Here’s where I got the idea…was he wrong? - Posted by Rock
Posted by Rock on April 24, 2000 at 16:53:01:
I agree with you and the others that responded that leveraging is the way to go and I should use other people’s money. However, at my last investor’s club meeting I was having a discussion with a fellow investor who only does conventional deals (he has wads of cash I guess) who brought up these points to me. This started me thinking that maybe I should go the conventional route to start. Here’s the basic points he made:
-
He said it’s better to find a good rental home in a good area that will rent easily rather than buying a home from a motivated seller in a bad neighborhood that stays vacant. Thus his point was to concentrate on finding well located properties that will rent out easily. He said I’d have less tenant problems, which leads to less damage and more profits.
-
He said to consider the time, money, and effort that I will need to expend in sending out fliers/postcards, and placing hundreds of phone calls with the hopes that I find a motivated seller who will sell on non-conventional terms versus making an offer on a well located property using a conventional deal. He said even if I put down $20,000 and have a $200 a month positive cash flow, that would be a 10% return. Yes, he admits that finding one motivated seller might net me a 30% return or more but he said he would rather buy 5 houses in one month with a 10% return on each of them rather than wasting time trying to find that one “steal of a deal” that could take longer. His point - 10% on 5 houses in one month is better than 30% on 1 house over a 3 month period.
So, that’s what had me thinking of putting my $65K into conventional deals instead. I haven’t decided yet - the posts I’ve received have me thinking that maybe the advice I received from this guy was way off. Keep the advice coming - I’m learning from all of you.