First thing first

General Real Estate Investing
1

Okay, I am interested in REI opportunities. But first things first, I need to expand my education about this business.

I understand there are various areas to be involved in. Obviously, a good credit history, and little or no debt is a great start for any beginner, including myself.

Having an accountant preparing my financial statement for a few years is another step in the right direction so that my finances are in professional order.

What is next? Do I need to talk with a real estate lawyer first or research into rental properties first? By research I mean, learning the ins and out of rental properties.

If it is research, any recommendations for websites or books to read information about this area?

Thank you for your time.

Mark

2

I would really get to know the neighborhood you are looking to invest in. If you want to be a landlord, find and talk to other landlords in your prospective areas. Drive around and look at the types of tenants you see, and how well the properties are taken care of.
Find out what the major source of jobs are in the area, and how that relates to housing.

3

Hi Mark,

I would start by reading the forums here at REIClub so that you can decide which area of real estate interests you. Then, study that specific area and learn the basics.

You don’t need an accountant to do a financial statement and I’ve never heard of doing a financial statement for a few years. A financial statement is basically a picture of your net worth at a specific point in time (now). You can easily do that yourself. In essence, it is as easy as assets minus liabilities.

After you’ve done some reading and learned the basics, then I would strongly suggest that you join your local REIA (real estate investors association). Make friends with the SUCCESSFUL investors in your area. Also, pick a target investment area and go look at 100 houses that are for sale in that area (inside and out).

Good Luck,

Mike

4

Hi Mark,
you have come to the right place! Accountants are good, but not necessary to get started in a real estate career. There is no reason to have a financial statement either. As a matter of fact, you do not even have to have any kind of credit history to get started in this business. AND- lawyers will bleed you dry! Don’t get me wrong, they certainly have their place in this business. However, lawyers tend to create problems in order to solve them. In other words, they must justify their existence, so they make things difficult and then smooth out the difficulties.

        The bottom line is this: pick your strategy, whether it is being a landlord or a "flipper", and go for it! Analyze deals but don't over analyze (PARALYSIS BY ANALYSIS). If going to local REI meetings helps you get over the "hump", then go.....but keep in mind that MOST seasoned nvestors will not be at those meetings. That is not to say that you will not meet succesful investors there, but just be aware that a lot of those meetings will be filled with people who have never done a deal. Most of those meetings are "pump you up" sessions (I know that will offend some people, but where I am from that's the truth).

       If you really want to make it in this business, never stop educating yourself and as soon as you have a good feel for what is going on......jump in head first!! There is more than one way to skin a cat and most of us investors are creative people. I am guessing you are too, so educate yourself and then let your bal<%&ls hang out!
5

Okay, thanks everyone for replying so far. I am looking forward to seeing this thread grow. In regards to specific areas or REI, I am more interested in property rentals using a few strategies.

Buy and hold to sell within 4 to 10 years depending on the the value of the “cash cow”.

Upgrading the property to increase the value of the property and neighborhood appeal.

For the first 10 years, I am looking at purchasing 1 multi-unit property every 2 to 3 years to build and stack up cash flow, and equity.

The next 10 years I am still figuring out the plan but it is safe to say for now, the first 10 years will be busy enough considering the research I have done already.

The goal is to acquire 5 strong “cash cow” properties in 10 years before I push myself outside my comfort zone. The way the market is going up and down, I am more comfortable with long term goals than “flipping” and such. Maybe down the road.

Regarding the accountant, every article I read about building a real estate team includes an accountant for the obvious reasons so I am comfortable with that. It is worth a piece of mind knowing my accountant is on top of the game.

(My accountant is also involved in real estate too.)

Now my question regarding renting and the lawyer as commented earlier,

While lawyers do cost money, it is wiser to shield my personal assets from my rental assets.

What would I be looking for from a real estate lawyer in regards to legal issues for rental properties?

Off to search for REI clubs in the York County, PA area. Anyone know of any?

