Posted by Jimbob on October 26, 1998 at 18:54:22:
I can relate to what you’re going through, I also live in a very expensive real estate market.
The concepts you read on this board can be applied anywhere only in your market they will be on a much larger scale. The challenge you have is to be able to see a profitable deal in the higher price ranges, like a house that sells for $275,000 can be rented for $1800-$2250 per month. This can be a little scary because if you were to find a deal you can lease/option or get an owner contract on, even with 1 payment out of your pocket, you’re looking at $2,000. Your best bet is to find a cosmetic fixer in an area you know you can resell, get in, fix it up, and get out with your profit. Again, it may not be a huge profit but you have to start some where.
Have you thought about getting a partner to go in on a couple of deals with you to help ease the fiancial burden? The profit wont be as high but neither will the financial risk. After a few deals you may be able to venture out on your own. Always do up a partnership agreement in writing, preferably with an attorney so there are no misunderstandings between obligations of each partner.
Another idea is to find a cosmetic fixer house for sale in a good area that is vacant. Approach the owner and tell him you’re interested in getting into real estate investing but dont have the resources to buy just yet. Ask the seller if he would be willing to do an “equity share” with you, in otherwords, he continues to carry the property, you agree to fixup the house really nice, you sell the property, and you both make a nice profit. You’d be surprised at how many property owners dont want to spend the time, money or energy to fixup a house they intend on selling, it’s hard work on the body. You’d also be surprised at how many property owners out there are dying to find someone handy who can fixup their property, especially with the market booming so much, there’s not enough contractors to go around. The sellers know they can get a higher sales price for the house if it’s fixed up. Again, legal protection is critical.
As for the multi-family rental units, pass on those, you will not make any money on them. As in my area, the sales prices far exceed the rental ability of the buildings, people with lots of money are buying those, taking negative cash flows for like a year or two, then selling them for large profits. This is OK if you guess the market correctly, but if you get caught in a downturn, it can be disasterous!
Start small and work your way up.