All Forum Posts by: Christian Becker

@Russell Redford

Learn about house hacking as a strategy to get started. Low risk. Can qualify for low down payment loans. If buying right, can get other tenants paying your mortgage for you so you live for free, which immediately improves your financial position and monthly personal budget.

Use the savings in housing costs to pay off debts. Save for the next deal. Cut costs everywhere you can.

Buying a deal for cash at $40k in the Midwest.

No remodel, MLS comps at $60k. SFR 3BR 1 BA in B/C neighborhood.

If I wanted to finance out right away, is the appraiser going to look only at the $40k?

Talked with a banker who said the appraiser won't go much higher than the $40k, even if not using a conventional loan. Other lender is willing to go 65% of ARV. Assuming ARV comes in at $60k:

On this example, conventional lender would go 75% of $40k = $30k cash back out.

Other lender would go 65% of $60k = $39k out.

What’s the chance the appraisal comes in at $60k if I bought distressed/wholesale off market? Obviously depends on a lot of factors. Anyone having success or problems with this strategy who would care to share what they’ve found?

@Blake Reynolds

Here my opinion. Like all the rest of free advice.

Once you do a deal successfully, you can talk about it. You tell everyone what you’re doing. And suddenly people are interested in what you’re doing. People like success and they want a part of it.

I’ve read several books and tons on BP. There are people who are abundance minded and others who think everything is scarce. There are people who do things in secret because they are worried someone else is going to take a deal from them or compete. The abundance minded go out guns blazing, share their excitement, experience and knowledge. They attract others. Once you have a deal or two under your belt, you will be able to attract people who want to give you money because they want in on the action.

Step 1: do a small deal

Step 2: don’t hide, but talk about it

Step 3: you will find money sources.

Keep a well paying job. Doesn't matter what it is. It's your ticket to loans, etc. You can do everything while holding down a job. Hire people like property managers, etc. The beauty of this is that it takes very little time. 

Eyeballing the numbers, this won't cash flow, or do so very poorly.  

What are your objectives? If it's getting into your first property and holding it a long time while other people pay your mortgage, then this may work as a house hack deal. Otherwise, unless you have a crazy hot area that appreciates a ton, you won't get equity in the place very fast with zero down and those numbers. If you're trying to launch your career into investing and want to grow fast, I'd probably look at other options.

Read about 1000 posts on this forum to start. On all the topics you have mentioned. It will inform and you'll start to see what direction you want to go. I've spent a few months on here and reading a few books. The benefit of a book is that it gets you some organized thoughts and ideas. Then you can take that and be a bit more focused. Another good way is to start with the posted podcasts. Pick 3-4 that interest you. Take notes as you go through them. It will raise a lot of additional questions. Start asking more on BP and read a lot on here.

You're asking a lot of big picture advice questions. You'll get your answers by spending some time researching. No one can easily answer them for you. I like SFR and small MF for now. Some people love 100+ unit apartments.

Read Beginner’s Guide: http://www.biggerpockets.com/real-estate-investing

Check out BP Podcasts: https://www.biggerpockets.com/podcast

@Evan Smeenge

So, here is another thought.

You’re putting down $48k on this deal cash. That’s after getting a sweet 6% down loan.

In reality, you're putting down 20% including rehab. Instead of doing that, find a turn key property and put down 20%, for the same money. Nothing to fix, can probably get something that has tenants in it. Now your monthly payment is less, no PMI. The Fannie products allow 15% down with PMI, 20% down no PMI for SFR, 25% down no PMI on MF.

Spending 6% down and 14% on remodel is a lot worse than paying 20% on down payment which reduces your monthly payment and increases cash flow and equity. The remodel money is money lost (of course can add value too).

This is something you learn by running about 100 different scenarios through your spreadsheet. I love working spreadsheets.

I built mine (sorry I won’t share it, took me like 100 hours to build) that will essentially model a ten year holding period and does all kinds of fancy stuff. I can plug in the numbers you have in 30 seconds and know everything I need. Building one, you learn a ton. Using it and adding more detail as you go and learn more makes it better and better.

And another thought (I’m full of them).

You’re already in the Midwest. Maybe you can’t find a smoking deal within 15 minutes of your area, but maybe within 2 hours drive is fine. I used to live in Milwaukee. Tons of deals there.

And within reach by car to look at personally. Probably a lot of other good areas around Chicago. I'd kill to live where you do and look for deals. Here the point: in many areas you can pay CASH for the entire SFR at $40k, which is within the same budget. No loan. And they collect $800-850 rent per month with cash flow $400-500. Sweet deal, in B and C neighborhoods. No war zones.

@Dustin Burke

Multi Level Marketing works for some people. Anyway is on top of the heap. They’ve been around for over 50 years. Not a pyramid scheme. The dream builders are a subgroup organization of their distributors that has done very well. Some of my family was involved with them 20 years ago. Just keep a few things in mind. It’s a sales business. You get paid commission on downline sales. You move up in the chain by getting more distributors below you that either consume products or sell products. Don’t know what their current commission structure is but let’s say you get 15% of everything sold below you.

If your organization of distributors and customers consumes/buys $10,000 per month then you get $1500 per month, etc. not easy to get huge sales numbers. May be lucky to get some customers who buy $50-100 per month from you, if that.

These are hard to build. Easy if you can convince all your family and friends to buy all their monthly consumables through the company. Soaps, detergents, everything.

Like everything it’s a networking business. Do you want to talk to everyone you know? Most will turn you down. Then you have to cold call/contact and do what the door to door salespeople do, asking people you know for referrals. But the people who take it seriously and stick with it can do well I think. But it’s not easy sales. Think Tupperware parties mixed with trying to find people who will treat it as a business and want more than just consume the products, who want to expand and make money with it. The problem is that these organizations are so slow to build that by the time you get some people interested in doing this as a business the previous people who were on that track are fizzling and moving on to other things because the big bucks they were hoping for didn’t come quick enough and it is real work to get there.

I would personally want my contacts to know about my real estate business and want to invest with me rather than burn all those up with trying to sell them soap and detergents, etc. Good luck.

@Evan Smeenge

And one more....

If you're using FHA, I'm assuming you're going to house hack this. You'll occupy. Can't use FHA for a property you don't live in. Obviously you can also easily manage yourself and get better cash flow. But at least for some time you're planning on living there. Essentially for free because the other tenant pays your mortgage. You do the lawn care for free. If you live there for 5-10 years you can refinance out of the FHA and maybe have appreciation on the property and paid off some loan to create equity. There are lenders that will do 10% down or if you have that much equity you don't have to bring cash for down. Some also don't require PMI.

Also, can you roll some of the utility expenses to the tenants?

@Evan Smeenge

One more thing.

Find out who is wholesaling in Chicago. Call a dozen or more real estate brokers and see what they have that would meet your numbers. Ask around on this site. On or off market. Some deals can only be had for cash, but they can be crazy good. If you find them, call your grandma, uncle or friend and see if you can get some cash to buy, then refinance after.