Analyzing that first Rental and knowing when to jump in!

20 Replies

There are many things on the calculator that I don't know how to obtain quickly and accurately enough to analyze the deal, multiple deals, with confidence in succession and then offer on them. These things include:

Landlord Expenses/Rent

Cap Rate

Loan Details

ARV

Repair Estimate

I've also been told to be pre-approved, but is that even necessary at twenty years old? I feel like it'll just be complete rejection given that I'm in college with little work history. Furthermore, how does having investors waiting idly by with cash work? Is it just a verbal agreement? My final question is whether or not cash is literally cash or could it be an open HELOC loan that is ready to go, or something of that nature?

Yes there is no sense getting pre-approved if you'll be rejected, but if that is the mentality what is the point of looking at investing in RE? You won't have investors waiting with cash if you plan to hold the property the only time that would be the case is if you wholesale. Cash can be a HELOC the same way that you can carry a credit card balance of $5k and have $5k in your bank account at the same time.

@Aaron K. What would be the point in not investing in real estate with that mentality? Just because I know I'll get rejected there are plenty of ways to get approved and still get loans through partnerships and splitting equity of the property! It's not just the rejection mentality vs. the reality of my circumstances and looking for more creative solutions. And maybe not investors, but partners also looking to hold the property having an open HELOC available was my thought. I see why you would come to the conclusion of investors on hold only being when one is wholesaling though! Thanks for the clarification on cash, I appreciate that.

@Timothy Douglas

Do you have a full time job ? Lending standards are pretty straightforward. If you have a permanent, full-time job and you’re debt-income ratio works then you should be able to get a loan.

@Timothy Douglas you know what's better than trying to buy property with low or no money down...?

Learning to make a strong enough revenue stream that you don't have to be limited to the "low and no money" methods we hear about. You're so young- go and learn how to generate revenue! Get into real estate sales, or wholesaling. Or learn to raise funds if you think you can be good at it (not the approach I'd recommend). 

Just get some money. Then turn it into more money. Then turn that into even more money. THEN, go make passive income on it. You're not trying to retire at 25 anyways, you'll be all kinds of bored. 

@Elliott Elkhoury ahh but post my retirement at 25 the journey to ending poverty begins. Learning to wholesale is a great idea though! I’m trying to focus in on one thing though, which I’ve chosen to be securing a duplex as a rental property! I love the advice though, thank you.

Just get to the point where you can qualify for an FHA loan to househack one, then take it from there! I'm just not a huge advocate of the no money down & BRRR stuff. Free property sounds great when you're short on cash, but it doesn't scale quick or generate maximum returns.

@Timothy Douglas Dude, you are 20 years old?!!! You definitely have time to learn all about all the questions you are asking above. 

I'm not sure if someone has mentioned this to you, but you could convince your parents to co-invest with you by showing them you are WELL_EQUIPPED to manage a property. 

Of course, before that, you will inevitably need to spend a lot of time (self-disciplined study) to learn Real Estate Investing and when you are ready to take down a small house (4 bed or something [rent rooms to your friends or other students) or a small multifamily), you will be a lot more confident to do this. 

Some investors started in college the same exact way I mentioned above, all have to do is LEARN a ton yourself and you can definitely make this happen! 

Good luck and buckle up for the long ride called Real Estate Investing...

@Jordan Woolf I see, what makes it difficult to scale without income? I feel like the 50,000 I make a year post grad won’t make it very easy to scale either. Isn’t that the whole point of using Other people’s money and creating win win situations?

@Timothy Douglas Using other people’s money is good but there are sometimes additional cost you should think about. Like closing cost etc. If you can find 100% seller financing you may not have a lot if additional cost but those deals are not easy to come by. If you want to scale your business you will probably need traditional bank financing at some point and they like to lend to people with good debt to equity ratios. I’m not saying it isn’t doable it would just be easier to have income from a job until you have a good foundation. When I was making 50k and single I was saving a ton of money. If I could go back I would have found a duplex and house hacked for 3.5 down, live in it for a year and do it again. 

Originally posted by @Timothy Douglas :
@Jason Allen I do not, but that's where a partner would come in that provides money while I manage the property or put somebody in place to manage the property for my portion of the cash flow.

At 20 years old with no experience you're going to have to find someone who trusts you with their hard earned money over a lifetime. That's going to be a tough sell.

Well, If you're serious about this then your best bet is probably to find a successful investor actually doing what you want to do (*important*). Give them free work and free value and ask for nothing in return. Do this for a year. Find them deals and ask for equity or cashflow in return for finding the property and helping with the asset management.

In the mean time learn how to write a good resume and fill it up with as much industry related material as possible because that's all you have and it does say something. Get as many free certifications, credentials, etc. as possible.

Remember this: at 20 ego and naivete is at an all time high, while experience and knowledge is at an all time low. So when you find this older successful mentor remember to actually listen to them and do what they say and don't burn the bridge when you get fed up and want to branch out on your own. I know you probably wont like to hear that and you probably wont even accept it, but in either case you'll know what I mean in 10 years and you'll wish you listened.

Good luck!

 

Originally posted by @Jason Allen :
Originally posted by @Timothy Douglas:
@Jason Allen I do not, but that's where a partner would come in that provides money while I manage the property or put somebody in place to manage the property for my portion of the cash flow.

At 20 years old with no experience you're going to have to find someone who trusts you with their hard earned money over a lifetime. That's going to be a tough sell.

Well, If you're serious about this then your best bet is probably to find a successful investor actually doing what you want to do (*important*). Give them free work and free value and ask for nothing in return. Do this for a year. Find them deals and ask for equity or cashflow in return for finding the property and helping with the asset management.

In the mean time learn how to write a good resume and fill it up with as much industry related material as possible because that's all you have and it does say something. Get as many free certifications, credentials, etc. as possible.

Remember this: at 20 ego and naivete is at an all time high, while experience and knowledge is at an all time low. So when you find this older successful mentor remember to actually listen to them and do what they say and don't burn the bridge when you get fed up and want to branch out on your own. I know you probably wont like to hear that and you probably wont even accept it, but in either case you'll know what I mean in 10 years and you'll wish you listened.

Good luck!

 

 Thanks for the advice! I do need to find a mentor in the industry that is either into multi-family rental properties or wholesaling. I think the part that gets me is patience during that process and time commitment while I'm doing so much else. Of course, you sacrifice for what you want! Did you have an idea of any free certifications?

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