With Money without Money ?

11 Replies

Whats the most diffucult thing to do when you don't have any money and you want to invest in real estate ?

Whats the most diffucult thing to do when you have money and you want to invest in real estate ?

What questions should you ask when it comes to borrowing money ?

Thanks

Well BSM, there are more factors to investing than just money. Another huge factor is time allocation.

Wholesaling for example, normally requires less money to get started than let's say rehabbing, but it will require much more upfront time allocation.

I would say the most difficult thing when you have no money, is to find ways to make money with no money. You have to rely on your work ethic more so in beating the streets and finding deals and not so much on your bank roll. Your investment options are more limited with little capital and require more time.

Now when you do have money to invest options open up. The issue becomes more where and what to invest in. You begin to have to weigh risk/reward factor on multiple different types of investing. With a large amount of capital, one could invest in commercial and/or apartments, hard money lending, development deals, or large rehab projects. Someone has to determine their desired rate of return versus risk factor and not forget about time allocation.

How much time you spend on it. Some projects/investments will require more of your time/attention/management than others.

Hi Ryan,

Thanks for the explanation. Ryan, do you own any property that has sec. 8 tenants ? If so, how are those tenants ? Do you get your check from the local housing auth. ?

Thanks

I normally have 3 or 4 at any time on HUD's Section 8. I think right now I only have 1. The tenants vary. Most of the time you will be dealing with someone who is not the most responsible type of person, but its nice getting the check from HUD or rather in Amarillo it comes from the city housing department.

Hi Ryan,

How did you acquire these units ? With lots of borrowed money ? Did you do a lot of rehad ?

Thanks

Well, I'm not sure exactly what you are asking.

Section 8 is a rental assistance program that you can do with any rental property. Now the rents are regulated and thorough inspections of the property are required, but you can offer any property through HUD's Section 8 program. Usually they will have a list at their office that you can place your property on to advertize to tenants that have been approved for Section 8 assistance.

Now I have 45 rental units which I acquired through different avenues. I financed all of them, and most of them needed varying amounts of remodeling when I bought them.

Now I have 45 rental units which I acquired through different avenues. I financed all of them, and most of them needed varying amounts of remodeling when I bought them.

Hi Ryan,

When you acquired these properties, did you take on a lot of debt ? Did you put any money down on these properties ? Did you use equity ?

What are some of the problems you have when dealing with tenants ?

Thanks !

I started with little capital and did most of my rental properties with little or no downpayment. For my 45 units, which is 6 different multifamily complexes, I put up a total of about $8,000 in downpayments/earnest money. Wow, I had never factored that before. That's not much money. :lol:

Now on the flip side, the amount of rehab that all but 2 of these properties needed was extensive. I currently have over $100,000 in remodeling costs on these different complexes out of my own pocket, and I have another $100,000 in second liens on them that I also used to rehab them. Also, my first 16 unit complex I bought, I had to put up $10,000 as downpayment. About a year after I bought it (and dumped almost $60,000 into it) I sold it for a very respectable profit.

I have not used conventional or commercial financing on any of my rental properties to date. I utilized hard money lending on purchasing all but one of the complexes, and that one I seller financed. Currently everything I have but one fourplex is on the market for sale. Whatever I don't end up selling I am planning on probably refinancing with a traditional lender for a lower interest rate.

Tenant issues vary from overly picky tenants to druggies. You will always have late pays and evictions. Dealing with maintenance issues in a timely manner is always important. With multifamily complexes, intercomplex tenant meshing is important. Everybody needs to get along. I currently have a property manager employee that takes care of all the day to day management duties.

Hi Ryan,

Thanks for the reply. Ryan,

I have not used conventional or commercial financing on any of my rental properties to date. I utilized hard money lending on purchasing all but one of the complexes, and that one I seller financed. Currently everything I have but one fourplex is on the market for sale. Whatever I don't end up selling I am planning on probably refinancing with a traditional lender for a lower interest rate.

Can you please explain the Hard Money aspect of things ? How does this work ? Its my understand that the hard money lender is usually the one with little risk because they usually charge lots of points and high interest. Do you know what was some of the risks that you and lender went through ?

Thanks !

The hard money lender I dealt with on most of my properties charged 12% interest with no points. The risk for the lender is that they may have to foreclose on the property and then take over management, rehab, and/or resell it themselves. Most HML's (like all lenders) don't like to get their hands dirty with owning property, most of the time they would prefer you to keep it and pay them.

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