Posted by Nate on March 24, 2001 at 18:58:51:
Take out the NOSPAM.
NT
Yet another series of questions - Posted by Randy (Ohio)
Posted by Randy (Ohio) on March 24, 2001 at 11:50:39:
Hello all. I have some questions and I am sure that you are all really sick of some of these as I know they have probably been asked before… Please forgive me.
I am totally new to investing in real estate and was wondering what your opinions are of my situation and goals. I would like to do this full time eventually as I find real estate overall fasinating. My short term goal is to replace my 33k per year income within a few years as I know my company will be laying me off in about 2 1/2 to 3 years. Long term goal is to pay off my mortgage of 84K in 5-10 years. Is this a realistic goal to try to replace my income by investing in real estate, especially with a slowing economy. THat leads to the next question. How does real estate do during a slow economy or recession. Now on to the questions that I know that you have been asked before…
What should I do to get me started toward this goal of replacing my income and becoming a full time investor.
My credit history is not bad, but not good…I make 33k per year and my wife makes 20k per year…(her credit is on the bad side…she had a defaulted student loan. I was able to buy my primary residence, but I had to get an 80% LTV 11.12% sub prime loan to do it…but I did it… I don’t have access to a lot of cash… I do have some credit with a hard money lender (Beneficial)… I know that a lot of you are full timers and it appears that most of you are very successfull… and I know that you all started someplace… I guess I am just asking for some experianced advice … how should I start…what would you do in my situation, and are my goals reasonable…THis is a scary thing…but after spending some time reading through all the sections you guys and gals are having a blast…LOL… I would appreciate any comments or sugestions… I live in the Canton Ohio area… if that helps…hehehe… again thanks
Randy
Re: Yet another series of questions - Posted by Randy (ohio)
Posted by Randy (ohio) on March 26, 2001 at 13:09:13:
Thanks a bunch everyone for your advice… I am sooooo glad I found this place… This is a scary thing and I have to just get out there and get me feet wet…I have been reading and studying… but that won’t make me money… I guess it is time to start using this education… thanks again…
Randy
Terry V…Long, but for the How-To archives… - Posted by Bill Gatten
Posted by Bill Gatten on March 25, 2001 at 15:07:33:
if you wish…
-0-
Randy,
Someone will undoubtedly presume that I’m advertising here…but given the eight or nine blatant advertising posts above, maybe not. In actuality, the following is a (real and honest) full free (albeit short) training course for someone like yourself, who may be looking for singularly the easiest, safest, least expensive and most comfortable way to make BIG money in this business?and a way to keep it once your get it.
All the advice you?re likely to get re. your post by folks other than myself (or my multitudinous minions) will have to do with starting out with flips to get that seed money going. Them Flips is reel simple…you merely buy a property for 60 cents on the dollar and sell it to someone for 70 cents on the dollar (they hve to make money, after all): and after 10 or 20 of these, you have bucks in the bank (if you haven?t found anything to spend it on yet).
Does Flipping work? Yes, of course. Does it work often? Well?according to those to sell courses on the subject, the more you try and fail, the better you get at it. And, of course, these properties are out there by the thousands just for the taking ?and you?ll get really rich this way at about the same time I get to mud wrestle with Cindy Crawford).
Is there a better way? Yes! How about flipping and ?holding? at the same time (i.e., having you kayak and heating it too)?and doing it all with properties that can have little or no equity in them (s?pose there might be more of those around than the 60 percenters? If you can make thousands on them, do you cre how much they have in them? Does IBM stock have ay equity in it when you buy it?
In other words: you can acquire a property and flip half of it to a resident (would-be buyer), who agrees to live in it and make all the payments, handle all maintenance and cover all repair costs for you…AFTER having come into to the deal with as much (usually more) money in your pocky book as you’d have made on most Newbie Flips (I always wonder why someone willing to work so flippin’ hard for months on Flipping for peanuts doesn?t just spend 2 weeks at night school with C-21 and get a real estate license…and make some ?real? money?without taking all the risks and having to work so hard).
