Today, I read only two blog posts on BP, and BOTH were about the same subject.
Getting Started in RE investing, essentially.
I believe there are very real, and many imagined impediments to would-be, aspiring Real Estate Entrepreneurs actually getting to it. Buying a property. Moving from the "classroom" to the real world.
I have a lot of thoughts on this and it is my favorite subject and specific topic. I am passionate about helping others transition from student to investor and sad that so many fail to actually accomplish this.
Let's discuss why.
Because the majority of people in this world are talkers as opposed to doers. It's easy to talk about wanting to invest. It's easy to talk about setting a budget and sticking to it so you can save the money to get that first one. It's easy to dream about.
Going out and making it happen is a completely different story. I worked around 70 hours last week just rehabbing a house to rent. When it comes down to that most people aren't willing to do it. The only other option is to pay someone else but most of these same people lack a good W2 job for the same reasons they will not work 70 hours to fix up a house......just much easier to talk about it.
Nice thread. People are so complex, and the things that stop any of us from being successful at what we want to do varies from person to person. There is no question that becoming aware of what is preventing us from moving forward is a great first step: getting rid of those 'road-blocks', real or imagined, can free us to be a success!
No doubt about that. And whether the reasons are real, or imagined, they have the same effect. Paralysis. Dysfunction. Lack of necessary action.
That is what I am talking about. There is so much information out there that it can be overwhelming.
Open one door, only to find 4 more doors behind it, and on and on.
But the reality is, that one will only really learn and gain knowledge by doing. As you said, jump in and get started and learn on the job.
Of course, it is a mistake to not adequately prepare. The challenge is knowing what "adequately" means for any given individual and situation.
While it is admirable to resolve, as you mentioned, to just go and learn on the job, it still leaves people not knowing how to get started.
My first advice, generally, would be to pick a strategy that makes sense to you. There are many to choose among. And your own financial situation might dictate one over others. Just pick ONLY ONE, and learn it well. You do not need many or all of the strategies, period. And that is often why people never get started, trying to bite off too much before they begin.
For example, wholesaling. This is one of my favorites for many reasons.
First, it can be done by anyone, even without any credit, income or cash.
Second, it encapsulates the most valuable skill set of all, shared in every strategy. Finding undervalued properties.
That is literally 95% of the battle in Wholesaling, and the largest portion of all other strategies. So starting out wholesaling would develop this skill in the quickest time frame possible, without ANY of the usual barriers to starting out (Money, Credit or income).
And with the intent of never actually purchasing the property, let alone having to rehab and then rent or market it thereafter, Wholesaling is the fastest way to develop the most valuable skills of deal finding and deal making.
How is that for a "solution"?
We own a college campus that's paid for and wanting to get another in a different part of town. It's overwhelming trying to gain as much knowledge as possible. I find myself going down rabbit holes searching for information..a discussion leads to a thread ends up into post after post..and I'm so deep into one particular subject it can be frustrating.
I see duplexes for sale for $35K where a mom lives in one side and the daughter lives in the other side where they've been long term tenants- in return I'm thinking what a perfect scenario. Rent is $350+ each side. So my next question- what are we looking like as far as repairs are concerned; I feel like they can't be too bad if people are living in the place on top of paying rent (supposedly). Next question- why hasn't the property sold if I think it's a solid deal. Next question- how can I pull the money out of our property to put towards 1-2 more to create more cashflow.
How many low-ball offers should I submit trying to find a desperate seller so we can get the best deal possible? What's our best financing option with lowest interest rate having a paid off rental? If I purchase 2 houses at the same time- can it be one payment/mortgage, with a low 5% rate with excellent credit? Hard to get the answers. Everyone says something different..
That is a lot of questions brother! First, clarify, do you own a college campus, or a property near one?
I agree with everything you stated. And I would add, that no real estate investing is easy. If it is, it was probably luck and a one-time deal. It happens, and we welcome the easy ones.
