Fulltime investing - Realistic dream for newbie? - Posted by Scott

Real Estate Investing
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Posted by Craig on August 20, 2005 at 07:12:37:

There are several things I am always saying - part of a deal is better than no deal at all, and never let a lack of knowledge, money, or anything else keep you from getting into the middle of real estate deals.

There is very little you need to do to actually start making money very quickly as a real estate investor. Most of the courses I have been through, even those for very new investors, do not focus just on those few things you need to do to get yourself into the middle of a deal in the next few weeks. I could be good that you are hooking yourself up with someone that is already doing it - that can be a key to success(see rule 1 above). Just make sure your initial focus is on finding great opportunities(rather than getting bogged down in how to negotiate, completing contracts, lining up funding, etc.). Once you find an opportunity, there is always someone that will know what to do with it - therefore you can make money.

Also, do not be lured into using ANY of your little bit of savings in order to launch your business(other than just little bits to enhance your marketing). It is better just to pretend you do not have any money until the deal flow and income from your deals supports your business.

Good luck.

Craig Cherry
http://successinsystems.com/profitcenters
Add Profit Centers To Your Real Estate Business - Free Info

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Fulltime investing - Realistic dream for newbie? - Posted by Scott

Posted by Scott on August 20, 2005 at 06:46:03:

My wife and I have ran our own business (not real estate related) for the past three years. Did well for the first two. This year has not been so good. I am thinking of closing up my business as I don’t see things turning around for us. I have a friend of mine who is a Real Estate investor. He has been doing this for 15 years full-time and makes 6 figures year after year. He has offered to teach us for a split in the deals we do together. I have about $50K in savings to live on. My families monthly living expenses are around 4k. And I figure I will need around $500-1000 month for advertising.

We will mostly be working on wholesaling and lease/options at first. With ideas of rehab and buy/hold/rent in about a year. I plan to work 40 hours or more a week in an effort to make this work out. My wife is finishing up college, so she will probably be working 15-20 hours or so per week with me, mostly locating properties, and fielding phone calls from ads.

My question is, is it realistic of me to think that in 6-8 months I can get this up and running and making a decent living from my efforts?

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YES! It is! - Posted by Marcus Lackey

Posted by Marcus Lackey on August 21, 2005 at 23:26:19:

I went FT after 11 months. This is a wonderful business. Rather than retell my story here, check out this link for it – wheresmyviper.com - wheresmyviper Resources and Information.

Read the stories of the other semi-finalists too. Basically all of the folks that really started kicking butt were coachable and were willing to bust their butt and treat this like a serious business. The fact that you are entreprenuers and have a successful and willing coach will be a tremendous advantage. I say go for it!

Marcus

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Re: Fulltime investing - Realistic dream for - Posted by jlaass(commercial pm)

Posted by jlaass(commercial pm) on August 21, 2005 at 19:47:37:

Can you reduce your monthly expenses w/some of your $50K so that it’s less of a burden to go FT in REI when some of those lean months come along?

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Re: Fulltime investing - Realistic for newbie? - Posted by Killer Joe

Posted by Killer Joe on August 21, 2005 at 24:48:43:

Hi Scott,

You said “I have about $50K in savings to live on. My families monthly living expenses are around 4k. And I figure I will need around $500-1000 month for advertising.”

Ok, so you have roughly $5K a month going out. That’s every month. That’s not the month your transmission left you stranded. That month really sucked. There are a couple of those months every year as well. So that’s about sixty grand a year going out/coming in, hopefully. Plus taxes.

The point of this is you need cashflow, you need lots of it, and you need it now. If you had 25 properties that ‘cash flowed’ $200.00 apiece per month, you would just break even. That’s a lot of properties. That will take a while. Can you see where this is going?

Every household needs a cash flow machine. A JOB does that for most households. Never underestimate the value of steady income. If you are going into RE to replace your cash requirements @ $60K a year right out of the box, visualize how your cash will be required to meet your needs, and aggressively plan to have that cash available for your household when it’s needed. If you need $5K by the first of the month, and that next deal paying you $8200 won’t close before 40 days from today, and you’re still looking for the next deal, life gets a little heavy.

One of the keys to making this work for you will be the velocity at which you can do deals that solve your cash flow problem. There is no growth until that is taken care of, only consumption. Structure your deals to solve short term cash needs, and long term investment goals simaltainiously. Don’t get wrapped up in a deal that will put you ‘over the top’ six months after you’ve entered the poor house. It happens all the time, we call these people ‘motivated sellers’.

Keep a tight watch on the deals you get involved in and how they satisfy your cash needs. Failure to do this will lead to a lot of sleepless nights. Regardless of any equity positions. Remember this, ALL the deals you work on will not close. Some of them just won’t pan out regardless of your actions. It’s just the nature of the beast. Be sure to plan ahead so the next payday that doesn’t come to pass doesn’t wreck havoc on your budget.

As a final thought, your statement “I have about $50K in savings to live on” says you have already deemed this spendable money. I encourage you to look at that money as investment staying power, and resolve not to spend it, but rather hold on to it so it can work for you when your education is at a higher level. All the best.

