Make sure you know what your getting into - Posted by waynepdx

Posted by diana on June 25, 2002 at 20:32:39:

And I just happened to have put my notice in at my job today!

“Going under” are not words I want to hear :frowning:



Make sure you know what your getting into - Posted by waynepdx

Posted by waynepdx on June 25, 2002 at 01:00:38:

I do not want to scare people away from this, but I just had a hour long phone call with someone related to real estate.

I learned of a person that started about the same time I did and I would have considered him to know a considerable amount of info about real estate more than me.

From what I could ascertain he did 5 or 6 deals, a couple of subject to’s and the rest lease options.

He is now filing for personal bankruptcy.

I do not know the entire situation but from what I could figure out he over extended himself and did not budget the properties correctly.

He also quit his job almost off the bat.

After you have done the one deal, sit back and really think about it.

Learn from it. What did you not like about it?
What surprises came up?
How can you make it go smoother?
What can you do to prepare so those surprises that came up wont be a surprise the next time?

I do not mean to scream but I do not want to see this happen to you.

Re: Make sure you know what your getting into - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on June 25, 2002 at 16:44:41:

Wayne dpx–(OR)---------------

Thanks for sharing your comments. They make a lot of sense to me. I hope that a lot of people heed your advice. In my advice on how to be a successful investor (found by putting “beginners success” on the search function of this main bulletinboard function of the CREONLINE.COM site) I warn about the two worst problems that a newer investor can face: never doing anything and, as you point out, trying to do too much too soon.

Yes, it is possible to make lots of money with real estate. But it takes time and knowledge. And it takes time to gain the knowledge. Even if one were to read every book on the topic, one will still make mistakes. Let’s just hope that those who read your post at least avoid the mistake of trying to do too much too soon.

Good InvestingRon Starr******

Re: Investor F/C - Posted by Dan-FL

Posted by Dan-FL on June 25, 2002 at 06:33:35:

When I’m checking for F/C,I see plenty of investors going down.Alot of them are green and did not research there market.They bit off more than they could chew and paid way to much for a property.Quitting your job to soon is tough.I know,because I did that and almost went under twice in the early years.

Re: Make sure you know what your getting into - Posted by Matt KY

Posted by Matt KY on June 25, 2002 at 01:44:37:

assign l/o agreements to t/b’s when starting out. wait till you have at least $20,000 before getting into a long term deal.

just my 2 cents. actually, johnboy’s 2 cents. im just repeating.

Your scaring me - Posted by diana

Posted by diana on June 25, 2002 at 20:28:48:

I just began investing a little over a year ago. I have aquired 6 properies and had a goal of 10 before this year was up.

I do not want to go under. When will I know if I’m moving to fast? Any money I get my hands on I put right into real estate. Is this the wrong way to go.

If I had to wait till I had $20,000 I would have never got started to begin with.

As long as all my properties are cashflowing should I worry?


Re: Your scaring me - Posted by Earl

Posted by Earl on June 26, 2002 at 09:01:12:

I agree with Ron. Even if all your properties are still cash flowing, you still need to think this through carefully. Murphy’s Law will inevitably strike some day when you least expect it and you have multiple vacancies, a big repair bill, etc.

The good news is almost always in CREI, time is on your side, particularly if you buy and hold.

Read Ron’s comments about having extra funds if needed - relatives, lines of credit, dead equity in your properties, in case of emergency.

My impression is there are a lot of Type A personalities on this web site that at times may tend to go too fast, whatever their strategy is.

In Rich Dad Poor Dad, notice that the author does not recommend buying properties no money down - instead he used techniques such as 1031 exchanges to ‘stack the deck’ better in his favor whenever he made a buy. And if he used exchanges, that means he would need to wait at least some time for his properties to appreciate and build up equity before he could exchange them.

The author of Rich Dad also said at one point he went for several years without buying anything, but all the while was studying, reading, and preparing for the great deals, so he would recognize them when he saw them. He also mentioned that Rich Dad did not build his fortune quickly, but took 20 years I believe he mentioned once, to build his wealth.

Good luck!

Oh, Oh, You’re Moving Too Fast. Or are you? - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on June 25, 2002 at 23:27:06:


I take your concern seriously. And I confess I don’t have a very good answer to provide you right now. Maybe some others will post better advice than I feel I can give. I will do my best for you.

