Best way to get started with little money or credit

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Best way to get started with little money or credit

Zach SikesBusiness Member
Residential Real Estate Broker · Edmond, OK · Member since 2011 · 452 posts · 183 votes

Hey guys, I just wanted to start out by saying I love the wealth of info BP provides.

I'm a young Realtor in Edmond, OK (northern suburb of OKC). I just finished my first year of selling real estate, but I became a Realtor to learn the market so I could invest. I'm 24, and I know that there is not going to be any social security left for me (#ponzischeme). I've seen first hand how well investing in real estate can pay off, but it seems you have to have money to make money. What's the best way to start?

I'd eventually like to own enough rentals so that I can hire someone to manage them while they are still providing passive income.

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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
15y

1. Don't buy a rental when you have no money.

2. Do Options and flip them quickly to make up front money.

3, From Edmon go to Miami, don't gamble just find people with money and make friends. You might use some private financing some time.

4. Act as an agent and earn a living.

5. Buy yourself a home, you can move up later on.

6. After you have some money in the bank and can carry costs for repairs, vacancies and mortgage payments, buy and hold properties.

7. Don't fudge on your taxes, take the depreciation as that will be added back in for qualifying for any loan. Show you are making money, but take those deductions available.

8. Don't get boxed into any certain "system"or strategy, know the business as a whole and work what comes your way and what you make happen.

Good luck

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  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    15y

    I was in your position at your age along with many other salespeople. Some of the guys were fantastic salesman and bought lots of properties and became very wealthy.

    You need to figure out if you are really good in real estate sales. What do they say, 10% make 90% of the money and 90% make 10% of it, or something like that.

    If you don't have enough income to support yourself and invest then get a job and invest.

    As it is you can learn a lot selling real estate, just don't stay broke.

    1Reply
  • Zach SikesBusiness Member
    OP
    Residential Real Estate Broker · Edmond, OK · Member since 2011 · 452 posts · 183 votes
    15y

    Well I'm doing pretty good for being new. We are planning on selling the house I bought in college so I can contract our next house. I plan on taking advantage of the cap gains tax break for your primary home, but I want to buy rentals.

    Problem is I can't buy my house and another, especially being on straight commission and writing off as much as I can.

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  • Dale Osborn
    Mobile Home Investor · Spanaway, WA · Member since 2008 · 1k+ posts · 578 votes
    15y

    Went through the same problems. Couldn't qualify for a personal residence, but was able to buy a 43-unit apartment complex. Only pay they would count was the military retired pay. I did not have a 2-year history with real estate so commissions did not count and first apartment with $3k-$7K monthly net could not be counted either. Not enough countable income to count for a personal residence, so bought the 43-unit apt complex and 2 years later went back and bought the 4300SF personal residence with less down than we had originally offerred. Got $10K back as commission so made it even less of a down payment. Don't get discouraged. Perhaps sell the personal residence and get into a commercial deal to increase monthly income. Wait 2-years and then look for your personal residence?

    0Reply
  • Zach SikesBusiness Member
    OP
    Residential Real Estate Broker · Edmond, OK · Member since 2011 · 452 posts · 183 votes
    15y

    @Realtyman - How did you qualify to buy the apartment complex but not a personal residence? I would love to do that instead, and live in an apartment there for a while.

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  • Zac Coplan
    gilbert, AZ · Member since 2011 · 16 posts · 0 votes
    15y

    You can create an LLC and start out with partners, that is how I got started and it worked out well. You need to trust the people you go into buisness with

    0Reply
  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    15y

    Zach, two properties I own today were purchased from an investor I worked with selling real estate 30 yrs ago. He owned 30 houses free and clear and gave me a deal a month for years. He sold his places for commission down, 5%, insisted that I list and sell them, no mls, and carried a contract 12% interest only balloon 3 yrs.

    Many yrs later he offered to sell me a couple places which I took him up on.

