Getting Started......suggestions PLZ!! - Posted by Steve C

Posted by kf_az on January 20, 2000 at 10:07:59:

Nell,
That’s a good point. I have also started in one area(lease options), then did a few rehabs and now I’m concentrating on wholesale flipping. I personnaly don’t feel it’s as important which area one starts in…as it is just to START. Because the sooner one starts, they can then start to get the real life education of what it’s all about. Then one can zero in on what fits. I kinda like the analogy…shoot the arrow first, then move the target.
k.f.

Getting Started…suggestions PLZ!! - Posted by Steve C

Posted by Steve C on January 19, 2000 at 23:38:46:

Hey everyone. For a new person…could anyone suggest what to do next? Ive read a few books and Im very interested in being a RE investor. Should I buy a course now? If so which one does anyone recommend. Should I use or stay clear of Realtors? Most of the Realtors that ive talked to think Im kind of crazy to go at this alone?(As a new guy …you just dont want to hear that). Should I attend a boot camp or seminar? Im so excited and nervous at the same time. Just dont know what to do TOMORROW! Sorry for this short fragmented post but I just need someone to grab me buy the shoulders and point me in the somewhat right direction. Any help would be greatly appreciated. BTW…great website, its been extremely helpful.

PS. Before I forget. With all the investors that frequent this site, why doesnt the more experienced REIs put together a sort of simplified beginners FAQ that new people could download. Kind of like helping them get started from day 1. Nothing extremely detailed just the essence of it. I think it would be very helpful to newbies. I KNOW ID APPRECIATE IT. Take care all.

Find your niche… - Posted by Mark (SDCA)

Posted by Mark (SDCA) on January 20, 2000 at 11:30:43:

Do what you love… If you don’t then you won’t stick with it. You DO need a support staff- maintenance people, lawyers, title, realtors etc. You can definitely go it “alone” with them onboard as contractors. So don’t listen to the negativity. I wouldn’t avoid realtors. I find most of my deals through realtors. You CAN find deals through realtors. You just need to weed through them. I would read this site and determine what types of deals you want to do before I would buy a course.

CHeers,

Mark

Re: Getting Started…suggestions PLZ!! - Posted by Pavon Bailey

Posted by Pavon Bailey on January 20, 2000 at 10:48:46:

Steve:

Welcome aboard the real estate cruiseliner! I am a newbie too. Hopefully this list would help you out in getting started. I welcome any comments or opinions from various readers on how this list can be improved, modified, or deleted. Hey, we all love to learn something new that can benefit us in the long run!

Anyway, what I did was this:

  1. I got a team formed to cover my weaknesses and inadequacies. My team consists of A) ATTORNEY (to draw up a contract for you in your real estate deals as well as provide legal advice B) MORTGAGE BROKER (to find investors for you that will buy your note and mortgage on the market for cash C) TITLE INSURANCE AGENT (to prepare all the necessary information for the closing for you D) NOTARY PUBLIC (to notarize mortgages/deeds for you so it can be recorded) E) MENTOR (someone that can guide you along the way…find these at your local investment clubs)

  2. Spend about 30 min.-hour to read the classified ads in your paper every night. Spend about an hour/hour and a half reading a real estate book or the articles on this website. You have to learn how to pinpoint motivated sellers (See LeGrand’s article “How to Find Motivated Sellers Parts I and II”)

  3. Call ads in the paper to prequalify sellers. Test their motivation even if you do not plan on buying the house to flip, rent, or lease option.

  4. Work with the end in mind. What I did was called ads that said “We Buy Houses, Real Estate Wanted, etc.” Talk to these investors and find out their criteria. Then locate a house that matches the criteria. If you find a house and can’t find a buyer before closing, you may be stuck and have to take title to the house.

  5. Above all, pray, believe in yourself, establish goals, set a vision, and just do it. Remember: Pay for your education. Buy books, courses, etc. They will all pay for themselves in the long run. Plus it’s better than making a costly mistake that’ll leave you broke and wasted for the rest of your life.

For the record, i got all these ideas from various articles here on this site. These articles are FOR REAL!!! In other words, they work!!! Happy Investing and best of luck!!!

Pavon

Re: Getting Started…suggestions PLZ!! - Posted by NellB(ID)

Posted by NellB(ID) on January 20, 2000 at 09:56:41:

People above have talked about finding the RE niche you want to work with. I started out thinking I would deal mostly in mobile homes. However, I’ve found because of the small rural area I live in that MH are very expensive and I haven’t found any motivated sellers yet. Plus, the people who have been calling me wanting to get into a home want a stick house. I’ve said all that to say this–you may start out in REI thinking you will go one route and find yourself mostly doing something else–like me.

