Completed purchase of first deal - Posted by Phong

Real Estate Investing
1

Posted by Phong on December 20, 2002 at 19:37:59:

My advice for you is to just go out there and get some potential clients. Get them to call you, go take a look at the properties, determine its worth. Trust me, you don’t even have to go through with the deal but you’ll learn so much more when you’re forced to analyze on a real potential deal.

Use my method of driving around the neighborhood and look for ugly houses then send letters to the owners. Cost me less than $15 to get this deal this way but of course this may just be beginner’s luck.

If you see some potential in a deal, no matter how little, stick with it! My buyer listed the house at 179,000 when he first decided to sell it. I called him literally every week to get status update. He kept lowering and lowering the price each time as he realized how unrealistic he was! Imagine if I just gave up the moment I saw the 179,000…

2

Completed purchase of first deal - Posted by Phong

Posted by Phong on December 20, 2002 at 18:55:50:

About 45 days ago, I wrote a message about my first deal. Well, I was finally able to get the loan funded and everything else completed just yesterday. I now officially the very proud owner of an ugly looking house in an OK neighborhood.

Here¡¦s the summary:

Purchased Price: 112,500
Rehab cost: 15,000
After rehab value: 180,000 or more
Down payment: 10%
Closing costs (fees, insurance, tax¡K): $3,500
Rate: 8.875% (should have been around 6.25% but I messed up!)

Current situation:

?h My uncle came by yesterday and offered $145,000 as-is so I know I¡¦ve made a really good investment.

Plans:
?h Spend 2 months fixing it up
?h rent for about 1 year then do a Tax exchange for a higher priced property or sell it straight up to get some working capital

Lessons learned:

?h Never forget to get seller contact info (phone, new address)-ended up having to contact escrow officer to get the info
?h Even with a 40 days closing period, start the loan process ASAP
?h should have gotten seller to sign closing date extension addendum during the sales agreement signing process instead of worrying near the deadline
?h Should have insisted on getting the seller to jack up the price a little bit ($4000) then have him pay the buyer closing cost of $4000. This would have saved me from spending unnecessary cash.
?h Must determine at the beginning whether a partner is necessary. I didn¡¦t do that and partnered up with someone on a deal I could have done by myself easily. Now I could only get half of profit for 100% effort. I found the deal, negotiated with buyer, obtained the loans, will handle all rehab aspects. My partner put only 50% of total monetary costs (downpayment, loan costs, rehab costs) while getting 50% of profit. This is a freaking expensive lesson especially when my family needs every penny from the result of such investment. I just hope that I¡¦ll be able to get some deals like this in the future.

What I plan to do now:

?h Marketing, marketing, marketing (bandit signs, ads in penny saver, flyers, sending letters to ugly looking properties¡K) to get more deals
?h Learn more about seasoning issues and escrow companies that can do double closing for flipping properties
?h Learn more about different appraisal techniques to be better at estimating prices of houses. The more confidence I become, the less I’ll need a partner.
?h Must sign up to be member of local REI to learn more and develop a network
?h Learn more about lease/option, sub2, short sale
?h Must find ways to get a good line of credit to make appealing cash offers to motivated sellers and cut down on closing costs
?h Must learn about tax strategies in regard to real estate investment

I hope this helps a few of you beginners out there as it certainly helped me as I¡¦m writing this down.

3

Good Going Guy - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on December 20, 2002 at 23:05:39:

Phong--------------

Thanks for sharing your experiences and ideas. I enjoyed them an predict that many people will benefit from your post.

Here is my thought: either keep the property for a long term rental or trade it up for a larger property, whichever you like. I’d suggest you try to get a copy of William Nickerson’s excellent book “How I Turned $5,000 into Five Million with real estate in my spare time.” It is out of print, but it was a best seller and so you can often find copies in the used book stores and thrift stores. Of perhaps somebody at the real estate investors club will loan or sell it to you.

Or else, if you are going to sell it for the cash, do that right away. You will have to fix it up again after the renters move out and before you sell it.

So, either do as quick a turn-over as you can, or plan to hold for the rest of your life. No in-between, in my opinion.

Oh, one more thing. There are two major mistakes that beginning investors make, I think. One is to do nothing, take no action. No profit there. The other is to take on too much at one time. I don’t think you need to worry about the first mistake. But, I suggest that you watch closely that second one. You might, in your eagerness, find that you are trying to handle too much at one time. Fixing up a property takes time and effort, getting other properties under contract at the same time might be too much of a load for you. Perhaps not, but I urge you to be aware of this possibility and try to really feel what you can realistically accomplish. There is no reason to get yourself in trouble by trying to do too much.

Good Investing and Good SharingRon Starr*

4

Re: Completed purchase of first deal - Posted by JP NYC

Posted by JP NYC on December 20, 2002 at 19:27:03:

I am a beginner and have yet to do my first deal. It’s inspiring to hear stories such as yours. I like how you explained the lessons that you learned, and the changes that you plan to make based on what you learned on this deal. Great job. Your input is much appreciated.

5

Go Ron - Posted by Bob

Posted by Bob on December 20, 2002 at 23:51:59:

Great post…

You are an asset to our community, you put your heart and soul in every response, you’re realistic yet positive.

Any newbie would be wise to start their education by searching for all of your articles, what a wealth of information. You are generous for sharing.

P.S. I’m glad I’m not the only one who’s posts are so long they should have chapters! LOL

Bob.