Just Starting Out - Posted by Kristin Terrones

Posted by troy on February 18, 2002 at 12:01:09:

No, I found a small local bank that required no seasoning. I did encounter several banks that required 6-12 months seasoning before they would consider an equity loan. Hope that answers your question. Thanks for the kind words.

Just Starting Out - Posted by Kristin Terrones

Posted by Kristin Terrones on February 14, 2002 at 10:47:08:

I have been researching the real estate investment business on and off for about a year (more intense recently). I feel that there is so much to know and some of it is pretty technical and it scares me. One thing I have noticed is that there are a lot of opinions and many contradict one another. I understand you will find this in everything, but investing seems like such a big step and I don’t want to do it blindly. I have read that it takes money to make it and I have read that you can use others money. At this point we can’t get approved for another mortgage (we own our own home). I am not sure how much equity we have, but I thought about getting a home equity loan and using it to get a property. Any suggestions?
Also, my husband uses much more caution than I do and he has been asking me a lot of questions that I don’t really have answers for. Can we do this without a lot of money? How much risk is there in flipping and not having a buyer? I don’t have a full time job (I am a student), is it dangerous not to have a back up income (we have my husbands, but that is reserved for paying the bills)?
Any advice for a potential newcomer would be very welcomed.
Kristin in PA

It’s also okay to know . . . - Posted by JoeKaiser

Posted by JoeKaiser on February 15, 2002 at 01:00:44:

Creative real estate investing isn’t for everyone and may not be a good fit for you. Simple as that.


Re: Just Starting Out - Posted by Robert (NC)

Posted by Robert (NC) on February 14, 2002 at 12:32:01:

If things are stable, but you have little cash and have some TIME to invest here is the approach I would recommend. I am NOT an agressive Real Estate investor and I am new, so I"m taking a cautous approach that my wife agrees with. My realtor would like me to be more aggressive . anyway… Here is my idea of a safe approach to minimize your personal risk. However, it does take lots of TIME (which if you don’t have money or other investors to give you the money to invest) which isn’t bad. I also guess you want to build a full time business. so here goes.

  1. Join a local real estate investment group
  2. Buy one or more courses from this web site (if you don’t have the money, work at a local fast food place for a few weekends, donate plasma, cut yards, babysit… anything to get the money to buy a few courses… EDUCATION is KEY)
  3. Be agressive in NETWORKING through your Local REIA. GET TO KNOW local investors anyway you can. BE NICE.
  4. Once getting to know local investors and what their needs ARE and what they are looking for discuss Bird dogging with them. Draw up a contract so you get couple hundred bucks for giving them good solid leads… This will allow you to learn the local market, and make a few bucks if any deals pan out.
  5. Once money comes in from the bird dogging, or other sources, put it in a seperate checking account and use this ONLY for your Growing Business
  6. After a few bird dogging deals, you should have built up a little cash reserve and learned your local investor market. Now you move in to try and get some properties under contract yourself (subject to your partners approval). Call your investors up and see if any are interested. From the bird dogging you should have a list of investors and what properties they are interested in. Assign your contract to them. YOu’ll make from 3k on up. You get MORE profit than birddogging, a little more risk (you might not find another investor). After doing several of these deals you should have a larger cash reserve.
  7. By this time you should have made contacts with Realtors, Bankers (call all small local banks and see what investor loan packages they offer. you will be surprised at how easy it can be to get an investor mortgage if you have a little money to put into a deal), Lawyers, other investors
  8. Hopefully by know you have a slowly growing business. Start talking to a tax advisor or business advisor to determine what type of business structure you need to create. You are about to go from making 2k to 5 k per deal to 10k, 15, or 20k per deal so having a good business structure will save you TONS on tax’s… At this piont you should also know enough to have a good idea where you want to focus… rehabs, buy and hold rentals… buy and lease option, get properties under lease so you can lease/option them… dozens of methods…

Ok… since I’m not an expert I"ll stop at that stage… since I had some money up front, we are buying a SFH as a rental. We were going to flip it, but due to the nice cash flow it will generate (really good deal on this house) we decided to keep it as rental.
We this one exception, I’m following the above plan. I’m not looking to get rich overnight… slow, steady, saft as I can be… I do know we will have some set backs and make mistakes, but this pace makes me and my wife happy…

I hope this gives you some ideas…

Happy Investing…

Robert (NC)

Re: Just Starting Out - Posted by troy

Posted by troy on February 14, 2002 at 12:03:57:

My personal feelings are that it is very dangerous to do any investing of your personal income that you could not afford to lose. If you have good credit, it would also be ashame to lose this in a deal gone bad. On the other hand, if you have poor credit, no money and no hope of recovering financially following your present course of action, what have you got to lose?

