All Forum Posts by: Tom Cafarella

My advice would be do this as long as you possibly can until you and your family can make the sacrifice. I own a bunch of rental units and my biggest mistake was not taking advantage of the FHA rules that allow you to continue to accumulate rental units.

If you do it the right way, you can use FHA programs to help you build your rental portfolio in the beginning a very little down payment. The key is that you have to Buy the max amount of units for your first purchase(4 units) and then subsequent purchases have to be equal or less units. You cannot go from a single family fha loan to a 4 family fha so if you are going to it start with a 4 and go from there.

If you continue to do it right you will be able to buy a bunch of mulit families with very little down and by the time you get to your 3rd or 4th multi, the original one that you bought will have a ton of equity that can then be pulled for future down payments. At that point, you wouldn't need to continue using FHA unless you wanted to/still qualified.

The more units that you can get using FHA the better. It is a sacrifice for sure at first, but the outcome is well worth it!

I don't know what the two of you have agreed upon, so I wouldn't know the terms.  I think what you are asking is more, what standard language should be in there, and my answer would be none until you actually have a deal.  I would sit down with the person and write down all of the terms of the deal.  For example:

1.  Who is putting up the money

2.  How are profits shared

3.  What happens in the event of a loss

4.  Who is managing the project

I would spend 30 minutes doing a brain dump of all of the basic things like this and then just put those on paper.  Again, until you have your first deal DO NOT spend a ton of time on this.  Spend all of your time getting the great deal

If you are going to be a real estate investor over the long haul, the answer to any down payment question would be “as little as humanly possible”. Over the long run you are going to need as much capital as possible and you want to preserve as much as you can.

Regarding PMI: that is something that goes away over time. If you get a great deal, PMI can be removed shortly after you buy the property if you get an appraisal and have enough equity. The cost of PMI is going to cost you more in the short run, but in the long run not having your capital is going to prevent you from actually being able to do more deals in the future and it is a small price to pay.

I think the first thing to understand about finding a renter, is that in most areas the amount of tenants looking for a place far exceeds the number of rental units available so you can definitely get someone good and should not have to settle.

If you don’t properly screen and find a good tenant, the results can be disastrous, especially in areas like where I live(Boston) where it can take a year to get a bad tenant out of a property even if they aren’t paying.

You need to have a great screening process in place either way, and one thing to consider is whether you are going to accept govt assistance rental programs or not. The pros of the govt assistance programs are guaranteed money and if you are in a location where you are having a hard time finding a qualified tenant, this is often the way to go.

If you are in an area with high rental demand and all of the tenants that you are screening all have great credit/income/job history, than you should be able to get a great tenant in this market.  

100 percent you need to go off market, especially in a competitive market like where you live

My advice would be to draw something up on paper that you would both agree to(the basic terms of the agreement), put it on paper and have both of you sign it. I would strongly suggest not setting up any sort of legal entity or even getting an attorney involved until you get the first deal under contract. Just make sure that the terms you both want is spelled out on the original agreement that you draft up yourself(in layman’s terms) and then once you are ready to pull the trigger you can have an attorney do a review and make sure that any possible issues are resolved.

Right now, focus on getting a great deal.  

The best way to find investors is to find great deals.  If you have great deals, the investors will be chasing you.  Whether you are a real estate agent or an investor, your goal is to find motivated sellers.  

I would recommend taking the following steps:

Step 1: Determine what type of houses you want to target for listing/investment purposes. This may seem simplistic but you really want to know exactly the types of houses that you want. For example, what geographic area, style of house, multi unit versus single family, size of the house etc.

Step 2: Once you know what you want to target, that allows you to then build the list. For example, if you want to buy single family ranges in a particular town, that narrows the search down and then you can move on onto step 3

Step 3: Find contact info for every one of these people: cell phone, home phone, emails, social media profile, home address, etc

Step 4: Put the information into a database: I like using a CRM like Follow Up Boss, but you can use an excel sheet to start

Step 5: Market to these people: call(on a dialer), email, message on social media, door knock, mail, etc. until you get one on one appointments with them

Step 6: Make offers that allow you enough room to make money

Even as a brand new investor, you do not have to have money to do these deals. If it is a great deal, you can wholesale your contract to another investor or partner with another investor that has capital.  

