You’re asking about two different things. One is an active, hands-on business. The other is at worst a hobby, and at best a long term investment. The incomes from either of these is different, too. One is passive, and the other is dependent on your ongoing effort/labor.
So, only you can make up your mind if you want to work for money, or make your money work for you? The fact is, you only have $37k. How far is that going to go regardless of which direction you take yourself? Either way, you’re gonna have to figure a way to rinse and repeat using that same $37k. Which brings me to my first suggestion…
Put that money in the bank. Act like you don’t have it.
Since you’ve already lost your working capital once, this should be a really ‘clear’ lesson on why using OPM is a much ‘safer,’ if not more sophisticated approach to investing (or flipping). If you had used someone else’s money back in 2007, your credit may have been damaged, but you’d still have your money… Just saying. It’s easier to get your credit back, then to get the cash back (for most folks)…
Meantime, I can give you firsthand example of what I’m referring to…
My first long term rental investment was made using other people’s money. I had none of my own money invested. I did have extensive experience with property management and some (minor) rehabbing (baths and kitchens, etc.) in my background. I also knew how to apply elbow grease, find property, and negotiate deals.
However, the MOST important thing I brought to the table was UNDERSTANDING MY FARM. I knew what was for sale and for how much, what had been for sale and how much it sold for, who the players were (competition), who the talkers were (time wasters), who was thinking about selling, and not so oddly, who the fat-heads were.
Understanding my farm was what gave me the credibility and confidence to ask for money to invest. Everything else was just frosting on the cake.
Even then …I started REALLY small, because I needed to be successful (I was still more nervous than a pregnant nun buying my first rental house). Nonetheless, I was successful at creating cash flow out of thin air …over and over.
Later, when I made a decision to move into apartments after realizing that I was going to have to be an ‘uber slumlord’ in order to create the income I wanted, I took a massive leap of faith into apartment investing. Lo and behold, my previous ‘lenders’ turned out to be available for bigger projects. Who knew?
My point here is that if I had waited to scratch enough money together to do these deals with my own money, I would probably have done two things:
- become undisciplined and settled for mediocre deals, or worse… since I wasn’t profit sharing…
- and/or stunted my overall progress.
My question to you, “Would anyone have loaned you money privately to acquire this ‘once in a lifetime’ deal back in 2007?” I’m betting no. Things were already slowing by the middle of 2005, much less by 2007. However, YOU thought you found the deal of your lifetime right before all the amateurs got their jewels caught in a grinder. You weren’t alone I’m quite sure. Well, you’ve already given us the rest of the story, so I won’t rehash it.
My point is that using OPM is a proven way to both invest objectively; forcing you to analyze deals and prove profitability …and avoiding self-delusion about values, but just as importantly for both leveraging your resources and time, and protecting yourself largely from potential loss. That doesn’t mean you can only buy screaming wholesale-quality properties. It does mean realizing that whatever profit you make on the deal, is made at the time of purchase and anything else is just gravy that you split with your private lender (or co-investor).
The same investing principals go with fixing and flipping. See flippingjunkie.com for what’s involved with this business. It’s the best blog I’ve seen on the mechanics of prospecting. Flipping is NOT the same as buy/hold investing. Prospecting for deals may be similar, but that’s really where the similarities end. Check out what he’s doing.
Either approach; fixing and flipping, or finding deals for long-term holding requires a ‘front-loaded’ effort (lots of time up front). However, fixing and flipping is an on-going effort, too.
Of course, I like flipping properties, but without the fixing part. :cool And I like to buy and hold, too, because it’s more like a ‘set it and forget it’ income stream. I work once, but get paid over and over for the same work. It’s a beautiful thing…
So, the bottom line in my opinion, when you’re starting out/over, is first become so familiar with your farm that you can both confidently recognize a deal, and attract investment cash (or private money) to buy it, but also keep your personal assets protected from loss. Later when you’ve got money to burn/lose, start using your own.
However, if you get good at making money for others, you will become quite the popular guy.
P.S. One of the better known rehabbers here in Southern California is a guy name Mike Cantu and he follows the OPM model I just explained above. However, he keeps one property for about every six or seven he flips.
The interesting thing to me is that he dedicates each house’s rental income to a certain obligation. He wanted horses, ‘but they eat and eat and eat’, he said… So, he bought a house specifically to pay for his horse’s food budget. He bought another house to pay for the rest of the horse expenses. Each income stream is dedicated to a certain obligation. I think that approach keeps everything real and immediate, if not practical.
Hope this helps…