I’m glad to have found this forum…and now my first post. I’ve always felt entrepreneurial in nature but never had the funds to get anything off the ground. It’s hard to get a loan from the bank even if you do have a business plan in line. It’s taken me long enough but I’ve finally realized that Real Estate is something that can give you Real Assets essentially without putting much money down. No business plan needed, just need to show (most of the time) that you will be able to re-pay the loan. Down the road Real estate through appreciation, improvements, etc, re-fi can grant you the funds to actually do whatever you want with. Whether re-invest in RE or move onto other ventures.
I’ve overcome the few fears that grip I think the majority of us before jumping into the REI realm. The thinking “how am I going to do this”. “Do I have enough money etc.” I put an offer on a 3-unit aparment building not far from where I live. Working with a buyer’s agent I think we put together a pretty good contract. $153,000 was the price w/ 10k cash back from seller. The place was under contract earlier but upon city inspection seller was told he needed to fix property within 90 days. I think the buyers were trying to do a 1031 and were constrained by time…either way they didnt want to wait. Along I come into the situation. I think it’s a good start in REI and will give me more opportunities down the road. We made the contract contingent upon all repairs being fixed. The previous landlord got lazy, was trying to maintain multiple properties, was going into other investments, I think we all know the story of lazy landlords. Needless to say there is much room for improvement (esp. in rent increases).
I am set to close on the 31st of October and my head is already spinning as to what I can do to get my next property. I recently took a Real Estate Principals and Practices course and met a lot of people who can help me down the road. Some are appraisers, beginning loan officers, very experienced loan officers, agents…I think we get the picture. I have been investigating the 125% loan. The loan I’m getting on my property is a 2/28 interest only loan, no pre-payment, no PMI and one loan. Around $1,200 on loan origination, 5-6,000 on closing costs. Looking to lock the rate soon, glad the rates have been dropping of late as well
My loan officer has told me that after a bit of seasoning 2-4 months it could be possible to take a 125% loan giving me about $40k. I know the 125% loan could be risky but I feel it depends on what you decide to do with the money you get that is very important. It can be used wisely bringing you more money (re-investment), or could be used regularly which could still help you improve your personal cash flow (consolidation of debts. etc.) Heck it can even be used stupidly
So…I’m thinking of doing the 125% loan to get some funds…From here I’ll goto a small bank in this particular city. I’ll definitely stay away from the big banks like HSBC, Chase, PNC, and goto a small town bank in this city. I’ll attempt to speak with no one but a manager or someone who is in charge of making big decsions. I’ll take about 10k of that 40k which I got and invest in another multi-unit (probably). I will take about 20-25k of the 40k and open a CD with this small-time bank and start some relationship banking. In one months time I go back to the bank and sit down with the manager and ask to use my CD as collateral for a line of credit…From there I continue on obtaining properties, opening CD’s and extending/increasing my lines of credit until I’ve built it up upwards to $150,000+ by this time I should be more experienced and ready for additional challenges.
The goal is to have a large line of credit, multiple projects working and a pocketful of $15000-20,000 in travelers check’s ready for anything I may come across during my travels.
Please critique this plan and tell me what pitfalls you see…I know I have to be careful to make sure and re-fi the interest only loan before the 2 year fixed period is up (depending on what’s going on economy) as well as keeping the 125% loan in order. I plan on keeping the first property for some time unless there is a better opprotunity in selling it.
All advice/comments/ words of wisdom is welcomed
Thanks