Unless they are experienced investors and are willing to mentor you, I would stick to the area that you know specifically.  In order to get great deals, you need to generate 1 on 1 seller appointments and if you are doing that 2 hours away from your house, it is going to be tough for you commuting wise.  If you really want to work with them, I would suggest moving there or if they aren't providing a huge benefit for you, I would stick to where you are and work incredibly hard at building a real estate lead generation machine for motivated sellers.

To be a great real estate investor, you need to learn how to get great deals. In order to get truly great deals, you need to learn the marketing and lead generation aspect in order to find motivated sellers that want to sell their house(before they list them online).

The path that I would recommend, which you can start now, is to begin working on generating a motivated seller lead funnel. In order to do this, I would recommend taking the following steps:

Step 1: Determine what type of houses you want to invest in. This may seem simplistic but you really want to know exactly the types of houses that you want. For example, what geographic area, style of house, multi unit versus single family, size of the house etc.

Step 2: Once you know what you want to target, that allows you to then build the list. For example, if you want to buy single family ranges in a particular town, that narrows the search down and then you can move on onto step 3

Step 3: Find contact info for every one of these people: cell phone, home phone, emails, social media profile, home address, etc

Step 4: Put the information into a database: I like using a CRM like Follow Up Boss, but you can use an excel sheet to start

Step 5: Market to these people: call(on a dialer), email, message on social media, door knock, mail, etc. until you get one on one appointments with them

Step 6: Make offers that allow you enough room to make money

Even as a brand new investor, you do not have to have money to do these deals. If it is a great deal, you can wholesale your contract to another investor or partner with another investor that has capital. 

To be a great real estate investor, you need to learn how to get great deals. In order to get truly great deals, you need to learn the marketing and lead generation aspect in order to find motivated sellers that want to sell their house(before they list them online).

The path that I would recommend, which you can start now, is to begin working on generating a motivated seller lead funnel. In order to do this, I would recommend taking the following steps:

Step 1: Determine what type of houses you want to invest in. This may seem simplistic but you really want to know exactly the types of houses that you want. For example, what geographic area, style of house, multi unit versus single family, size of the house etc.

Step 2: Once you know what you want to target, that allows you to then build the list. For example, if you want to buy single family ranges in a particular town, that narrows the search down and then you can move on onto step 3

Step 3: Find contact info for every one of these people: cell phone, home phone, emails, social media profile, home address, etc

Step 4: Put the information into a database: I like using a CRM like Follow Up Boss, but you can use an excel sheet to start

Step 5: Market to these people: call(on a dialer), email, message on social media, door knock, mail, etc. until you get one on one appointments with them

Step 6: Make offers that allow you enough room to make money

Even as a brand new investor, you do not have to have money to do these deals. If it is a great deal, you can wholesale your contract to another investor or partner with another investor that has capital.  

I buy on average about 10 properties per month. Out of the 10, I keep 1 or 2 of them as long term buy and hold properties and I fix and flip/wholesale the others.

The market is extremely competitive but if you are able to get deals off market, you can still get great deals.  

In order to this this I would recommend the following steps:

Step 1: Determine what type of houses you want to invest in. This may seem simplistic but you really want to know exactly the types of houses that you want. For example, what geographic area, style of house, multi unit versus single family, size of the house etc.

Step 2: Once you know what you want to target, that allows you to then build the list. For example, if you want to buy single family ranges in a particular town, that narrows the search down and then you can move on onto step 3

Step 3: Find contact info for every one of these people: cell phone, home phone, emails, social media profile, home address, etc

Step 4: Put the information into a database: I like using a CRM like Follow Up Boss, but you can use an excel sheet to start

Step 5: Market to these people: call(on a dialer), email, message on social media, door knock, mail, etc. until you get one on one appointments with them

Step 6: Make offers that allow you enough room to make money