Good luck.

suggestions… - Posted by Dirk Roach

Posted by Dirk Roach on January 20, 2000 at 04:01:52:

Hi Steve,
On this site under the “how-To” articles you can find an interesting article
A Glossary Of Common Terms Used In Loans And Lending
by Ed Wachsman

http://www.creonline.com/articl68.htm

Not really a FAQ, but it is packed full of nessicery info.
As for courses and whatnot, that depends on what you want to do, and what particular tool is appropriate for a particular deal.
So that is a hard one to give intelligent advice on.
The upcoming convention can give you a wide assortment of tools that the successful investors use. And you would be surprised on how often various techniques and what have you will cross over into different fields.
So anyhow you might want to check that out. It is a good opportunity.
Both Ed and kf have given you some extremely sound advice.
Anyhow good luck and welcome to RE investing,
Dirk

Re: Getting Started…suggestions PLZ!! - Posted by Ed Garcia

Posted by Ed Garcia on January 20, 2000 at 24:20:18:

Steve,

Lets see if some of this can be of some help to you.

The first is to evaluate how much time you are going to be able to commit to
Real-estate? If your approach is hit and miss, so will be your result.

Second: Go to the street. It is the best teacher. Rather than talk about doing
deals, reading in the library, getting courses, JUST DO IT.

You’ll find in the long run, the street is the best teacher. Not only that by getting
out an doing it, you’ll learn your MARKET, meet people to build a NETWORK, learn
the demographics as well as the geographics of your area, and of course you
would have over come the biggest obstacle in getting started, PROCRASTINATION.

We need to do what we call, penciling out a deal. When doing that, we ask ourselves a
battery of questions necessary in structuring a deal.

I’m going to give you 5 steps to get you started.

(1) How much do we want to make?

So many times I hear someone act as if they are afraid of loosing a deal because of the
profit they put into it. Forget about it. I’d rather be sorry about the deal I did not make,
rather than the one I did. The profit is what protects you in a deal. Don’t be afraid to make it.

When doing a deal I want to make at least 30% and believe me when I tell you, when I structure
a deal with 30% in it, I never get it. Some how the profit always dissipates, even after I thought
I figured it to the penny.

Would I do a deal with less profit? Yes but I would do it as a flip, lease option, or as a leveraged
deal with positive cash flow.

(2) Determine the Value of the Property.

The next thing I must do is determine what the property is worth. The obvious thing to do, is comp
it. Don’t let the seller or real-estate broker tell you what it is worth. Get it comped yourself.

(3) Deferred maintenance.

Usually I figure my profit after taking off the deferred maintenance, otherwise it distorts my
profit. So it must be figured in the beginning to determine your profit.

(4) Game plan.

What do I want to do with the property? Do I want to fix it and sell it? Do I want to keep it
long term or short term? When I buy a property, I have a plan for it. And usually I buy it with that
plan in mind. This part is so important, I’m going to go into more detail by giving you an example.

Remember, you make your money on the buy.

GAME PLAN.

Each deal speaks for it’s self. For example, if I bought a house for lets
say $50,000 and had to put $10,000 into it for fix up. I’m in this deal
$60,000. Now what would that house have to be worth in order for me
to feel comfortable to buy it, and debt service it on my line of credit.

$70,000 ? No I don’t think so. I have no room in this deal for error.
What if after a month or two I don’t sell it ?
Now remember, we can play the what if game all day. I can create a fast
Sale for the purpose of this posting to make myself look good, but that’s
Not the answer. So remember we have to always be careful with
hypothetical questions and answers. The profit structure on this deal is not
good enough for me to do the deal.

$80,000 ? Were getting better, but No. I have to keep in mind that things
can go wrong with my deal. What if I sell it after 2 months, and then the
sale falls through after being under contract for 45 days because of financing.

Now I have had the property for 31/2 months, and have to put it back on
the market again. Also what if the market changes or slows down ?
Even though I show on paper that I have a $20,000 profit, that’s not so.

For the fun of it, lets take this so call $20,000 profit and structure a
Game Plan around it.

(1.) I plug in 6 month worth of debt service on my deal. I’m in the
deal $60,000. Interest, depending on the interest of your credit line,
Let say for the benefit of our example is 9.5%. Our payments would
Then be $475 per month. 475X 6 = $2850.

(2.) What ever the market value you come up with, always cut it 5%.
Because realistically, the potential buyer is going to want you to
Discount your price. Now if you don’t have to, great. But lets face
It. If you were trying to sell it for $80,000 and someone offered
You $ 76,000, you know you wouldn’t want to wait for another
Buyer. You would still be debt servicing the deal. With you luck,
You wait another month or two and the next buyer would make
The same offer. Terry Vaughan will tell you, that the first 10% of
a deal is water. I agree with Terry, but for the purpose of this
deal we’ll just keep it at 5%. So lets take off another $4000.