In my case, I had good credit and did not want to risk the little cash I had, so I invested in a HUD foreclosure for my personal residence. I put 5% down on a 50k 4/2 and got a 3k buyers credit to help with closing costs and some downpayment. I then put 10k into the property using credit cards. Next, I took out a home equity loan for 22k, (house appraised at 88.5k) using 10k to pay off the credit cards and the rest is for reinvesting in my next rehab. The best part is, I still have 20% equity in this property when it comes time to sell in 2 years, and no cap gains!

This is a conservative approach, but one I feel is good for beginners with little cash. Just be sure to buy right, or this will never work. I highly recommend the formula I got from this board for purchasing a rehab. It is ARV (After Repaired Value) x 70% - Repairs = Max Allowable Offer.

Good luck!

Re: Just Starting Out - Posted by Tim Fierro (Tacoma, WA)

Posted by Tim Fierro (Tacoma, WA) on February 14, 2002 at 10:58:48:

Kristin, you may get differing opinions because there are many types of investors, many different locations, many different purchase strategies, many different exit strategies, etc…

The ‘techniques’ will be very similar, but you have to find the techniques that work in your area. A Subject-To type of deal may work very well in an area with $20k homes as maybe the owner just wants to get rid of it. If you think about it, these types of homes have a value less than most people have in their car values. :slight_smile: But a Subject-To deal may not work well with $500k homes if the owners have more of a fear of you actually making the payments. It will have to do with the motivation of the seller and their fears, and the buyer/investor’s calming and negotiating skills.

You will need to determine what areas of investing you like the best and start to learn a method at a time. Learn the ins and outs of it so you know it well, and keep learning other ways to also purchase. When you run across a seller who you can’t help, try to pass it on to another investor in your area who may be able to help.

Home equity loan to buy properties? Yes, that is one way to buy and to get funds, but make sure you have all your investing decisions making money so you don’t lose your own house in the process.

Your husband has questions? Excellent! It makes you sharpen your skills so you will have the answers. If your husband is asking, you may have sellers asking some questions too. Know your market area, and know your techniques and skills.

How much risk in flipping when you don’t have a buyer? That risk should be assessed before you purchase. If you know of buyer/investors in the area who look for a certain type of deal, then keep your eyes out for those type of deals. If you find a good deal, ask around to other investors if this is the type of deal they would do. You don’t want to buy a run down property real cheap, but have nobody to sell to.

Try to network with others in your area, maybe look to see if there is a club local so you can meet other investors in your area.

Re: Just Starting Out - Posted by Joe M.

Posted by Joe M. on February 16, 2002 at 17:54:29:

Conservative but effective, great way to start out Troy. You said you pulled out 22k on a home equity loan. Is that the same as refi’ing as far as seasoning issues are concerned? happy investing!

Re: Just Starting Out - Posted by wpage

Posted by wpage on February 14, 2002 at 11:17:10:

There are risks in every new business.You don’t have to be afraid to invest in real estate as long as you have all of the information on the deal before you make the offer.Decide what type of property you want to buy…sfh, duplex, etc. Never buy vacant land. There is no cash flow.Learn the value of homes in the area you want to invest. Talk to agents.Find one you are comfortable with. No pressure saleman.It doesn’t mean you have to buy with your agent now, but maybe down the road the agent will have a deal and will call you. Get comparables.Look at many houses to get to know values. Go to open houses.Find out the interest rates and how to calculate a payment.I would not start out with the idea of doing flipping. Many things can go wrong with flips. Start out looking to buy a straight deal. Put your financing in place. You will need a minimum of cash for sure, despite what all the gurus will tell you.My personal favourite investments is to buy a sfh in relatively good condition,(no major repairs to do)one that may only need cosmetic repairs like removal of wallpaper and some painting. After I buy I turn around and l/0 to a t/b for 18 to 24 months, with a revenue covering PITI and maybe $150. to $200. cash flow per month.Take a good deposit up front (5% to 6% down) and put all of the responsibility of minor and major repaire on to the t/b. Easy management, nice cash flow, and an exit strategy with no commissions. lol