Buy and Hold Process questions

[Kari M.]

First I would like to express my sincere appreciation for this website! The confidence, wisdom and success of the posters are extremely encouraging to this rookie!

After spending the weekend pouring over, and barely scratching the surface of the posts on this site, I have a couple questions on the conclusion I've drawn.

It seems that the process for a new investor looking to do buy and holds is:

1. Write a business plan. I can do this.

2. Find the money. I am feeling confident that I have 1, possibly 2, private lenders.

3. Find the deal. This is the step that I am needing the most help. I understand that I need to network. Is it possible to find one in the local listings? Can I knock on doors? Which doors do I knock on?

4. Close the sale. How do I practice this?

Thanks in advance for your advice.

Kari

[Jon Holdman]

Hard money, or private money as Kari mentions can work to acquire rental properties. Its not the cheapest approach, since you're going to pay high money costs and then the cost to refinance into a permanent loan at a reasonable rate. But if the alternative is to pay 25% down plus all the rehab costs out of pocket, it may be a better alternative.

Here's an issue I've hit recently, though. If you do go the hard money or private money route, then plan on a refi, set up the loan to come from an entity (Corp, LLC, etc.) rather than an individual. I've ran onto at least one lender who has a one year seasoning requirement to refinance a loan if the current lender is an individual. Simply have the lender create an LLC and have the LLC loan you the money.

Knocking on doors would mean the doors of sellers who might be desparate. People in foreclosure, houses with code issues, houses in probate, non-owner occupied houses. Numerous possibilities.

Bank owned houses are a good possibilities. These will be listed, and can be competitive in some places.

Don't overthink your business plan. If your goal is to buy houses that cash flow $100 a month (using real life expenses aka the 50% rule, and not cash flow = rent - PITI), and you want to have $5000 a month coming in, then you need 50 houses. Its not much more complex than that. You're not trying to do an IPO.

Get out and do some driving around. Find good areas. That means areas where you can get a decent rent compared to the price of the house. That's often in areas that are less than the nicest.

Closing is handled by title companies. Its not really something you can practice. Rest assured, though, that something different will go wrong every time. So every closing will be a learning opportunity.