line of credit. In my area, Bank One will give you a line for 100% of the value of my home. Don’t worry about the rate: 10%-12% etc. You are only going to put properties on and off this line quickly. Research this, and then get back to me with the info.
-
I’m going to email you with a phone number to check and see if there is a local reia group in your area. I bet there is. Joining your local reia group is a must and is invaluable. We need to find one that is withing 1.5 hours of you.
-
Ok, you’ve seen my bias before: I believe in getting a solid education before you jump into this business. (If you don’t, it’s like trying to build the empire state building on a 6" slab. Not a good idea. Let’s pour a solid foundation, ok?) Buy these books; they are the best of the best.
Landlording Books: Landlording by Leigh Robinson; The Landlord’s legal guide by NOLO Press; and, eventually, subscribe to Jeffrey Taylor’s landlording newsletter (www.mrlandlord.com).
Rehabbing: get Myer’s Buy it, Fix it, Sell it, Profit, and books on home construction.
Do an archive search here on the topics of tenants, landlording, evictions, etc so you can start building your knowledge base. Do the same for rehabs, flips, etc. Do one on both boards. The info on NGII tends to be better.
I’m going to suggest to you, Jeff, that you start by learning to be a flipper. There are pros and cons to this approach. Pro: once you get real good at it, you can generate an easy extra 5k a month getting properties under contract and selling the contract to real rehabbers. Con: flipping, imho, is an intermediate level skill, not a beginning skill. Why? Because you have to be good at finding properties, analyzing repairs, and selling. Accurately estimating repairs takes awhile to learn.
Once you learn it, though, you will eliminate that 8k in cc debt, get the cash to invest in rentals, and it will be a great foundation for learning how to do a rehab. You may want to consider buying LeGrand’s rehab module; I think it’s around $500, but it’s well worth it.
- No doubt about it: KEEP THE DAY JOB!!! I see so many people here rushing out to abandon their job in the hopes of making it rich in real estate. Give me a break. This is a business! If one currently has the knowledge, skills, connections, and track record of success (15+ successful deals), then one might be ready to consider taking this to a self-employement level. If not, one is just asking for depression, failure, bankruptcy, and major heartache.
So, keep your job. You need it while you learn the biz. You need it for the cash flow to live while you become a good rei. You need the job to borrow money for your rentals. In your case, Jeff, you have a job that allows you time before sunset to look for properties. Perfect!
So: let’s recap. You are going to start building your info base on landlording so you will be ready for your first rental property in 9 months. You are going to read all the articles here, archive stuff, and books to begin learning how rehabs are done. You are going to become a flipper, because it requires no cash or credit (but you have both!) so you can make contact with rehabbers, learn that biz, generate cash, and have fun. You will be making offers on houses in your area at 20k or less that need 20-30k in work and will sell for 70-80k when done. You will use your home equity line of credit, if necessary, to purchase really solid deals so you won’t lose them and so your potential rehabbers won’t steal them (waiting for your contract to expire). You will make 2-5k on each flip, and, after you have done a bunch, the ideal will be to do your own rehab that you keep as a rental (two birds with one stone). Expect all of this to take a year to accomplish. At the end of this year, though, you will have connections with folks on your area, you will be an intermediate skilled flipper, you will have done one rehab, and you will have forayed into landlording. Not a bad way to start!
Let me know what you think of this plan. Also, get back to me with the other info when you get it. Till then,
HR
Re: More great information…(super long) - Posted by Jeff in MKE
Posted by Jeff in MKE on March 06, 2001 at 18:48:19:
Hi HR,
So far it sounds like everything is coming up roses for the wife and I.
I was scrolling down and just got your post so please excuse my tardiness in answering this.
I normally know when you answer when I get a response in my E-Mail box.
First of all i’d like to say that my wife and I took our first trip down to the courthouse today.
Needless to say we were in total awe.
It’s really a fast paced business.
We found were to look for forclosures,pre-forclosures,
And where the auctions take place.
It seems there’s an auction everyday.
We met a few nice people down there that were very helpful.
Ok,now getting back to the questions:
1)1) The fact that you don’t have any investment properties yet is good. It won’t lower your debt ratios. Do you know what I mean by debt ratios, debt to income, fico score, etc?
A)I think I have a fairly good idea what debt ratio is.
Two questions though:
1)Would consolidation of the cc debt help my debt to income ratio?
2)Say I had a two-family home that I rented and just as an example say I had a $300.00 per month positive cash flow,would this help or hurt my debt to income ratio?
3) You have 25k in equity in your home. You need access to that. I want you to call all the banks in your area and see who has the best deal on a home equity line of credit. In my area, Bank One will give you a line for 100% of the value of my home. Don’t worry about the rate: 10%-12% etc. You are only going to put properties on and off this line quickly. Research this, and then get back to me with the info.
3) This I will take care of and respond tomorrow.
4) I’m going to email you with a phone number to check and see if there is a local reia group in your area. I bet there is. Joining your local reia group is a must and is invaluable. We need to find one that is withing 1.5 hours of you.
4)I went to the web site you recommended(www.nareia.com)and wrote down the phone number,I also found out there is a W.A.A.(Wisconsin Apartment Association)group located I my city.
It meets every third Tuesday of the month.
5) Ok, you’ve seen my bias before: I believe in getting a solid education before you jump into this business. (If you don’t, it’s like trying to build the empire state building on a 6" slab. Not a good idea. Let’s pour a solid foundation, ok?) Buy these books; they are the best of the best.
Landlording Books: Landlording by Leigh Robinson; The Landlord’s legal guide by NOLO Press; and, eventually, subscribe to Jeffrey Taylor’s landlording newsletter (www.mrlandlord.com).
Rehabbing: get Myer’s Buy it, Fix it, Sell it, Profit, and books on home construction.
5)My current collection of books are as follows:
1)Carleton Sheets No money down course,and the Investor success series inculding,"The painless guide to property management.
2)Nothing down for the 90’s Robert Allen
3)Fast cash with quick turn real estate, LeGrand.
4) buy it,fix it,sell it,profit, Myers.
5)5 magic paths to making a fortune in real estate.Lumley
6)Rich Dad Poor Dad. Kiyosaki
7)The Millionaire Next Store.Stanley
8)Think and Grow Rich.
I went out on a wim and bought these books and I’m still have not read them all yet.
6) No doubt about it: KEEP THE DAY JOB!!! I see so many people here rushing out to abandon their job in the hopes of making it rich in real estate. Give me a break. This is a business! If one currently has the knowledge, skills, connections, and track record of success (15+ successful deals), then one might be ready to consider taking this to a self-employement level. If not, one is just asking for depression, failure, bankruptcy, and major heartache.
A) No worry there my wife and I are on a 10 year plan which would be the time we want to leave our present jobs and be doing REI full time.
But letting my wife quit will be difficult because she works for an airline and well you know all the free tickets and all.(LOL)
7)Let me know what you think of this plan. Also, get back to me with the other info when you get it.
A)I did find out one other tidbit that I found to be a nice suprise,I am able to borrow against my 401k where I workand i pay myself back at 8.5%best thing about it is it doesn’t show up as borrowed money on your credit report because I borrowed it from myself and am paying myself back,cool hey?(Ilove these 401k programs!!)
Thanks HR,
I’ll start making the phone calls tomorrow and get back to you with the info.
Jeff in MKE