Posted by Alex on May 15, 2006 at 16:10:42:
Jimmy, thanks a lot for sharing the details!
Alex.
Please No B.S. Need Serious Help (experience only) - Posted by Fritz, FL
Posted by Fritz, FL on May 13, 2006 at 05:34:31:
I am going to be straight to the point.
75k + student loan debt plus other, NO MONEY SAVING.
I am very interesting in Commercial RE (dream big)
I can afford some home study course.
After reading a lot of the posting on CREONLINE and
other Commercial RE forums, I’m starting to get discourage
because of my financial situation and that I get the impression that without 10 -25% down payment and excellent credit no ones would take me serious.
Should I be looking else where to make money.
I know some Gurus would like you to believe NO CREDIT, NO MONEY, NO EXPERIENCE ARE NEEDED.
NO B.S. PLEASE, I WANT TO HEAR FROM THE PROS THAT
HAVE BEEN IN THE BUSINESS FOR A LONG TIME.
PLEASE HELP.
Thank you in advance.
Fritz, FL
Re: No B.S. Need Serious Help (experience only) - Posted by Invester-Mo-Lester
Posted by Invester-Mo-Lester on May 22, 2006 at 12:56:52:
Just a tip: Some people on this site might get offended if you post things like “NO B.S. PLEASE, I WANT TO HEAR FROM THE PROS THAT
HAVE BEEN IN THE BUSINESS FOR A LONG TIME.” multiple times. It implies that most of us here are fly-by-night folks that don’t know what they are talking about or that while others on this site are giving bad info, you deserve the best. Try being a bit more professional when asking for advice.
Stay Positive - Posted by Jimmy
Posted by Jimmy on May 13, 2006 at 08:32:02:
As you have learned, cash is critical. I don’t care what the gurus say. There is no substitute for cash. With that said:
-
There are sellers out there who will not care about your financial profile. They have a problem and want to make it someone else’s problem. Be that guy. Learn how to convert problems into little nuggets of gold. good management skills is one way. rehab crews is another way. develop construction skills and DIY.
-
Start working on your financial situation now. Get the debt paid down. Cut your lifestyle budget. Here’s a test question. What kind of car do you drive? Often a telling answer. I did a seminar presentation one time for people just getting started in REI. School teachers, recent grads, lots of struggling people. At the break, I went out to the parking lot to take a survey. I was amazed (well, not really). In that lot were nice BMW’s and MBZ’s and shiny new monster SUV’s. and there was my little 1998 Toyota Corolla sitting there. and I laughed. and laughed some more. and went back in and re-directed my presentation to controlling personal expenses, building bankrolls, etc. several people bristled at my arrogance. How dare this a-hole tell me I can’t have a Roadster? My answer was this: In 20 years, would you rather be in situation A or B? Situation A is a series of nice cars, a country club membership, a fancy house,… Situation B is a more modest lifestyle, but with 20 rental properties, almost completely paid off. I’ll take B.
reply - Posted by Maya
Posted by Maya on May 13, 2006 at 08:02:09:
Fritz, you can actually start investing in commercial real estate at a very low price if you can buy an office condominium. You can get one for under 100,000$ compared to the other properties that sell for half a million and then finance it. You can also ask other investors to loan you some money. Start with your immediate family. I asked my father to invest with me and it went really well - he had the dough, I had the drive. 
Re: Please No B.S. Need Serious Help - Posted by Bill Farrand
Posted by Bill Farrand on May 13, 2006 at 05:50:16:
Fritz,
Here is one way to start investing that has worked for alot of beginners. Start with SFR rehab or wholesale and build up your capital reserve for future downpayment on multifamily 5+ units commercial property. Not as glamorous as all the hype of no money down but you will be earning $$$ while your learning.
Good Luck.
Re: Stay Positive - Posted by Fritz, FL
Posted by Fritz, FL on May 13, 2006 at 14:14:59:
I have a 1992 BMW 525I, 163k miles (run great) that I paid $1500 from my best friend, and have no attention of purchasing another car in the near future, until things start to fall into place. I am in the process of calling my creditors and negotiate my debt
I will stay positive
I’ll forever be grateful, for your input and your help Jimmy.
Thanks again
Re: reply - Posted by Fritz, FL
Posted by Fritz, FL on May 13, 2006 at 14:03:07:
I’m grateful for your input Maya.
Fritz
Re: Please No B.S. Need Serious Help - Posted by Fritz, FL
Posted by Fritz, FL on May 13, 2006 at 06:40:01:
Thank you kindly for your advice Bill.
Re: Stay Positive - Posted by Jimmy
Posted by Jimmy on May 14, 2006 at 10:00:16:
a few more thoughts:
-
you will not be attractive to banks at this point. but keep working on your issues, and your profile will improve. In 1992, I got canned from my job, has $20,000 in life savings, and about $45,000 in debt. a new wife and new Ford Explorer. looked pretty blique. by 1997, all of the debt was paid off, and I squeezed myself into home #1 (148K in Northern Cal. 50K down, and had a hell of a time getting qualified for a stinking 100K mortgage. but I got it). traded up 2 years later. [I wish I had been able to keep home #1, because it is now worth 550K. but it enabled me to get into home #2]. by 2000, I bought my first rental units (NOT in Cal). By 2005, I was up to 65 units, and I as able to leave CA and devote all of my time to my properties. The Point: This stuff takes time. But if you are committed, dedicated and disciplined, you can reverse your problems. Things seem to move slow at first, but they can take off in a hurry.
