Starting with 20-30k

11 Replies

What do people recommend for someone who is just starting out in REI?

Flips on single families?
Foreclosures?
Wholesaling?
Buying a multi family house and renting it out?

Living in the Mass is extremely expensive, housing has gone well beyond the means for someone looking for a starter home. I refuse to rent and just piss my money away. I'd rather live in a house that I am fixing up, rather then live in a nice lofty apartment.

I have a friend who is willing to invest and go 50/50 on a deal and so far we have just been looking at single familie homes, around 200k, to fix up. The way we look at it we can afford a mortgage around $1,400/month. We each have about 10k to put in plus we can get a little funding from the family for the first house.

For financing we were entertaining the idea of an 80/20 loan. First loan is at market rate, second loan is 1% or so above market rate. Looking to put nothing down, since that money has to go to renovations. I believe the offer fixed rates, but the ARM's are more intriging for a flip, but of course risky.

So that would be my general outline for a plan. But I am wondering if people feel there is a better way to start, if so what?

I'd also like to get some input on finding deals. You can do all the searching online you want but still be behind the 8 ball. Using MLS, locate agencies....etc the good deals already seem to be off the table. Is it just something you have to look at multiple times daily or is there a better way to get an "inside source" before all the info is release to the public.

It may be because I am just starting out, but I seem to only find houses that are on the market for months and months and clearly investors aren't pounding the door down for them, so why should I?

Thanks again!

I also wanted to ask one more question.

It seems almost impossible to dedicate the time you need to find a good deal to do it while working a full time job.

How many of you just jumped into real estate as a full time role and how many do it on the side?

I'm unhappy with my current job and would certainly like to just get into real estate full time. But the draw backs are not having the income from my current job and also lack of benifits.

I just feel like the days pass by so fast but I can't get anything accomplished because by the time I get settled in at home its 7-8 pm and i relax for an hour go to bed and get up at 5am :protest:

So its almost impossible to find the time to do anything more then read books, articles, check listings every now and then...etc

You may want to at least look at a 1 year hybrid loan. You'll get a reduction off of the fixed rate because after the 1 year the rate is adjustable. But if you are going to flip it in 6 months, that doesn't really matter.

You seem really motivated to change your situation and that is a great start. Giving up your full-time income to jump into real estate will be very difficult. If the money doesn’t come in fast enough you may find yourself quitting. I understand your position. Twelve years ago I decided that I had had enough of depending on a job. “JOB” is an acronym for “Just Over Broke” or “Journey of the Broke” and I didn’t want that anymore. Knowing that I could not just stop working I began a transition. I started looking for ways to generate additional income streams that didn’t involve trading money for time. Some things worked very well and others didn’t, but I kept going. People were always telling me “that won’t work”, “you can’t do it”, “you’re crazy” but I didn’t listen. Today those people are still doing the same mundane things that they did then and I have a lifestyle that many envy. Real estate is one of the things that worked very well for me and I encourage you to learn as much as you can and go for it. Just remember it is not “get rich quick” and it is work but it is absolutely worth it. I would suggest that you find a way to transition into it and give up your full-time work after you have established yourself to some degree.

8)

What I would suggest is to enter into an emerging market and buy affordable rental property. I do sales in the entire south and I am the real estate arm of a large construction lender, therefore we have some resources others may not. We are seeing the best deals right now in Mobile, Alabama for single family homes. They make great rental properties and are in the go-zone region, so depending on your tax bracket, this may put you in a unique position. In Mobile, AL, 10 days ago a German company called Thyenn Corp Group or somehting like that announced they are going to be building the biggest steel plant facility in the country, and will likely be the biggest in the world. It is supposed to bring in over 50,000 new jobs over the next 5 years which is quite significant. Not to mention Dale Earnhardt Jr. is expected to build a 6 track speedway surrounded by a dozen hotels and numerous restaurants. Cost is currently cheap out there and you can find some very good buys on preconstruction. Multi-family with 20K down, you may have to look for seller financing for some of it.

Great advice guys.

Rehab- I hear ya with stickin out the full time job at least until I get a few deals done and make sure I can make a living off of it. I am certainly motivated to learn and work hard to get out of the standard 9-5. People think I just want the "easy way" or the get rich quick. But its not about that, I have always been a hard worker and will always be one...just not for someone else. Started my own landscaping business when I was 16..but it ended went I went away to college. So that entrepreneur attitude was there early on.

As i'm driving home after work, stuck in traffic I look around and I say "is this what life is like? people just sit there an deal with this?" I can't ever picture myself working for someone else for the next 40 years of my life. 1.5 years of this current job and I've already had it. I could be making 40k....70k...120k....and still that lack of satisfaction/accomplishment would still be there.

Stallan- Certainly sounds like a great market to be in. Something very intriging but its something I may have to wait on for another year or 2. Its an overwhelming/daunting task to make your first investment in a market you live in, let alone one that is 1,000+ miles away.