The reason wholesaling is difficult, is because it requires finding and negotiating good deals. That can be said about all strategies, which was my point of mentioning wholesaling. With other strategies, like buy and hold, you can sometimes get away with paying more for the acquisition, but I don't. I treat them the same as wholesaling. Same for fix and flips.
I spent 2 days with a coaching client, in Salt Lake last week, driving for dollars among other training activities. We found 13 visibly distressed properties in about 5 hours. We spent another two hours researching them on the internet. What was interesting, is that three of them, all in different neighborhoods, were owned by the same wholesaling firm. In other words, a wholesaler had found and bought them. It works.
Another property offered another good example for my client. As we got out of our vehicle to walk over to the vacant house, the owner drove up in a car and asked if he could help us. We explained we were looking for homes to purchase, and had a 10-minute conversation. He was a 36-year-old criminal defense attorney, who lived down the street, and bought this house when he found out it was coming on the market. Kind of a neighborhood-insider deal. He had done the same for two other properties. He had not decided yet whether to fix it up and live in it, rent it, or sell it. He was in essence, a wholesaler. It works.
My client had learned, in a few hours, what he had not been able to understand or learn in years of studying about real estate investing. His eyes were now wide open. In a hot market like his, off-market deals are about the only way to find deals which will work out, in any strategy. Driving for dollars is the simplest, easiest, and probably most efficient way to start. A couple hours of doing that a day, three days a week, and there is no way he will not find a good deal within a month or two. One strategy, one tactic, is all he needs. Yes, he could do internet and direct mail marketing too. And even engage "bird dogs" to look for and send him leads when they run across potentially interesting properties.
Ok, that is what I figured, but if you owned a college campus, your situation and my advice would be quite different!
Cannot answer all of your questions here, but will start.
First, I understand how frustrating it is, trying to learn all about RE investing. That was the point and premise of this discussion. I felt like that in law school, like drinking from a firehose. Just have to stay focused and be patient.
Regarding the duplex questions. First, it is important that you learn how and then always perform an analysis on any given deal. You take into consideration the rental income, purchase price, any repairs and fixup necessary, and the usual expenses associated with a rental property. These normally include an allowance for Vacancy, Maintenance/repairs, Cap Ex, Management, taxes, and insurance.
Depending on how you finance the property, you may also have a mortgage payment, which may include Principle and Interest.
Absent actual data and information, I usually use 10% for each of the 4 expenses (Vac, Maint, Capex, Mgmt) and often, the taxes and insurance are around 10% too.
So the typical Expenses assumptions I use, add up to 50% of the monthly rental income.
In your example, if the rents were $700, with tenants paying all utilities, then your 50% expenses would leave you $350 a month leftover to service your debt (Mortgage Payment) and anything leftover would be your net cash flow. If you paid all cash for the property, at $35K price, so have no debt service, then your cash flow would be about $350 per month. However, if you put 20% down and borrowed 80% at 5% rate for 30 years, your P&I mortgage payment would be $150 per month. That would still leave you $200 net cash flow. Everything being equal, this appears on paper to be an outstanding investment opportunity, based on what you shared. But that is just the beginning of the decision process for you. In other words, the pro-forma analysis did not rule OUT the deal.
You would then take a much closer look at it. We did not include any fixup or closing costs in the acquisition cost.
You would need to inspect the property and determine what work is needed and might be needed in the near future. And take that into consideration in your offer price.
Cannot say why the property may not have sold yet, you have to figure that out. It can be for many reasons, including the market, location, condition, and many other potential influences on the value, or a buyer's desire or interest in owning the property. Could even be incorrectly listed.
As for how can you pull money out of a property you own outright, to use for other investments, there are a number of ways. Obviously, selling it would be the typical method. Second, is placing a mortgage on it, and use the borrowed funds to purchase other properties. This loan could be a regular cash-out-refi or you could obtain a Home Equity Line of Credit (HELOC) on it.
