Real Estate investing given current financial position? - Posted by Brian V

Posted by phil fernandez on December 19, 1999 at 19:18:51:

If building wealth is what Brian wants to do, I’d say that he should use his $1,500 to invest ( probably Lonnie deals ), rather than buy himself a house to live in.

A consumer house is a money pit which Jim has already explained. Property taxes, insurance, repairs and more repairs. Where’s Brian’s money coming from to pay for these items. Looks like an alligator to me.

Brian has to live somewhere. How bout if he finds a cheaper place to rent and perhaps rents out a room to someone in the cheaper rental. He’s probably going to be living for free.

GL your idea of buying an apartment and living in one of the units has some merit.Jim might disagree.

All in all, Brian will have ample time to buy his own house down the road. Right now he should be concentrating on building up his war chest.

Real Estate investing given current financial position? - Posted by Brian V

Posted by Brian V on December 19, 1999 at 01:53:25:

Hello. I’m 22 and I recently graduated from college; I make 35K a year. Obviously this isn’t very much money. I am single and without extravegant expenses and no credit card debt (300/mo education loan, 280/mo car payment, 600/mo rent, 150/mo groceries,and 120/mo utilites). I roughly have 500 left over income each month that I divert to different accounts like vacation fund, mutual funds, savings, etc. I really want to get started in realestate, but I don’t have a lot of money–maybe 1500 saved. How would you recommend I get started given my financial condition. I feel that I’m wasting my money paying 600/mo to rent, but my lease won’t be up till June with a 1.5K penalty for breaking. Any suggestions for converting my current stable (but low income) financial status into a real estate money making cash cow that can eventually replace my job (I’ll always have my Bachelor degree)?

Thank you,


Re: Real Estate investing given current financial position? - Posted by AL

Posted by AL on December 20, 1999 at 17:31:47:

BRAIN,as youve already found out this is an excellent web site to help you get on the right track.It is also quite refreshing to know of someone your age want to break free from the rat race!If I can add just a bit more advise.THERE is a great game out called CASHFLOW 101(its pricey costing $295.00 but beleive me it is worth it!)you can find it at`ve been a full time real estate investor for 2 years now, got the game 8 months,and it has open a new way of how to approach my finances.JPiper hit it right on the head DO NOT ACQUIRE ANY MORE NONINVESTMENT DEBTS!WORK ON GAINING KNOWLEGE AND THEN TAKING ACTION.Also use this great site to answer any questions.One more thing look to join a local real estate investment group.Hope this helps.

Re: Real Estate investing given current financial position? - Posted by SCook85

Posted by SCook85 on December 19, 1999 at 10:25:41:

I don’t have much to add after following JPipers great advice.
However I would like to say that compared to many who want to get involved in investing you are in great shape. Many of us start from a hole with bad credit. Maintain your payments, and take it one step at a time. You will do fine as long as you take action.


Re: Real Estate investing given current financial position? - Posted by JPiper

Posted by JPiper on December 19, 1999 at 09:45:32:


So we?ve finally reached the point where $35,000 isn?t much money huh? I remember a book that I read back in my early 20?s?. ?How To Become a $25,000 a Year Salesman?. I remember thinking I?d really have it made if I could just make $25K. Times change huh?

I?d start by understanding that you?re standing at the threshhold of the rest of your life. (Of course I guess we all are, but at 22 you have most of your life ahead of you.) What?s important right now is NOT to buy yourself a house to live in so that you don?t ?waste? rent. What?s important is to set a foundation for the rest of your life.

You may have thought that was college?..but really what that foundation should be is education, information. ?Know-how? will get you farther in life than any single thing that I know of. To educate yourself I would read ALL the free information available on this site?.How To Articles, Money Making Ideas, Success Stories. Once you?re through reading all this?.READ IT AGAIN. Read the Newsgroup every day.

Go to the library. Check out every book on real estate. READ THEM.

When you have completed this you will have some ideas on what interests you. My suggestion would be that whatever that is should be something that will put some cash in your pocket. That might be wholesaling, it might be lease/options. But whatever it is, it should involve putting cash in your pocket for now.

Whatever that is, I would buy a course on that subject. Once I had studied that ONE course, I would get out in the field and make a deal. It?s really that simple. Nothing about real estate is rocket science. You don?t need 10 courses. One course, one single idea, will get you started.

As a caution?.if you?re one of those people who think you have to reinvent the wheel?..DON?T. Just do one thing that has worked for someone else?and do it well.

Don?t bother getting a loan and paying it back in three months. You?re already establishing credit with your student loan and car loan. Make sure you pay them on time?.no late payments at all. Keep your job?it sounds like a good beginning to me. Continue to save your money.

