Newbie talking with Experienced Investor

8 Replies

I am a young aspiring real estate investor in the triad area in NC. I am definitely in that first eager stage of soaking up everything I possibly can. I have been spending my lunch breaks driving around the area looking at houses, neighborhoods, and signs just to get a better idea of my market. Today I stopped by a house that has been undergoing renovation and it now looks completely flipped and has a "for rent" sign in the front yard. I got the number off of it and am going to call today to see if I can get in touch with the, hopefully, investor. I am so nervous!!! It is so intimidating thinking about how much more knowledge and experience they have in the business compared to me. Also I am going to my first REIA meeting tomorrow at lunch. So my question is what should I do or say? What do investors want to hear? I am hoping to just get my name out there, and maybe even find a mentor. I really just want to go through the deal with them and ask them a million questions about it but I don't want to be annoying or time consuming. Any advice?

Getting out to the local REIA meeting is a great step forward. As you said, just soak up as much as you can. Going to a REIA meeting in a new city is sort of like going out to a bar alone. It's kind of awkward for you since you don't know anyone, but once you break the ice you see it's not nearly as intimidating as you imagined.

Understand growing your circle will take some time, but just as you mentioned getting your name/face out there is starting out on the right foot.

Real estate investing is a business with the objective that the investment property will make you money. Ask to see whether the owner has created a Marketing Package. In other words has he or she already run some income and expense numbers that you can preview? If so, pay close attention to what they project for rent, property taxes and other operating expenses, and financing. Are they realistic projections? If there is no Marketing Package then you will have to crunch the numbers yourself. What do you project as a "realistic" rent, operating expenses and mortgage terms and conditions? It's all about cash inflows (rents) less cash outflows (expenses and mortgage payment). Knowing what remains is step one. 

This post asks a good question, but reminds me of the book titled "Beware of the naked man who offers you his shirt".  Who is an expert investor, who is a real guru and should you pay just anyone to be your mentor?

In an up market much as we have now ANYONE can be a "genius", "hero"  or whatever you want to call the person who has done a sucessful deal or two.  Anyone can purchase and sell for a profit in a rising market.  Smart or talent has nothing to do with it.

I read some of the deals  just closed here on BP with everyone excited and congratulating the purchaser.  That's fine but I have to wonder if they really thought through the deal, especially the short term financed ones.  I just want to ask them what is going to change in your situation in the next 2 or 3 years that makes you believe the bank will refi for enough to bail you out.  There have been several posts lately from people who had their mentor tell them to make the purchase and now regret they ever met the guru or the house. "One year and I can't sell my flip" or " I bought two homes at the county tax sale and I can't get anyone interested in buying them for anywhere near what I paid". 

This is sad.  Real Estate investment is not for everyone and just because you can make a deal doesn't mean you should.  Leverage works both ways and if you neither understand that or believe that you shouldn't be investing in real estate.  It is very hard work but can be very rewarding.

A simple tale to explain what can happen. I have an acquaintance from my REIA who started investing in 2003 and turned $10,000 borrowed money into $660,000 equity by the end of 2006. He was a guru, the go to go guy for some local new investors. Then in 2007 even though he knew,felt,the market was slowing bought a nice big home and started building rentals. He neglected to notice that while his equity increased due to the market conditions, not due to his genius, he over extended himself. When 2008 hit and the market changed just as he finished competing his rental homes, he couldn't refi the properties due to law changes at Fanny and Freddie limiting investors to 5 properties. He suddenly went from a potential income of $500 per rental to a minus $1100 per rental. He had no control over the change just as he didn't have any control over the market forcing the values of his properties up before 2008.

Today while he didn't really lose any of the properties some are still under his original purchase price and he has about 10,000 equity total.  He has income from the properties and depreciation that's great but one of the properties he just sold went for a whopping $5000 over his purchase price after holding it for 11 years.

Sorry for the long rant but if it saves one potential newbie from buying a bad property it is worth the effort.  Analyze and ask  not could I but should I buy and how does it fit into my overall scheme.

@Chelsea Newton  

Welcome. Enjoy the meeting.

Check out the Start Here page http://www.biggerpockets.com/starthere

Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Here you will meet wholesalers who provide deals and rehabbers.

Two Great reads, I bought both J. Scott The Book on Flipping Houses, The Book on Estimating ReHab Costs http://www.biggerpockets.com/flippingbook

Download BP’s newest book here some good due diligence in Chapter 10. Real Estate Rewind Starting over

http://www.biggerpockets.com/files/user/brandonatbp/file/real-estate-rewind-a-biggerpockets-community-book

Good Luck

Paul 

@Chelsea Newton  

I see you are going to the lunch meeting Thursday. I usually go and it is a very good group. 

Don't worry about what to say or do, they will take care of that. Garfield is the leader there and he is great.

Thanks for all of the help @Martin Scherer   and @James Kobzeff  it is very helpful! And thank you Account Closed 

I am looking forward to attending the meeting for the first time today! I hope to see you there!

Chelsea,

I attended my local REIA meeting in November and found it somewhat intimidating. Don't let it scare you. If you feel intimidated just stick it out, even if you don't happen to talk to/network with anyone. (There's always free food/drink). Im in the exact same boat as you.

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