That didn’t go as planned!

152 Replies

@Anthony Wick I’m in nearly the same boat not enough income and discouraged because disputes the rhetoric no money Is a real pain. Where I dIffer Is I have equIty In a rental house whIch I cant borrow agaInst because of my income and debt to income. I’m wondering if I could create a note and sell that or offer an investor a note for cash and financial statement any ideas?
@Nick C. One problem I’m running into is that realtors won’t even talk to me about a deal because I haven’t got a pre approval letter. Looking at several properties that are vacant in the area and sending out a few letters but frankly don’t know what I would do if I got a response.

@Doug Orchard I think I have heard of someone else doing that method on BiggerPockets. Not too positive but my biggest advice to you is to not get discouraged. There is going to be a way you just have to keep searching until you find it. Dont give up!

@Branden Sewell Guys here are giving you super literal advice. I don’t like it. Don’t do a 3.5 down FHA right now, the mkt is starting to show weakness. You could be underwater, sleepless and stressed out, for a full decade. I don’t mean to come off as rude, but if you’re asking this question, you need to go research leverage seriously. Fully understand how it can go wrong. Then save up your money and come to a lender with confidence.
Originally posted by @Branden Sewell :

@Lincoln James I don’t find your comment to be rude. But it would be helpful if you could share some of your knowledge on here about leverage. What should I be learning about leverage? 

Taking out a loan to buy a property is the retail purchaser's only true venue to leveraged investing. In terms of bonds, if I buy a house with 20% down loan (80 LTV) for 30 years and rent it out and maintain it so that after expenses I don't cash flow a dollar, my investment yield is about 7%. If you look around for similar yields in the bond market, you'll come up short. That return is with 20%down! With 3.5% down it's more like 11.6% if you don't even cash flow!!

/The reason it’s  dangerous is this: let’s say you put down 3.5% on a 195k property. Thats 7k down with maybe 5k in closing for 12k. So your loan is 193k. Now suppose the mkt for your duplex goes down 5% and you have to sell. The property is now worth 188k but after commissions you can get 180k. You’re immediately down 13k plus your 7k for a total of 20k. 

/this is for a 5% mkt move. If you couldn’t come up with 20k before, then you are now screwed and you have to short sell. Now consider what a 10% loss would do to you. Your credit would be smoked for 7 years and you couldn’t apply for a loan for 2.

/Consider also that at 5%, you're going to be paying somewhere around 1000/mo for the mortgage not to mention taxes + exp. So maybe you live in your side and rent out the other. What happens if you have a dry spell and can't rent the place for two or three months? Assuming you aren't cash heavy or you wouldn't be asking this...You're effed.

/I know I might be coming off as risk averse, But there are so many ways high leverage can hang you dead. Think it through. 

Edited because bad at math

I'm quite surprised at the negativity here over this. IF you are determined enough it is not hard to find a person or business who is looking for more homes. So the way to get started is to find that person/company and offer to help find deals for them. In exchange for your time you get their expertise and will get a fee when you find suitable deals. This enables you to use their money and their expertise in vetting a deal which will be a great training experience for you.

You will fin din that process you will connect with people wanting you to help them find deals.  Keep doing this until you have some money!

I started this way in NZ and the USA.

@Lincoln James I think that is the risk you take to play the game. I don’t think you can avoid all the risks that can happen. I’m already paying a $1200 a month rent. So what would it be for me to pay a $1200 a month mortgage. Im already paying someone elses money and losing opportunity so why not take a risk at being in the winning side of things? I guess the first deal doesn’t have ideal scenarios but action is what I am going for. I hear a lot of stories on BP of people who started with high risks but they started and that’s what mattered most.
@Branden Sewell I agree with that but that isn’t the whole story. Leverage is the financial equivalent of RDX. You’re entering an inflated market where experienced investors are talking constantly about the dearth of deals and you’re surprised that you couldn’t get a zero down loan from an institution. What people are answering here is the question : can I get a high leverage loan? What, IMO, they should be asking is why In Gods name are you trying to lever up if you haven’t done that basic research? You have to have respect for leverage. If this is the risk you decide to take so be it, but I would highly advise hanging out for a bit before taking that plunge. Work with others. Know what you’re doing. Then embrace leverage as a tool to build returns.