6
Off to search for REI clubs in the York County, PA area. Anyone know of any?

Try this link;

http://www.reiclub.com/real-estate-clubs.php

7

The first thing you need to do is decide why you want to do real estate. If you don’t know why you are doing it then when are you finished? For example if your living expenses are $3000/month and you can find 15 single family houses or a 20 unit apartment building that yields you $4000/month then you are now working for fun and not for a living. That means you are financially free. This is my definition of rich.

With that goal when you have 5 single family houses you know how many more you need. If you get 15 but they are only yielding $3000/month you know you need to get the yield up, by refinancing or replacing some etc. That also tells you if a house that is a good deal is good enough for you to buy.

Remember always start the journey with the end in mind.

8
While lawyers do cost money, it is wiser to shield my personal assets from my rental assets.

Why would you need a lawyer to seperate your personal assets from “rental” assets?? I am assuming by rental assets you mean business? Just deed the property into your LLC or a trust…neither of which requires an attorney.

9

Bluemoon06 - I am amused by your question. I do know why I am doing this, I do have a timeframe. because no one lives forever. So I ultimately have to get out at some point.

I am just solidfying my plans for the next 10 years while a 20 year plan is very far-reaching, I do have a general idea in what direction I want to take it in.

1st 10 years - multi-unit properties within America
2nd 10 years - multi-unit properties within America and expansion into overseas properties.

The overseas properties may be a bit out of reach for REI club so that is why I am focusing on my questions to within American where I can maximize my information within REI Club.

As far as monthly expenses versus income, my current income exceeds my expenses, I have no debt to speak of. I do want to increase my monthly income for a number of reasons, some of which are listed as follow,

Contribute to the community
Freedom from the employee lifestyle
More time to focus on my activities which includes real estate.

Hopefully that answers your question Bluemoon06 because your response did not answer mine.

Realestateexpert2007 - Why would I want to separate my personal assets from rental assets?

Several reasons,

Expansion opportunities which may require additional investors
Did Donald Trump need an attorney at some point?
It’s America - the land of the most lawsuits in the world.

Enough said?

Reading LoriK’s reply about researching jobs and its relationship to housing,

York County is a growing area feeding off the rise in employment in the metro Baltimore region which is encouraging long-distance commuters for cheaper housing. As a result of this, it has increased opprtunities in the county. I am just not sure what yet.

Does anyone have recommendations for resources where I can get this information?

10

I have another question,

Are PMI required for purchasing investment properties with less than 20% down?

I know they are required for personal home purchases but I can’t find information as to whether this applies to investment properties?

11

It’s really an academic question. If you pay more 80% of the market value for a property, it won’t cash flow anyway. I wouldn’t do that.

Mike

12

Amused or not, it was a serious question and we still don’t know the answer.

What is it that you want to accomplish by real estate investing? How will you know when you have accomplished what you set out to do? What goal are you striving toward?

Good goals are objective, measurable and have a finite timeline. Having a net worth of $5 million by the time I turn 50 is an objective, measurable goal with a specific deadline for achievement. Just saying that you want to invest in multi-family property to increase your monthly income so you can contribute to the community is a good sound bite for a beauty pagent contestant, but, as a goal it is BS.

Wanting to increase your monthly income is starting to sound like a goal statement, but you need to tell us more – how much, how soon, and how much is enough?

Acquiring 5 multi-unit properties in the next ten years is not a goal statement. It is an action plan to accomplish some goal that you have yet to tell us. The multi-unit properties may increase your monthly income, maybe not, or, maybe not enough to meet your monthly income goal.

Hard to tell since you have not really defined your goal for us. Goals don’t have to be long term and far reaching either. I have a very simple one year goal, the same goal every year – increase my net worth by 5% during the year.

Now, what is your goal? Is it objective, measureable, and constrained by a specific deadline to accomplish it?