KJ

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Re: Fulltime investing - Realistic dream? - Posted by Scott

Posted by Scott on August 21, 2005 at 24:13:16:

Thanks everyone for your comments. I feel confident in Larry’s ability to help me. Have known him a long time and I don’t feel he would steer me wrong. He has been doing this a long time and has a lot of contacts.

I feel I have a good business plan and I am not afraid to do some moderate advertising. I will be concentrating on flips and occassional lease options to generate fast cash in the first 12-24 months. I am not even going to attempt to try to manage a rehab project or a rental for at least 12-24 months and even then it will have to be a great deal. He has contacts with lots of private investors, but I will also be developing these as I go for my own personal use.

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Re: Fulltime investing - Posted by Chris (WI)

Posted by Chris (WI) on August 20, 2005 at 21:27:40:

When I started about 20 months ago I had a failing business (wood working), no money, lots of debt and little confidence because I had racked up an impressive string of failures in various straight commission sales jobs over the previous 4 years before launching my ill-fated wood working business. I found what I thought was a good deal and brought in a partner (I thought he had money, he didn’t, but he knew someone who did). We bought for $112K sold for $155K a few months later and did absolutely no work on the property. My share was about $8500, but I saw the $40K in profit and got pretty excited. My personal overhead is similar to yours and my wife stays home with our 4 kids. I figure if I got all of the profit it would last me at least 10 months (not figuring in taxes, but you get the idea). If I worked full time at this could I find another deal before I ran out of money? You betcha! I’ve done 5 more deals since then averaging about $30K per deal (I have yet to capture all the profit on a single deal but I made them all happen and I will eventually be getting all the profit for myself). Being rather dense, it has taken me this long to finally jump in full time and only now am I going to start spending any money on marketing. You can absolutely start full time! I assume you will start flipping to generate cash. Once you get good at that and do it consistently only then would I consider any buy and hold strategy. 4 of my deals would have been excellent rentals but I couldn’t even consider holding them because I have no other source of income and I am digging myself out of a hole right now. I hope to start accumulating rentals in about two years when I am debt free and have a cushion. Good luck.

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Re: Fulltime investing - for newbie? - Posted by freeman2be

Posted by freeman2be on August 20, 2005 at 20:36:04:

I worked on my RE business for about 2 years before I ever made a penny at it (didn’t spend much either though). Spent a lot of time studying and learning. Made many offers, but couldn’t close any deals during those first two year. Learned a lot, changed my model (business plan if you like) many times, and now I’m starting to get some results. Was unemployed for the first 4 months of those first two years. Saw the light at the end of the tunnel and got a job. I’m probably about another 2-3 years from being able to go full-time. Not trying to scare you away from it, just telling you how it has been for me.

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Business vs. Investing - Posted by MatthewC

Posted by MatthewC on August 20, 2005 at 18:02:38:

The problem I see with many, many people both experienced and beginners is that they confuse a business with investing.

The investing part comes with the financing and perhaps some light management. But if management becomes heavy and very active, it is no longer an investment per se. It becomes a business project.

So, many rehabbers think they are in real estate investing when in reality they are in the real estate BUSINESS.

This distinction is very important because it will guide your actions as well as the tax ramifications.

Nothing wrong with being in the real estate BUSINESS. It can be lucrative. But it needs to be treated like one. That means staffing, management, administration, organization, and all the stuff that goes into any business.

The question you need to ask yourself is, can you successfully launch and grow the BUSINESS. Can you learn the business fast enought to get it going?

Starting any business generally requires a bit of time and some staying power. That is why I alway shun when someone comes on this board and says, they have been working for someone all their lives but are going to lose their job and have no savings and no credit and no outside help.

I do not want say it cannot be done, because people have done it before. But I would not want to put my money behind a person who has never self-started anything and has no resources to draw on.

In your case, it appears you have some entrepreneurial background and you certainly have some starting resources to begin with. I would say you have a fighting chance to make a good go of it.

But you better learn and move fast! The months go by quickly. :slight_smile:

MatthewC

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Fulltime investing - Realistic dream for newbie? - Posted by Mr. Big

Posted by Mr. Big on August 20, 2005 at 15:54:23:

Yes it is quite possible, though I recommend most people start part time.

Your case is different as you have business experience and your friend to guide you.

The friend is the key. If he is really a successful professional as you say, it is worth it to pay to learn the business from him no matter what he charges. If he takes half of each deal it’s worth it to shorten the learning process and avoid the inevitible mistakes.

As a business owner I assume you know how to investigate and analyse his business as you would any business you were planning to buy into.

And I also assume you won’t go into any partnership deals until you satisfy yourself that he is contributing his fair share of money, skill and experience and that your share of the profits is sufficient to make it worthwhile.

As you no doubt know the main thing is to assess your resources and create a realistic business plan before you jump into a new venture.

I don’t know if you will be making a full time living in 6-8 months but it is quite possible you could. You will have to sit down with your friend, discuss the real estate business, and map out a plan with his help