Fear - Posted by Bill Moran

Real Estate Investing Real Estate Financing
#1

Posted by Rich-CA on April 21, 2007 at 13:04:26:

You need to draw up a budget so you account for all your costs (down payment, closing, vacancy, repairs, HOA fees, utilities while vacant, insurance and so on). You also need a realistic idea of what similar occupied units are renting for and how long it takes to fill the vacancy (some markets its 2 weeks, others it takes 3 months). If you will self manage, then there are no management fees to budget.

Once you have realistic numbers, you can make a business decision as to what to do.

One more thing. Don’t gamble on the house price going up much more than the inflation rate. Some markets (like one where I have invested) have dropped over 17% in the last year. If I said “don’t count on appreciation to make money” on this forum a year ago I would get laughed at, but now the truth that appreciation is “icing” comes out. If you cannot make money without appreciation, don’t gamble.

#2

Fear - Posted by Bill Moran

Posted by Bill Moran on April 21, 2007 at 12:50:45:

Iwould like to create some passive cash flow by buying and holding. Iknow It will take some time to create any sizeable money. I would like to do this full time. I have only $15,000 to get started. after 1 or 2 houses I can see all my money gone ie [down payment and closing cost.] Then Id be out of business, cash flowing about $400 a month. Am I looking at this correctly or am I missing something? buying and retailing to create more money is probaly out of the question due to the down turn in the market. I think it would take to long to find buyers with down payment money in their pocket. Any help would great…Thanks

#3

Re: Fear - Posted by LK

Posted by LK on April 23, 2007 at 09:26:18:

Good title. Most of us aren’t limited so much by our finances as we are by fear or by our lack of determination and imagination. I started out buying with no money down for one main reason, I didn?t have any. It was all fine until I “looked down”. It’s like riding a bicycle on an icy rail 1000 ft off the ground. The view is great and you can’t believe you are doing so well, and then you look down.

There is no doubt that cash is king (and good credit is Queen). You didn’ mention your credit status.

From your post, you stated you will double your $15,000 in 3.125 years. That is a nice return. If your goal is to buy 2 houses every 3 years, then you?re set.

But if your goal is to buy 2 houses per year (or more), then you need a boost in your determination and imagination. First you find the house for sale by a MOTIVATED seller, and then you begin looking at the many different ways the deal can be structured.

  1. If the seller is really, really motivated, they may let you take over their payments.
  2. If their not quite as motivated or if they own the house outright and are just tired, they may provide 100% financing (with LOW interest).
  3. If the house needs a lot of repairs, you may be able to get a construction loan for 100% of purchase plus repairs to be refinanced/appraised when repairs are complete. If you can only get 90% for purchase plus repairs, you may use a credit card/home supply credit to make up the difference.
  4. The seller may carry back a portion of the purchase price allowing you to finance the difference with the bank.
  5. Another method is to lease option a house and then sub lease it to a tenant buyer. You can exercise your option when you find a buyer or obtain suitable financing.

These are methods that can be used to buy and hold property, which is what you said you wanted to do. I think there is always room to flip and get chunks of cash in any market; it just may take more determination and imagination. This cash can then be used for your buy and holds.

My post made me think of Ed Garcia’s (financing forum) nine ways to buy with no money and no credit. Here is a link to one of his many responses on the subject:
http://www.creonline.com/real-estate-financing/wwwboard6/messages/1951.html

I know that you didn?t say that you had bad credit. If you have good credit then it is less difficult.

Sorry for the rambling, but you may pick out something useful.

#4

Re: Fear - Posted by camgere

Posted by camgere on April 21, 2007 at 16:42:50:

The title of a really great song by Sarah McLachlan.

A $4800/year return on $15,000?
Survey sez: How many millions of dollars can you invest and still get a 32% return? People are looking for you!

After 3 years you have another $15,000 to invest.

Are you familiar with the sequence: 1, 2, 4, 8, 16, 32?

It helps if you state what city and state you are in. A 3% earnest money check is more than $15,000 where I live. There are places you can buy a house lock, stock and barrel for $15,000.

What sort of LTV and downpayment are you looking for? How many years do you want it to take to pay off the mortgage (taking into account the more years, the more money you cash flow right now)?

Realistically, for marketing purposes, who is your ideal tenant? Realistically, what sort of property does your ideal tenant want to live in?

We need to know a bit more about what you are trying to do in order to give suggestions.

Best of Luck To You!

#5

Re: Fear - Posted by Greg

Posted by Greg on April 21, 2007 at 15:27:15:

I would learn to find some really motivated sellers. Out of State owners come to mind, but there are tons more. Learn to take some properties Sub-2 and control some property, with Lease Options. You can receive some cash flow this way, without gong broke in the process.