HELP!! First time investor questions (I have a plan)
To anyone who may have experience flipping land/homes in rural areas outside of major cities, please read this post and I would love to hear any insight as to what experience you have had and any advice you would be willing to give a first-time real estate investor to give some direction to get off their feet and into the market for the first time. If you would just like to make general comments on my finances or ask me random questions as well, comment or ask away….
To start off, I’m going to give a brief summary of myself and finances to be as transparent as I possibly can:
My name is Will and I currently reside north of Atlanta in a suburban town of Cumming, GA. I moved down to Atlanta four years ago after college. I am an engineer working in Roswell, GA, with a degree in Civil Engineering. My wife and I are 28 and 27, respectively (we don’t plan on having kids anytime soon). Between my wife and I, our current annual income is around $100k per year. We just moved into our first home about 3 months ago. Below is a good summary of our monthly income/expenses. Please note that we have no credit card debt and our cars are paid in full. Also note, I was pretty conservative with my estimates.
Income and Assets
Current Savings (Between my wife and I): + $10,000
401K (Between my wife and I): + $15,000
Equity in Home (Have owned home for 3 months): + $20,000
Monthly Income (After Taxes): + $5,500
Expenses
Mortgage Payment (I don't have to pay PMI): - $900.00
Home insurance: - $75.00
Average Utilities (Electric, Gas, Water, Trash, Internet): - $275.00
Random Subscriptions (Prime, Spotify, etc...) - $50.00
Student Loans: - $500.00
Food (includes occasional take-out): - $500.00
Car Insurance: - $180.00
Cell Phone: - $120.00
Pet Food/Supplies: - $100.00
Others (hobbies and random items): - $300.00
Total Monthly Expenses: - $3000.00
As you can see by quick glance, we are able to save approximately 2k-2.5K per month based on our current financial situation. Now that you have a good idea of our finances, I am going to dive into what I was planning on doing to get involved in the real estate market.
The safe approach (or at least what I would call safe). I was planning on going in on a 3-5-acre plot of land in the North Georgia mountains near one of the many touristy vacation towns about an hour or two away from my home address. I was planning on starting this endeavor with a very good friend of mine in the Atlanta area who shares the same aspirations as me and is also very sharp with their finances. Our plan was to buy a piece of land (30-40K) in North Georgia and pay in cash. Have a well and septic system installed (30k). Both of us have had experience in home framing/foundations so we would then build cabin homes at different locations on the plot of land and start a rental vacation cabin/home company with virtually no debt (except annual property tax of course). We are very serious and determined about doing this and realize that this would likely take the next 5-10 years of our savings and finances just to get this off of its feet. We have been discussing this for about the past 2 years and now both of us have home and have somewhat of a saving account built up.
My questions are as follows:
Am I crazy for thinking of this as a plausible scenario?
Is this a project we could complete in sequence? For instance, could we buy the piece of land this year wait until we have the finances to keep moving forward with the project, or would our money be better used investing in a vacation home right way?
Would it be smart to invest all of our savings into a project like this if it isn’t producing any passive income right away?
Would purchasing a vacation home and renting be a better idea? We would have to undergo a joint mortgage. Is this a good idea to do this with a good friend?
Would flipping land in North Georgia alone be a good opportunity? If so, where are some good places to start looking?
If anyone else has had similar experiences they are willing to share or would just like to elaborate on the above questions, your responses would be GREATLY appreciated.
Most Popular Reply
My two cents is: you get five points for pairing with a friend, because of the advantages that brings. However, the points you will theoretically LOSE for going in on a project with a friend ranges from 0 to 6. I for example got deeply involved with a friend (well, a good acquaintance) and didn't do all the DD I probably should have (taking stuff on faith). Fast forward to today: it has been 20 months instead of 9, and I'm $45,000 over budget (I'm the capital partner). I have stayed awake at night and gotten a few grey hairs.
If you want to get involved with a friend, try to limit your downside by saying Hey I like you and trust you but we have to go about this as though we are not friends, but strangers. Take nothing on faith. If it works out, that's great -- and from what we know of each other, it may very well. But we need to proceed as though it will fail, and thus do a lot of DD, trust but verify, and put everything in writing.
Feelings can get hurt with friends in a way that is not likely with strangers.
Having said all this, I have a deal with a friend that has been going on for 3 years and there are no hiccups to speak of. Now, I didn't do a hell of a lot of DD, so it's almost lucky that things are still peachy.
If you have a good idea and/or skills and/or financial capacity, you might very well be able to find a non-friend to do a project with.
Man, there are so many bumps and bruises one has to endure on their way up the ladder. I don't envy you! When you see someone who has been active and fairly successful over a 5+ year period, or someone who has 1,000 or 2,000 posts on BP, they merit your respect (all things being equal) because this business can chew up and spit newbies out. That's not to scare you exactly, but to say you have to be very careful. Take off rose-colored glasses and be prepared to take some lumps.
WIshing you the best, of course :)