I have a rental portfolio of 127 units and soon to be 147 units.  I've experienced a lot: wholesaling, flips, single family rentals, multi family, office, triple net commercial, development...and now it's time to give back :)

So, fire away...what's holding you back from getting started?  If you could have your biggest questions answered, what would they be?

@Salvatore Lentini

Just not knowing exactly where to start and a tad bit of analysis paralysis.

I haven't been able to find the right properties on my own. I also in the past was unable to get Realtors to provide me with listings. The Realtors wanted to make sure I had been approved for financing 1st. 

Is it required to get approved before looking for a property?

And also Analysis paralysis is also an issue for me. Thank you.

@Salvatore Lentini how to find great deals, what's the best ways to get funding to start building portfolio of rentals

Waiting for my credit score to show up for loans, getting funding without loans.

Figuring out what fair market rent is in the area to properly analyze the ROI on a deal.

Finding a good property management company.

I have lots of worries, but I'm mostly just worried about messing up my first deal and turning what should be a good investment into something that loses me money because I didn't know something.

@Salvatore Lentini Congrats on your success, and this is a great thread, thanks for starting it and offering to give back. 

I try to reach out to as many people getting started and offer my input as well. I wrote a recent blog post to try and address what I feel is the biggest struggle most beginners have. Which is ultimately just a confusion over what the process is supposed to look like. (A common thinking pattern that not only leads to analysis paralysis, but fear, depression, lack of confidence, anxiety..) It's the gap between your expectations, and your current reality. 

Anyways, hope my post below offers some help to people getting started as well.

Keep up the great work!

https://www.biggerpockets.com/...

@Tim Hudson - There's no "one right way" to start. It's different for everyone depending on your goals. If you're interested in flips, then start reading articles on flips, learn the formula for determining a deal. I use a very rough rule of thumb of the purchase price should be 50% of the price you will sell it for when it's done being rehabbed and on the market. Or you can do ARV (After Repair Value) x 70%. Take that number and subtract your estimated rehab costs. What you're left with is your offer price. Example: ARV = $200K. $200K x 70% = $140K. Rehab costs = $40,000. $140K - $40K = $100,000. You'd offer $100,000. That would give you $60K to make your profit from. You'll have closing costs and carrying costs, seller assistance....you subtract those out and you get your profit. So once you know that formula, you start looking on the MLS (which means you need to find a realtor), or you start getting yourself on wholesaler lists, or start a direct mail campaign. There are many ways, you just need to pick. Once you start looking at places you apply the formula. You can even start putting in some super lowball offers that you know you won't get but it gives you practice. There are a lot of steps along the way and you can't possibly prepare yourself for every single scenario. Even after years of investing and hundreds of rentals and flips I am constantly running into new things. You learn the basic framework and then jump in. You need to do step 1 before you can get to step 2.... and you can learn step 2 when you get to it. Don't worry about step 19 when you haven't even done step 1. As long as your basics are solid and your numbers are good, you have to adapt to each deal on the fly. The example above is for flips but no matter what you're looking to do in real estate, it all comes down to mapping out the path. Come up with the list of steps and tackle them one by one until you get to your goal.

Hi @Leslie N Harmon - Not necessary to have financing before.  It helps but not necessary.  That's the trouble with working with some realtors.  Unless they specialize in working with real estate investors, they follow their tried and true methods and requirements they have for people looking to buy their primary.  You need to find a realtor that works with real estate investors.  Or you can get on a bunch of wholesaler lists.  Message me if you want tips on how to get on their lists.  It's not hard.  Believe it or not they are out there looking for you!  Wholesalers are always looking for investors to add to their list.

Regarding funding, it depends on which type you are looking for.  I have a bunch that I've used to build my rental portfolio.  Online lenders that aren't concerned with W2s and tax returns.  I also have private lenders that consist of my attorney, my realtor, my commercial broker, family, friends, other investors I met on BP, people I've met in my neighborhood etc.  They are all around you.  You just need to start asking around, start letting others know you are investing in real estate.  You need to start and little by little the money will start to find you.  It's like the lottery saying "You've got to be in it to win it"  Same with real estate "You have to be in it to start succeeding in it".  If you never get started, you'll never find an investor.  Make sense?

@Peter Petwr - I don't understand the credit score comment but regarding the other 2 questions, you're getting ahead of yourself.  Come up with a plan.  If your plan is getting your first single family rental then put a plan together.

1) Where do you want it to be?  Close to you?  How close?  If it's 20 minutes, draw a circle around your house on a map of 15 miles in every direction.  Start looking into those towns.  Which ones have good school districts.  Which ones have good rents compared to purchase price.  Check out the crime in the area.  Go online and look at forums that talk about those areas.  Talk to realtors in those towns.

2) Once you've narrowed it down, get on wholesaler lists (there are a bunch of ways to do this.  Message me if you want to know more).  Start going to your local real estate investment group (search online).  Find out who the best realtors are out there that like working with real estate investors.

3) Learn the cashflow formula (basically your monthly rents minus all monthly expenses).  You can get fancy and factor in tax benefits but I don't.  I view that as the added bonus.  I want to make sure my properties are cashflowing x amount per property.  If your properties are cashflowing, the sky is the limit on how many more you can buy.  If they are bleeding money you won't be able to continue to buy.

4) Once you find a few prospective properties, ask the realtor to run some rental comps.  Look online at the many different rental estimate sites.

5) If you find something where the numbers work, start lining up financing (you can start this at any stage but I find it helps to have a tangible investment for private lenders, hard money lenders, family and friends to look at to decide if they want to invest.