How zit done, Bill?
OK, well, I?ll ?splain it.
Go find a ?motivated? seller (foreclosures, BKS, divorces, estate sales, tax liens/sales, ?Don?t Wanter landlords, FSBO?s, abandonments, disrepairs, etc.).
Your ads and correspondence say ?I Buy Houses. Full Price…All Cash or Terms. Nothing too old, upside down or ugly.?
When the calls come ion, if the seller wants all cash, you THEN offer is 60-65 cents on the dollar and you get a Hard Money Loan to cover it (I?m getting hard money here in So. Cal for 10% and 4 points at a 70% LTV, believe it or not). There is no qualifying or credit required in a true HML. It works like a pawn shop for real estate: they give you the money and couldn?t care less whether you ever pay them back or not?they do just fine either way.
If the seller would rather have a full price offer, then it?s all ‘terms.’ He or she stays on the loan for you, and five (10?) years later (when the property is sold or re-fi?d) you give them the equity they’ve been carrying.
If they wants cash AND are willing to carry some, you get the HML and agrees that the rest will be forthcoming when you sell the property at term (save that one for the last, however). If they want interest on the amount they’re carrying, that?s OK too, if it doesn?t run your payments up too high: but save that one for the really, really last.
In your offer, you agree that you?ll cover all the closing costs and any refurbishment costs: unless there is minimal, no, or negative equity: in that event, then they pay all or part of the costs of getting the thing off their backs (i.e., they pays YOU to take it).
In the beginning, you take control with a Option (so that if you can?t find a taker within, say, a month, you can just forgo the option and back out: no harm, no foul). When the buyer is found, then you execute the offer along with you new “partner.” This saves those butterflies in the lobster pot when the prospect of not being able to find a buyer before your first payment is due overtakes you.
Next, you advertise for a buyer.
NO DOWN, NO CREDIT APP, NO BANK QUAL
3 Pmts & Clos. Costs moves you in
$150K 3+2 w/pool. Only $xxx p/mo.,
- tx & ins. Call: xxx xxx xxxx
When the buyer answers your ad, you say: "If you can afford the $xxx in up front costs and the payments of $xxx, I’ll just give you the property (pause)…the only thing I want out of it is to have you put the loan in your own name or sell it a few years; and, at that time, if there’s been any appreciation, I’ll just split it with you.
??What? You don’t like the split idea? No problemo (pardon the Spanish lingo there)…instead of the $xxx up front, then, you can just come in with twice that amount. All the other terms remain the same. Oh , I see, the split idea sounds better now? Either way is fine with me: I go both ways (so to speak).
Now…let’s assume it’s going to take $7,000 to get the property. In that case, it turns out that those “3 pmts and clos. costs (in your ad)” just happen to come to?um? $12,000 (putting a free house and $5K into your pocket book)
Also…if you acquired the property at $135K, you set then set the MAV for your buyer at $150K, assuming that’s not too far above FMV (?you?ve already made $20K and haven’t spent a dime yet).
Next, if the payments are, say, $1,150 per month, your buyer pays you $1,350 per month: over five years that?s another $12,000 ($32,000 so far on a free house that you got without bank qualifying, down payment?or payments even)
At the end of the transaction when the property is scheduled to be sold or refi’d: if it were to have increased in value by, say, $20,000 by then…you’d have another $10,000 coming to you (that?s $42,000 so far?how we doin’?).
And, too, if the loan has paid down by $5,000 over that period, you have another $2,500 coming to you becasue of your split arrangement.
Now…think about it: Is $45,000 profit worth the effort?especially if you were to do, say one of these a month for the next five years, would your income tax bracket be altered at all. Would you be glad you didn?t flip all those property for a piddly four or five thousand buck up front?
