Looking to get started - Posted by rme

Real Estate Investing Apartments
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Posted by Frank Chin on May 11, 2011 at 06:43:10:

Let’s say a certain style of “real estate investing” is going out of style for now.

I interpret your approach is one of “I have no money to invest” scenario. Depending on how much MONEY you have, then you can always go on the “buy and hold” route, or even “buy all cash” and then flip route. Having no money presents it’s challenges.

I’ve been following the real estate scene for over 30 years as a “buy and hold” investor, and my wife worked a short stint as a “real estate sales agent”. Most of the “lease option”, and “desperate seller” scenarios requires some salemenship to pull off, and often some chicanery thrown in, which is why even if you succeed, you might have the law gunning for you.

You won’t find a state AG gunning for you if you bought a property for next to nothing and held it as a rental. Try to flip it, and you might have some trouble.

My dad owned a commercial property, and he’s been approached to do “lease options”, or do “seller financing” though the years, usually because the buyers want to do a “no down deal”. I advised my dad there is nothing in it for him in this, all benefits reside with the buyer. The reason my dad thought about it was he just didn’t want to bother with collecting rent at one point.

So I pointed out to him that with a lease option, he still has to go and collect his monthly payments, and with seller financing, he is the bank and is still collecting monthly mortgage payments. So I told him if he is tired of collecting the rents, I would be more than happy to take over do it under a property management arrangement, and he can keep the place. This happened over 20 years ago, and values have tripled after I talked him out of it.

One thing you have to keep in mind is people you are trying to talk into lease options would rather sell and take the money.

I know some immigrants who come to this country with nothing in their pockets spend the first few years scrimping, and saving a bundle, then do “buy and hold” investing with cash. An investor bought two attached 3 plexes next to me a few years ago, and he can’t speak English to save his life. But he says he owns over a dozen properties in the county, and the former owner who I know well told me this buyer put down $700,000 on a $1,000,000 property. With $700,000 you don’t need to speak English, or good salesmanship, or any chicanery, and you can hire the fanciest lawyers you want.

Bottomline, “buy and hold” investing has not gone out of style.

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Looking to get started - Posted by rme

Posted by rme on May 09, 2011 at 13:14:39:

Hey guys I am looking to get started in real estate in about a year. Why so long?
Well because I am in the military stationed overseas and I return next year to the
states. During my time here I have focused on building up my credit so that I
can have a very good score as well as eliminating as much debt as possible.
Once I return I want to go straight into real estate. I am looking into buying s
simple mans guide to real estate and study that for a good 6 months before I
leave here. Is that a good idea? Should I be looking into reading/studying
something else? Should I shoot for rentals or lease options? Any advice would
be appreciated.

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Re: Looking to get started - Posted by Ken

Posted by Ken on May 11, 2011 at 09:12:37:

You will be best at what you like so keep that in mind.If you like the idea of flips you should consider wholesaling.Basically you get a contract at a good price and sell the contract to someone who can close and do the repairs.Vena Jones-Cox has a good course

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Re: Looking to get started - Posted by Jon

Posted by Jon on May 09, 2011 at 14:59:31:

For most folks starting out, a good approach would be via lease options. They are easy enough to understand and because you needn’t come out of pocket to do these type deals, they are risk free if done correctly.
So I suggest that as your starting point. As you grow as an investor and gain capital and experience you can look into expanding your knowledge base and start utilizing other strategies. Best wishes.
By the way, for lease options there are a number of choices available. I recommend Carbonare’s, The Naked Investor. Real good practical guide to all things lease options.

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Re: Looking to get started - Posted by Jim Johnson

Posted by Jim Johnson on May 10, 2011 at 13:59:26:

Lease Options are anything but risk-free. I suggest that rme read this post by LEASE PURCHASE to at least be aware of the pitfalls of lease options. Proceed very carefully. Here is his post:

http://www.creonline.com/wwwboard/messages/98779.html

Good luck to you.

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Re: Looking to get started - Posted by RME

Posted by RME on May 10, 2011 at 12:10:43:

Thanks. I will look into lease options.

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Re: Looking to get started - Posted by rme

Posted by rme on May 10, 2011 at 15:28:34:

Thanks. Is that saying Lease options are becoming illegal? Also what
about flipping? How hard is to get started in that?

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FOR BEGINNERS - Posted by Marko Rubel

Posted by Marko Rubel on May 11, 2011 at 11:04:36:

Yes, start reading and learning! This is a great business!

As far as where to start, here’s my opinion - you have 2 routs
for your REI biz.

One is “Fixing the Paper” route, another one is “Fixing the
house”. The first one I refer to is creating a favorable financing
that enables majority of buyers to buy the property - so
creating Seller Financing arrangements. I call it ‘fixing paper’
because you are creating the financing.

The second route is where you rehab houses.

The first route is easier, faster and A LOT MORE profitable!
However it takes learning, so start now!

In the first scenario you will eventually be buying houses and
selling on Seller Financing, so starting with LO is the best start
because many of your Tenant/Buyers will later be the
candidates for SF. This way you will learn what kind of buyers
market you have there in terms of how much down and per
month they can afford. So then, all you need to do is learn how
to buy without using banks, and then you have an unlimited
number of deals available!

