Trouble before even starting, newbie needs advice.

59 Replies

I'll try to be brief, lol.

I'm trying to get prepped a bit before seriously looking for my first deal (wholesale or flip).

Background:

I cannot get any first time home buyer breaks and can't house hack. I have no high value assets. My credit is garbage (had to do bankruptcy last year) and I only have access to $10K (assuming I can roll my 401k into an SDIRA. If not, I only have $3K). No family or friends who have (or are WILLING, lol) to lend.

Even assuming the 10k, it's nowhere near the 20-30% down payment needed for hard lenders.

Add to that, I'm in Central NJ so nothing is cheap.

I've read about assigning contracts and all that ron legrand-type stuff, but it all seems scammy if not illegal, and I refuse to run a dishonest business.

There has to be a way to get going, but right now I'm at a loss. Any advice or guidance is appreciated.

Thanks.

Hello David. Although we aren't in the same position, I am also strapped for cash right now. It sounds like to me you need to do everything you can to save and be frugal. Keep networking here on BP to find partners. Look at out of state opportunities as your market is quite expensive. If you need help with anything, let me know!

And remember that the market is hot right now, so maybe buying right now isn't the best thing for you to do.

@David Rosenhaus Read the book on "Long Distance Real Estate Investing" by David Greene. Then invest where it makes sense. Much easier to get started this way.

I live in Phoenix, AZ and chose Durham, NC to buy two duplexes getting started. I used a HELOC on a primary residence and pulled off the BRRRR method. Much easier to buy something out of state and will make you a better investor by forcing you to build systems/processes.

@David Rosenhaus When I got started, I had $0. I had credit in the 600s and I was going through a divorce. Now, I am not saying I was in a worse or better position than you, but You should focus on your strengths. Do you work full time? Do you have some knowledge to bring to the table? All deals have 3 things. Time. Money. Knowledge. If you have time, you can be an asset to someone, ESPECIALLY if you bring the deal. Remember 50% (or less in some cases getting started) of something is better than 100% of nothing. If you don't have the money, I understand. That is something where networking comes into play. As far as knowledge, if you are new, I would recommend trying to get your real estate license. It could help you understand the market a little more. 

@Johnathan Boyle

Thanks, Jonathan. I agree with you 100%. I'm very happy to find a partner to work with. I guess that's kind of the main reason I wrote this post. It's my first step (or maybe misstep? Haha ) of networking.

My intent wasn't so much to focus on the negative, but rather to be transparent if somebody were to work with me. I just want them to know what their getting into. I have great faith that there are people out there to work with.

Btw, I lived in Belleville when I was 6 months old up until 4 years old. The only thing I remember is an old Italian place my stepfather used to take us to called the tick tock. I doubt it's still there.

@David Rosenhaus Haha. Unfortunately Zig Zag isn't there anymore. If I recall, a pizza place is where it used to be. and I get it. Transparency is important. Just want to let you know that they may be hurdles but it can still be done as long as you have the mindset for it. 

@Johnathan Boyle

You brought up an interesting topic suggesting to get my real estate license. When I had first started looking into real estate investing over 20 years ago (and then dropped it lol), I had seen somewhere that there are legal negatives to being an investor and a real estate agent. What are the pros and cons of having your license as an investor?

@David Rosenhaus There are cons of course such as having to disclose you are a licensed realtor and a piece of paper showing it, BUT I honestly think the pros outweigh the cons. The pros are you have access to the MLS so you can run comps. You basically have the ability to get a better idea of what purchase prices or resale prices will or should be. That is what I use for all my deals to give me the best idea of how to proceed.

Not what you want to hear, but I'd start saving and spend the time figuring out what the options are.  If you did bankruptcy last year, wait a bit before jumping in.  Real estate is not a race and it takes time to make money.

@Theresa Harris

Hi Teresa, that's basically what I'm doing right now. I'm in these forums trying to learn and get prepared for a very successful career.

On the other hand, life only gives us a limited amount of time, and I am way past the halfway mark, so I won't be dawdling either. (and using a word like dawdling should give you an idea of how old I am... 不不不不不)

@David Rosenhaus

FHA loans would be a good starting point which requires less money down. I would always say stick with conventional financing with 20% down though.

Otherwise, look into hard money lenders. They typically will charge higher interest but it will cut you through to potential financing options. Never used one and probably never will since I prefer funding my own projects but again, everyone has different needs.

@David Rosenhaus

Wouldnt recommend long distance investments for your first flip or long term hold. You need to understand the process in its entirety before going that direction. From opening the deal to project managing to closing out. Get into a property you can consistently visit during all stages

@David Rosenhaus

Hey David, looks like you have a tough set of circumstances.  At this point it seems like you might have to wait things out for a bit.  I'd definitely use this time to learn and network as much as possible.  When covid restrictions are over, hit your local real estate meet ups consistently.  Become a familiar face among real estate investors locally and learn.  If you establish great relationships, someone will give you an opportunity either as a partner on one of their deals or as a worker.  For instance, there is someone who "works" for me and the only thing he does is visit my job sites and learns as much as he can about the rehab process.  I pay him a little bit of money and in exchange it gives me a local presences since I invest out of state and GC's will take advantage of you if they know you can't monitor them regularly.  To make a long story short, he as done this enough times, saved enough money, and now he's ready to invest on his own.  He's gained a ton of experience working with me and locally he has met trades people that can help him as he gets started.  This guy was fresh out of prison when he started working with me so he had no credit history, no money, no job, and a felony.  This is all possible because he established a relationship with me, I had an issue that needed to be addressed and he offered a solution.

