In over my head!!!?

15 Replies

Ok so we all thought about REI way too long before taking action right? So I'm in action...but actual action is a full time job in itself..lol..that was a fact I should have anticipated, right? Anyway, I'm real busy with my ventures, and meanwhile I have a day job (granted its a work from home on my own schedule - sweet gig) but it's been getting brushed further and further under the rug cause I'm just too busy to give it my all. Its only a matter of time before that gives. If they dont do it, I have to, because I just dont have the time anymore. So thats the last shred of security I have left here - but it came with 70k, bennies.....Once thats gone - I'm on my own- Just me, my two kids, 5k bills/month, and my passion for real estate to bring it all together. How's that for pressure, eh? I sure hope I'm doing the right thing. lol...maybe this belonged in the "psychology" section....

saying you don't have the time anymore - that's questionable.

and what i mean is, how accurate is that statement.

alot of people come to this conclusion too quickly.

many times they're really saying,

"I don't want to make the time."

far be it from me to judge, so i'm not judging. i'm not saying you do or don't have the time - i'm simply asking:

is it accurate?

what can you do in order to manage your life and find balance?

if you don't, you won't have as much fun doing anything.

Sounds crazy.

Consider this though. If you have to work for a living that means your trading your hours or your labor for dollars. The moment you stop putting in hours in your day job is the moment your cash flow stops. But if you focus on realestate and get some places bought and rented out then you'd have a monthly stream of renvenue coming in which will continue regardless of how many hours you put in. Rentals are basically on autopilot continuing to make money for you. So if I were you I'd focus on trying to buy your first apartment building. Even flipping houses isn't as good because you still have to trade hours for dollars. The moment you stop flipping homes is the moment you have no additional income coming in. So I'd try to get an apartment pinned down if I were you. Like for me I own my own business which does well. But I may have one more deal on the go right now, that if it goes through I'd be able to already match the income stream of my regular business from my apartment buildings. And this would only be my 3rd. And that's a lot of cash, like well over five figures per month. Actually if you found just one small 20 unit apartment chances are your cash flow could be getting close to 10k per month after all expenses and debt service. And if you factor in apreciation of the building you'd be making perhaps another 5k per month. So that's why I'm saying like getting into just 1 apartment building could turn your situation around and give you enough cash flow to not have to try to work so hard to make ends meet every month.

I suppose I'm also getting stressed as my company has been bought out twice in the last month and some goings on as of late lead me to believe that I may be unemployed one way or another pretty soon anyway. I'd rather not be at their mercy - you know? So no time like the present to line up whatever else I can. I have thought about the apt building actually as every once in awhile I see one that I think would probably cash flow very well, but I'm under the impression I'd need some hefty cash down on anything over 4 family unit as it would be a commercial loan. I'm not THAT well funded yet. Plus if I spend all my cash on a down payment, where do I get more? Rehabbbing at least gives me the potential for large short term return on my money.

r2d: i as well would love to get into the commercial side of apartments/condos and such, but coming from Minna's perspective, where do you get all this cash to just go out and get a loan enough for a 20 unit apt. building?

If i do not have a substantial amount to put down, do you have suggestions to get around that? Or is it best to start out small with smaller residential properties until i can build up enough cash/equity to put down on an apt building.

Here's what you do:

1) Go buy Carlton Sheets No Money Down course off ebay for like $40 bucks. So that you can study the chapter on "Creative financing".

2) If you own a house, perhaps you could either flip it for a sizable gain. Then just rent a house or apartment to live in just temporarily until you get a building. Then you'll have all the cash you need each month coming from your building to shop for a much nicer house to live in later on. Alternatively, you could refinance your house to unlock some cash if you don't want to move. Or find a friend, or partner who might be willing to lend you the money. And use the cash you just unlocked as your 10% downpayment to buy an apartment building. You only need about 10% down to buy an apartment building. Just look in the yellow pages under "mortgage brokers". Call a few up. Tell them that you're a realestate investor and that you're looking at buying an apartment building. Ask them what's the maximum they would lend on a building. Perhaps have a like a listing sheet of a building that's for sale so that you can give them some details if they ask for them. So you find a listing sheet on the mls of one that has say 20 units going for say around 1m or something. That way if they have more questions about the building you can give them particulars off the listing sheet. It would have to be newer than 1960 by the way to give you a better chance at high ratio financing on it. I guarantee if you call around you'll find a mortgage broker than can give you most of the money you need. Like perhaps up to 90%. But say they come back and say we could lend up to 75% or 80%. No problem then you just get the seller to carry a small second of like 10% or 15% and you're still in business. Because 80% first + 10% second + your 10% equals a 100% done deal. That means you only need say $50,000 or $100,000 to get started. Because whatever amount you can come up with you can times that by ten and that's what you can buy.