I don't know what's available in your area, I just signed up on a waiting list to build my own home in the area it's charity sponsored and you put in a couple days a week helping build houses for a year and then one of the houses is yours. They guarantee the payment won't go above a certain percentage of your income. May check with local HUD office also houses for humanity helped a person i met build his own home on same plan.

My thought is if you have little to no experience and no money ( even if you have good credit) then you tend to have very little value to offer and can't command  half.

In those situations you take what you can get as the person with the money is taking a higher risk with a newer investor versus a known investor that is very seasoned and experienced.

Once you start getting experience then you can start looking for better sources of capital or renegotiate split of the next deal with current investor once showing a positive track record of success.


Originally posted by @Branden Sewell :

@Mark Sewell Yes, I have to agree. Great last name. haha. I have a cousin named Mark Sewell. Cool stuff. It would be nice to have you here in FL as well. Seems like you have a great way of communicating with people and making them see their value. That goes a long way. I love helping people find their value and their potential.

Honestly, my business pays the bills and it is my full-time job but I want to get into Real Estate Investing to build some passive income and not have to worry so much about slow seasons, or working until I'm 60.

My business is doing pretty well for doing primarily painting. We have had a pretty successful 1st year and I'm sure next year will only be better. We are just now starting to see referral business and word of mouth business come in. I know that is going to take some time since we are so new to this area.

Well, I also have a Cousin, Marty Sewell, that lives in FL.... works for the Miami Marlins as a media guy.  Claims his job is to chase away the sports reporters from the buffet table in the locker room, and says it with a straight face.

Man, you are really in such a good place.  Good for you.  Keep doing what you are doing, and keep meeting people, and it will come to you.  

Fight the urge to 'prove everybody wrong' by showing them that you are ready 'go out and take action'.... that's guru talk.  Just be smart.  Doesn't mean paralysis by analysis, or give in to fear, but this isn't a race either.  Build the network and watch and learn, especially since you already have a front row seat, potentially, at your day job....  

Now moving on your more recent post, now that to me makes sense.

If you are paying $1200 rent, and you have an opportunity to buy a house and live in it, then do that. Build some equity. You aren't really risking much there, as long as you buy right. Plus you have skills, you can fix it up. Do that, fix it up over a 1-2 year period, and see where the market is going. If we are in a good market, and you don't mind, maybe sell it...? Or make that rental property, and go get another fixer to live in for a while.

@Mark Sewell So many investors say a single family is a terrible idea and a duplex is a better option. That’s why I was aiming for a duplex instead. I like the idea of having someone else pay my mortgage while I save money for my next deal. Anyway, we already got pre approved for $200K and we can definitely make that happen on a single family so if it comes down to it we might just get a single family the end of this year and do exactly what you said. But I’m trying to fight for the duplex if possible.
Originally posted by @Branden Sewell :
@Dean Letfus

I was surprised too. I was hoping to find some encouragement and some bold go getters with solutions and answers. I appreciate your feedback. I will take the negative too and glean from it.

 there is no magic formula for this... get a job in the industry earn and learn.. save and then invest.. no ability to borrow basically and no cash will be big time waster for you.. don't waste time on something that is a unicorn and not real. 

@Branden Sewell ,   There's plenty of bold go getters on here. But what you are looking for really is a no risk way to do something very risky without any commitment on your part.  So it's difficult to take you seriously as you have a somewhat Utopian world view currently.

What I can tell you is what I did. Which is arrive from another country knowing very little about the US market. I did have good real estate investment experience which is what you need. I turned nothing into a million dollars in 12 months by doing exactly what I am suggesting you do.  Find some good players in your market and learn from them by serving them.  IF you are serious about RE this is the fastest and lowest risk way to get going.

Forget about someone posting here how you can get a 100% loan and buy houses without any money at all. Guru's make their money by telling people this is possible. But you'll notice they make their money through real estate investment education program sales.

@Dean Letfus

Yeah I have to admit I am a complete idiot when it comes to real estate but the whole reason I made this post is to learn what I dont know. Its obvious that I have a lot to learn. Saying that I am a complete novice when it comes to real estate is an understatement. LOL :P Thanks for your feedback!