    He also bought for cash. I found him in the for rent ads. Best thing I ever did was find him canvassing landlords.

    0Reply
  • Howard Streckert
    Houston, TX · Member since 2011 · 9 posts · 0 votes
    15y

    Zach,
    I agree with Jeff and Zac, make contacts with experienced investors, learn from them do deals with them.

    0Reply
  • Mark C
    Member since 2011 · 21 posts · 1 vote
    15y

    As a Realtor, your greatest advantage is getting your hands on deals before everyone else does. Like Howard said, make as many contacts in the business as you can!

    0Reply
  • Silver A.
    Real Estate Investor · Select a State · Member since 2010 · 79 posts · 17 votes
    15y

    Zach, you could start right now by making wholesale offers. 90% of them are turned down anyway :) So this is a chance to learn and practice being persistent and making better offers. Besides, you just might end up having an offer accepted. Then wholesale, rinse and repeat.

    I would not go into rentals right away. Too many expenses and not enough money coming in monthly.
    Only keep the house as a rental when you can get it for super cheap and can refinance it in days for more than you paid for it. Otherwise - flip. If you have gotten 10 wholesale offers accepted you'll know what numbers make a great flip in your area and can act on it.

    Good luck!

    0Reply
  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    15y

    How is the market there? Do you know which way values are going?

    Find a free and clear or almost F/C property and offer to finance 25% or so using a private money first mortgage. Make it 10% interest. Have the seller take back a second. Find investor. Let me know email on here.

    I am assuming you have a little cash down?

    0Reply
  • Ben Wilson
    Real Estate Investor · Cincinnati, OH · Member since 2011 · 72 posts · 28 votes
    15y

    Wholesaling, definitely - little cash, no credit, no risk...

    We hold several rentals, but we still wholesale 5 days per week to provide steady cash flow...

    Good luck!

    0Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    15y

    Sounds like an oxymoron... Wholesaling Realtor. I'd talk to your broker in charge (or equivalent) before reaching any conclusion that wholesaling will be the way to go. Seems to me that it would be real hard to keep the two sides segregated.

    1Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    15y

    1. Don't buy a rental when you have no money.

    2. Do Options and flip them quickly to make up front money.

    3, From Edmon go to Miami, don't gamble just find people with money and make friends. You might use some private financing some time.

    4. Act as an agent and earn a living.

    5. Buy yourself a home, you can move up later on.

    6. After you have some money in the bank and can carry costs for repairs, vacancies and mortgage payments, buy and hold properties.

    7. Don't fudge on your taxes, take the depreciation as that will be added back in for qualifying for any loan. Show you are making money, but take those deductions available.

    8. Don't get boxed into any certain "system"or strategy, know the business as a whole and work what comes your way and what you make happen.

    Good luck

    4Reply
  • Zach SikesBusiness Member
    OP
    Residential Real Estate Broker · Edmond, OK · Member since 2011 · 452 posts · 183 votes
    15y

    @ Financeexaminer,

    That seems to be about the most sound advice I've gotten so far.

    1. - Seems like a no brainer
    2. - Options sound like a good alternative source of income
    3. - I think I can find some good private financing here, and I don't know anyone in Miami, hahaha.
    4. - Am currently expanding my business in hte first 2 and half months of 2011, I matched what i did in 2010.
    5. - I bought a home in college, and have around 20-30k in equity in it.
    6-7-8. So it seems like I should just network and meet people, learn more of my market, and do little to no risk deals to get experience before I start buying and holding.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    15y

    I meant Miami, OK, not FA. But if you have money folks right there, no need to travel up the road. You got it! Good luck...

    0Reply
  • Zach SikesBusiness Member
    OP
    Residential Real Estate Broker · Edmond, OK · Member since 2011 · 452 posts · 183 votes
    15y

    Hahaha not many people reference Miami OK. I've got it now.

