All Forum Posts by: Robert Leonard

@Todd Miller not a personal judgment of you or your finances, but if the only debt you have is your primary residence and your debt to income ratio is unacceptable, the banks obviously think you own more house than you can afford?  If you have equity in your current residence, (and if the rental is in a desirable area) why not sell your current residence to raise the capital you need for a down payment on the rental.  Then you can move-in and bring the maintenance up to date and start saving?

You could make yourself more credit worthy and get an outstanding deal on a property you already know everything you need to know about.   If you live there two years, you could stand to gain a huge tax free capital gain (by today's tax rules). 

I think you might actually NEED this course of action to get out of the check to check predicament?  Again, that's with the limited facts available.  I've been there before and believe me, you are losing ground until you get out of it.   

@Rae Remer my first recommendation is to never quote a Zillow value.  The site is useful when looking at sold comps in an area around a property you are looking at to get a "preliminary estimate" of values, but not reliable enough to quote their "zestimate" for value.  If it happens to be near the right number, this property is underwater and the only thing that might make this property interesting (not considering other factors) is if it were available by way of a short sale where you could purchase it at a more realistic value that has nothing to do with what's owed on the property.

Now, to consider the other factors.  No heat/air, a leaky basement, mold issues AND a broken in ground pool could easily run double your estimate of repairs.  When doing estimates on your own as a novice, you can expect it to cost twice as much as you think and take twice as long to get it done.

AND it's in a declining value area?  There are so many negatives to this property that I think they overshadow the few good things you mentioned.  This one is a clear no to me.  Keep looking and be patient about getting started.

@Bryant Cheely welcome to BP! You just missed a chance this past Tuesday to meet a good group of investors who meet monthly in a REIA group called "The RING" that you can find on meetup.com. We meet monthly on the 3rd Tuesday of the month. Hope to see you there one day or maybe before then. I have a son at LSU and I need to find a place for him before the Fall. I'm looking to buy, since I am in the business, but I will rent if we find a decent place at a decent price. I want to invest in the BR market and there's no better time than now, when I absolutely need a place for my son.

@Account Closed I also want to invest in the LC market. The LC REIA on meetup.com is about to shut down because there is no organizer and it is a matter of days before the group gets deleted. That's a good opportunity for you or anyone else in the Lake Charles area who wants to do some networking with other investors. I started a group with two of my fellow real estate professionals in Lafayette and its going pretty well. See you around the site, if not in Lake Charles!

@Krystyna Fennelly 

try "The ABCs of Property Management" by Ken McElroy

and

http://www.biggerpockets.com/renewsblog/2014/01/09/bp-podcast-052-raising-millions-ken-mcelroy-rich-dad/

That's the best I can come up with!

@Jeff Lee welcome to BP!

Here's my take on your questions:

#1.  I would go for a fixed rate option if you have any?  One that comes to mind that will work with the numbers you mentioned would be a lending club loan.  They will loan up to 35k as long as they are in 1st lien position and it is a short term loan so that will help you keep the interest you pay low.

#2. I would use the cash buyer's advantage to purchase the property ahead of the challenged financed buyers in this price range. You will also be competing with cash buying investors - cash is king. I also think you don't fully appreciate the power and advantages of leverage in REI. Also, only use cash to buy if you have sufficient cash reserves (~20% of cash available) after the purchase and repairs.

#3. If you go that rout, there's really no catch.  It will all be there in writing.  The only way it becomes a catch is when you don't take the time to read what you sign at the closing.  Unless you are a very fast reader, I would ask for all closing documents in advance so you'll have time to read them.  If they can't provide that, let them know that its your first closing and that you'll need time to read it all.  The vast majority of people who cry about getting "duped" into bad loan products are people who go along with the hasty process of getting everything signed and getting out of the closing.  I'm not suggesting that everyone is out to sucker you either.  You just need to take the time know what you are signing and check for errors.  I find errors all the time at the closing table, that have to be fixed before the documents get signed.

#4.  See my answers for #2 and #3.

Hope this helps a little.  See you around BP and maybe one day here in LA!

@Lokesh W. what @Joe Fairless said!

I'll only add that when he shows you his insurance documents, call the insurance company and verify that his policy is in effect before you hire him.

@Jeffrey Charter I don't have the commercial experience, but I do have the rural experience. Commercial is a very specialized area that you really need to know what you are doing in and there is a whole lot to know that's very different from residential REI. If you pursue it, I would only do it if I had a well trusted commercial investor or agent to work with me.

Where the real potential in this property may lie is in the 22 acres of land.  However, unless you can acquire it at a price that will allow you to wholesale it quickly, you may have to hold it for an undetermined time to one day cash in on it.  Too much uncertainty for me.  Depending on the proximity of this property to a population center, new developments can happen very slowly in rural markets.

I know none of this may sound encouraging, but rural investing can just be exceptionally challenging.

Ah, that one will be sold through www.homepath.com and there will be an "owner/occupant only" bidding period when it is first made available for purchase.  If it's in a condition that's not financeable, you may have a chance.  Even with "homepath renovation loans" being available, not many owner occupants can or want to handle a rehab project when buying a house.  It all depends on your market and how fast houses are selling/investor activity?  Hopefully it works out for you.

@Jerome Stratton it really depends on the bank. If it's one of the big 5 (BOA, Chase, Citi, Wells Fargo, or GMAC) probably not. They almost always sell through REO brokers.

The smaller the bank, the better your odds of getting through to someone who can actually give consideration to your offer.  You want to ask for who handles their REOs or bank owned properties when you call or visit the bank.

@Kay M luck happens when preparation meets opportunity! That's a borrowed quote.  One without the other is wishful thinking.

If you recognize the potential for what can be done in REI, you are on the right track. Keep learning and position yourself to be ready when an opportunity happens. You mentioned "no credit or money" and those are two things that you can do a lot to change. Be smart about protecting your credit because in real estate, you can do more to create advantages with credit than in just about any other area. Live within your means and avoid borrowing more than you absolutely have to, to pay for your education.

Your education can be your ticket to your no money problem. When you get a job, make sure you keep your standard of living at a level that will allow you to have funds for investing. Your job will give you the cash flow you need to get bank financing. Despite all of the creative ways to finance deals, bank financing is one of the lowest cost ways to do it. That goes back to my first point about your credit, your credit is real money that when paired with a steady paycheck will get the ball rolling for you in REI!

I am speaking from experience. I discovered REI when I was flat broke and unemployed. Long story short, I bought my first home on my 1 year anniversary from getting a full time job (the first day I was qualified by the old rules of financing). Some would say I was lucky, but it wouldn't have happened if I hadn't prepared for it.

I know you asked about finding a partner, but while it's not impossible, I think it's highly unlikely that an investor with capital to invest will bank on a college student with no experience on such a venture.  It will still be a stretch to try to pull it off, but if you are determined to try to start now, your best bet is close family or friends.