Motivated Newbie looking to build passive income

REDONDO BEACH, CA · Member since 2016 · 37 posts · 8 votes

Hello BP World!

I have been on BP for less than one week now and I love it. I get lost in multiple posts and podcast, all of which just adds to my excitement and interest to get started.

I currently reside in Los Angeles, CA but realize that it takes a lot to get going in this market. While I hunt for the right deals locally, I am interested in starting in other promising areas as well. I have an interest in Austin as well as other cities in TX as well as the greater Phoenix, AZ area.

I would love to not only learn from others here but would also like to offer any help that I am able to do. This is a new industry for me so I don't want to ask others for assistance without being willing to do the same in return. I look forward to seeing what people have to say.

Take care and good luck!

Josh W.

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Cassie Sherie

Seattle, WA · Member since 2016 · 81 posts · 43 votes

10y

@Josh Wallace if you're looking to do "creative financing" anyway why not get creative and do multifamily from the start? I'm new to bigger pockets and investing also...but from what I've learned so far it is less risky to do at least a 4 plex or bigger if the numbers are right....cause you will have rents from other tenants coming in if someone moves out or doesn't pay...verses SFR where you are relying on just one tenant for the entire mortgage etc. Once you get in to the 100+ unit apartment complexes it costs less overall for closing costs, inspections, lawn maintenance, manage....on and on. and the NOI/ passive income is obviously way better.