If you want to be in fixing up houses biz, then you should start
with wholesaling. This way you learn how to find & contract
fixers cheap, so you’ll be prepared to start in rehab biz.

Again, unless you have contractor background and know how to
deal with them, I would not suggest this route. There are
another 20 reasons why “fixing paper” is a lot easier and more
profitable.

I agree that buy/hold is a good strategy, but only in addition to
the above - the reason is that it takes way too long to create
any substantial wealth. Doing the first route above, I’ve had
years where my net profit exceeded $1M in a single year, and
doing that with buy/hold is impossible in one year.

There’s a long way of getting wealthy and a short one, I prefer a
short one. Just know, both require learning and work!

Let me address the need for capital - more knowledge you
have, the less capital you need. There are plenty of deals out
there that you can do without using any of your money. I got
even paid to buy many times, my students are getting paid
anywhere from $5k to $40k to buy a property at create a binder and print out all the articles
from this website! Then read them and highlight the important
things, then read them again. Start calling ads in the paper right
away and looking for deals. This is your first step.

Again, the knowledge is power, so get armed. Start Now!

Take care,
Marko

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Re: Looking to get started - Posted by LeasePurchase

Posted by LeasePurchase on May 11, 2011 at 19:17:02:

No, Lease Options are not becoming illegal. There are inherent dangers in all Seller Carry or Assisted Type arrangements. I personally believe, from personal experience, that Lease Purchase/Options and Rent-to-Owns, are the most dangerous.

If you do them, or something like them, just don’t do the things that could cause your transaction to be classified as “a sale”. I found out the hard way.

Flipping can be profitable but it typically involves either selling or assigning your contract or option, outside of the closing. You cannot use the End Buyer’s funds to close your deal. You are required to take title, via your own cash or credit first before you can resell the property. Some lenders may also require seasoning of the title before you can resell the property. You just need to sell to someone who has a lender who doesn’t require seasoning.

IMO, it would be much easier to get started with Lease Options versus Flipping. Just learn how to protect yourself and your transaction before you do. I would also suggest that you find a successful investor in your area, that has done many transactions and work with them as a bird dog while learning the right and legal way to do deals. You should be able to find someone at your local REIA.

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Re: Looking to get started - Posted by Jon

Posted by Jon on May 11, 2011 at 11:44:25:

There will ALWAYS be the buffoon who, wanting to show how smart he is, eager to tell you that everything is dangerous and to be wary. Thanks to these clowns, there are more deals and money to be made for those of us with a better attitude and, apparently, more know how.
Lease options are NOT risky. Screw up and do something wrong, sure, there will be consequences. But what area of life does that NOT apply?
I’ll stand by what I said earlier. Lease options, done correctly, are the safest and easiest way to break into this business. Don’t let the negative nabobs keep you down.

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Re: Looking to get started - Posted by Frank Chin

Posted by Frank Chin on May 10, 2011 at 17:33:46:

You have to be very careful getting into flipping now.

To be able to pull it off, you’ll need a seller in financial distress, desperate to sell it to you at a way below market price, so you can then turn around and sell it at market. But because of abuses, states have started to look into and ban the practice, or give practitioners a hard time.

I’m in NY State, and my state passed a “Home Equity Theft Prevention Act”"

The way the act is written, there’s so many things the seller could do wrong. Also, states have taken aggressive action against individuals, such as Joe Kaiser:

http://www.atg.wa.gov/uploadedFiles/Home/News/Press_Releases/2009/kaiser%20fact%20sheet.pdf

In addition, because of heavy losses suffered by government mortgage giants Fannie Mae, they have made flipping extremely difficult. See:

http://trustyourlender.com/2011/02/the-fha-flip-rule/

Does this answer, “How hard is it …??”

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Re: FOR BEGINNERS - Posted by RME

Posted by RME on May 11, 2011 at 12:09:04:

WOW…so much info from you guys! I really appreciate that. Lease
Options and Wholesaling were the main two I was interested in doing.
Then after I build more capital, I was looking at getting some rentals
later down the line. I did start looking into the SAFE act and I must
admit that it did get me a little worried about doing LOs. I have about
a year and I will spend that time learning as much as I can so I can try
to be as prepared as I can possibly be when making my first deal. This
is exciting.

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Re: Looking to get started - Posted by rme

Posted by rme on May 11, 2011 at 24:11:14:

So looking at these post is it safe to say that investing in real estate is
becoming more difficult in the past?

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Re: Looking to get started - Posted by LeasePurchase

Posted by LeasePurchase on May 11, 2011 at 19:23:09:

The only reason it may be more difficult for some now as opposed to a few years ago is the fact that they can’t get away with what they used to do. There was a lot of fraud going on and it was being ignored for years. Plus, new legislation has been introduced that has scared investors.

I don’t believe it is any more difficult today than a few years ago. I just closed one on Monday and another one next week. I think the reason I’m doing as many deals as I did several years ago is that there are fewer investors to compete with. I’ve noticed a significant reduction in the attendance of my local investors club meetings too.