I’m having a hard time figuring out the best path for me to take in regards to getting into REI. I’ve been haunting these forums for a while now trying to gather as much information and education as I can but I still feel like I don’t know how/when/where to take the first step. My ultimate goal is to profit from ‘Fix-and-Flips’ and ‘Buy-and-Holds’ with SFRs eventually working into 2-4+ unit buildings and so on. I want to invest in real estate not only because of the money at the end (that is a good reason, don’t get me wrong) but, I’m more in love with the idea of buying a home that’s been neglected and then rehabbing it and bringing it back to livable condition. Like giving the Tinman his heart.
I currently reside in Metro-Detroit/Oakland County, MI in one of the many suburbs (a market hit hard by this recession) and I’ve been watching real estate listings and there are deals-a-plenty around here but my problem is lack of funding and connections. I also live close to a few meeting places of REIAs in my area but alas, conflicting work schedules won’t give me the opportunity to attend. How much is really to be gained by attending? On a side note, I feel so strongly about REI that I truly feel like it is my calling, to Rehab-and-Resell homes to not only improve the home, but to improve the neighborhoods that I know and love and want to help. I’ve lived here in Southeast Michigan for 27 out of my 28 years of living. I know all the high-income areas, I know all the middle-income areas, I know the low-income areas.
I know where I want to go (Fix and Flips) but I don’t know how to get there. I think I may be intimidated by all the other options and I guess I’m feeling overwhelmed. I’m absolutely ready to take the first step but again, $0 available funding on my end, 0 connections…what can I do? Do I start wholesaling like so many people seem to be doing? Should I even try to get into a Joint Venture/Partnership with little to 0 experience or funding?
Thanks to all who have any advice or direction to offer.
How do you become a property investor when you don’t have savings set aside?
Real estate investing without cash means that you need to take it slow and steady to build equity. The worst thing you can do is overextend yourself and trash your credit even further. Here is what I would recommend:
Buy on land contract. Because mortgage rates are so low, this is not always the cheaper option but it keeps you from going to get a bank loan. In a land contract, the owner plays the role of the bank but he will charge you a rate higher than the bank, especially if your credit is poor. You put a little money down, let’s say 1 - 5% of the purchase price, then you make monthly payments to the property owner for generally a period of 3 to 5 years. You would also pay all of the taxes and insurance.
At the end of the payment period, you have to pay the remaining amount in one lump sum. That is when you get a loan. By then, you have equity and hopefully a higher credit rating. Meanwhile, you rent out the property for at least what you are paying.
Sounds like another victim of the late night infomercial scams.
There is something called bird dogging. You can also try applying for credit cards if you have no equity. But, I think you’re setting yourself up for disaster trying to get into fix and flips without any money. My advice is don’t quit your day job and look into securing an apprenticeship in one of the construction trades in your spare time so you have a firmer grasp of the kind of costs involved in a fix and flip, esp. in Metro Detroit which is notorious for annual municipal rental inspection licenses. Just to have a third party inspect something stupid like duplex is $500. If they run the pen and discover lead paint or asbestos, you can’t get a license to rent it out until it’s resolved. If you need repairs, it has to be fixed before you can the get a rental license. If you make it past that point, you still have to get rent on a regular basis. You’ll be bankrupt before you even get started. Your goal is to save money and learn more about basic construction. A good book to read is the Richest Man in Babylon.
I was once in your position: 0 experience, $0 funding, 0 connections. I started out reading this forum and going to local REIAs to learn more and to network with local real estate investors. The first property I bought was a duplex. I lived on the second floor and I had a tenant on the first floor.
I took a two hiatus from REI. Then with 2 more years of corporate America, I decided I wanted to own my own business. So I went back to reading and gathering all the info on this forum, talking with local RE investors, and read other books I decide to start wholesaling. (You need to decide what you want in your life and from real estate investing. Come up with your WHY.)
I quickly realized that I needed to master marketing and sales to run a successful wholesaling business. As I was educating myself in marketing and sales, I met my real estate business partner at a local REIA.
If you continue to plan, educated, and implement what you learn you will start realizing your goals. My partner and I are wrapping up our second year in business and now we have 2 years more experience, a lot more money (Only 6 figures a year, striving for 7), and thousands of connections.
Thanks to all for your helpful advice. It seems I just need to start small with wholesaling/bird dogging until I can work up enough funding and contacts to get started with my own projects. Thanks again to all!
I would also recommend looking into getting your real estate license. If you are serious about getting into real estate, then this is a great first step. The educational requirements will help you learn the basics about real estate. Afterward, you will need to join with an existing real estate office. There, you will earn valuable experience and perhaps some commissions too.
yOU WILL GET ALL THE THINGS YOU ARE LACKING BY STARTING OUT WITH BIRDDOGGING/WHOLESALING, WITH THOSE YOULL MAKE CONNECTIONS WITH OTHER BUYERS IN DIFFERENT AREAS AND FIND OUT WHAT THE PROPERTIES ARE REALLY BEING SOLD FOR AND WHAT AREAS ARE REALLY HOT. PRETTY MUCH EVERY FIX AND FLIP GUY STARTED OUT AS A WHOLESALER THEY RUN HAND AT HAND. FLIPPERS ARE THE BEST FOLKS WHOLESALERS SALE THERE DEALS TO AND LETS SAY YOUR A FLIPPER AND YOU COME ACROSS A DEAL YOU DONT WANT OR ARE TO BUSY WITH OTHER FLIPS TO GET TO IT. YUP YOU GUESS IT, YOU WOULD PASS IT ALONG TO SOMEONE ELSE BUT YOU WOULD ONLY KNOW HOW TO DO THAT IF YOUVE WHOLESALED BEFORE. WITH WHOLESALING YOULL LEARN THE EXACT FORMULA FLIPPERS USE TO BUY THERE PROPERTIES AS FAR AS WHAT PRICE YOU NEED TO BUY AT IN CERTAIN AREAS AND SO ON.YOULL MAKE A TON OF CONNECTIONS JUST BY BEING IN THIS INDUSTRY PLUS YOU CAN GET REFFERALS FROM YOUR BUYERS FOR LENDERS TITLE COMPANIES AGENTS ETC. PLUS YOU BEING GETTING PAID OF COURSE AND WITH SOME OF THAT MONEY SAVE IT UP :beer HOPE I WASNT TO LONG WINDED LOL
I second what Chuck has to say. Become a bird-dog ! Make sure they give you training.
I train my bird-dogs to be investors in the end. This process take several months, many stay birdogs, some go on… I pay $500 - $1,000 per deal found.
Definitely starting out as a bird dog is the best route to take. Unless you want to go about things on your own. It might take a lot of time surfing discussion boards and that is a possible route, but being a bird dog is the quickest way to get things going.