Your low-ball offer question. Not sure how to answer that, even if I had more info. If that is a strategy you want to use, then you have to decide how many, and for how long, and how low, etc. People do it, BP just had a podcast with an attorney investor who bought hundreds of condos by making tons of offers each day. So it works.
Not sure how to answer your question about best financing option on a paid off rental. Need to clarify that.
If you purchase two separately platted houses, they will each have their own mortgage, but a bank might do a single note, cross-collateralizing both properties, but that would be odd and not serve any purpose I can see, absent more details. IF you meant the duplex and not two houses, and the duplex is actually a single parcel in the land records, then yes, it would be a single mortgage and note. Again, give more info on this one.
So always remember, answers can only be as good as the questions asked. The more detail and info in your questions, the more accurate and applicable the answers can be.
Hope that helps.
@Rob Cook - my answer to @Brandon Turner ‘s:
Because the majority of people in this world are talkers as opposed to doers. It's easy to talk about wanting to invest. It's easy to talk about setting a budget and sticking to it so you can save the money to get that first one. It's easy to dream about.
Going out and making it happen is a completely different story. I worked around 70 hours last week just rehabbing a house to rent. When it comes down to that most people aren't willing to do it. The only other option is to pay someone else but most of these same people lack a good W2 job for the same reasons they will not work 70 hours to fix up a house......just much easier to talk about it.
@Brett Michael direct mail can be a good way to find deals, once you get the list right. Seniors are a good target because they can be ready to downsize or transition to assistance. However, as you can see from the multifamily house you found, that quite often a family member might live in the building. This can detract from the motivation to sell.
In general I don't recommend owner occupied multi-family as their monthly cost of living might actually go up when they lose the rental income and start paying rent.
I question this gentleman motives. The last thing i would recommend to a NEWBIE is wholesaling...............................that podcast n guru territory.
!l Buy n hold _very EZ.
8
!
10. Wholesaling-----------------so few make it. I liken it to Poker Pros...... most Poker pro s also work the morning shift @ McDonalds, at least the ones i knwo. Or if they dont want to be in the rat race a common theme is to scam other poker pros.
OK, if that is so.
The last thing you would recommend your daughter to do is study to be a doctor, lawyer, a NASA scientist, because so few make it.
I made it starting as a wholesaler (and lookie here... I made it as a NASA scientist as well..). Am I different? Special? Handsome? super sexy? (note I didn't say "sexy".. I said SUPER sexy, end note)..
Freck yeah I am...
But you can still make it even if you are not as lucky and blessed as I am.
Having such a low imagine of oneself, of course you are not going to make it.
99% of the failed wholesalers are simply stupid unrealistic dumb idiots that can not use 2% of common sense and brain power. That other 1% of the failed wholesale attempts, simply failed due to circumstances out of their control, i.e. not being stupid.
It is as simple as that.
Give it your all, have 2/3ds (pronounce it as "two Turds") of a brain, work hard, be better than everyone else... and no sweat!
I didn't do wholesaling because I liked it. I hated it then and I HATE it now! But what choice did I have having no capital, a foreigner and at the time just quite my first corporate job? None.
Wholesaling it is!
@Rob Cook - my answer to @Brandon Turner ‘s:
I believe the people who have started, successful or not, have found their WHY, their true passion. Once you discover your WHY, you’re able to setup goals to support it. Once you have your goals established, then creating investing criteria to support those goals is much easier and drives confidence. Those criteria also act as bumpers or lanes for you to survey your investment vehicle.
STEP 1: Find your WHY
STEP 2: Set Goals to support your WHY
STEP 3: Establish Investing criteria to support your goals
STEP 4: Only take advice from someone who has successfully done what you’re trying to do and is in a better situation than you are currently.
You know my man..
If you need to find your why.... you are in trouble. (But yes I know what you meant)
In my case it was more like, "if I DON'T... I will be stuck in this crappy life"...
