My wife and I are new to real estate and BP. We have been reading up on the material provided on this site ONLY. I say only because i do not want you to think that we have been sucked in by "Infomercial scam". We are in need of help from the members here at BP. There are questions that i would like some feed back on if someone has time to really help.
1. in which order do we begin? setup business; locate property; financing ?
2. what area should we focus on as beginners? (rental;flip;wholesaling)
3. Will our availability to credit and financing be a factor in our direction.
4. Will our location be a factor in our direction? (small rural town north Texas panhandle)
we have seen it written too many times to "just do it" but at the risk of coming across too green, we have no starting point. I listed only four things above but am i missing the obvious? I feel like i'm more green than i realize and may come across clueless. I am okay with that because i will learn something in return. We have located a few properties in our small town that could be worth looking into further but we really don't know what we even are looking at. In our minds we see the potential but is it realistic? Are we looking at properties and wasting our time because we are going about this in the wrong order? It just boils down to the fact that we are in need of some guidance and coaching.
Thank you all in advance for your help and guidance.
Decide #2 first.
If your buying and holding you dont need to worry about setting up any business at this point. Get with a lender to see what you can qualify for first with conventional financing. What type of cash on hand do you have available for buying homes?
If you want to buy and hold you should have funds for down payments for bank financing. If your gonna flip most likely you would use private money, this is how we fund all of our flips using private loans.
I dot know anything about the market in your location so this is something you will know better then myself.
Let me know if I can assist further.
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There is no money at this point for conventional financing. We think that this market is good for rentals just not stable enough to invest in a flip. I believe that the area will require holding on to a piece of property longer than i would like in order to sell. I want to flip more than deal with rentals at this point. So would it possible to do flips in another market than which you live in or is this a bad idea?
I have looked into financing options but have not gone forward with anything yet until i have a direction.
Fix and flip and rentals are two very different businesses. Rentals build wealth in the long term, require minimal effort once they acquired (though cetainly not zero effort) but don't spin off tons of cash on a daily basis. You should consider these an investment like stocks or bank CD's. Earning 10% cash on cash return is pretty good. You can do better in some areas. You can do a lot worse in most areas.
Rehabbing, OTOH, is really a job. You do the work you get paid. Its a pretty hands on business and does require a significant amount of cash, even if you get a hard money or private lender. If you do a good job it can produce some big paychecks. If you mess up, you can end up losing money.
I've done rehabbing and cannot imagine trying to do it at a distance. Even with contractors is a hand's on business. If you try to do it at a distance you're going to be handing someone your checkbook while they do the work for you. You could consider moving to a different area if this is really your goal and your area doesn't work. I've moved for jobs three times. MO to TX to CA to CO.
Jon Holdman, Flying Phoenix LLC
Congrats on your new endeavor into RE investing. One of the biggest hurdles when you're starting out is trying to figure out what to focus on, there are just so many options - and all of them sound exciting and potentially profitable!
I think knowing what your goals are will make it much clearer for you where to begin. Here's the way I would look at the options:
1. If your goal is to make more cash fairly quickly, but you do not have any substantial personal savings (or don't want to risk it yet), then look at wholesaling or getting your RE license. Both of these options allow you to get in the game without a ton of cash outlay. You can also typically work these around your current job.
2. If you have some money saved and want to put it to work, decent credit, and are comfortable with your household income as it is, then look at purchasing property for long term rental (buy and hold) working with a traditional lender.
3. If you have a chunk of cash saved (or access to people who do and will partner) and want to make more income short term then look at buying, fixing, and selling. I consider this the highest risk option for new folks, but if you have some experience in construction then it might be a good one to consider.
4. If you want to build passive income, but have little to no cash to invest right now, you can buy rental properties on seller financing or "subject-to" an existing mortgage (lots of info on BP for you to find out more about these options). You still need some money saved for reserves if you're going to hold a rental property.
Regardless what way you go, I do suggest setting up a business entity to operate under from day one. This is a litigious business and its good to protect your personal assets from some of the crazies out there :D You don't need to go nuts with a website, tons of branding, etc, just set up a basic corporation or LLC instead of operating under your own name.
Location: I am of the opinion that you can find deals in your own back yard no matter where you live. I think it better to start closer to home (within an hour so drive), pick a few neighborhoods you like, and then start working them. There are deals out there, you just need to practice knowing what they look like.
So my short answer:
1. Decide your strategy
2. Set up a business entity for asset protection
3. Meet with some lenders and see what options are out there (small local banks and good mortgage brokers may have some less-known options for you).
4. Start marketing for deals (or working with a realtor) and get out there and look at some property!
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