Posted by JM-OH on September 09, 2003 at 13:18:32:
I leveraged the equity in my home, via a home equity line of credit, to purchase my first deal. I set aside some personal cash as reserve funds in case something went south with the deal, luckily I didn’t need it.
My entry was a purchase through the foreclosure sales, which I would not recommend for a new investor, and then a retail flip as my exit. I used the profits from that first deal (15k) to form and fund a business entity and cover all my startup costs. My focus then switched to a l/o exit to generate cash flow, which is what I’ve been doing this year. Next step, wholesaling, got my first one under contract now, hopefully my buyer will close within the next couple of weeks.
I’m finally confident in basic REI techniques and my abilities to take a first step(but a little scared) in REI after reading Carlton Sheets and most of the articles on CRE on and off the past year.
My situation: Curently own and occupy a home with 20k equity. Some cash in hand (11k). Good enough credit for loans, if needed. I want to purchase and occupy a new home in about 6 months or so. I want to purchase something right now that will generate a monthly positive cash flow (rental, l/o or any other technique), rent or l/o curent home when i purchase new home in the spring and I live in a low to medium priced home market.(50k-350k)
Can anyone steer me in a positive direction to take 1 step at a time, that they may have had in a similar situation starting out. I guess I’m really just looking for some positive reinforcement from someone with experience in REI.
Thanks for all your help and an unbelievable education.
Posted by JM-OH on September 08, 2003 at 15:30:19:
JD,
A year and a half ago, I was in your situation. I had good credit, about 20k in equity to invest with, and some limited cash available. I’m no expert by any means, I’m working on my fifth deal, and now more than ever, I realize how much I have to learn.
I would first focus on entry strategies that you’re comfortable with (hud/va, reo, etc) and then determine what exit strategy you want to generate cash flow (rental, l/o, etc). I read a really good book during my first round of due diligence. Keys guide to Bargain Homes is a great primer to understand many ways that distressed properties can be purchased below FMV. You should be able to pick it up on Amazon for less that $15.
Once you have a satisfactory comfort level with your entry and exit, try your best to make a graceful entry into the world of REI. Just remember, don’t go chasing possibilities until you understand the probabilities.
JD, I have frequented here countless times in the last yr. My advice is to read ALL the success stories and check in the archives. I am also new with no deals under my belt but I am a successful small biz. owner. I am also thinking about what u are doing because me and the family are pondering moving back closer to home (1 and 1/2 hr. away) and leasing our current home out with an anticipated $75-100/month cash flow. Think about it. We bought our home for $135/k one and a half yrs. ago and our area is appreciating at least 8%/yr. In 20-25 yrs., I see no reason why our current house wont be worth at least $300/k. Not bad considering we would only have been there 1 and a half yrs and the rest, tenants paid for, all the while collecting small cashflow. And by the way, we did get a 20 yr mortgage. Imagine if me and you had 10 or 20 of these things, and in 20 yrs, we’d be multimillionaires with no mortgages on any properties! Not to mention my parents bought 20 acres of land and built a NEW home approx. 26 yrs ago, all brick, 3/2 for $35k and about 2-3 yrs. ago sold it for $110/k with only 10 acres of land, and this is in a very small town in N. FL., not your typical high cost, high appreication areas of FL. Best of luck!