How do you do all this without violating a due on sale clause, without risking any money up front, without subjecting the property to anybody?s liens, suits, marital dispute actions, BK, Probate, etc.? Without double Escrows, lender seasoning issues, negative cash-flow, vacancy risks, etc.? Oh? just by use of the PACTrust.
Come by an see us in Atlanta (at the CREO convention). We?ll talk. Or you can click on the banner ad above (click ‘Refresh’ a few times if its not showing at the moment) for a ton of free info, workshop dates. Etc.
Here’s how diffcult it is:
- Find an over the barrel seller
- Find an over the barrel buyer
- Put the property into he PACTrust
- Stand between them and collect the money until the trust terminates and property sells…then collect some more
Hill Gatten
Re: Yet another series of questions - Posted by BillW
Posted by BillW on March 25, 2001 at 11:29:23:
Randy, Congrats on your approaching freedom from the j.o.b.
To answer some of your questions:
Replacing income by real estate investments in a slowing economy? Yes, it’s a good way. No matter what the economy, someone is always making money and someone is always losing money and investment situations are always around. You just have to find them. ( Kind of like going on a cruise ship. Someone’s always making enough to go on these things, it’s just that the passanger list keeps changing.)
How does r.e. do in a slowing economy? Same answer. Less people can afford it, but there are always people who want it. That’s where being creative comes into play. Buy from people with problems and sell to those who have solved their problems.
How to start?
There are lots of ways, but I’d start looking around for properties that I could put options on and then flip to rehabbers. If you have a full time job, it’s hard to rehab houses in your spare time. You usually need to get contractors involved (not really a problem, but more cash is needed, or at least the accessability to it). With options, you need only put down a small option consideration and then you control the property. Build a list of rehabbers and when you get one under option, call them and flip the first few. Use the profits to clear up your wife’s and your credit. Then pay your loan down and refinance for a lower rate. Once you’ve reduced your expenses and cleared up your credit, then you can explore other ways to do deals. By then, you’ll know some contractors, so do a rehab or two. Sell the ones in marginal or bad areas, keep the good ones and rent or lease/option and keep moving. Create a number of streams of income to replace your present salary and your wife’s. You might think of the mobil home deals like the ones on this board.
Above all, get yourself well informed as to how to structure and do these deals. Start slow and ask lots of questions. Get some courses in what interests you so you minimize the mistakes.
And, most important, get started and don’t procrastinate.
Good luck and keep us informed.
BillW.
Re: Yet another series of questions - Posted by TJ
Posted by TJ on March 24, 2001 at 18:15:37:
I’ll tell you how I got started. But mind you this is just an exapmle since there’re countless ways.
I had a regular job which gave me enough to live on. I bought a VA foreclosure duplex (0-down/assumable loan). It was a vacant fixer, ugly as h*ll, but with possibilities. My wife and I rehabbed it, rented it and quickly got a second. We put the money right back into investments and just kept doing that. Knowing I’d eventually want to quit my regular job we alternated fixers with apartment building purchases to build a steady income. Now we have a sufficient income from the apartments alone, and it’s a nice feeling. I absolutely recomend you keep your day job until you’re very well-established in the RE. There’s two reasons for that. One is that it allows you to re-invest every dime you make in RE in a continuous cycle while living off your job. It’s amazing how your assets grow when you do this. Second, when you seek loans, at least from conventional sources, they really like to see that steady job on your loan-app, regardless of how well your RE investment is going. Good luck.
Re: Yet another series of questions - Posted by Nate
Posted by Nate on March 24, 2001 at 18:03:09:
If you are in the Canton Ohio area I can offer a piece of advice never to become involved in any way with the several people there with whom I had a bad experience.
I do not want to post names publicly or slander anyone on the board, but if you email me privately I would be happy to talk about my experience with you.
Nate
Re: Yet another series of questions - Posted by Randy (ohio)
Posted by Randy (ohio) on March 24, 2001 at 18:13:27:
When I try to send you email it is coming back… what is your email address?