"Where do I start?" is probably the question that everyone on here has heard a million times but at some point, in your life you probably asked the same question when you were starting out.
Hello, my name is Tyler I'm from Rome, GA and I could use some advice. I've been living paycheck to paycheck pretty much my entire life and I'm tired of working jobs where no matter how hard or how little I work I'm going to make the same measly $80 a day (before taxes). I've had jobs that pay more and jobs that pay less and as cliché as it may sound that Rat Race is all too real. So, I've fantasized and researched and played around with the idea of investing in real estate and the more I learn the more interested I am. However, I'm realizing that as I’m browsing this site and google I find that it seems like the world of real estate investing is like a giant map and each forum post I read or each listing I see or every site I go to is just a dart thrown randomly at that map. I need to find a general direction of travel.
I grew up doing live-in flips with my parents for many years in Florida back when the market was insanely inflated just before the 2008 crash. I'm very familiar with the rehabilitation part of the industry and have a fair amount of experience doing the work (I'm no licensed contractor but I'm not afraid of a DIY project if it needs to be done). So, I've thought flipping would be the best place for me to start, although, there doesn't seem to be a lot of properties in my area worth flipping. Plenty of them that need it, but the amount of work is far greater than the potential return even if the house was built with gold bricks. So, I've looked more into rental properties. The idea of being a landlord is a little more intimidating but with a property manager I would be more comfortable. Now the question is, is it worth finding a mild flip and then rent (I believe this is the BRRRR method. Love the idea, need to understand it more), or should I find a move-in ready house and turn it right back around to rent? The latter seems like a much more streamlined method but may be outside the realm of possibility for me.
I am a veteran and have the option of using the VA Loan, however, I was hoping to save it for my own personal house. I'm not opposed to using it for an investment property, but I'd like to keep it as my secret weapon for now. My credit is in rough shape. Divorce is as much a blessing as it is a curse, So the standard FHA and USDA loans are probably not options at the moment, meaning I'm looking more into hard money or private money financing.
How do I determine my metrics? for example, I found a house in my area, 5 bedroom, 3 baths, hardwood floors throughout, in ground pool in the back yard, massive property in a pretty nice area. Listed for $70k, ARV was something like $160k. looking at the pictures on Zillow, it looked rough but not condemnable. I called up the realtor and schedule a time to look at the property. When I got there, I noticed not a single square foot of the paved driveway was 1 whole piece, the pool liner was stretched off the walls down to the deep end where a new ecosystem was forming. cracks in the grout of the brick (foundation issues, potentially), tarp on part of the roof (but the whole thing was garbage anyway), water damage throughout and a thriving community of mold. The house would be better off bulldozed, obviously I didn't have many more conversations about that property. But say it wasn't so bad, maybe it needed a roof, some landscaping, fill the pool, replace some drywall and flooring. How do I find out what that costs? Am I allowed to bring a contractor to the property to write up an estimate right then and there? would it be better to schedule him to come out another time to do so? I very much doubt the contractor wants to run around with me all day looking at properties that are probably going to be busts anyway. I don't want to throw in random numbers into a calculator to make up a deal to present to investors just to be laughed out of the room or hit by a brick wall when we break ground, so what's the proper way to find out this information?
This is something I'm very serious in pursuing and I realize that my position in this is not ideal, but also within the realm of possibility. Because of the stakes I need to make sure I have a solid plan to execute and I’m afraid I will research everything to death and never pull the trigger. I realize there are things that can’t be expected and can't be factored in, so when will I know when I'm comfortable enough with what I’ve learned to finally execute?
Thank you for any wisdom you may be able to provide and thank you for taking the time to read my long-winded entry. I wanted to make sure I covered everything that I was concerned with
Tyler R. Bemesderfer
What I would recommend is to look at the property and even if you are not sure of the rehab costs, get it under contract with a due diligence period. During the due diligence period you can check the property out closer and get your contractors to take a look and get estimates for repairs. Obviously the financing of the project is a big part of the equation. If you have it under contract and are able to pin down rehab costs, you could wholesale the property to another investor and make a small profit as you learn and build up some cash. I’m almost certain that I know the property that you gave in your example. If I’m not mistaken, I believe that house has already been purchased by an investor and they are trying to resale. That house probably needs $50K at least in repairs. I would recommend staying away from houses with pools if they are in bad shape. Repair costs are pretty high and appraisers give you very little to no credit for them. Also stay away from houses with water problems. Some are as simple as fixing gutters but many are much more expensive fixes. Hope this helps a little.
I bet you know which one im talking about too. When I spoke to the realtor the day I went to see it I asked what the seller's intentions were with it because it had been listed half a year. She said another investor picked it up a while back and is just wholesaling it. I like the idea of wholesale like you told me, it would be a great way to build up some capital, I just have to do my homework on it.
@Tyler Bemesderfer :
It is clear you have thought a lot about this path. Your head is definitely in the game and you are asking great questions, now you just need to learn how to move the pieces. As you know, I am new like you (I just responded to your message to me) and don't have a lot of expertise to offer, but what I do know from my little experience is that learning just how to move those pieces will take some trial and error. So get comfortable with that idea.
Other then the pool, what you described really didn't scare me. (I agree to avoid pools--especially if you are considering a buy and hold) Obviously it comes down to buy-in and and local rent rates (which is probably the missing piece for me), but with the right numbers, those problems are pretty common and can be addressed. If you have not already, definitely get comfortable walking through rehab houses. Definitely go see a few with a contractor so you can really get an idea of actual costs. We have a habit of blowing numbers way out of proportion UNTIL we do a few and get actual knowledge. Also, be sure you grab a couple contractors to compare their costs and methods. There is a pretty big (and potentially expensive) learning curve to this business. So keep doing what your doing, ask the questions, walk the properties and take the leap! Good Luck!
It doesn't particularly scare me much either but it's a little rich for my blood just starting out. once i get a few notches in my belt I would be more comfortable with it. If I went for that house now I would probably be setting myself up for failure rather than success right off the bat. You are right though there are things to look at that look worse than they really are and its going to take some practice recognizing that.
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