Why it might take a few months to get started - Posted by Ronald * Starr(in No CA)

Real Estate Investing Real Estate Gurus
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Posted by Ronald * Starr(in No CA) on December 16, 2002 at 21:05:46:

Shawn–(OH)--------------

I’ve about finished his 12-cassette no money down audio course. I thought it was of decent quality. I’m not sure I want to recommend it exactly, but I would not discourage a beginner from listening to it. Just wish it had come with the workbook. But when you pay less than $10 on e-bay, sometimes you don’t get everything.

Now, sounds like you could use a little stress release. Stop thinking about real estate for a while. Think about saling in the Carribean see, out of sight of land. The sun is relaxing you. The waves slapping against the hull are relaxing you. Deep breathes, Shawn. Deep, deep breathes. Ah, release the tension.

Good Investing and Good Posting****Ron Starr**************

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Why it might take a few months to get started - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on December 15, 2002 at 16:24:59:

Some people seem to think that reading two real estate investing books and about 500 postings here on CREONLINE.COM is all that is needed to start investing in real estate. And, perhaps for a very few people it may work. But, I think that most people should expect to spend several months studying real estate investing and their local marketplace before they start making offers on properties. In my advice to beginners at http://www.creonline.com/wwwboard/messages/22128.html
I suggest to expect to spend at least 6 months learning the ropes, and perhaps longer.

I want to get together a list of some things that beginners probably should know before they start actually buying or making offers on properties. I hope you will feel free to add your own suggestions. Here are some. Depending upon one’s investment approach or locale where one invests, this list is incomplete and it may also have items you don’t really need to know much about top get started.

How to calculate estimated expenses for a rental property

Finding out the rental property rental rates for different types of properties in different nearby locations

Learning how to quickly get or pull comparable property sales for a particular property being offered by sale

learning the prices of houses and small rental properties in the different neighbhorhoods of your area

Knowing what is required to make a contract legally enforceable in court

Knowing what is required on a deed to make it legally recorderable

Knowing what to expect in the way of closing costs when buying properties or selling them

Knowing where to get or knowing how to find out lien information against a person and the person’s property

Understanding the importance of the order of priority of different loans and liens

Knowing how to calculate an offering price for a rundown property

Knowing how to find out how the owner of a property is and how to contact that person

Knowing about “standard loans” such as those from convential lenders

Knowing how to calculate loan payments for an amortized loan or at least where to go to get that information

Knowing what types of properties are selling fast and which one slowly in the area

Figuring out a strategy for investing

Learning about the mathematical basics of real esate investing: the numbers to consider, such as gross rent multiplier, cash on cash, return on investment, return on equity, net operating income, cap rates and perhaps more such as mortgage constant and debt coverage ratio

Learning how to tell if a property owner is eager to sell or is very determined to get what s/he wants or full market value or more

Different ways to structure purchases to reduce the amount of cash to acquire the properties

What kinds of insurance to get and what they might cost

What property taxes are in different nearby jurisdictions

What transfer taxes are charged in nearby juristdictions

How much it may cost for various real estate services:
appraiser’s fees
title work
esrow fees
pest control–“termite”–inspections
private building inspectors fees
cost for a certificate of occupancy in the local building department

How much it may cost for conventional loan fees

How to negotiate with a property owner

How to negotiate in general–with suppliers, workers, authorities, neighbors, etc

What a foreclosure is and something of the basic process in the state

How the assessor’s office determines assessed value and whether that has some consistent relationship to actual market values and if so what

How long it might take to get a loan approved from a conventional lender and go through the escrow process

How to advertise for renters and buyers of properties

How to advertise for motivated sellers of properties

Where to find the documents you will be using to carry out your purchase/acquisition program–leases, options, sales contracts, rental contracts, and more

How real estate agents and brokers get compensated for their time and effort

What ethical principals real estate licencees are supposted to adhere to

Where to go to complain about poor treatment by real estate licensees and what sort of complaints might be considered serious

The landlord-tenant laws for your state and local area

The income tax aspects of rental property ownership–both federal and state, possibly even local

What are 1031 exchanges, what they do, when to use them, how to set them up, how the work

What prospective house buyers look for when they are looking for their new home

What investors are looking for when they look at an investment property to buy

What are easements and what do they mean to the property buyer/owner

What are your rights if you are leasing a property, you own a property and are leasing it out

What are the pros and conts of leasing out a property vs doing a month to month rentall

What is section 8 rental assistance programs and when might it make sense to use them

How do you screen rental applicants

When is it time to get rid of a not too good, not too bad renter

What are some of the ways to take title to a property and what are the ramifications of using different entities to do so

