Posted by Sean on August 30, 2005 at 14:49:01:
Pittsburgh, PA
Question for full timers (part 2) - Posted by Ed Howard
Posted by Ed Howard on August 29, 2005 at 11:36:41:
I’ve read with interest the ‘Question for full timers’ thread and was interested in the varying opinions. So interested in fact that I’ve realized that I could use some help too.
I’m about to come into a little cash ($50-60K) and I want to invest it in RE. I have a steady job that I’m not planning to give up and while I’d like to make some ‘quick money’, I have the time and am patient enough to also take a slower approach.
I’m new at this and I’m looking for advice. Rehabs, wholesaling, rental properties or . . . ? Thanks in advance for any ideas and suggestions.
Ed
Re: Question for full timers (part 2) - Posted by Jeff Gehbauer
Posted by Jeff Gehbauer on August 29, 2005 at 18:10:14:
Ed - join a local real estate investing group and network with the investors in that group. Quiz those investors and learn from those who have done the deals. Finally, let them know what you are looking for.
Thanks - Posted by Ed Howard
Posted by Ed Howard on August 29, 2005 at 17:00:48:
I just wanted to take a minute to say ‘Thanks’ to those of you that have responded. I truly need to be educated and with this forum and the books I’m reading I feel like I’m progressing.
Sean, around here the median price of a house was $224K last month - so buying a house for cash and renting it out is impossible. I really don’t know anything about wholesaling houses, but I am intrigued by the idea and would appreciate any thoughts or suggestions on reading materials.
Once again - Thanks to all of you!
Ed
Re: Question for full timers (part 2) - Posted by John B. Corey Jr.
Posted by John B. Corey Jr. on August 29, 2005 at 13:35:27:
Ed,
There is no good answer or there are many good answers.
It will depend on what you want to do, what skills you have, how much time you have and other such trade-offs.
The MH suggestion is a good one as you do not need to put much into a deal while you learn.
Buying something free and clear was also a good idea in that you are taking less risk during the time you do not have much experience.
The best investment would be to spend time reading here and get some books from the library plus bookstore. For next to no money and a chunk of time you will really advance you knowledge and do better deals.
John Corey
Chelsea Private Equity LLC
Re: Question for full timers (part 2) - Posted by Sean
Posted by Sean on August 29, 2005 at 12:15:15:
The safest approach there is, is to pay all cash, and own properties free and clear. A free and clear asset generating a likely always growing cashflow over time is a wonderful thing.
The question however is are you willing to trade your CASH in hand, for the cashflow amount that 50k would buy you free and clear?
Where I live, with 50k, I could free and clear 2-3 properties and keep 5-10k in the bank for emergencies… these properties would then generate between 800 and 1200ish a month in cashflow, or 9600 to 14,400 a year or around 20-25% ROI per year.
This is by FAR the safest path… as long as you pay your taxes, and keep the properties up, you have no other overhead, other than marketing when you need a new tenant.
Buying and holding on credit, is a great long term path as well, as eventually you wind up with free and clear properties, and you can certainly use 40 or 50k to get you into a good number of properties, unless you live in a very high dollar market without needing to get too creative. Downside, vacancies definately hurt more when you have underlying mtg payments that still need made, and you can wind up OVER leveraged and have everything fall down. But long term, you will have lots of free and clear properties making you LOTS of income if you hold them long enough.
Retailing is a way to make bigger money fast, but it has its own pitfalls… repairs cost more than anticipated, holding empty houses can eat you alive here too when they don’t sell as fast as you thought etc.
Wholesaling, well frankly you don’t need any real money at all to do this, so 50k in cash is irrellevant.
If I had 50k and was thinking in slow burn mode, I would do one of three things:
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buy and hold a few properties free and clear.
-
buy and hold more properties carring mortgages.
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Buy 1 house that I can buy, fix up and sell for 30k or less in my estimation… do it, and when it sells, pay my taxes, and repeat it, perhaps with a slightly higher dollar house because you should now have more than 50k to work with.
Just my thoughts.
Re: Question for full timers (part 2) - Posted by Sailor
Posted by Sailor on August 29, 2005 at 12:14:33:
Check out the Mobile Homes forum on this site. Buying/selling some inexpensive MHs might be a good way to cut your teeth on doing RE deals. MHs are much quicker (no escrow), so you can make your mistakes early & increase your learning curve faster. Lonnie Scruggs’ book, “Deals on Wheels” is the primer.
Tye
Re: Thanks - Posted by Sean
Posted by Sean on August 29, 2005 at 18:42:12:
Ed,
Not to undermine your point, but the MEDIAN in my market is about 140 or 150… but that doesn’t mean there aren’t 15-20k houses in non warzone areas too.
Every market is different, you have to discover your own market and things… MEDIAN doesn’t mean you can’t possibly find nice homes for far below it.
Wholesaling is all about having a large buyers list.
Re: Question for full timers (part 2) - Posted by Darren
Posted by Darren on August 29, 2005 at 14:04:01:
I like John’s advice. Since it sounds like you’re not sure which type of investing you prefer, keep the cash on the sideline and act like it doesn’t exist until you decide. Learn first so you make well reasoned decisions. If you decide renting is the way you want to go, Sean gave you great advice. If you want to wholesale, however, you won’t need much of the money to get started, maybe a couple of grand to advertise. Leverage your brain. This is afterall CREONLINE or Creative realestate online.
Re: Question for full timers (part 2) - Posted by Charles Parrish
Posted by Charles Parrish on August 29, 2005 at 20:59:32:
I wouldn’t spend any of your money on real estate!!!
I would spend some of it (a small portion only) on advertising. Advertising to find real estate bargains.
HERE ARE THE STEPS:
- Find a professional investor, a pro with known skills
- Run ads or radio commercials; Real estate wanted, homes, commercial, non-comforming…etc. use the pro’s telephone number and your name.
- The pro will take the calls and negotiate a bargain offer.
- You both confer, write an offer.
- Use delayed ssttlement clauses in your offer, right to extent, write to assign, right to re-market.
- Sell the property before your settlement
- Attend settlement and collect your assignment fee.
Good luck,
CharlesParrish,com
Oh, I forgot to tell you, sell the property at public auction (auctionbrokers.org)
Re: Thanks - Posted by Vlad(IL)
Posted by Vlad(IL) on August 29, 2005 at 21:16:33:
Sean,
How far are your 15-40K houses from the 150K houses? Would you drive 1-3 hours for deals?
Re: Thanks - Posted by Sean
Posted by Sean on August 30, 2005 at 08:02:04:
The 15k-40k homes at times are less than 5 minutes from the 150k or even 500k homes.
Would I drive 1 to 3 hours to find deals?
That’s easy, if that’s what I had to do to find deals, then YES I would do it.
This is work folks, its a business and its work… like any type of business you do what you have to do if you want to be successful at it.
Now, would I do everything in my power to make sure I wasn’t overlooking other opportunities I didn’t think of closer before driving that 1 to 3 hours? Yes… but if after making sure there wasn’t anything closer, I would indeed drive 1 to 3 hours to get deals, if that is what it required.
THere was a time not that long ago I was commuting 1 hour each way (150 miles a day) just to get to a J.O.B. You do what you need and have to do, provided it is legal and moral, if you aren’t willing to do that, you won’t be successful no matter what business you are in.
Re: Thanks - Posted by whyK-CA
Posted by whyK-CA on August 30, 2005 at 11:27:05:
Sean, where are you located, if you don’t mind…Thanks.