I recently got laid off from a law firm. With the legal market being in the toilet right now (there is no demand for corporate lawyers when corporations don’t have the money to buy other companies, and when banks refuse to lend to help this happen), my prospects of getting a new job soon are not good. If I do I will be paid a lot less than I was before. And frankly, I was getting a bit tired of what I was doing.
I have been talking with friends about going into business, and one thing that got mentioned was real estate investment. Specifically, buying a multi family building and renting it out. My hope is that, one day, I will be able to live off the income generated from rent.
I have about $200k in savings that I can use to fund this new potential project of mine. But my issue is that I have no experience at all in the real estate or rental market. What are some good guides that I can get? What are the important steps in starting out?
My view of real estate investment is that there are a lot of scams out there that suck people in with promises of all the money in the world, only to leave them dry and saddled with undesirable property. So I am a bit suspicious. But in my experience internet forums often do a good job of calling the BS out and giving frank, honest advice. I hope this is true here.
I would start with reading a lot of books on the topic.
Understand how to do cash flow analysis. How to calculate PITI etc…maybe even take some of the seminars/courses. Even though some of these courses exagerrate quite a bit, you need some foundation level knowledge before you can even get started.
Derek, with $200K in your pocket and little knowledge in your new venture, you’re treading on dangerous turf. I suggest you do some scouring around for the type of real estate you’re interested in. There are many to choose from, but you can’t know them all right out of the box.
Start with one area of interest, preferably one that doesn’t require you to dip into your savings. A mistake with $500 on the line is a lot less painful than a mistake with $50K on the line.
I grew up in a small apartment building; six units in a working class but low-crime part of the city. So when I think “rental market”, I think of that type of building. Maybe a bit smaller. I’m less attracted to a single-family house because it seems you get less income.
I’m a very risk-averse person (as most attorneys are) and wouldn’t want to get into it without doing my homework first. Are there specific books or courses you would recommend?
Start reading the Beginners & Landlording forums here from beginning to end. Check “Real Estate Clubs” under “Investor Resources” at the left side of your screen to see if there are any REI clubs in your area. Try to find a successful local investor and pick their brain over lunch. I would not spend money on courses. There’s no reason to give someone a lot of money for their REI “secrets.” Read up on here about property valuation, tenant screening, etc. Have proper documentation for your properties. Get a rental application, good written lease, and move-in inspection form.
If you made it through law, you’re probably a pretty fast reader.
Start with your public library, those books are free. They may also have audio books on landlording and investing.
Read this site, going way back. That’s self-education.
Go to your local real estate investment club, but don’t get sucked into any deals yet. That $200,000 is going to be like candy, don’t let them take it from you. Don’t tell anyone just yet about your money.
I like your 6-unit idea, or 4-unit. Take a property management course or get Propertymanager’s book. Just don’t let that book scare you. I haven’t had to do an eviction yet in over 5 years.
What about a job in property management, or in Real Estate? You need income while you learn the business. A Title Company might like you too.
Research owner-occupied financing for your investment. I think you are going to be very successful. Being conservative is good. Keep us in the loop, we like happy endings.
What is “Propertymanager’s book”? Author/title so I can look it up?
I bought “Complete Idiot’s Guide to Making Money with Rental Properties” yesterday (it was only $20) and read/skimmed it cover-to-cover last night. I’m under no illusions that this is anything but an intro text, but at least it taught me some of the jargon that you guys use.
I’ve also been looking through websites that list rental properties for sale in my area. Not to find a particular property, but to see what prices are like in each neighborhood.
Sorry I didn’t respond right away. Have been away from the site for a while. This is sort of ironic. I have a very close friend who is also an attorney that is without a job. (Albeit staring their own firm).
THey also have done some investing with me in Chicago and have been happy and has done great wonders for their psyche to get through the duldrums of being unemployed.
What area of Chicago are you in? What progress have you made in your endeavor so far?
Go with someone that you TRUST with a good track record and a solid statistical history of RIO that you can SEE. What state are you in? I would focus currently on single family RE and wait for the muti-family for about 6 months until the market drops a bit…
I am a db in AZ that does helps investors and Property Management all of the time-let me know if you have questions.
This is relatively simple. Use your lawyer network to find an attorney that can refer you to a very large real estate investor in your area. Do what he does. If you don’t like that particular line of investing then keep using the network and something will fall into place. All it will cost you is a few lunches with potential friends or partners. Just don’t tell them about the money upfront. You will all so lose the boredom that comes with unemployment. That will be 500.00 for my advice. Sorry I always wanted to say that to an attorney.
call up some of the counties in your area and ask about “Scavenger Sales”…If counties in Illinois have enough properties that are delinquent on property taxes, they will auction/sell them off at “scavenger sales” in the odd years. The starting bid should be just the unpaid taxes.
This is a real inexspensive way to acquire properties…often for 10-20-30 cents on the dolllar…get one in the right area at a great price, and you can bank some really nice monies with quick turn around. Then you can have more money to invest with
I agree with the 3rd post from AJ290…don’t invest it all on your first deal $40-$50,ooo (or even less) should be enough to get first proeprty depending on the method you use to by it…if you go to a tax sale, this will be plenty…you will most likely buy a $200,000 home for around $50-$60,000…maybe slightly less or more.
Good Luck. (make sure you check the IL state statutes too see what liens or encumbrances will survive the issuance of the tax deed…then check the real title to the property too see if any of these liens are on the property…if they are, consult a title company and get a search for around $100)