Should you have different entities doing your property management than are owning your properties

What sorts of things can you do to reduce the risk of being sued

What can you do to reduce the chance of losing should you be sued

What are paper, notes, mortgages, contracts for deed, and how does one figure the rate of return on them

How does one find money sources other than institutional lenders

What financing options make the most sense for long-term holding properties, for quick-turn over properties

What about paying down loans early, is that a good idea or why not–what are the considerations

How does one actually make money with real estate

How does one find investors to whom to resell good deal properties

What is the effect of selling a note to somebody else “with recourse” or “without recourse”

Should you consider getting a real estate license or a brokers license

Should you consider working as a real estate licensee for commissions

What are some other investments than residential property and what are their characteristics

With so many different ways to invest in real estate how can I figure out what way to start off for myself

How do my credit scores effect the types of loans I can get for real estate investing

Gee, is there anything else I should know about real estate investing?

Well, as I said, some may not be necessary for everybody. But all of these seem important to me. And I am sure I will be thinking of things to add to this list later. After all, this is just what I came up with off the top of my head, without really thinking about things deeply.

Like to add some? Think I should eliminate some of the above? Any comments?

Good InvestingRon Starr*******

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Re: Why it might take a few months to get started - Posted by ChrisC

Posted by ChrisC on December 20, 2002 at 21:31:13:

Great Post!

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Just had this chat w/John Hyre - Posted by Dianna in Seattle

Posted by Dianna in Seattle on December 16, 2002 at 23:12:07:

John Hyre and I were chatting about this very thing the other day.

I was saying that it is frustrating to think that people are doing this so “easily.”

I have about 3 years of full time investing under my belt - rentals, lease/options, foreclosures, preforeclosures, bankruptcy – and I feel like I’m treading water at times.

I noted to John that I feel like my knowledge base and experience are intersecting and I feel like 2003 will be my year.

But, it can be frustrating if you feel like the average joe is doing it easily, quickly and without any problems.

Thanks for your post!

Dianna in Seattle

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You mean I’m not taking too long - Posted by jim

Posted by jim on December 16, 2002 at 08:27:09:

Ron–
Great post. Actually I was getting a little down on myself that I have made $$$$$ in pocket yet. I have worked a couple deals that fell through but the learning I got from them was invaluable.

Thanks for your knowledge

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How about TYPE of Investing? - Posted by TCR_Va

Posted by TCR_Va on December 16, 2002 at 24:15:00:

I see many newbie’s wondering (including myself in the beginning 6 mos ago) which way they should go as far as the type of investing.

Should I wholesale? Should I retail? Should I lease purchase? Buy and Hold? SFH? Multi-family? What?

IMHO, a newbie who has NO credit or bad credit should not start out with lease purchases. Wholesale flips = quick cash would be the answer I think. At least that is what I will start with in 2003 after months of studying, reading, and chatting with seasoned investors.

Personally, I think they should know all the items in Ron’s list - it makes for a ‘well founded’ individual.

$Cash$ and I got into a conversation on another board about a statement that I made once before (which originally turned out incomplete) but, in it’s complete form, it stands true and remains a fact of life…

Knowledge + Experience = Wisdom

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Re: Why it might take a few months to get started - Posted by Heather -Tx

Posted by Heather -Tx on December 15, 2002 at 21:51:47:

Also might be beneficial to go into how it helps when you are a beginner to Partner up with someone that is more experienced. Estimating repairs, getting financing, and getting it all done LEGAL and contracts correct ect ect, REALLY helps when you have a partner on a few deals I Would think.
I know on our first few, I wouldnt have it any other way!

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WOW Ron…another good post - Posted by Glenn(okla)

Posted by Glenn(okla) on December 15, 2002 at 20:19:30:

of course…if one simply visits here daily and checks the new posts…they are BOUND to learn something.

I always learn something here

Glenn(okla)

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For some a few years… - Posted by Shawn J. Dostie

Posted by Shawn J. Dostie on December 15, 2002 at 19:06:57:

