Wondering about my strategy for getting started
Our home is in my mother-in-law's name and almost paid off (only $8,000 left). My thoughts are to take out a $50,000 VA loan out on the home to put it in our name, pay her the rest of her money, and use the money to invest in rental properties in a high volume marketplace, the city of Bangor, ME. We currently live in Lincoln, an hour away, but a dying community. The average price for Bangor is $145,000 to $165,000 for multifamily units, with around $33,000 down and then $800 a month payments. Rent in Bangor is at about $1,000 a month per apartment. Is this a good strategy for us moving forward?
#4 All Forums Contributor
- Plymouth, MI
Yes, ..No.....maybe....?
There is so much more to it, when deciding on a strategy, than what you have proposed. Mainly because there is so much more that influences that decision...and all that will follow.
Here is what you need to do before you start investing:
1 - Learn your market to find the micro-markets within your market. Make sure the market you have decided to invest in is in fact worth investing in. It's about the numbers...profit potential (not growth), and cash flow potential. Don't base your market choice on future events you have no control over, and don't base your starting points on profits you will (maybe) make down the road...and especially if while you're driving down this "road", you are losing money (negative cash flow). Future equity is NOT where you should be starting out investing.
2 - Learn how Money Works. Another way of saying this is learn a number of different strategies, so that you can invest in a number of different ways. This will mean that where others see problems, you'll see opportunities. Basic flipping, holding, and BRRRR strategies are just that...basic...and, some of the weakest ways to invest.
3 - You need to learn the differences between some common terms/concepts, and how to apply them to REI. Cash and cash like substance, cost to buy and cost to use, own and control, measuring returns using Stock Market terms and using REI terms, possitive CF and Negative CF, the power of the penny, the power of compounding, goals and plans, etc...
4 - You need to learn how to develop a REI Plan. First, you need to understand what a Plan is. You need to establish your goals (this is almost always misunderstood), and how to use reverse engineering to connect where you are now to where you want to be (goals). That's your plan...the steps along the way.
...and how all of this must work together, at the same time, to reach true success.
Don't just "jump in". This isn't like learning how to swim. This pool isn't 4 ft deep, and many times, depending on where you "jump in", the bottom may not exist. Don't accept losing money on your first few properties as OK because it "is a learning experience". If that were true, I want to meet the REI that lost the most money at their start. They must be the smartest REI on the planet.
If you have any questions on what I stated above, I will explain them to you in greater detail than I can in this format.
Thank you for taking the time to answer me! I am just getting starting in just the basics in learning about what even all the terms mean, and am taking an online finance class and the basic real estate class to understand it all. When we bought our home five years ago, it was condemned and we had no credit. Our mother-in-law helped us out, but now we want to get this house behind us and change our circumstances. So I have been exploring different ideas and options to moving forward, this idea being one of them. But there is still much for me to learn before I do anything!
Obviously this isn't financial advice and there are quite a few variable that I don't know.. with all of that said.. If it were me and my choice, I would move out into one of the multi-family units in bangor. Learn about all kinds of different aspects of real estate market and management and you don't even need to leave your house.