At your age it?s kind of fun to create some fantasies. Let?s imagine that you learn how to acquire real estate. Let?s imagine that you acquire 12 houses in a year? a month?..and that you do something with these houses that create $200 per month cash flow. After one year your income is $2400 per month. After 2 years your income is $4800?..which surpasses your current income from your job.

In 10 years?.your income is $24,000 per month. You?re a ripe old age of 32. At that time you will have 120 houses. Now here?s what?s fun?..imagine that each of these houses had a 30 year mortgage. By the time you?re 52?.just a couple of years younger than me? will have 120 houses free and clear.

Let?s say the rent at that time is $1000 per month per house. You?ll be making $120K per month from the houses that you bought in the first 10 years of your career.

By the way, you don?t have to stop buying houses when you?re 32. If you don?t?the numbers just get bigger.

But step 1 is knowledge. Step 2 is action.

By the way?I wouldn?t buy a house to live in right now. Devote your time, energy, and money to knowledge?.plenty of time to acquire a house to live in. For now, don?t worry about consuming?worry about investing.


Re: Real Estate investing given current financial position? - Posted by A-FL

Posted by A-FL on December 19, 1999 at 02:25:56:

There’s always hard money loans. You’d be surprised how many lenders are willing to do this.

Re: Real Estate investing given current financial position? - Posted by GL

Posted by GL on December 19, 1999 at 13:34:05:

Hi JPiper

You have some good ideas there. I think we are approaching Brian’s question from 2 different perspectives.

I am suggesting he should own his own home to live in, if he never buys another piece of real estate in his life. Everyone should own their own home.

If you are going to own your own home you should buy that first little house as young as possible. This is so obvious for so many reasons I will not insult your intelligence by listing them.

Now having said that, once Brian buys his house and perhaps fixes it up if it needs fixing up, and gets used to being a homeowner with its advantages and its problems, it will be time to decide if this is something he wants to go into more seriously. Real estate investing is not for everyone.

With the knowlege and experience he has gained it will be possible to make much more informed plans and decisions.

Re: Real Estate investing given current financial position? - Posted by Brian V

Posted by Brian V on December 19, 1999 at 11:25:07:

Thank you for breaking my situation down…it sounds like you understand my position quite well and have encouraged me tremendously! I have already ordered a comprehensive course that should be sitting on my doorstep when I return from vacation in January. I have been reading the newsgroups and articles here as well as going to Barnes and Nobles and reading some of the books there–they are great because of their “free to read” policy and I have actually purchased books from them so I don’t feel bad–but there is a lot of current information. Thank you all for your support, this is truly a unique bunch of people that visit this site…I hope that in the next year to come I will have added success and knowledge that I can pass on to the next guy or gal.


Re: Real Estate investing given current financial position? - Posted by GL

Posted by GL on December 19, 1999 at 08:39:50:

Start by buying your own home. It is not too soon to start looking if you will be able to maove in June. I assume you will be living in the same area for at least a few years, you will not be taking a new job onthe other side of the country?

Learn about real estate,from this site. Start looking at houses, going to Open Houses, talking to real estate agents, reading your local real estate ads.

Work on your banking relationships. Get to know your bank manager, take out a small loan and pay it back early. Then take out a bigger one and pay it back early. Like borrow $500 for Christmas presents, keep it until January and pay it back.

Look for a good deal but do not be blinded by a cheap bargain. Before you buy ask yourself "Could I be happy living here for the next 5 years? "

You won’t necessarily stay there for 5 years but that is the idea. Don’t buy something you hate because it looks like a deal. It will only drag you down and bum you out and make you sell too soon for too little money.

Do these things and you should be able to find a deal by June. If not DON’T PANIC. Take your time and don’t buy the first thing that comes along. It is more important to get off to a good start, it doesn’t matter if it takes a little longer to find the right deal.

You should have no trouble if you learn and apply some of the creative techniques discussed on this site.

Re: Real Estate investing given current financial position? - Posted by JPiper

Posted by JPiper on December 19, 1999 at 14:16:20:

I understand that you?re suggesting that Brian ?should? own his own home. Frankly, I completely disagree.

I think Brian should avoid homeownership like the plague right now. While I think we all know there can be certain benefits to homeownership?.we should all know that there are certain disadvantages as well. Houses require repairs. Repairs cost money?.sometimes a lot of money. Houses require time?.time to mow lawns, shovel snow, trim hedges, etc?.unless you hire it done. If you hire it done?it costs money.

In short, houses are a type of consumption?.they become consumption of money, time, or both.

When I answered this question I assumed that Brian wanted to become wealthy. If so?.in my opinion?the VERY best direction right now is to DEVOTE ALL his TIME and MONEY to becoming wealthy?..and to devote as LITTLE as possible toward CONSUMPTION.