Good post, but let’s not forget the credit hang up.
It seems that lately, we’ve been getting a lot of posts from people that think they can buy a cherry property for 60% of FMV with not only 0 money down but also receive 20% back at the closing table! Oh yes… but also be able to do it with terrible credit if they create an LLC! Let me tell you what. This lil’ post has been brewing in my head for about a week now but I didn’t know where to post it. I’ll attach it to yours Ron.
Real Estate is a business, whether part time with part time results and pay or full time results and pay. As such you will come in contact with many different people, both sophisticated and ordinary. These people are entrusting you, if they choose to do so with the single most largest investment vehicle that many of them will undertake in their lifetime. Your current credit profile is, in my eyes (and any lenders eyes), a picture of your moral character as well as a financial picture. Every time you sign your name to a financial document whether it be to a mortgage or a credit card slip, you are making a promise to the holder of that money that on your good name you will pay back the money that you just signed for, which allows you to receive something that makes you feel good now, without actually having the cash in hand, in a timely fashion. If you are consistently not paying your bills on time it means that you are not trustworthy. Very simple. Very plain. Does that mean that bad things don’t happen to good people? Absolutely not! But when bad things happen to good people they take responsibility for their own actions. They don’t make excuses, they make arrangements to pay what they owe to the people they owe. We are in the information age! I can’t tell you how many people a year tell me they don’t have any credit, or that they have good credit and after I have them fill out a credit application and I run the report, (which takes about 5 minutes max), it shows every financial transaction, every collection, every bad check, unpaid utility bills, judgements, tax liens, bankruptcies, 30,60,90,120+ late payments that you’ve had for the last 7 years! Does anyone actually believe that a lender can’t tell the difference between a good person that’s had a rough time at a particular time and a “flake” that’s never paid anybody, or the variances in between? Trust me I can spot a liar a mile away and I ain’t that sophisticated!

Now, a person can change. A person can decide that they want to do things differently. A person can buy a house with terrible credit. As a matter of fact I just sold one on L/O to a lady with 0 down last month. We’ll see how she performs and you can bet that there is a reasonable amount of profit and a lot of safety valves for me in that deal. However, if you want to become an INVESTOR, you better take the steps to improve you credit and your cash position. My recommendation is to become a homeowner as soon as humanly possible. I have three ways that I would personally recommend, and I am sure there are many others. The cheapest way is to purchase a used mobile home. They depreciate like rocks, but one look at Lonnie Scruggs book “Deals on Wheels” sold here cheap will show you how to get forced appreciation. In most cases you can find an owner willing to finance it for you, and once you have it paid for you can duplicate your actions and buy another and another and build your little empire. The second way is to buy a duplex, live in one side and rent the other and again once you have a handle on one, duplicate it. Don’t try to reinvent the wheel, it isn’t neccessary. The reason I propose duplexes is that in most cases multi family housing is owned by a more sophisticated seller who will have a deeper understanding of the risks and rewards invoved. As such, you are much LESS likely to get a GREAT deal, but if the cashflow works and it helps you attain your portion of the dream…
The third way is to get into a house utilizing one of the methods mentioned here everyday… L/O, Land Contract or CFD, subject to (my least favorite) Even though you may not get the best deal with your bad credit which is your fault, in 3-5 years you’ll still be better off than if you continue to rent due to appreciation and amortization. But, if you feel you are ready to make the step to being a trustworthy person, start paying your current bills on time, stop blaming others for your current position, take steps to change yourself from within. Maybe it’s time for a checkup from the neck up. And if you decide to acquire a piece of real estate, for heavens sake, remember that you gave your word that you would pay x amount per month for x months. And if your word is no good… where are you?

Good Luck,
Shawn(OH)

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Excellent List Ron nt. - Posted by phil fernandez

Posted by phil fernandez on December 15, 2002 at 18:31:28:

nt.

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Are you a NUT Ronald *Starr? - Posted by $Cash$ (NV)

Posted by $Cash$ (NV) on December 15, 2002 at 18:01:06:

Ronald * Starr(inNoCA),

Well, I think about 99% percent of the new people here might be thinking is this guy a NUT, I bought the course and read it, I am ready to go, read a few posts here also, you mean I should also know about things on this list.

The experienced investor is thinking Ronald * Starr is right on in his assesment of what it takes to get started in this business, including me.

What you are saying this is a business, you must run your real estate investing career like it is a business, it takes the things you mentioned and a lot more to become professional and ‘truly successful’.

IMHO

John $Cash$ Locke

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Re: Why it might take a few months to get started - Posted by Kristine-CA

Posted by Kristine-CA on December 15, 2002 at 17:40:37:

Ron Starr: very nice list. And very complete. I would like to suggest:

Why you need to find and work with a good real estate attorney.

In my very short time doing rei, my attorney and associates have been worth every penny.

Also: how to calculate the the minimum costs of running a your rei business–overhead such as marketing, mailings, office expenses, and misc. costs. OR, why it takes SOME MONEY to do rei.

