BiggerPockets

OK, long story short... I bought a unit with 20% down about 5 years ago, fixed it up very nice, rented it out, paid off the mortgage note, sold it, saved up more $, and now I have just under $250,000 in my high yield money market savings account. In the midst of council there is wisdom, so how should I invest this chunk of change? I live in So Cal, I'm ambitious, I want to buy as many units with as little $ down as possible, I know of and greatly respect the 2% rule, I'm still alive; age 25, I'd like to buy and hold individual units as a landlord, I like the idea of my own LLC, I'm married with a daughter, just got a CA Real Estate Sales License, just signed with a broker who does real estate and loans, I love quality time with my family, just got out of the Navy, and I'm ready to consider all advice! What should I do? How can I maximize the # of units I can buy? Thanks for your :help: and please assume I know nothing except 3rd grade English.

Mark,

I got this GREAT investment, but you have to hurry because it will NOT last!!
All you have to do is wire your $$$ to my associate in Africa and then you should start seeing a 15% return... monthly!!

That was obviously a joke. BP is a GREAT place to gain ALOT of knowledge and network with some very smart investors who will not BS you. Having said that, I don't think it is a great idea advertising anywhere on the internet that you have $250k life savings and are ready to invest invest invest it all somewhere.

Josh and the moderators do a great job at keeping the scam artists out of BP, but still I think it's better to keep some information out of publics view.

Having said that... welcome to BP and read as much as you can on here and network, you will learn alot! Try going into the welcome forum and introducing yourself there also

rob

I personally would mix in some flips to increase that nest egg (double it in a couple years) and have even more to work with. Commercial buys (apartments if you like residential units) could be a great and viable source to not only force appreciate your investment, market appreciate it, but also deliver the cash flow you desire. The commercial market is getting slaughtered right now and will continue to do so for the next few yeras. Build up your nest egg with flips and take advantage of the commercial opportunities that will be around for you next from 2010-2012.

I can do better Mark! I can pay you 18% and I am in CA, not Africa, I am for real, and there are no scams here.
Thats $45k a year for doing nothing on your end!

Mark, you have many choices:

1. If you limit yourself to SoCal, Will's idea of fix and flips is a good one. You can also lend money to others who do fix and flips in return for a share of the profits. I have not seen any great apartment deals in CA except perhaps in the central valley. The coast seems to have very low cap rates for some unknown reason, which means your ROI is going to be very low unless you assume high rent increases, which don't seem realistic.

2. If you go to the neighboring states of Nevada and Arizona, you have more options. Again, fix and flips and funding are good options. I have actually moved to Phoenix specifically to fund fix and flippers. I have also seen apartment complexes here that meet the 2% rule. But for me the 2% rule is not good enough - I also need good appreciation potential. That is, I need a mismanaged property with lower-than-market rents and/or higher than market vacancy so that I can improve the numbers and force the appreciation on it.

3. You may also wish to consider some other categories of investments. Lonnie deals, mobile home parks, small strip malls, etc. And if you decide to venture outside RE, you can consider stocks. Stocks are actually my favorite investment of them all but I must admit that they are not suitable for as many people as RE.

4. One other investment option would be buying notes. Read the posts by Marc Faulkner here on BP. I do not know much about notes but here's what I am thinking. Suppose there's a note on a home with LTV of 80% or less. And suppose you can buy that note for 25% below face value. You now have a note in which your investment is only 60% of the value of the home. Because you bought it at a discount, your yield should be pretty decent. And if the borrower defaults, you get the house for 60% of market value, which is better than most fix and flippers can do. (I must admit that these numbers are just speculation - I really do not know enough about the notes business to give advice.)

Good luck with your strategy and keep us posted about your decision and progress.

Mark, I have not done a blanket loan or obtained a business line of credit so perhaps some of the other experts can give you some ideas.

When I moved to Phoenix last month, here's what I did do:

1. I did a quick study of all the local banks and credit unions. I am an experienced stock investor so I was analyzing them for financial strength and liquidity. If they are struggling for cash, they are not going to be able to lend.

2. I then called the decent ones and asked to speak to the person in charge of making commercial loans. I interviewed them about their lending practices, current trends in the market and their own concerns, what they look for before issuing a business line of credit, etc. I then went with the bank that I got the best feel for in terms of their lending attitude, personal rapport, etc.

3. I regularly chat with the lending officer whenever I go to the branch. He has assured me that they are going to look at my business and consider me for a business line of credit. But I am also realistic and do not expect them to do this right away.

After all this, it is quite possible that the bank I selected might turn out to have been the wrong one. But with my due diligence, I feel I have at least stacked the odds in my favor.

My suggestion to you is to create your entity (LLC, etc.), start buying your rental properties such that you have good cash flows, create a record of cash flows in your entity and then try to get a loan. It is hard to walk in and try to get a loan for a new venture. And don't forget the 50% rule for expenses!

Mark it sounds like you are a in a very good position. It also sounds like you are taking this very serious and are ready to move forward.

The first thing I would do is put together a small portfolio. If I am reading correctly it sounds like you have done One deal? Take that deal and make binder. Go down to walmart and buy the cheapest 3 ring binder you can find. Insert into this binder before and after pictures of the property. Put together all of the financials on this property. Inside this same binder put your personal financials.

Now I want you to find a local bank in your area. Give yourself about a 30 Mile radius around the area you intend to invest. This is important as that is the area the bank will be ok lending money in. Keep in mind this local bank has "One maybe two branches". That is it they only deal in your area. They know nothing of the area outside that radius(I am exaggerating this last sentence but just trying to make a point).

You know how I found my one branch bank when I got started? I researched the local Homevestors owner. I found the bank he uses to make his loans. You will have to learn very basic deed research to figure this information out.

Once I knew the person who signed his loan paper work I set up an appointment with her. I made my binder. You don't need anything fancy just like you don't need to wear a suit when you meet with them. I went to the appointment told her what I wanted to do showed her my past work and she approved me on the spot.

Without taking this step I would have way less than I have today. Doing this step was crucial in my success of being an investor. Knowing you have financing lined up really gives you the ability to chase down deals.

Continued from post above:

Now that you have your financing in place start looking for deals. With your 250k you are going to be able to borrow a lot of money most likely. This is assuming you have good credit of course. I see no reason why you couldn't do upwards of 1 Million dollars in combined deals.

On a side note I would highly suggest keeping a reserve. Maybe 50k or so. Hey you never know when some repairs or high vacancies are going to pop up. Better safe than sorry.

You don't have to settle on one area of investing. Maybe you do a fix and flip with some of your money. Maybe you buy one rental a month. Maybe you find a small apartment complex(Funding is way harder on commercial). Just study up on different avenues. There are many ways to make money in real estate.

From what you mentioned in your first post though it sounds like you want to be a landlord. I would start here and do most of your research in this area. From there if you branch off and see other areas to invest start researching those. I will say you are probably going to have much more success in something that interests you.

Goodluck

I would suggest buy more units and do what you did with your other unit and in the mean time try wholesaling. It will make you a lot of money in the mean time.

Brian Haskins

Btw, if anyone has any other info, please feel free to continue sharing.

Thanks,

Mark