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Eric Dowling
Real Estate Agent · Los Angeles, CA · Member since 2015 · 201 posts · 82 votes
10y
Welcome to BP @Josh Wallace You have come to the right place! The podcast are great I cant get enough of them either. Good luck and don't hesitate to reach out!
0 Reply
Brett Goldsmith
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
10y
Welcome @Josh Wallace
If you're interested in targeting homeowners in foreclosure in LA county or ever have any questions about the foreclosure process or work out options mortgage servicers offer borrowers, let me know. I'm always looking to help where I can and create win-win relationships.
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Amaka Nzenaguora
Voorhees, NJ · Member since 2016 · 28 posts · 5 votes
10y
Welcome welcome, It is just refreshing to have a source of already analyzed info to use.
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Josh Wallace
OP
REDONDO BEACH, CA · Member since 2016 · 37 posts · 8 votes
10y
Thank you, gentlemen. I plan on attending the BP meet up tomorrow in Santa Monica, perhaps I will see you there.
0 Reply
Thomas FranklinPro Member
Real Estate Investor · Miami, FL · Member since 2010 · 939 posts · 739 votes
10y
@Josh Wallace If you can be more specific regarding what type of Real Eatate Investments you wish to pursue, in order to derive Passive Income, I am confinement the BiggerPockets Community can provide you sound advice based on both knowledge and experience. What are your short, medium, and long term objectives? Do you have enough cash or access to cash, to begin and sustain your endeavors? Do you seek partnership opportunities? What is your Business Model?
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Michael Lee
Investor · Coppell, TX · Member since 2008 · 2k+ posts · 646 votes
10y
Hello and welcome to BP! I think that anywhere by the big cities will do well because of their closeness to Mexico. I was born and raised in Dallas Texas but my provision offered is not very biased. I have never been to Los Angeles in my 59 years. So I can not offer you anything in California. Just be where you want to be. Learning is one of the main keys for investors. I have heard that mistakes and fear are pretty normal. Just learn from your mistakes and learn how to deal with fear in a positive way. Just keep on going no matter what happens. I have also heard that a lot of investors have been broke before they got rich. Do not try to do everything yourself. Find local and experienced Team members that are trustworthy and return your calls. Team members are usually Attornies, real estate Agents, Inpectors, CPA's, and Genral Contractors.
I am 59 years old and I found BP about 7 months ago and I am still trying to decide what to do. I also went to college, not that this is mandatory, and I got a business degree that emphasized real estate. Since I was in Texas, I was qualified to get a broker license without taking anything extra. Regardless of what I had I felt more comfortable in the construction business. I was in the construction industry since I was 17. My father has been in real estate for about 40 years and he has taught me a little bit. If you think that I can help you please contact me through BP at any time. Good luck!
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Mike Hicks
Real Estate Agent · tampa, Florida (FL) · Member since 2013 · 206 posts · 96 votes
10y
welcome to BP, you've definitely landed in the right place
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Jo-Ann LapinPro Member
Loan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
10y
welcome to BP. I love it too. Have you checked out the beginners introduction the real estate investing and also the calculators?
[email protected]
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Josh Wallace
OP
REDONDO BEACH, CA · Member since 2016 · 37 posts · 8 votes
10y
@Thomas Franklin I am looking to add rental properties to my portfolio, starting with SFR to start/learn, then progress from there. Starting out, I do not have large amounts of capital to put down so creative financing is a must. Before the year's end I want to have my first deal done and moving forward I want to add at a sustainable yet active rate. I am open to partnerships based off of character and merit of the people I partner with. Long term objective, I want to be able to not rely on a paycheck (W2) at a relatively young age.
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Jo-Ann LapinPro Member
Loan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
10y
Yes I understand. Are going to look on the LA area. What type of property are looking to purchase. A combo of seller financing and alternative/?hard money is a viable option too.
[email protected]
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Cassie Sherie
Seattle, WA · Member since 2016 · 81 posts · 43 votes
10y
@Josh Wallace if you're looking to do "creative financing" anyway why not get creative and do multifamily from the start? I'm new to bigger pockets and investing also...but from what I've learned so far it is less risky to do at least a 4 plex or bigger if the numbers are right....cause you will have rents from other tenants coming in if someone moves out or doesn't pay...verses SFR where you are relying on just one tenant for the entire mortgage etc. Once you get in to the 100+ unit apartment complexes it costs less overall for closing costs, inspections, lawn maintenance, manage....on and on. and the NOI/ passive income is obviously way better.
1 Reply
Thomas FranklinPro Member
Real Estate Investor · Miami, FL · Member since 2010 · 939 posts · 739 votes
10y
@Josh Wallace I agree with @Cassie Sherie , but please consider the following. You may want to consider starting out, with buying a Residential Multifamily Property Duplex, TriPlex, or a Four Plex. Many Realtors will suggest purchasing a property using a FHA Loan, to reduce your out of pocket money. If the property requires rehab, the Realtor and/ or Mortgage Broker will suggest applying, for a 203k Loan. A 203k Loan is where the purchase price and rehab costs are rolled into a single loan.
Assuming you have a respectable FICO you can buy, with a FHA Loan (3-5% down, a 30 year amortization schedule, and a residential loan rate). Because you closed personally, you will not have Asset Protection, in the form of closing in the name of a LLC. What happens if one of your tenants has a slip and fall, on your property, or something else happens to them? You are on the hook and can be personally sued, for everything you own. Some people will say, "Take out a quality Insurance Policy and you will be protected." Ambulance chasing attorneys know their way around and can legally navigate around Insurance Policies. Another downside is you loose on the advantages, of the Federal Tax Code, by not closing in the name of a LLC.
If you want to close in the name of a LLC, Mortgage Lenders will offer you Commercial Loan Terms (25-30% down, a 15-25 year amortization, and a ballon due in 5-7 years). This is what I am encountering, in the current Mortgage Industry.
If you think you will go FHA, 203k, etc. and then Quit Claim the property, to a LLC, or a Land Trust you run the risk of the lender discovering a Title Transfer occurred and activating the "Acceleration Clause" or "Due on Sale Clause" that requires the loan to be paid in full, within 'x' number of days. These clauses are contained, in all Promissory Notes nowadays.
Many Realtors and/ or Mortgage Brokers will not tell you this information. Many, but not ALL are only focused on the commissions he/ she will earn and not focused, on your best interests. You many be asking yourself what can I do? Locate a Motivated Seller that will consider Seller Financing. You may have to put more money down (10-15%), but you can close, in a LLC, with no worries about banks. I have a lengthy Legal Opinion, from my seasoned Legal Team regarding this matter.
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Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
10y
Hey Josh! I'm right next door to you in Venice. I also buy out-of-state.
Super cool to meet neighbors!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Thomas Franklin one thing your missing in the FHA 3.5 % down Oh my god slip fall I will lose it all statement is there is NO EQUITY to get and the owner has no assets.. NO attorney is even going to take the case.. Insurance will handle it .. I totally disagree with your thesis
Podcast Guest on Show #222
JLH Capital Partners51 Review
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Josh Wallace
OP
REDONDO BEACH, CA · Member since 2016 · 37 posts · 8 votes
10y
Sorry for not monitoring this thread better. Thank you to everyone that has provided feedback, there is a lot to think about on here. I would for set up the proper legal team and layers of security to protect my assets (LLC, umbrella insurance - $2 million policy is maybe $20-$30 a month, lawyers...).
@Cassie Sherie, you bring up a great point. I want to start small for 2 main reasons
1) I want to learn from the ground up. Maybe not necessarily a single unit but owner occupy a 4 plex
2) If I don't exceed 4 units, I can utilize my VA Home Loan benefits if I owner occupy.
I want the education first but I agree, the more units, the less risk of having 100% vacancy.
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Fred Roth
Real Estate Agent · Minneapolis, MN · Member since 2015 · 7 posts · 1 vote
10y
Welcome Josh. You had mentioned the possibility of buying properties in other states. In BP podcasts, Brandon, I think always harps on the idea that in the most expensive real estate markets in the country, one can always go within a 2 hour drive and find investment properties with a high rate of return. Having lived in the Bay area and other overpriced metros, a think this is a good strategy. You probably already have a sense of your region and places that might be affordable but not to bad of economically. A main plus is that you can drive to prospective and/or existing rental properties.
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Ryan Hopkins
Architect · Raleigh-Durham, NC · Member since 2016 · 76 posts · 47 votes
10y
@josh Wallace welcome to the encyclopedia black hole of never ending REI knowledge!
In regards to your area, I used to live in marina del Rey and understand your thoughts...prices are high. I agree with what has been said before, start small and get your feet wet before you delve into non liquid properties.
I would stick with sfr, maybe even a quick flip to increase capital and focus on building confidence initially before you get wrapped up in something more complicated.
As everyone has said before, welcome and feel free to reach out!
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