I agree, generally. I have never been a "goal" guy, and it is odd and confounds many who have trained me. But, I have also run into other very successful investors who say the same thing, goals are not their thing.
I think the important things are Drive, Ambition and Work ethic. Knowledge comes with experience. Skills come with doing. Success comes with consistent hard work over time.
I have made a lot of money, in Real Estate investing. I always feel like every deal I come across might be my last one! So I better nail it. That sense of urgency and drive has never waned, and at 59 I guess it never will.
My "problem" has always been, being what I consider a "small thinker." By that I mean, I gravitate towards simple and avoid complicated. I would rather roll up my sleeves and dig into a nasty rehab property, than spend 3 more months trying to find a deal that could make me the same money, without getting my hands dirty. I do NOT believe real estate investing is passive, period. Not the way I do it. It is a business to me, and I treat it as such.
And as a business, I have to have a continuous flow of deals, not one here or there. So my approach to finding deals, has always been an active one, and if I had a "goal" of buying two deals a year, and then found and bought two in January, what would that goal do for me? Yes, you could set another. But that reveals the goal as superfluous, and like partnerships, can take on a life of their own and get in the way of doing business.
That all said, I do believe in knowing your "Why" but only to support your drive to do what has to be done to succeed.
Exactly. And this, of course, is why does have an opportunity in RE investing and in ANY other business or profession too.
The world rewards (pays) people for DOING the things others don't want to do. This has been my edge in all of my business activities for over 40 years.
Want to find deals with the least amount of competition, buy ones others don't want - the dirty stinking broken down ones that are "too much work" for most people to be bothered with.
While those types are practicing their "passive RE investing" (aka, known as never buying a deal, or not making any money because they buy from someone like me after I captured ALL the profit to be made), I am plodding along buying deals weekly and they think I am "lucky." Or more likely, that I am of subpar intelligence, working so hard and getting my hands dirty. Yuk. What an idiot.
I have 4 rentals under rehab right now, and at most times, and I have been "retired" for 20 years. I applaud you, Derek, on your work ethic and attitude. Just remember, you are "making" $50 to $100 an hour for that 70 hours a week you put in rehabbing your own property. How many of your naysayers are earning that much? Let alone enjoying the lifestyle you have as a self-employed business owner. And the control over your future and finances. Plus, you are learning skills and knowledge you will use to find the next dirty hands deal, and snatch it right out from under the upturned snob noses of your "competition."
Excellent point. I am an online marketer, which is nothing but, a modern version of Direct Response mail. You are right. And though ALL marketing takes some money, the profit from a single wholesaling deal can fund your marketing for a full year. Get started, get your first deal, then treat it as a business and act like it is your job, not a hobby, and you will join the ranks of the "lucky" overnight successes in Wholesaling! lol.
I like the way you think, putting yourself in the sellers' shoes. That is a smart and necessary deal-making skill and approach. Helping others get what they want, will get you more of what you want. You have heard that before, and it will never cease to be true. Business, residential real estate especially, is about people. So approaching it without regard for the people aspect, will not be very successful.
2 days driving for dollars in SLC. I missed the part where you opened escrow.
If my daughter came home with a D in science and an A in boys i will recommend wholesaleing to her. You think she will be in the 1% tile with Mr Cooks guidance?
If my daughter came home with an A in cutting up frogs and doesn't even know what a boy is i might steer her to medical school.
You are cracking me up, brother! I like the way you think and express yourself too. I did not respond to the person you did, because I figured there was some serious mental impairment she must be suffering and I don't pick on cripples.
You are an example of why Wholesaling is a very viable strategy for beginners. Frankly, I cannot understand arguments otherwise, other than that it is hard. Duh. You could not have stated that better. And as I stated somewhere in this thread, ALL RE investing is hard usually. That is why we have an opportunity. If it were easy, everyone would do it, and there would be no deals to be made.