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  • Tony Kawaguchi
    Residential Real Estate Agent · Honolulu, HI · Member since 2010 · 12 posts · 0 votes
    15y
    Originally posted by Zach Sikes:
    Hey guys, I just wanted to start out by saying I love the wealth of info BP provides.

    I'm a young Realtor in Edmond, OK (northern suburb of OKC). I just finished my first year of selling real estate, but I became a Realtor to learn the market so I could invest. I'm 24, and I know that there is not going to be any social security left for me (#ponzischeme). I've seen first hand how well investing in real estate can pay off, but it seems you have to have money to make money. What's the best way to start?

    I'd eventually like to own enough rentals so that I can hire someone to manage them while they are still providing passive income.

    Welcome to the forums, Zach! You said it yourself that "you need to have money to make money"... Investing in real estate is not cheap at all, but it can pay great dividends in the future if you do it right. In areas with expected property value growth, you can try purchasing a property and then renting it out. Within a few years, if the market's rising steadily, you make be able to increase your rent to be higher than your mortgage payments, so in effect your tenants are paying for your mortgage as well as a bit of profit for yourself.

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    15y
    Originally posted by Tony Kawaguchi:
    ... it can pay great dividends in the future if you do it right. In areas with expected property value growth, you can try purchasing a property and then renting it out. Within a few years, if the market's rising steadily, you make be able to increase your rent to be higher than your mortgage payments, so in effect your tenants are paying for your mortgage as well as a bit of profit for yourself.

    Wow, advising somebody who's a newbie to take on negative cashflow. And it sounds like the plan being described has the intent of keeping such a property. All I can say is: Avoid negative cash flow rentals, unless you have wads of money sitting around to prop up that property. If you buy speculating on appreciation, then be prepared to take a loss if market drops, and also be prepared to sell when the market hits your targeted price increase.

    1Reply
  • Zach SikesBusiness Member
    OP
    Residential Real Estate Broker · Edmond, OK · Member since 2011 · 452 posts · 183 votes
    15y

    Thanks Steve -

    I think the only way I'd take on negative cash flow is multi family units with some not rented out.

    Sounds like pretty good advice Steve.

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  • Rob Caldwell
    Investor · Mooreville, NC · Member since 2008 · 139 posts · 58 votes
    15y

    Before you make your first offer to buy, go out and find several investors that actually buy. I mean the guys that have the funding in place. Find out what and where they buy and what their preferred equity position is. Now you have a road map of properties you want to target. As soon as you get one of those under contract, now you can assign it to one of those performing investors.

    The key to success these days is having an exit strategy before you make an offer.

    0Reply
  • Zach SikesBusiness Member
    OP
    Residential Real Estate Broker · Edmond, OK · Member since 2011 · 452 posts · 183 votes
    15y

    Thanks Rob -

    I think having an exit strategy in place would greatly reduce the risk, especially the first couple of go arounds.

    HCO Leasing4.198 Reviews
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    Homestead & Co4.9172 Reviews
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  • Zac Coplan
    gilbert, AZ · Member since 2011 · 16 posts · 0 votes
    15y

    You should also consider investing in SEO on a website. There are many inexpensive options for you, and it should not take a great deal of upfront investment to get the site going.

    0Reply
  • Edward CAMPBELL
    Banker · Baltimore, OH · Member since 2011 · 1 post · 0 votes
    15y

    Yeah, don't do what I did when I was your age. I went into every deal I could find like it was my last meal. I put my heart and soul into a deal that netted me $350. Then I got the wake up call that was "carrying costs". I got the shaft. I didn't know enough to buy and hold and honestly I should have stopped listening to Carlton Sheets way before I did. It took me quite a while to realize just what the posters before me have already said. Get into commercial easier (the deal matters more than you) or utilize options for cash. Now I broker funds for commercial deals and occasionally buy something when it makes sense. You seem to have a good head on your shoulders, use it. If deals won't make you cash, don't waste your time. If they do, jump on them and find a partner if you need to.

    0Reply
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