I'll certainly keep Mobile on the radar if I can get some expereince under my belt up here. I've also heard that Pensacola FL is a great place to get in right now. I read that they are putting in a new airport there for business means but it will also be a small hub for travel and leisure for the general public. They are also building quite a few businesses in the area. The coast is "under developed" in terms of Floridian coast and its a portion Florida that has a lower chance to be hit by a landfalling Hurricane then most of FL. I believe 5 year growth rates were around 40-60% for housing. One drawback is that there are a lot of investors getting in and they are throwing up Condo's/Apartments going up fast.

Keep the input and advice coming guys! I love taking a look at new perspectives and continue learning from everyone that has already got the start!

I understand the difficulty in maintaing property. Do you think investors invest solely in their own market? If so you better be a real door knockin machine! Ever hear of a property manager? Sorry for the sarcasm...I just had a cup of coffee...If you have the right property manager, which you can find out in a conversation with them over the phone, you will never have to worry about who is watching your house.

When you say Pensacola, do you mean Panama City? It sounds like it. Yes, they are supposed to start the new airport on 10,000 acres next year. There is a big problem with mitigation on the parcel with bald eagles and such and the start date keeps getting pushed back. True, that the housing market is projected to appreciate over the next 5 years by about 50%, but false that it is in the condo market. I was recently in Bay County and met with Panama City Beach's city planner. You will throw up your lunch if you knew how many of those condo's and preconstruction condos were investor owned and/or reserved. It's pretty scary. investors who bought a year and 2 ago are facing either foreclosure, HUGE negative cash flow, or cancelling contracts and forfeiting their 20% deposits. Those with deep pockets can afford to hold off. Don't get me wrong, it's a beautiful place but as everywhere the condo market is horrible. I am highly motivated to build a development in the Rosemary Beach section of Bay County and target affordable housing about 2 miles from the coast. Land is a problem out there because a certain entity owns most of it. Single lots are very expensive...too expensive for investor purchase in my opinion. I refuse to throw myself into the fire of that market. My business model is trying to undercut the market with our resources at our bank who owns my firm and modular home manufacturers. I can't make it happen there yet. I'm hunting though!

Yes, my mistake....Panama city just had a brain cramp there.

I am fully aware that investors make purchases outside of their market. I don't want to limit myself to just NE mass but I think for my first deal I'd like to just get comfortable with the process and be able to walk through it and keep an eye on my property/work on it myself.

I think you may be overestimating the kind of investment I can pull of right now. I am not sure any of my properties I have in mind would be worthy of a property manager. I am not going to be purchasing 6,8,10..+ unit places right out of the gate. I simply can't afford something like that.

Purchasing a single family or multifamily to rent out is what I am anticpating. I may end up just donig a flip or two....not really sure.

This is exactly why I am here fielding the opinions/views of people like yourself who already are in the industry.

I've got a single family home rented in North Carolina, Mississippi, and other states. I have a property manager on each of them and they are happy to take my $75 per month to drive by once in a while on their way to work and send me my rent check. No property manager will turn down business especially in the stagnant national market we are in. I don't own multi-family in some places either. If you have 20-30K to utilize, it is going to be tough to make numbers work in your area unless you utilize seller financing or something to that nature. What about a rehab loan in your local area. If you are in Boston, there have to be plenty of rehab stuff to do. Although we are not licensed to finance rehabs in MASS, I know a great rehab lender out of NY who finances MA. You can do those with little money out of pocket also. Plus, it's something you can be a little more hands on with.

What part of NC is the rental property? Is it yearly or weekly rental?

I have been to the outter banks 2 times on vaca and loved it. Those rentals make an absolute killing, but I think that market is priced over my head for now.

When did you get in down here?

I have a place in Leland, NC which is near the seaport in Wilmington and one in Greenville. Greenville is very cheap. You can get a brand new home with a 2 car garage in a nice development for about $135,000 maybe even less. There is a new hospital there which is one of the biggest in the Carolinas, a new dentist school, etc...It is projected that 800 doctors are going to be moving into the area for their business. It's a huge medical field. History says that each doctor brings in 6 additional people for admininstration, jr. doctors, etc...

Leland is also a good time right now. Prices are higher than Greenville but the potential is just as good with the seaport experiencing a major expansion that is expected to bring in over 40,000 new jobs to the area.

Rental rates for Greenville are right around $1000 per month, sometimes a little less. Leland I am getting $1450 on my home...They are annual leases on both of them. Vacation lease wouldn't be a bad idea for Leland. A good friend of mine is with ERA Realty in Wilmington and he keeps his eye open for me.

Funny you mention Wilmington NC. 3 or 4 months ago I was looking at real estate around there, simply to pass some time and I was shocked at the prices. There were some incredible deals, houses like that would go 2-3 times that up here in Mass.

Wilmington is a nice city and the NC shoreline is beautiful. I never thought of it much of an investors place(besides the outter banks) strictly because I didn't think there was much in the way to draw people out that way.

I think its a couple hours from a major airport and its a couple hours away from the pharma/tech triangle down there.

I'll go with a couple vacation rental homes in on Panama beach and open up a watersports rental place(jet skis, kayaks, caneos, boogie boards). :mrgreen:

I agree with you that other markets are a better option for me, someone with minimal savings and lower income. It makes it difficult to get started right out of college when the average house in your county is 368k.