Most people who "try" real estate investing, whether wholesaling or any other strategy, will fail. It is not peculiar to RE investing, it is in any business. And the lower the barrier to entry, the more unqualified people will enter, and create and become the dismal statistic. It is just the way it is. Wholesaling, unlike most of the other strategies as typically approached, is the lowest barrier to entry strategy, because as we have both stated, one can wholesale without credit, a job, or large amounts of cash as would be necessary for down payment and rehab funds. Therefore, more idiots will try wholesaling, and more will fail. Does not mean wholesaling does not work.
I love wholesaling because it works. Because anyone who is willing to work can succeed at it. There is plenty of information available on the How-To of wholesaling and an avalanche of buyers out there ready willing and able to take them off your hands fast once you find and lock down good wholesale deals. And with the stock market unwinding, over the next 3 to 5 years, there will be an avalanche of money rotating into real estate. The only RARE and therefore MOST PRIZED real estate capability is, as always, going to be the ability to consistently and systematically locate GOOD DEALS. And that is 95% of what a wholesaler does. Want to be the guy with all the marbles, whom everyone respects and comes to, be a successful wholesaler and control the inventory for all the rehabbers and flippers or lazy investors who don't want to do the work to find good deals, and will have to pay you for your creativity and effort.
You are cracking me up, brother! I like the way you think and express yourself too. I did not respond to the person you did, because I figured there was some serious mental impairment she must be suffering and I don't pick on cripples.
You are an example of why Wholesaling is a very viable strategy for beginners. Frankly, I cannot understand arguments otherwise, other than that it is hard. Duh. You could not have stated that better. And as I stated somewhere in this thread, ALL RE investing is hard usually. That is why we have an opportunity. If it were easy, everyone would do it, and there would be no deals to be made.
Most people who "try" real estate investing, whether wholesaling or any other strategy, will fail. It is not peculiar to RE investing, it is in any business. And the lower the barrier to entry, the more unqualified people will enter, and create and become the dismal statistic. It is just the way it is. Wholesaling, unlike most of the other strategies as typically approached, is the lowest barrier to entry strategy, because as we have both stated, one can wholesale without credit, a job, or large amounts of cash as would be necessary for down payment and rehab funds. Therefore, more idiots will try wholesaling, and more will fail. Does not mean wholesaling does not work.
I love wholesaling because it works. Because anyone who is willing to work can succeed at it. There is plenty of information available on the How-To of wholesaling and an avalanche of buyers out there ready willing and able to take them off your hands fast once you find and lock down good wholesale deals. And with the stock market unwinding, over the next 3 to 5 years, there will be an avalanche of money rotating into real estate. The only RARE and therefore MOST PRIZED real estate capability is, as always, going to be the ability to consistently and systematically locate GOOD DEALS. And that is 95% of what a wholesaler does. Want to be the guy with all the marbles, whom everyone respects and comes to, be a successful wholesaler and control the inventory for all the rehabbers and flippers or lazy investors who don't want to do the work to find good deals, and will have to pay you for your creativity and effort.
Well dang it man.
You are a better man than I am. You were strong enough to turn the other cheek and not respond.
Well sheeet!
Thanks for the kind words. It just irked me that.. here is someone offering free help and they get shot down for it. What the heck !
OK am I the only one that ever mistyped biggerpockets and hit the key next to the b?!?!??!!
It happens to me all the time and I fear I one day won't catch it...
So let it be told here and now, if that ever happens... it was an Aks Zee Dent!!
(I have now ruined the biggerpockets name for you for ever have I..)
It is the internet. Trolls everywhere. I ignore them.
Note another raised her ugly head and chimed in while ago, in an incomprehensible blathering of fantasy, assuming facts not in evidence, ranting about jibberish as if, they are drunk. Oh well, their loss if they cannot learn from people who offer information and have to insert themselves and their dark motives and problems into this thread.
So feel free to confront them when they are out of line.