3) Now alternatively you could try this. Go on your local mls or commercial mls service online to look up what apartments are for sale. Doesn't even have to be in your state. Just has to be what you'd consider half decent. Then look up the listing realtors information. Create a "Letter of Intent to Purchase". That's basically a simple letter stating that you'd be prepared to buy the building based on the terms you outline in the letter. Such as price, financing, closing date etc. Then what you propose is that the seller of the building carry a second mortgage in the amount of 25%. And you propose that you'll get a new first mortgage for 75% or possibly assume the first. Then you would customize that letter and make it look professional and fax it off to each realtors listing. Here's the thing it's just a letter. It's not a purchase contract. But the realtor who receives it will run it by his seller. Say the seller doesn't need all cash at the time of close. Then they might very likely be totally fine with carrying a second mortgage. Try to make that second mortgage for 5 years. If you send out enough of these letters I guarantee you'll get a realtor calling you with a seller agreeing to carry a second and wanting to write up a formal offer. So you write up the offer subject to financing. Then go back to the mortgage broker with the deal. Tell them you need a 75% (or more) first mortgage as stated in the contract. The broker will then go find you your first mortgage. The key with this technique to just contact tons and tons of sellers. Like just shop until you drop. Because you're just looking for the seller who will carry a second. That's the number one priority. Don't even worry about the building. If it's fully rented I guarantee it's cash flowing. So just forget about it..capeesh!!

Remember you need money to buy property, but whoever told you that his has to be your own money out of your own pocket was full of s-h-i-t!!! Remember, 75% first mortgage + 25% second mortgage = no money down deal. And remember 75% first mortgage + (more than 25% second) = you get the building, and you get cash money at the time of closing. So what are you waiting for!!! Get that letter of intent ready and your fax machine running non stop, because my friend you're going on a shopping spree!!!

Minna;

I've read a lot of your posts and I kind of had the impression that your investment thoughts were similar to mine.....BUT (you knew that was coming, right?), $5000 monthly bills????

You say your job pays $70K, whether that's gross or net you're spending way too much on lifestyle.

Just my $.02.

all cash

Yeah I'm well aware of that one...I do have too many bills. But I guess to be more accurate that does inlude a $1300 mortgage which is paid by my renters, and a payment on my heloc (that is only temporary as its still sitting as liquid in the bank since I need it to fund a rehab I am doing this month) so its closer to $3000 in just personal expenditures. You know unless my rental sits vacant for awhile, or somehow I manage to lose real bad on this rehab. But yeah - paying down my debts is way towards the top of the list on my priorities.

do you have any cash flow on your rental are you just breaking even after considering property taxes and insurance? I worked and raised a child and bought two triplexes in a year --- I thought it was going to kill me. Just the financing. Just curious. Also, you're in CT, which is a very expensive state.

r2d2, just curios are you talking from a specific experience?

It's pretty difficult to find a property that you can put only 10% down on and get a positive cash flow after taxes, and maitenance even if max price is less than 90 X monthly rentals. Maybe I'm not looking hard enough.

I remember a woman selling a duplex about six years ago making the statement that although she'd owned rental property for 30 years she felt she didn't really make a lot of profit --- but it did help her out on taxes. Others in the business 30 years really do live on borrowed money and buy and sell single family property to come out better just to pay those enormous property taxes and insurance which can run $30,000-$40,000 if you have enough property.

I don't personally know a lot of people living on their rentals--they have inherited property or have another job or other means. It costs alot of money to upgrade apartments from window units to central heat and air and
put storms on windows to conserve energy so that tenants can afford to rent from you. Painting and roofing a few buildings in a year can make you humble as well.

Get serious 5k per month to support a family? You got to be kidding. That's damn cheap and ultra frugal! That's not much of a lifestyle. That's like 1250 per person. That's ultra frugal.

Robert - Yes I'm absolutely talking form experience. You can buy properties with no money down and still have them cash flow. I've bought a building with like 6% down one time. My friend bought a building with a 75% first and a 35% second and walked away from the table with the building and $17k in his pocket. And they usually cash flow as well.