Giving notice on your job is a serious matter. It is difficult for me to respond not knowing some of the data. You mention having six properties. But you don’t indicate if these are single family properties or multi units. I don’t know how many units you have and how much income you have from them. I don’t know the types of neighborhoods you are investing in and the quality of your renters. The stability of the clientel and their income.

I don’t know how big a “nut” you have each month and how much your personal living expenses are. From your comment that you could not have started if you had had to save $20K, it sounds as though you don’t now have much money socked away for emergencies, vacancies, etc.

I wonder if you have lines of credit upon which you can draw should you need to do so? I wonder how easy it would be for you to earn extra income doing some part time or pick-up work should you need to do so? If you found that you had to go back to work, would it be easy for you to get a job, or might you take several months? If easier to rejob yourself, the more risk you can take quitting too soon, I feel.

I quit working soon after starting real estate investing. I certainly did enjoy not having a job. However, after several years of struggling along, I found I just did not have enough rental income and the buying and selling for profits, while it works, was a little too erratic. Then I missed making a 1031 tax-deferred exchange on a property sale where I did not have much cash coming out–I had borrowed against the equity to buy other properties. I ended with over $100K in income tax bills and had to sell a couple of properties to pay them. So, I went back to work again. When I decided to seek employment, it was only a matter of a day before I was employed. So–think about yourself, if you get desperate, could you get income flowing in again quickly?

Some people advocate that you not quit your regular employment until your income properties provide you with as much income as your job has. I think this is pretty much right. But it also depends some on how much income your were earning compared to your living expenses. If you were barely squeeking by on your salary, I think the advice is sound. If you had more than enough income, you might quit your day job when your income is somewhat less than your properties bring in. Especially if your prospects for more income are good. Perhaps from being able to raise rents on the current properties or perhaps from being able to easily acquire more income-producing properties.

The problem is that properties have vacancies from time to time. You have no income until the unit is ready and rerented plus you probably have to return security deposits and get the property cleaned and fixed up. In some markets that means virtually no downtime, especially if you are speedy at turn-around. This usually comes from a lot of practice at it. In some markets, it could be a month or more to rerent.

Lets suggest that you need net rental income of about 125-133% of your living expenses. Anything more, fine. If you don’t have this, you might want to say “Oh, that notice was a mistake, please throw it away, I was just feeling strange when I wrote it up and handed it in.”

Now, how to know if you are “going too fast.” I think that this may be something that the individual can not easily determine for himself or herself. People tend to fool themselves. I don’t know how self-analytical you are. Whether you are a realist, optimist, or pessimist. Also, having less than a year of experience, you do not have much to go on to judge the situation that is supposed to create your income stream. That suggests to me that you need to talk to other people about their judgment of whether you are going too fast or not.

And that becomes difficult. I would suggest that only somebody who is an experienced real estate investor should be consulted. And those people would be, ideally, from your area so they know the variability of the rental market and how hard it is to fill vacancies. And, it would be good if they know you pretty well. The trouble is that a lot of people will pretty much judge how you’re doing by thinking of how well they would be handling things if they were in your situation. If you are more accomplished than they are, they might be discouraging to you. If you are less skilled than they are, they may encourage you and you may slip.

I don’t think that it is easy to judge whether you are going too fast. Maybe I’ll have some inspiration soon and will be able to give you some guidelines later.

Do you manage your own properties? I will assume you do. I wonder if you have read books on managing properties? At least two or three. One of which should be “Landlording” by Leigh Robinson, or something of similar weight. Have you had several vacancies and have handled them and now are well prepared for others? Have you found some good service providers in the area to handle the physical repairs or can you do them yourself?

You mention that you are thinking of acquiring 4 more properties soon. I wonder how easy it is for you to acquire properties where you live. Can you get properties with little or no money down? Can you get good cashflow from new properties right away? If the answer to these two questions is “yes,” I would worry less about your prospects.

Do you have fall-back help? Friends, relatives, others who could loan you money if needed? Do you own your own home and have equity in it with which you could finance yourself for a period if you run into rough weather?

I think from some of these questions and comments that you can see how difficult it is to project your prospects with the complete lack of information I have now.

You may be an extremely able business person, able to manage people and properties like a whiz. I don’t know you.

I wish that I could offer you something a little more concrete to help you take measurements of where you are and where you are going. If you will provide more details about your situtaion, yourself, and the environment in which you are investing, I might be able to respond and give you better advice. If I think of something in the next day or two, I’ll add a new post or posts. And perhaps other people, seeing the details may be able to aid you.

Good Investing and Good Self-Inventory TakingRon Starr