What direction should this newcomer go?

Question

Hi everyone.  I'm brand new to the real estate investment world.  At this point my interest is high and I am looking to get a broad education before I become involved in any investments.  I understand and agree with the theory of picking a niche and mastering it so I'm curious which types of investments someone who has been around the block might think are best for me.

To help facilitate this let me provide some background on myself and my current situation.  I am a 25 year old male and have been working as a volunteer for the past 5 years.  Due to that I have very little savings (practically nothing), so I am looking into the various ways of investing with little or no money.   I have no debt however.  My credit situation is an odd one, I just received my first credit card a few weeks ago, somehow I have good credit.  I'm not sure how the acquiring a loan will go as I have not been making an income since I was 19.    I have a fair amount of construction and landscaping experience and am drawn to the idea of forced appreciation.  I will soon be working a paid job and will most likely only be doing real estate investments on the side.  I am very open and interested in the idea of pursuing this full time as soon as my financial situation permits.  My goal in this endeavor is to become financially independent, living off of the cash flow and obviously maximizing it.

I realize my situation is a rare one and I have some obstacles but I'm determined to find a way through.   Given my circumstances and interests what is a good way to get started in the business?

Michael Boyer · Answer

When you get the requisite employment history (plus the solid credit you already have), you might aim for a 2-4 unit property as a first home purchase (2-4 units counts as residential and there are some great loan programs to look into).

That looks like a highly possible niche based on the above profile.

Then being handy will help you operate and maintain the property. It sounds like you have worked with people, so you could probably manage the tenant issues as well.

If being a landlord is not your goals, your background may make you well suited for a live-in flip, where you buy a fixxer-upper property and make the improvements while you live there (forced appreciation); then after a couple years, you can take advantage of the tax free sale.

Both of those strategies combine with something you may be looking at and need anyway--a place to live of your own. So you get a 2-for-one, making your first home an investment.

Best of Luck

Kris Klark · Answer

@Michael Boyer Thanks for the response! Is it realistically possible to find financing without being able to provide a history of income?  It seems it would be difficult to get anything from a bank without being able to prove my legitimacy but are their private lenders that are willing to lend to people like me?

Michael Lee · Answer

Hello and welcome to BP!  I have been with BP for about 19 months and have yet to pick out something as a niche.  There are some people that say wholesaling is typically where to start.  You need to have bravery to succeed and you gain a bunch of knowledge doing that without having money.  Unfortunately, there is much competition doing that.  The important way to do that is to be a dominate investor.

Without a bunch or completion you can buy small complexes of apartments with no experience to do that and not do that part time.  There is a man that started that way, with a job, and worked two years of doing that before he quit.  He has since got larger complexes and writing a book and teaching.  His name is Lance Edwards and I think currently living in Houston.  He offers his book to you and I think it was free.  He said you could get deals without seeing the property beforehand from your kitchen table by making evaluations and make offers.

By the way I am now 60 years old.  I tend to write long letters and are opinionated about what I say.  I am still medically recovering and I spend a bunch of my time learning about real estate learning (about 10 hours per day).  I do that every day (7 days a week).  I consider that I am lucky to be married to a frugal woman that has been saving money for about 25 years.  We have a daughter who in her 3rd year at the University of Arkansas.  My wife is surging and paying all expense on her salary alone.

Keep control of everything you are responsible for.  Do not assume anything is going to happen. A title on a person's business card does not mean that they know any more than you.  This choice is hard work but can be highly recommended.  Mistakes and fear are pretty normal.  Just learn from any mistakes and learn how you can think about something else when any fear arises.

There are several things you should do before you start investing.  One of those things is to form some type of corporation or a LLC.  You might want to hire an attorney and/or a CPA to advise you which way to go.  Just do that after you have selected to do in your niche.  That formation will keep your personal things out of reach against your business.

Another thing you might want to do is to get your financing your projects so they can be copied and turned in with your offers.  That letter can possibly make the seller be more confidence in your ability to close.  Have that loan letter say your average loans  close and the maximum amount you a qualified for.

One other thing you might consider before investing is to locate your office.  Just make sure it is convient for you and have minimal distractions.  You can locate your office in your place of living as long as you can close it off and have a minimal of distractions that are personally based or anything else.

Track all of your expenses and income listed in a report and review them regularly with 3rd parties to help reduce expenses and increase your income.  My father has been buying and selling real estate (mostly commercial) and he has taught me a little bit.  He has been doing that for about 45 years.  The bulk of my experience is in the construction business.  I had a little real estate experience but I never did that full time eventhough I had a real estate license for about 30 years.

Good luck to you!