Me Too!! - Posted by andy
Posted by andy on July 05, 2001 at 10:33:40:
Hey James,
I just turned 20 and am also embarking on my RE investing career. Like a year ago I started reading everything RE related I could get my hands on. After reading every article on this site, reading some books, and buying courses I can afford right now, I feel very comfortable with my ability to put deals together. Let me share with you what I’ve been through so far in my Young RE Career.
First of all, I wished I had 20k to work with, oh god do I! That’s been my only setback is getting that little bit of capital to start with. Now, one thing I do have going for me is that I have a steady full time job and exelent credit. In my opinion, the type of financing you apply for totally depends on the type of deal. For example, if you were going to purchase a rental property that you intend to keep long term and earn some monthly cash flow, you would probally apply for a conventional bank loan with a low rate. In our case, being the “youngins” that we are, it is hard to get this type of financing. I’ve learned that banks base their criteria on income and credit. The problem I had with these loans was not that my credit is bad, but my credit was new and my income did not match up well with the loan payments. I mean, sure the rents from my tenant would cover my mortgage payment, but the banks want to see steady income, if not they will see the loan as too risky. An alternative to this was to try to get owner financing, where I wouldn’t borrow from the bank but rather the owner would hold the mortgage. I wanted to go this route but couldn’t do it due to the down payments the owners were asking for. However, I see you do have some money to put down so this may work for you. In this case it would be in your best interest to find a motivated seller(i’m sure you’ve read this term many times on this site). Sellers who would be willing to hold the financing.
As far as looking for properties to rehab and sell, I’ve learned that this is my best chance of obtaining financing for a property. These types of loans (hard money/private loans), which lend according to the value of the property after it’s repaired, are a great source of getting financing for properties that banks would not even consider. I found that these hard money lenders WANT to lend to investors. Sometimes these lenders won’t even verify income or credit, as long as they have enough equity in the loan, the money is yours to work with. It’s pretty ironic to me that I can easily get a loan for a fixer-upper but can’t get a loan for a beautiful house!
Lastly, I know you’ve heard the term “flipping.” There are great articles on this site about that aspect where you don’t need any money to do the deal. I also agree with Anne about concentrating on marketing and education first. I just don’t have the time to drive around to look for the “perfect investment property” and the financing to get them.
During the last year my main focus changed like 4 times. It’s just with all the information I was absorbing, I wanted to do everything. First I wanted to buy a property to keep long-term to produce some monthy cash flow, next I wanted to flip, then, I wanted to fix and retail, finally, I wanted to lease/option houses. Then it hit me like a bolt of lightning: I can focus on all of these at the same time! It all depends on getting the SELLERS TO CALL ME.
It all depends on the type of deal it is and applying the right technique to solve a seller’s problem and putting the deal together. So my main focus right now is marketing. When sellers call me, I’m going to get as much information as I can from them to determine if the deal will work and which technique will be the best to apply.
So my recommendation to you is, don’t spend the 20k on a huge down payment. It’s not going to work if you only going to get 200-500 a month cash flow a month from rents. The return on your money would just be too low and not a good way to get started. I suggest getting as much education as you can before cutting any deals. You have a lot of start up money to work with. Spend it wisely.
And James, we may not be able to drink yet, but were certainly going to have enough money to buy our own liquor store one day! LOL.
Good luck,
AndybFL