Basically there are just a bunch of steps along the way.  You won't know how to do them until you get there and experience it.  By finishing one step you are forced to learn the next step.  But if you don't take the 1st step you'll NEVER get your 1st property.  That's a cold hard fact.  Rental properties are pretty forgiving I have found.  As long as you have enough padding factored in most of the worst case scenarios are that you break even.  If you're very concerned you could house hack.  That way the rental income is mostly gravy.  If the other side of the duplex is not rented you're still just paying for a place for yourself to live.  Plus you get the best rate possible because it is an owner occupied loan.

@Salvatore Lentini at what point does the education phase in reading get to the point of too much education and start to be an excuse? Should I read and learn AS I LOOK, or read a few books and attend a few meetup meetings before I start to look for properties to rent?

What advice would give an aspiring Real Estate Investor that lives in a very expensive market (Bay Area) is a single father to one child with an approximate total debt of $72,000 (ie car loan, student loan plus others). 

Still living in a household with other family members so housing is not much of an issue. 

My goal is to pursue a multifamily, ideally a duplex for starters and work my way up from there. 

Do you think I should pay down debt before even thinking about investing? 

@Kris Tidwell Im on the same boat, although I think consuming information is a great thing to educate ourselves, but not knowing when to take action is also one of my problems.

@Salvatore Lentini

You mentioned using private investors. Do you typically setup joint ventures to enable this? One issue I foresee is running out of capital so the ability to use private investor funds is essential. I'm just trying to figure out the best way to go about it. Thanks for your insights

@Salvatore Lentini

Funding! I have less that stellar credit, so no bank. Im relying on Hard Money or Private Money, so I need to find amazing deals... the local market is a sellers market and difficult to find deals that will work. This being my 1st deal, I’m not comfortable doing anything out of state.

Originally posted by @Leslie N Harmon :

I haven't been able to find the right properties on my own. I also in the past was unable to get Realtors to provide me with listings. The Realtors wanted to make sure I had been approved for financing 1st. 

Is it required to get approved before looking for a property?

No. It's not. We're looking right now and haven't pulled the trigger on getting pre-approved yet. We did, however, know our FICO scores in advance and let one lender do a soft pull to confirm what we already knew.

Next agent who asks you that, if you choose to continue talking to them (I wouldn't) you can turn it around on them as ask who their preferred lenders are and let hem know that you're happy to consider their recommendations.

Check the agents listed here on BP and see if anyone works in your area. Remember, you don't just want an agent, you want an agent who is either an investor themselves or works with investors on the regular. Better yet if they know how to evaluate a property.

You want someone to help lift you up, not put roadblocks in front of you to hold you back.

 

I have a stable job, and great credit score, but need to come up with 20% for down payment. Still researching and trying to get it figured out. 

Ok, thank you. I will look for agents in the Atlanta area on BP. 👍🏽😊

My issue is finding deals and the 20% down. I have a down but not 20%.

@Salvatore Lentini . Time is my biggest obstacle. I work as an professional in the logistics field and love what I do. I have about 100k to invest but I dont have the time to manage a flip or rehab. I have the skill and knowledge to do most of the work, as I grew up in a construction business but available time is holding me back.

@Kris Tidwell - real estate books are great for planting the initial seed and outlining steps and strategies but you'll always feel like you don't know enough... that you need to read one more book or learn one more strategy.  Meeting real people, real estate investors "out in the wild" is what will give you the confidence to start investing.  We all have these visions in our heads when we're looking to buy that first property of what a real estate investor is like.  The reality is, they are just totally regular people like you and me.  Once you realize that, making the leap becomes a lot easier.  So, read a few books, attend some meetings and start looking. 

@Patrice Holloway I am int he same situation. My husband and I are in the saving faze and by spring we should be able to have enough for the 20% down + additional savings for rainy days. What is your savings strategy? 

@Josh Rodriguez - how to go about handling debt varies from person to person.  It depends on a lot of factors: how much income you have coming in, how much those monthly payments are, what kind of interest rate you are paying, what point in the amortization schedule you are in, what kind of access you have or think you'll have to private funds, the type of property or properties you plan on buying, comfort level with risk and debt, long term plan, etc.  There's no reason why you can't do both (pay down debt and invest in real estate).  Like I said it all depends on the plan.  Maybe you get a plan in place to pay down debt, while you start looking for an investment property.  Say it's a flip.  Maybe you partner with a family member or a friend or a coworker...anyone with money but no time.  They put the money up, you put in the sweat equity.  They get 70% of the profit and you get 30%.  You're still paying down your debt but when the flip is done, maybe it profits $25K.  Your 30% stake gives you $7500 that you can use to invest in another deal where you put some "skin in the game" and get a higher percentage.  Maybe 60/40 or 50/50.  Or you use the $7500 to pay down more debt.  This is just one path of many but I'm mentioning it to show you that whatever your situation is, there are ways forward.  You just need a plan.  

@Alexander Kempf - Yes I work with private investors on all of my investments but in different ways.  It all depends on the deal and how the numbers play out.  Sometimes I work with private investors by doing high interest 8-12% interest only loans.  I buy the property cash, rehab with cash and then when complete and rented I refinance the property and get a 30 year low interest mortgage.  I use the refi money to pay back all of my lenders.  Other times I work with private investors by giving them equity in the deal but no interest only payments.  Their money goes into the purchase and rehab of the property.  When it's done we either refi and get everyone paid back while they retain their equity, or their money stays in and the property just cashflows better.  Either way, I am into the property for nothing.  Or sometimes it's that same scenario but I put "skin in the game" so I can get higher equity.  Getting private lenders definitely helps with real estate investing...especially if you want to grow quickly or build a large portfolio. 

@Salvatore Lentini

Buy and holds 3-4 Multi-Fam, build a portfolio is my goal, start off as owner occupied. Eventually scale to bigger units. If you could give me a few tips for step 1. I’m done waiting and overthinking I’m ready to pull the trigger.