@branden  Asking good questions makes you not an idiot actually. The problem is people want the cake without the need to grind flour or break eggs. I met lots of people when I was Memphis based who wanted to make a fortune out of real estate. I never saw them chasing deals at 10 o'clock at night like I was or passed them on the road at 6AM driving for dollars like I was,  but I could always find them in a bar on Beale st. or sitting in a fried chicken joint spending money they didn't have on food they didn't need.

It's just hard work. And if you're serious you'll modify your life style short term to create some funds to get started.  Get 10 grand together and you can get going on your own it isn't like you need a million bucks.

Originally posted by @Branden Sewell :

@Dean Letfus

Yeah I have to admit I am a complete idiot when it comes to real estate but the whole reason I made this post is to learn what I dont know. Its obvious that I have a lot to learn. Saying that I am a complete novice when it comes to real estate is an understatement. LOL :P Thanks for your feedback!

Yeah, hold up.... somebody on BP has decided you have a somewhat utopian view of the world.  Maybe a fair comment, maybe a bit much.  That does not equate to being 'a complete idiot when it comes to real estate'.  You need to nip that in the bud, friend.  Stop putting yourself down.  Are you making ends meet?  yes.  Are you up to your eyeballs in debt?  no. 

OK, maybe you are a novice, that is fair, and so am I.  Hell, I think I might be going backwards.  But let's focus on being positive. We are just starting out.  We cannot be out here comparing our Chapter 2 to their Chapter 47.  Just isn't a fair comparison.

Dean rightly adds that asking good questions is positive.  Just keep asking them!  And keep being positive!

@Branden Sewell I'm in Orlando as well and am interested in finding a duplex in a few months. Are you having any luck finding decent looking places in nice areas? I'm struggling to find anything worth looking at twice but on a side note I'm currently only browsing and won't be pulling the trigger till around December.

@Dean Letfus

Just so you have some background on me. I moved to Florida one year ago. I moved here to start a business. Mind you, I didnt have any prior experience starting a business. I didnt know exactly how it would work. I moved to Florida with some money in the bank to pay our rents for a few months and live off of our savings. We moved to Florida with no income. My wife didnt have a job lined up and all I had was the plan to start a business. My own father told me not to do it because it was too risky. Guess what I didnt listen to him. I moved anyway and started the business. I hustled and made it happen. October will be a full year in business. We will hit around $511K. I am actively saving $1-$2K per month. We had some big loses the first few months from bad decisions. But that didnt stop us... we learned from the mistakes and kept moving forward. I define myself as a go getter. $511K might not seem like much for some people but Im proud of what we have accomplished in less than a year. Just because I was wrong about a concept with real estate does not mean I have a utopian view of society; however, I had bad information. Now that I know how it really works I course correct and keep moving forward. All that to say, I really appreciate your feedback and I will head your advice. :D I will have a little over $10K by the end of the year but that still wont be quite enough from what most people are telling me.

@Mark Sewell

I wasnt being completely serious. lol

Depending on your market value 10K can be enough. You mostly need cash to pay title companies, attorneys maybe and taxes etc. It's actually not that hard to buy a house using 100% OP or bank money but there are always out of pocket expenses as you Americans call them that can't be avoided.

For example if you find a good enough deal you might get a lender to give you most of the money and get the seller to leave s small amount in for 12 or 24 months. Or you might find a partner or associate willing to lend you the deposit etc. etc. You just need enough cash to cover anything unexpected or unavoidable. On a single property purchase 10K is enough, providing there aren't enormous back taxes or a hidden lien.

Originally posted by @Branden Sewell :

@Jack B.

I appreciate your feedback. Can you delve deeper into why you say it is not the right time?

1) Based on your demonstrated limited knowledge about the subject matter, such as what it takes to buy a house, manage one, and the economic fundamentals and attention to the market slow down.

2) Based on your lack of down payment.

3) Based on your lack of reserves since you likely don't have reserves if you don't have a down payment.

4) Based on the upcoming recession, which will likely lead to your business slowing and it could lead to your wife getting laid off.

5) Based on the slowing real estate market. 

6) Based on your yet to be established business. When you have had that business for 10 years fine, but the vast majority fail within the first 1-5 years. Few survive past 10.

Combine all of these factors are a huge risk. I can't begin to communicate how risky this is for you right now.