(3.) I always plug in a realtor. Now I know that there are a lot of
Geniuses out there that don’t need them. They are so great that
they can sell the property themselves. Great, you plug in a
Realtor. 76,000 X .06 = $4,560.

Lets recap. A sale of $80,000, gives us on paper a $20,000 profit.

$20,000
-$ 2,850 Debt service
-$4,000 5% Discount
-$4,560 6% Sales commission.

Potential Profit $8,590.

As you can see the profit dissipates quickly. And personally I don’t think
It’s enough to take the risk your taking with your line.

How about $90,000 ? Now all of a sudden the deal can make sense.
We have between a $17,500 and $18,000 profit.

Lets look at our LTV (loan to value). 60,000 divided by 90,000 =
67% LTV.

So you see the deal speaks for it’s self, but the structuring of a deal with a Game Plan is what will
let you know if you should do the deal.

(5) Financing.

How am I going to take my deal down? An I going to create a seller carry back, and use a lender
to give some money to the seller? Will the seller carry back the whole deal? Will I have to buy it with
a combination of down payment and financing? Or will I pay cash and then refinance it later, getting
all of my money back.

These are just a few basic fundamentals of doing a deal. I hope this is some help to you.

Ed Garcia

Re: Getting Started…suggestions PLZ!! - Posted by kf_az

Posted by kf_az on January 19, 2000 at 23:53:13:

Steve,
Your emotions are familiar ones. First, let me say that all of your questions can’t effectively be answered without knowing more about the general direction in which you point yourself. The answers to almost all of your questions differ with regard to the niche or type of Real Estate investing you would pursue. So, with that said, my advice to you is to read all of the How-to articles posted on this site. Between doing that and the books you refer to already reading, you should be able to narrow down what area of investing you want to at least start with. Armed with that information, I think you can ask much more pointed and effective questions…and get much better answers.
Then…look out!!! Sky’s the limit.
kf
P.S. I don’t think that’s a bad idea about the FAQ, but that would be a post directed to J.P. Maybe there’s reasons we haven’t thought of that would preclude such a thing. Or maybe they’re working on it already…dunno.

In addition… :slight_smile: - Posted by Pavon Bailey

Posted by Pavon Bailey on January 20, 2000 at 12:16:47:

Steve:

I hope the first part of what I said comforts you and soothes your nervousness. I’m still nervous too…it’s human nature. You might be afraid that you’ll be laughed at, that you may make a fatal mistake that’ll leave you bankrupt, whatever. But at least try to do it for once. I’ve also included more things I’ve learned (and applied) from reading books and articles on real estate.

  1. If you talked to a seller, and everything is done right (appraisal after fixup, motivation is very high, cash flow possibilities, etc.), schedule a time to meet with the seller to inspect his property. Establish rapport with the seller. Don’t get him angry or make him feel embarrassed. Obviously there will be something wrong with the property. Don’t just overtly say it. Use tact. The seller will appreciate it. It pays to be nice and courteous.

  2. If you like the house (don’t fall in love with it) and you plan on selling it, make an offer on the house. Have it tied under a contract. Once you have it under contract (signed and dated), then the NEXT DAY put an advertisement in the paper for the house or call the investor and tell him you found a house that matches his criteria. Ask if he would like to see it, or put an ad in the paper. use owner financing, lease option, anything to get the reader to notice that you’re very motivated now (because you are the seller). Pick a suitable buyer. Ask if he can put cash down, needs time to arrange financing, or if he can buy it all cash (that would be ideal). Remember: most people will either offer a low price but will pay all cash or offer a higher price but with favorable financing. It will be very rare for someone to offer a high price and pay all cash.

  3. If you plan on living in the house, skip step 2. Just move in and enjoy the scenery.

  4. Always strive to do a simultaneous closing with you, the new buyer, and the original seller present, if you’re planning on flipping the property.

I currently have 4 buyers with criteria to buy one of my houses. I’m just locating a house to sell to them. Because I’m in school full time here in New Orleans, I don’t have much time to call selers, but I still do. You’re in business for yourself so you can choose when and how to work.

Hope all of this stuff helps out in your investing career. Then you can tell your boss to take that job you’re doing and…well, you know. Good luck!!!

Pavon

PS: Here’s a list of other helpful sites packed with info on notes, mortgages, real estate, and the like. I personally love these sites.

www.realestatelink.net
www.noteworthyusa.com


www.allaboutforms.com
www.wealthnetwork.com
www.notenetwork.com
www.papergame.com

Anyone else know of any sites please tell me. I will appreciate it. Thank you.