I had a thought on something I’d like to do today. I thought I would start an online journal of sorts of my progress towards investor. I like reading things like this, and hopefully it will help people start doing instead of reading (Which I am guilty of thus far).
So where to begin? I started reading about real estate investing a few years ago, and for about a month and a half I was trying to push myself to make my first deal. I ended up falling away from it, even though I had a support group, I never felt comfortable calling people and asking to buy their house. Reason being, I had no money and no credit. I still don't have either really.
The thought of doing the real estate has been lurking in the back of my mind since then. I would perk up when I heard my family talking in the kitchen about what was going on with my their houses. After all that listening, I finally talked to my grandmother about the possibility of her being a partner with me. She said she had wanted to buy houses in my state (They live in Idaho, I'm in Utah), so her and my aunt could start to put together a "retirement plan".
I am working to be part of that plan, which is where you come in. What follows will be a journal, that will (hopefully) help me and in turn help you. As I said, I'm not totally new to the concepts of Creative Investing. But I am a beginner. I have done a fair share of reading. Today I went into the library, and read a book on foreclosures. Just sat down and read for 4 hours. I think the author was Dean Cook(?). Anyway... I have to read all of the articles that were in my areas of interest, most of them 3-4 times in an effort to truly understand them. I'm not going to lie, most of it seems a little vague and inaccessible, but I know its in there. And right now I'm confident that I can do it.
Obviously I'm going to fail, in some aspect or another. Which is why I'm here. So we can learn from my mistakes. So,here we go.
SO, let’s start with what I’ve read and understand. I was trying to focus on two area’s.
Lease option/sub2 and wholesale/flipping/rehabs (5 subjects, 2 areas) . I understand more about lease options than sub2's. But from what I understand, I like the idea of a sub2 deal more than a lease option.
The wholesale/flipping/rehabs are what I will be focusing on. I will be open to all types of deals, Rehabs are just what I will be searching for to begin with. I think it is better that I focus my efforts for now while getting my foot through the door so to speak.
I read an old copy ('95?) of the Carlton sheets course that my mom has when I first started. It was pretty good I guess. It was what opened my eyes.
Right now I'm reading Rich Dad, Poor Dad's cashflow quadrant, which is excellent in my opinion. Good motivation and great for a different perspective. I have one more chapter before I'm finished.
When I was in the library today, it dawned on me that the library actually has good books! I searched for the rich dad poor dad series and they have all of them. I was about to go and buy them, but I don't need to now. I always thought the library was full of Sci-Fi, kids books, and stuffy non-fiction. Funny how some of that stuffy non-fiction is starting to appeal to me. (Strange things happen when you grow up) The library is number 1 of my top 10 childhood misconceptions. 8) Barnes and noble is also a good place to go and read. I went and read for 6 hours or something in there a week ago about lease options and sub2's. No one bothered me about reading without buying and they have alot of books that the library didn't.
So I guess getting back on track, the point of this is to kind of give you an idea of where I stand information wise. Obviously this isn't everything I know. I also challenge you to ask me questions about what I know, bring it on, let's see if it is in there like I suspect it is. I think it will help me alot if your all willing.
A lot of new investors focus on the how to and like one or the other best. I think it is better just to focus on good deals and then figure what process to use to take advantage of the deal.
As an example I just bought a little rent house for $16500 that needed a few grand in repairs. With a rent of $500 per month I decided just to keep the house as a rental. I could have sold it for a cash profit, done a lease purchase, flipped for a few grand. I had to pay cash as it was a Fannie Mae foreclosure so it could not have been a sub2 or lease purchase or owner finance. I did a private loan deal at 12% and put done 10%. The rate is a bit high but not for my credit as I am in Chapter 13 right now. Had I just been focusing on sub2 I could not have done this deal.
I was looking for cheap houses. The same thing I was doing when I bought my 30,000 foot building in Corpus. It was a cash deal again and I was forced to use a hard money lender. I probably could have flipped the contract or taken in a partner but decided to do it on my own. Once it is rehabbed and leased I will have several exit options which include selling for a $300K profit orrefinancing and keeping for $3K per month cash flow or taking in a partner for a combination of both with a better interest rate on the new loan.
What I am saying with these examples is not to focus so much on the how to do a deal but on doing the deal and then picking the method.
What I have done so far in terms of going and doing it…
I bought a subscription to RealtyTrac.com which seemed good, until I figured out the information is outdated. But it did get me started looking into REO’s and the foreclosure process. It’s not the best site for me 1. Because Utah is a Non-Disclosure state and 2. If I think its a good deal, I’m sure 100 people before me have as well.
BUT with every negative there is a positive. 1. While reading about the houses, I started to get a feel for my market. And major layouts and home plans during certain time periods. I also have better feel of price ranges is certain cities and suburbs now.
I learned that banks don’t want to talk to me. Most of the banks I called redirected me to a web site that sells their REO’s (not a bad thing, now I know where the REO’s are listed)attorneys don’t want to talk either. But I also learned I’m not as timid on the phone as I used to be. I almost had a panic attack the first time I called a FSBO, literally lol. I had push myself to dial the last number and try and talk to them. I haven’t done that in a few years, but I feel a little more comfortable now and bet it will go better.