Sincerely, Kristine

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Re: How about TYPE of Investing? - Posted by Xarvet

Posted by Xarvet on December 17, 2002 at 20:19:23:

IMHO, there’s no way anyone can tell you what’s the best type of investing for you regardless of how much experience you have. There is no “best method” for beginners or “best technique” for intermediates. There are investors that start doing all different types of deals – sometimes they make it work, sometimes not, sometimes they enjoy it, sometimes not. The more important question is “How do you want to spend your time?” If you always want to be out looking for deals, negotiating, buying and selling, etc. then wholesaling or flipping might be fun for you (and a nightmare for someone else). Maybe you would rather spend your time finding really ugly houses, managing contractors, managing large projects, and reselling properties, etc. If so, then maybe rehabbing would be more rewarding for you. IMHO, there are no “easy” techniques that are a gimme for beginners. Every type of investing requires knowledge, persistence and luck. I’ve heard “pros” advise newbies to start with lease options because they’re “easy” or flipping, etc. There are easy L/Os and hard L/Os, easy rehabs and hard rehabs, easy flips and hard flips, etc. Start by doing what you’ll enjoy spending your time on (because you’ll spend a lot of your time) and doing what’s going to help you reach your goals (because that’s the point after all); not doing what someone else tells you is the right place to start. And most of all, be prepared to make mistakes and change your mind many times. You’ll never know what it feels like to flip a house, buy a foreclosure, fill a vacancy, etc. until you actually do it. So, try something (anything) and see how it feels.

My $0.02

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Re: Why it might take a few months to get started - Posted by Xarvet

Posted by Xarvet on December 17, 2002 at 20:22:44:

Also consider the difference between “partner” and “advisor”. You may or may not need a partner, but you’ll definitely need advisors (lawyer, realtor, accountant, investor, to name a few).

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What about Carleton Sheets, Shawn? - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on December 16, 2002 at 14:44:01:

Shawn–(CA)--------------

What about Carleton Sheets, Shawn? Does he not get on TV and assure us that we don’t have to have money, or credit, to buy real estate. We don’t even need brains-- we just need to buy his home study caurse.

And, aren’t you afraid of being called UnAmerican? Oh wait, now rereading your post you did not say not to use credit, you just said to use it responsibly. Ok, nobody can criticize you on that score.

What can I say? You make a lot of sense. And how can people expect to move toward wealth and financial independence if they haven’t shown the sense to use credit wisely in the past? They have to move into a different track, a different approach if they hope to succeed in real estate investing.

Good InvestingRon Starr******

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The credit hang-up - Posted by Diane (TX)

Posted by Diane (TX) on December 15, 2002 at 21:21:44:

I totally agree with you, Shawn. Ron has a good list, but one thing that should make the list is cleaning up your credit. After all, why should you expect people to pay you, if you don’t pay YOUR bills?

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Re: How about TYPE of Investing? - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on December 17, 2002 at 21:15:28:

Xarvet----------

I think you have given a very good synopsis of real estate investing strategies. I agree with what you say.

Now, I am not real excited about advising people to do different kinds of deals because "you’ll never know what it feels like … " I suppose that sometimes that may be required. But I would advise a beginner to try to get as much of a feel for each type of strategy without doing the work his/herself. By reading and trying to visualize what may happen. By reading books on property management, for instance. By talking to investors and asking for the joys and the downsides, for the feelings that occur, etc.

Good InvestingRon Starr*****

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Re: Why it might take a few months to get started - Posted by Heather -Tx

Posted by Heather -Tx on December 17, 2002 at 22:49:32:

Yep your right there… I just prefer the partner… But you DEFINATELY Need someone in your corner helping you out. Partnering is GREAT! But if you cant get that an adviser works too :slight_smile: Anyone to help you out from making simple mistakes that you would without the help!

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I own his course… - Posted by Shawn J. Dostie

Posted by Shawn J. Dostie on December 16, 2002 at 16:56:17:

and he helped me with my motivation and is largely responsible for me buying my very first property! But, for a newbie, this is dangerous tiger by the tail investing. I currently own 10 properties that I would sell in a heartbeat for 275k and help someone get into it with 0 down using OPM. Wolves and sheep. But, I believe this stems from our newly evolved culture of I want it and I want it NOW! and after things don’t work, I’m gonna sue you and I’m gonna sue you NOW! And if I don’t pay my bills it’s your fault, you’re a predatory lender, you should have known that I couldn’t pay and I’m gonna file bankruptcy now! By the way Now that I’ve filed BKR I’m gonna open a LLC and by 500 properties this year and be a millionaire… You wanna invest your cash that you’re too stupid to know what to do with and I’ll pay you uh 25% of the profit uh… no how about 12% since I’m gonna do all the work… Oh no I’ve turned into a slobberin’ mutterin’ fool… one o’ them thar fellas you see out there on his soapbox on the corner preachin the end is at hand…

I think I need a break,
Shawn(OH)