BiggerPockets

I'm trying to buy a cash-flow property that I can hold for a few years, while a tenant pays the mortgage and a few dollars profit every month.

Recently, i've hit a road block in my search for the first investment property. Conflicting information of where to find deals. I've been using realtors to see homes on the MLS, but i've heard people saying that:

MLS listings aren't good deals, or there's too much competition
Sheriff's sales are bad for the novice buyer
Pocket Sales/Exclusive sales are hard to find
Local connections...I've been to a local RE meeting, and all the wholesalers seemed like sharks, and you need to buy cash.

I have enough money for a down payment, and IMMACULATE credit. I want a cash flow property, where should I look to find deals? MLS, craiglist, sheriff sales? I've hit a roadblock!

A few other things to consider. Since you are looking to finance your purchase, you want to check with a lender before proceeding too much further. While having good credit is important, it is far from the most important part of the equation. As Will said, you not only need a down payment, but you also need 6 months cash reserves for everyone property you own (or rent) including the property you want to buy.

In addition, the lender is going to want to see that you have enough income to cover both your primary residence and the rental you want to buy. Assuming you are in shape to do both, we can look at a couple different ways.

You could find a partner and pay all cash. This of course lessens your return, but you don't have to deal with financing.

Another option is to buy a fixer from a wholesaler that will be worth significantly more when fixed up. You can use a hard money loan (HML) which generally counts as a cash offer. When finished with the repairs, you can refinance into long term financing. A word of note on this: Depending on the foreclosure rate in your market, it may be difficult to refi as appraisers are using comps from other foreclosures often times. It is very important to make sure you are buying not only well below market but that there are recent comps (last few months/within a mile) that support your valuation.

If you have a retirement account, you can often times convert it to a SDIRA (self directed) and use this to purchase real estate although you can't touch the proceeds until retirement age.

You can also look into taking over properties Sub2 or buy doing short sales. You have A LOT of options. Don't get discouraged.

Thank you all :)

I'm interested in getting more involved in the short sale side of real estate; but before I really dive into that i'd like to purchase my first income producing, cash flow property that I can manage myself...Once that goal is reached, i'd like to re-invest in short sale flips, and wholesaling. Really learn that side of the industry and then (years from now) buy/hold some waterfront properties along the coast and southern hot spots where people vacation.

^^But that's down the road, part of the future plan :D


I'm in Hunterdon, NJ
No dependents
Have 50k available in liquid cash right now.
A steady job paying weekly
Excellent Credit.
Pre-approved for a $300k mortgage

And that's my story, i'm looking, looking, looking, but i just don't know if i'm "turning over the right stones". The idea of a HML and then refinancing is interesting. Does anyone have personal experience with this? I off to a great start w/ savings and want to keep going on the right, (profitable) path!

You are using the term "cash flow property", but you indicated you only want to hold the property a year or so. I'm not certain you have a strategy in mind that is going to make money for you...If you are looking to do a flip, do a flip and be out of it in 3-6 months.

If you are really looking to buy cash flow properties, you need to find a property that will pay off in 15 years or less and produce enough cash flow that you are at least break even. Ideally, you aren't going to have a ton of cash tied up in the property. You buy a property like this, and then another, and then another...before you know it, you've got tons of cash flow and tons of equity. But you need to decide that you will NEVER sell these properties unless you can roll it to another deal that makes better sense.

But you know what? If you buy these types of deals consistently, it's hard to find a better deal to get into.

Hi, good points above, don't forget about seller financing! Even though you have funds for a down payment and go a conventional route, that doesn't mean you should use your money.

You can also find rentals with landlords.
IMO, there are rarely good deals on the MLS listed by individual owners. You might try pre-foreclosures, dealing with the owners which might end up as a short sale. But, if I could do a deal quickly and get a good price from an individual with seller financing, I'd probably rather do that than go the short sale route, that might not end up being much less in your area.
I'd say use your funds sparingly, with 10% down and seller financing you could have half million in properties.
Another aspect of this, don't get into a portfolio of properties at first with one seller on one note, spead them around and make sure your notes come due at different times to avoid a run on a bank for several loans in one year. Just the surface of a strategy to consider. Bill

I'd like to hold a property for at least 5 years; then possibly re-invest in another area, or hold the positive cash flowing properties and create my own "pension" in 30 years once the mortgage is paid.

Why does everyone recommend not using your own money? So less of a down payment is more?

"Another aspect of this, don't get into a portfolio of properties at first with one seller on one note, spread them around and make sure your notes come due at different times to avoid a run on a bank for several loans in one year. Just the surface of a strategy to consider"

^Bill, would you mind elaborating on that?

Curt's on point with his suggestion. Just make sure you're using a reputable individual/company to buy the property from.

Why not use you're own money? Called leverage my friend, and it's the most important word any investor will ever have to know. Leverage over your competition, leverage over your property manager, and certainly leverage in the monetized definition:

"the use of a small initial investment, credit, or borrowed funds to gain a very high return in relation to one's investment, to control a much larger investment, or to reduce one's own liability for any loss."

Originally posted by Michael Quarles

...
I asked him why he thought it was a good deal if the company had to put someone on an airplane and fly them to another state to sell it when if it were a good deal they would just advertise it locally..

...

I have to agree with this - the locals are passing on some of these deals (or is that duds) for a reason. Either the numbers don't really work, or the location isn't so desirable.

The cost of a MLS property is too expensive from a pure marketing dollar standpoint...

Learning how to find deals without a Realtor is almost a must if you're looking for equity..

For sure! MLS properties are almost always priced too high for investors to make decent returns (with the occassional needle in haystack).

Think of this business as if it were a real estate business... We find deals just like agents do... A bunch of advertising, either paid for or worked for...

What we say to a seller is very much different...

Happy house hunting