Posted by Killer Joe on July 12, 2005 at 01:29:34:
Hi Terrance,
First of all, slow down. Action ALWAYS trumps inaction, so you are way ahead of the game on this front. At this point it would be good for you to understand the difference between BEING urgent, and possessing a sense of urgency.
If you were lying on a hospital bed, you would want your medical team to have a sense of urgency, but you would NOT want them to be urgent. Being urgent leads to mistakes, having a sense of urgency leads to action.
Having a sense of urgency helps define what actions you need to take. Having a sense of urgency brings clarity to the mind. Being urgent is the reason they invented ‘anti-lock’ braking systems for cars. Those individuals who utilize that feature, are definitely urgent, although they may never have had a sense of urgency.
Try to remember that REIing is a long term commitment that thrives on a sense of urgency, and faulters when the player is urgent. Remember your words " I just wanted desperately to get into the game." Don’t let these come back and haunt you. It’s not about getting into the game, it’s about understanding the fundementals, following through, and reaping the rewards of good planning, goal setting, and perserverance.
If you are like so many other new investors you see the potential for striking it big in REI. Pace yourself, this is a long road. There are times where you will take big risks when extrodinary opportunities come your way, and there are times where caution will be your best friend. Learn to differentiate between the two. A person who is urgent will be blinded to the differences, a person with a sense of urgency will have clarity about the decisions required. Be that person.
HTH
Someone please help me. A couple of months ago a friend of mind got me interested in real estate investing. We took advantage of the fact that I had pretty good credit and bought a couple properties for under market value and are presently lease optioning or owner financing them at the top of the market price. This is a very easy concept for me to grasp, but my problem is that I’ve been reading this website for a little over a month and I realize how little I know about true real estate investing. First, my frind is a loan officer so he has actually taken care of all of the loans. I DO read and understand the terms before signing them, but to be honest I wouldn’t even know how to go about getting a loan if I wanted to. I can’t even understand some of the lingo when reading some of the post on this site. Don’t get me wrong, I am in no way some dummy who has let someone take advantage of me. I am a college graduate and as I said before the concept of buying at below market and selling high is just simple mathematics,but I don’t feel like I’m actively participating in real real estate investing. So if anyone can give advice on what I should do next or what course of action I should take that advice will be greatly appreciated.
P.S. I own Calton’s program and have read a couple of other publications.
I’ve tried to avoid responding, but you’ve got me worried, kid! There aren’t enough details for me to fully assess your situation, but unless I’m reading your post incorrectly, it kinda sounds like it isn’t a matter of lack of REI knowledge, but general (yet sweet) naiveté. Don’t know what the term “friend” means to you, but this loan officer is using your credit to make commissions AND has part of the action? If he doesn’t have a stake in the properties, only in the commissions, is he just using you to generate loans @ no risk to himself? Recommendations: Invest your time, $$$ & efforts in locating & consulting with (1) a CPA knowledgeable in REI; (2) an equally knowledgeable attorney. You also need to sign up right away @ your local community college (degree notwithstanding) for basic REI classes. If these deals blow up in your face, it could take a decade or more to totally recover financially. If you supply more details other folks w/be better able to respond to your questions. I’ll keep my fingers crossed for you–
As DaveD asks, what is your friend bringing to the table? He’s a loan officer, so he’s making his money up front every time you take out a loan. The issue really isn’t that you “wouldn’t even know how to go about getting a loan.” Everyone and their Aunt Sally get loans; usually a real estate agent steers someone to a competent loan officer who asks for the proper documents. Don’t worry about that.
But DaveD’s point about your burning up your credit is on target. So what you really have to learn about is creative financing which, in the case of lease-options, may well involve having the seller hold the financing during the lease-option period.
Also, not to raise any red flags, but you might want to take your agreements with your friend (I hope you’ve got them in writing) to a real estate attorney. There are a million ways to structure deals. Some might not be very favorable to you.
In addition to taking your existing agreements to a lawyer, invest in one or more courses on lease-options. Yes, buying below market and selling high is a major element of lease options, but there are others that also are important. (Maximizing cash flow, if that’s what you want, equity buildup from loan paydown, minimizing your risk if something goes wrong with the tenant.)
Posted by DaveD (WI) on July 11, 2005 at 09:37:31:
First Terrance, congrats on getting out and doing something, even though you not sure of what you did. Most folks talk, you acted. Be proud, even though you might feel naive or overwhelmed.
Your friend. Hope you are not partnering with him, if so, what is he really bringing to the table?
Institutional borrowing has its place. Either for buy and long term hold, or buy, fix and sell. Rarely does it work very long as buy and soft term sell. As you add properties, your credit will eventually take a hit as you baby-sit folks with crummy credit you hope to L/O to. Your debt to income and debt to asset ratios will soar… and your bank will eventually get cut you off.
This is why you need to keep developing alternative financing sources, such as private and seller financing. If your goal is to sell on soft terms, you should endevour to buy on soft terms first. Save the institutional financing for where it is needed most.
Re: New Investor. PLEASE HELP!!! - Posted by Terrance (tx)
Posted by Terrance (tx) on July 11, 2005 at 23:52:57:
First, I’d like to thank everyone who posted a reply offering advice. I’d like to give a little more detail about my situation and maybe someone can expound on it a little more. The first property I bought was through a co worker whose father was being transfered to another city on his job. He was already having some financial problems and he would have to start paying rent in a month as well as his mortgage. He was asking for 100k and the county appraisal distric appraised the house at 125k for tax purposes. I had a CMA performed and homes with the same BR, BA ect were selling for about 140k, so I bought the home for 100k and I presently live there with the intention of selling in couple of years. The other two properties were purchased as a package deal for 240k and 175k and appraised for 280k and 220k respectively. I also had a CMA performed on those properties amd both are selling at more than the appraisal suggests. Not to mention that there seems to be a really high demand for this particular sub division. Those are the specifics of the so called deals that I have made. I’m not trying to mask my inexperience I just wanted to let it be known that I did as much homework as I know how to perform. Also my friend does not have any stake in any of the properties. Although he has a couple of properties of his own. Someone mentioned that he’s using me to get loans (him being a loan officer) at no risk to himself and to be honest with you all I KNOW THIS IS TRUE. I just wanted desperately to get into the game. I have a full time job that I’m prretty secure in and so does my fiance, but I truely believe that this is my passion.That’s why I visit this site EVERY SINGLE DAY and I WILL become successful in this bussiness. Of course with a little help from you guys. Anyway thanks again for the replies and any and all advice will be looked at and taken very seriously.