I set goals in the last week
1.Contact 5 different banks about a specific REO
(this was before I realized the information I had was outdated, so I just contacted 5 banks and got 3 web sites. The others never called back.)
Contact a realtor
(Emailed 2 called 1, none of them took me seriously. My friends brother’s friend is a realtor and I think he might be a good bet. He has already found investment property for my friend’s brother.)
Work on finding a farm area and developing a marketing plan
(I started driving certain areas and looking at the styles of homes and making guestimates on the value, not much more than that. I need to work on this one a little more)
Talk to my grandmother about details
(done)
I am going to be working on finishing these goals this week as well as making new ones for next week.
TedJr,
Thanks for the insight. For me it just feels less “chaotic” if I am looking at one or two areas. Like I said, it doesn’t mean im actually focused only on those kinds of deals. I will be dealing with motivated sellers of all types and trying to solve the problem. If it means that I do typical financing or Hard money lender then cool. Its more of a mind game, and now that I say this outloud it sounds a bit rediculous…
(I hope you see the change in my thought from the start to the end of that paragraph)
Thanks, seriously. Haha. I just got a new perspective and some food for thought. I am going to try and think of a way to elaborate what just happened. I think that if I read this as someone elses post I wouldn’t actually get what you just said.
A lot of new investors [b]focus on the how to[/b] and like one or the other best. I think it is better just to focus on good deals and then figure what process to use to take advantage of the deal.
What I am saying with these examples is not to focus so much on the how to do a deal but on doing the deal and then picking the method.
This is really good advice, offered many times by different people. The weird thing is that it never made sense until I replied and actually tried to explain and think about why I am focusing on one subject . Honestly right now I am in information overload, with a side order of cold feet. I have read so much stuff and it all seems complicated. But when I was writing that a minute ago, I had a moment of truth. I felt like I should be focused on calling people I think will be good rehabs, or lease options. But really, no matter what kind of deal it is, essentially all I am doing is talking with a person who is willing to listen to an idea I have. AND THAT IS WHAT I SHOULD BE PUTTING ENERGY INTO. YES! There it is. Focus on the deal. I hope that makes sense. Think about it.
I finally got a realtor on the phone today. He is starting to send me properties. I think I may take him to lunch to get to know him. Another weekly goal down. Booya.
I went and looked at a few houses today with my partners. They are looking for something to buy and rent after minor rehab. There was a house that was worth 140,00 fixed up going for 109,000 as is that I was interested in more than they were. All of the carpet was removed, the upstairs bathroom was gutted and partially completed (tile half way up the walls and a new tub, mirror and a place for a shower was being installed), and a new addition was made onto the back of the house which had a family/hottub room. I was thinking about the numbers and was considering offering $98,000 for the house. Tell me if this sounds ok
$140,000 arv (est. depending on work could be worth $150,000 I think)
-15,000 for me
-10,000 est. construction cost (just a guess, I need to get a contractor quote)
-5,400 realtor fee’s
-4,000 closing cost
-5,000 holding
$100,600
Is there anything I left out? Let me know how this sounds. These are all estimates, but it should all be pretty close to this. The closing costs seem a little high, but im overestimating.
Sunday, my grandmother took me out house hunting. I showed her some of the properties that I was interested in looking at and explained my stance on real estate to her and what I would like to see from us working together (She is one of my partners). She was on the same page as me, and knew more than I realized about CREI. So I started asking questions and picking her brain a little, trying to find out what she was looking for.
We ended up viewing a HUD home about a mile from my house, and next door to it was a FSBO property that was pretty shabby looking. (The guy was a cement contractor and had dug a trench in the front yard to extend the driveway 5 feet, yard was trashed, etc.) She ended up calling the number and talked to the owner, and got him to come by and drop off a key so we could view the house. We went over on monday to look at the house. It was an older house that he had started to rehab and lost interest in. He was into it $86,000, and was asking the same. She negotiated a sub2 deal with him and also got him to agree to come and clean the garage out and take most of his junk from the back yard. She is estimating $10,000 in repairs and with an ARV of $115,000. I talked with her a little about me doing the repairs, which were all cosmetic, and we decided it was best that I take a wage of $1000 a month with a bonus if I finish in three months or less. She explained that she may be living in the house or renting it for a few years after I fix it up, which meant it would take until she sold the house for me to get my share of the equity split. I'm happy with the situation and look forward to doing the job. It should be a good learning experience for me.
Today I went to Barne's and Noble to read some more. I read about half of a book that was on mortgages and another on fix and flip properties. I'm not crystal clear on the specifics of mortgages yet, but I understand a lot more than I did yesterday. I learned the differences in ARM vs. FRM and ARM vs. Balloon mortgages. How to calculate what the actual dollar amount would be for an interest rate over a period of time and what points and origination costs meant to me as a applicant. I also learned a little about mortgage brokers, what they do, and what makes a good broker. The fix and flip book was basically re-reading topics that were covered here, on this site. It gave a little more concise list of things to look for when doing the home inspection and also a more detailed list of what I should factor in when deciding whether a deal is actually a deal.
I love Barne’s and Noble. I think I’m going to buy stock in them lol.