If Brian wants to become wealthy he doesn?t have TIME to mow the lawn. He?s working one job, and pursuing real estate in his spare time. That leaves no time to mow lawns, shovel snow, fix the house, or watch TV in a finished rec room. If Brian acquires an asset?he will cover the cost of that asset with a tenant/buyer or other?.who will pay for the asset with HIS MONEY and HIS TIME FOR BRIAN.

Brian has PLENTY of time to acquire his first house to LIVE IN.

Matter of fact, maybe Brian should move to a cheaper apartment?or take a roommate. $600 sounds high to me (depending on where he lives). Money and time should be directed and focused on one single goal?building wealth. There?s time for the comforts of life later. The time to be UNCOMFORTABLE is when you?re young.

Just my opinion.


Re: Real Estate investing given current financial position? - Posted by GL

Posted by GL on December 19, 1999 at 15:24:12:

How does it make sense to shell out $600 in rent when he could be using that same money to build equity in his own home? In many parts of the country it is possible to buy a cheap house or condo townhouse and spend $600 or less on PITI(Principal Interest Taxes and Insurance).Your ideas only make sense if he can live somewhere for free.

Here is an even cheaper idea. Buy a Lonnie Scruggs mobile home for $1000 cash. Spend $2000 on new carpet paint etc. You can doll up a mobile quite nicely for a small sum of money. Now he has his own home, all paid for in cash, which he can show on his financial statements as a $7000 asset. No grass to mow etc. if the park takes care of it. Lot rent $150 month leaving an extra $450 for investing.$450 per month on a $3000 investment is 180% a year.

Too expensive? Why can’t he own his own home and live in it for free? Buy a big house like a 5 bedroom 3 bath . Advertise for roommates to share. Charge enough that the other 4 pay all the expenses. At that rate they are getting a good deal to live in a luxurious house and Brian can live there for free. Plus get tax writeoff, appreciation etc.

We haven’t even mentioned buying an apartment house and being your own live in manager. Get a good deal and the positive cash flow can easily give you a free apartment on as little as 6 units, maybe even 4.

I don’t recommend these to a first time home buyer, except the first 2. I mention them to show it is not false economy to buy a house to live in. If you need to live somewhere and pay rent it makes sense to pay it to yourself. And if you know how to work it you can live very cheaply or even for free. Let’s see you do that as a tenant.

Re: Real Estate investing given current financial position? - Posted by JPiper

Posted by JPiper on December 19, 1999 at 17:20:13:

?Your ideas only make sense if he can live somewhere for free.?

Really now! My idea was really that bad?!?

Frankly I think you miss the entire point. So let?s see if I can say this somewhat differently.

If Brian?s objective is to build wealth in real estate?.in the beginning his objective should be to conserve his cash. He will need this to educate himself with. Later, he will need his cash to market himself. He may need some modest cash to use to close transactions with. In short, if he SPENDS his cash now for a house to live in, he will have set his start back?not forward.

Here?s what I?m proposing. Brian doesn?t have $3K at the moment?.so your idea doesn?t work. But he does have $1,500. Now he has an option. He can SPEND this on a MH to live in (if he wants to live in one). OR he can INVEST in the same MH?.sell it for $7K?.$500 down. He finances the balance over 36 months, 12% interest, payment of $216. He borrows $3K against this $6500 note at 15% interest for 36 months?.$104. This gives him net cash flow of $112 per month?.plus $3,500 in his pocket.

Now with luck, maybe Brian can go buy two more MH?s?.for $3K total?and do this all over again. At the conclusion of this he now has 3 MH notes (net equity $10,500), $7,500 cash, and $336 in net cash flow (if I figured this all correctly).

Meanwhile using your advice, Brian is now saving $450 over his rent by living in a run-down MH. He can?t fix it because he doesn?t have that $3K you spoke of. So after 4 months he finally SAVES up enough money to go SPEND on that carpet and paint you spoke of.

I think it?s safe to say that Brian?s financial statement looks significantly better if he does NOT buy a MH to live in, but rather, INVESTS his money in KNOWLEDGE, MARKETING, ACQUISITION, etc. These numbers are going to be even more dramatic if we compare this to your idea of buying a $50K house.

Keep in mind I?m not saying NEVER buy a house to live in. I?m only saying concentrate on investments first, not consuming your money.

By the way, at this particular level, there is no tax advantage to buying a house. And in the beginning stages equity will build at only $40 per month or so. So what you have left is appreciation?.and amount that needs to be offset by the cost of repairs.

Again, this is just my opinion. Others may have different views for Brian, as you do?but the numbers above illustrate one way to build wealth?and it doesn?t start by buying a home to live in.