Getting started in real estate investing-Need advice

I just purchased a new residence and I've been debating what to do with my older residence. I thought it might give me a "foot in the door" into the world of real estate investing. I have about 50K of equity in the older residence, can afford both mortgage payments for the foreseeable future, and my current career allows me the freedom to devote some time to REI. My motivations are two folds: I would like to own (and grow) real estate as part of my overall financial portfolio, and second, wait for more favorable market conditions to sell any portion of real estate that I acquire in the near term.

I am considering renting or seller- financing the old residence to generate additional income that can allow me to re-invest into acquiring additional properties while learning the ropes of the business. Does that sound like a reasonable strategy for a beginner? If not, what would you recommend? Thanks in advance.

Anthony Larson

Real Estate Investor · Las Vegas, Nevada

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Jun 23 '11, 09:23 PM

another thought would be to sell with owner financing get 20% down with a compettivie interest rate

and use that money to buy another property, just keep a reserve account.
depending on how much you get from the down payment you may be able to get a 4-unit or soemthing like that

I think with that plan you'll be getting cash flow from the seller finance house, should cashflow from 4-unit and equity buildup plus building equity in your primary

so your accomplishing both goals

do a search for the 50% rule on bp that will help with buying the 4 unit (or whatever type of property you decide on on)

check with a lender and make sure you would qualify to purchase another property

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Jun 23 '11, 11:48 PM

Its all about numbers. What's the old house worth and what can you get for rent? Is there appreciation potential? Just because it was a residence you liked doesn't make it a good investment property.

Jon Holdman, Flying Phoenix LLC

Chuck K

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Jun 24 '11, 02:26 AM

Originally posted by Jon Holdman

Its all about numbers. What's the old house worth and what can you get for rent? Is there appreciation potential? Just because it was a residence you liked doesn't make it a good investment property.

Hello Jon, the old house is worth around 170K, I have a 15 yr mortgage for 120K at 4.5%. It is in a good neighborhood. Rental for similar properties are going between $1200-$1300. I'd appreciate your feedback.

Bill Vaughan

Real Estate Investor · mckinney, tx

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Jun 24 '11, 02:38 AM

Myself, I am not that into seller financing especially now.

Alot of forecasters believe higher inflation will be coming. The last place you would want to be is holding a long term fixed rate note. You could however do the note as an ARM

Also, you run the possibility of a cash flow problem if you tenant leaves. Then you are paying your mortgage and rehabbing the property at the same time.

On the other hand if you are willing to assume the risk it very well will have a higher payoff than selling outright

Bill Vaughan buyer's agent-Global Realty 1.5-1.8% commission billvaughan75219@yahoo.com

James Hamling

Real Estate Investor · Minnesota

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Jun 24 '11, 03:15 AM

I think where is best to begin is to evaluate yourself first, you knowledge base and skills capabilaties. Real estate investment is not a singular thing, it is muti faceted with multipule specialties, and where people get burned and loose money is jumping into unknown waters.

In a generalization, I prefer holding as the best return currently. Although you have many options. Hire a good managment firm to run 100% of the business of renting the property, including finding a tennant, contracts, everything. Then use it as a training course, stay involved, observe and learn from the pros all you can.
-or-
Locate a savy local investor who is cash poor, and JV. They provide intellectual work, and you the resources. Again, stay involved in every aspect and learn learn learn.

One of the most powerful lessons in any business is, know what you are great at, and hire great people to do the rest.

My best advice, a great property can quickly turn into lead boots if managed wrong. Don't risk it, if your not a renting all star, get someone who is.

Chuck K

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Jun 25 '11, 02:15 PM

Thanks to everyone for the great responses, I'm digesting every bit and reading up on the rest.

I have another question, I had refinanced my previous residence with a 15-year mortgage, if I decide to rent it out, would it make sense to refinance it now for 30 years to improve my cash flow prospects?

Jim Stardust

Real Estate Investor · Cincinnati, Ohio

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Jun 26 '11, 08:00 AM

Depends if you care more about cash flow or building equity and paying it off faster, most everyone here believes in the 30-yr mtg for rentals.