-
Look out for predatory sellers trying to take advantage of the legions of cashless Carlton Sheets devotees. Cashless buyers have no bargaining power and these sellers know it {I am one of these nasty people). Example: I have a duplex I want to sell in June. I’ll sell it to a cash buyer for 40K. ot to a cashless NMD person for 45K. 1K down to cover closing costs, 44K on a note. 30 yr am/10yr balloon/9%/$354.03 monthly payment. place fetches $650 in rents. 1400sf frame duplex built in 1950’s. decent shape. If this market advances, the deal will be a winner for the buyer. If the market falls back, or there are periods of high vacancy, I will likely get the property back. its in Nacogdoches, TX. and you can use the curerent manager if you want.
The Point: I am not terribly concerned about the financial profile of my buyer. The elevated price and interest rate compensate me for the higher risk. and taking back properties in TX is easy. takes less than 30 days.
Re: Stay Positive - Posted by Prashant
Posted by Prashant on May 14, 2006 at 16:03:41:
Jimmy, thanks for an inspiring story. I’m in SoCal and I see no possibility of buying anything at a decent cap rate. I saw a couple of postings for properties in TX with a cap rate of 10%+. Is a 10% cap rate is normal for TX? Or are they overpriced there too? I’m sure you must have seen up and downs in the real estate market. Would it make sense to wait for the market to cool down or are there places which are still reasonably priced?
Get Away from CAL - Posted by Jimmy
Posted by Jimmy on May 15, 2006 at 07:32:12:
Coastal California will present you hugely negative cash flow. If you have the ability to carry the property for an indefinite period of time, you will do well on CA> all the action is on the backend. It is wrong to say that CA real estate is no good. People have made millions and millions there. but they do not make their money in rents.
Other places are more “normal.” By normal, I mean resale values are more in line with underying rents. I can’t speak for the rest of the country, but certain places in TX work nicely. I happen to like a particular part of East TX (Longview, Tyler, Jacksonville, Nacogdoches).
I do not focus on cap rates, because I do not buy “finished” properties in retail condition. I buy problems, remediate them, add significant value, get them rented up, and hold most of them. I like to buy stuff as cheap as possible. I do this by looking for (a) sellers who want to unload 5-20 properties at a time, (b) properties rented well below FRV, (c) properties in distress–neglect, need major work (d) sellers in distress even better.
The Point: I would rather invest 65K and have an asset throwing off $1500 a month, than to buy that same asset for $120K. Example: I just bought a brick 4-plex for 15K. uninhabitable, but structurally solid. I stripped it down to the studs, joists and rafters. replaced everything. I mean everything. will finish up in about 3 weeks. when finished, I will have another 35K in it (50K in all). It will rent for $375-400 per unit. I could sell it at that point for 120K or so.
The Point: Go upstream. Don’t buy retail. Doing this will give you two “outs” for each property. You can flip it for a quick profit, or hold it for significant cash flow.
Re: Get Away from CAL - Posted by Alex
Posted by Alex on May 15, 2006 at 12:14:30:
Jimmy,
Unless I’m missing something, you said that you live in California, and yet, you invest in fixer uppers out of state. I’m not new to out of state investing, I too, live in Nothern California and I have a 10-unit in Georgia, and now I’m getting close to having a contract on another 14-unit property out of state. I always liked the idea of having something fixed up, but how do you do such a major work long distance? Do you go to location and stay there until it’s all done? Would you share your methods?
Thank you in advance!
Alex.
You Got It Right - Posted by Jimmy
Posted by Jimmy on May 15, 2006 at 13:55:39:
I built the East TX portfolio while living in Northern Cal. I have since moved to Austin, which is a 4-hour drive to my properties.
The guy who got me started is a client/friend and a contractor. I had the ability to do rehabs from day one. Most people will not be so lucky, and will have to develop their network of contacts. All you need is one good GC, because he can bring in all the other skill sets.
For most people, the first 1-2-3-4 deals will necessarily be retail/finished properties. Mine were. I still own them. They are decent performers, but not nearly as good as the stuff I rehabbed later. But the first deals got my feet wet and my enthusiasm up.
I have two primary GC’s. One covers Tyler and the other covers Longview. I trust both of them. Their work is good, fast and very reasonable. Both understand the difference between preparing a property for rental and preparing for resale. Both were referred to me by people I know and trust. I can handle most business on the phone. I do visit at critical points in time. Obviously, I visit before I buy. and I have a pretty good idea of what I need to do to the property. That is really the last time I need to be there. But I usually visit again when the work is done, just to check it out.
These guys find me deals !! They know they will get to do the work. no finder’s fee. no commissions. and they do not limit themselves to listed deals. Ever had a broker bring you a FSBO???
Bottom Line: to do this from afar, you have to have good people at the location. A well-rounded construction type is your ace in the hole.
Re: You Got It Right - Posted by Prashant
Posted by Prashant on May 16, 2006 at 02:45:41:
Jimmy, thanks again for the excellent information.