Steps I'd take if I were in your shoes.

1.) Use this time to learn.

2.) That bankruptcy will be an issue but as time is passing while you're learning and growing, that bankruptcy will have less impact.

3.) Become known locally as a person that is eager to learn about real estate investing.

4.) Figure out how to add value or fulfill a need that an investor has.

5.) Save cash.

6.) DO NOT INVEST OUT OF STATE AS A NEWBIE.

7.) Positive thinking will attract positive opportunities.

8.) Consider FHA lending options to house hack.

9.) As you connect and build relationships with investors, ask them about owner financing.  They might have a property that want to sell and might be willing to hold the note.

10.) Partnership, partnerships, partnership.  As a newbie, shared experiences makes the highs and lows more bearable. 
 

Anxiety is the biggest factor for failing. Don't be so anxious to jump into real estate. I like to think that people should fall into real estate when they have the business maturity, business savvy and when the person is so positive about a deal he is going to make he does not have to ask anyone for advice. Otherwise, listen to advice from others and be prepared to fail.

Start in the real estate business with your limited budget, limited experience and you are a sure-loser. Get a part-time job wiping tables to build up cash, read every book you can get your hands on, get real estate books to study to be a real estate agent and broker even if you don't want to be one. Go to every real estate club meeting you can find. Get a job as a handyman or in the construction trades. Work for a real estate broker. Learn to build databases and spread sheets. 

DON'T JUMP INTO REAL ESTATE until you know exactly what you are doing and you will be light years ahead of everyone you know.

Now that this virus seems to be ending there is a lot of money to be made when kids go back to college and you can buy a property and rent rooms to 2 students per room. As stated in previous posts, a Japanese girl I met started with no money, no driver license, no job and in 7 years she owned 18 properties. She rented the living rooms to 2 to 3 girls, closets, garages and even the laundry rooms. When she was 27-years old I estimated her cash-out at $2.3 million.

The big money is in multi-unit properties and I stay away from single-family properties unless I get them for a steal. You don't make more than minimum wage collecting rent from homes unless they appreciate. Hang around people who own multi-unit properties.

Partner with someone and exchange your time for equity in the deal. If you dont have money, leverage your time.

Start knocking on doors of preforeclosures, make cold calls to distressed owners, send direct mail (can be costly), drive to find distressed property, etc.

Get a good deal, money will find you.

Originally posted by @David Rosenhaus :

I'll try to be brief, lol.

I'm trying to get prepped a bit before seriously looking for my first deal (wholesale or flip).

Background:

I cannot get any first time home buyer breaks and can't house hack. I have no high value assets. My credit is garbage (had to do bankruptcy last year) and I only have access to $10K (assuming I can roll my 401k into an SDIRA. If not, I only have $3K). No family or friends who have (or are WILLING, lol) to lend.

Even assuming the 10k, it's nowhere near the 20-30% down payment needed for hard lenders.

Add to that, I'm in Central NJ so nothing is cheap.

I've read about assigning contracts and all that ron legrand-type stuff, but it all seems scammy if not illegal, and I refuse to run a dishonest business.

There has to be a way to get going, but right now I'm at a loss. Any advice or guidance is appreciated.

Thanks.

Take 18-24months to get yourself together... I know you want to get started but you are pushing a huge rock up a hill with your credit, recent BK and lack of capital.  When you are ready to get going forget wholesaling... it is a scam/easy way out racket that will get you nowhere fast.  Save every penny - keep your day job - invest every penny of profit back into your biz.

 

@David Rosenhaus , I agree with Stephen that I would focus on saving money and clearing up credit as much as possible.  If there are other items not related to a bankruptcy, get those items cleaned up.  Every little bit can help.

Wholesaling, in general, is not scammy, but it seems many people are doing it trying to make a quick buck, which does feel a bit scammy.  Sometimes what people are doing is illegal, since they are marketing and selling real estate they don't own without a license.  To stay well within legal bounds, I would consult with a real estate attorney before you go down this route, but then you run into money issues.

Another route to start getting involved and hopefully building knowledge and network is to get your license.  If you are outgoing, have a strong network of friends and family, etc, this could be a way to start.  I will caution that I recently heard a report that there are more licensed agents in the country then houses to sell, so you could be in for a challenge, but it gets you going too.

Beyond that, back to save and network.  Save and network.

@David Rosenhaus You have great advice here. Continue studying, saving, clean up your credit (which there are some hacks to do that too), and find a partner. I would enourage you to look at of state (and yes, newbies can do it... I'd highly suggest having a mentor help you with your first few deals) so you can invest outside of your expensive market. "Live where you want, invest where it makes sense."

Fellow newbie here.

Have you ever heard about tax sales? It's a good place to buy properties for cash for as cheap as possible. It requires A LOT of time researching though.... And you the need cash on hand. I'm no expert on tax sales but I am familiar with them. Look into it! It might be a good opportunity for to buy and sell quickly to earn some extra cash.

The other advice you're receiving is really solid. But you can look into what I mentioned in the meantime, if you're willing to put in the work.