13

Mark - I used to work in Accounting/Finance for about 30 years before happily dropping out of corporate America…Unless you want to pay a fortune for an accountant to take your original receipts, create reports from your checking account activity, etc., I’m assuming you’re really talking about having an accountant simply prepare your financials from totals that you give him, plus the settlement statements, etc. that you have…I’ve had the same CPA prepare my taxes (my returns are about an inch thick every year) for the past 10 years or so but I give him all the categorized expenses, income, etc. for each of my properties…He takes care of the depreciation for the properties, what capital improvements qualify for 5 year items, 7 year items, etc…Those are details that I don’t care to stay on top of…I did corporate taxes 20 years ago but have no desire to try and keep up with all the changes in tax regs year after year…

So that you don’t spend a fortune for professional services, I’d suggest that you track your own income/expenses on Quickbooks or some other program (I actually do mine on Excel spreadsheets that feed automatically onto one master spreadsheet that I give to my CPA at the end of the year)…This way you can produce your own financials at the click of a button to see where your finances are…Then give your CPA a summary at the end of the year to produce your tax returns…

The only way your accountant can truly make money for you is to point out where you’re losing money, how to change the situation around, and where you’re making money so you can keep on doing what you’re doing, but this is info you should be able to realize from running your own info on whatever software program you’re running…

Listen to the guys (and gals) on this site…The responses they gave you above were right on the money…Go to your club meetings, learn your neighborhood, etc…This is how you get to be successful…

14

I don’t understand why this is not a goal. He has what he wants and he has the time frame in which he wants it. ???

According to the dictionary, a goal is defined as “the result or achievement toward which effort is directed” The result is acquiring 5 multi-unit properties. I would like to believe this would take some effort. He even gives a time frame - in next ten years.

Can you expound on your “this is not a goal statement” statement? Very curious to understand what then is a goal, because I may have it misunderstood.

15

AB,

I think what he’s saying is that this is not a useful goal. It is so vague that it is all but meaningless. A better goal would be to say that I want to purchase rental properties that will generate $1,000 per month positive cash flow within 1 year.

To achieve this goal, you could buy 10 rental units that generate $100 per month each.

Simply buying a multi-unit property is pointless. How much cash flow or equity does it need to make to make it worthwhile? Are we talking a duplex or a 100 unit apartment complex?

I always suggest starting with specific goals and working backwards to determine how you will meet the goal.

Mike

16

Ahh! Ok, that makes sense.

17

[b]Tri Country Real Estate Investors Assoc.
William Sands 610-3217-1770
Pottstown PA 19464
frakrealty@aol.com
Meets 3rd Wed of the Month

Wyoming Valley Real Estate Investors
Jim Strabu 570-288-3375
Wilke Barre PA 18703
Last Tues of the Month

Rental Property Owners Assoc of Lebanon Co
Judy Fake 7717-274-3604
211 W Walnut St
Cleona PA 17042
4th Tues of the Month[/b]

Try these :cool

18

First of all, thanks to everyone who has been commenting here. THis is very encouraging and posistive for me.

Okay, I suppose it is appropriate to answer the goal question from Dave T since it all begins with a goal.

Amused or not, it was a serious question and we still don't know the answer.

What is it that you want to accomplish by real estate investing? How will you know when you have accomplished what you set out to do? What goal are you striving toward?

Good goals are objective, measurable and have a finite timeline. Having a net worth of $5 million by the time I turn 50 is an objective, measurable goal with a specific deadline for achievement. Just saying that you want to invest in multi-family property to increase your monthly income so you can contribute to the community is a good sound bite for a beauty pagent contestant, but, as a goal it is BS.

Wanting to increase your monthly income is starting to sound like a goal statement, but you need to tell us more – how much, how soon, and how much is enough?

Acquiring 5 multi-unit properties in the next ten years is not a goal statement. It is an action plan to accomplish some goal that you have yet to tell us. The multi-unit properties may increase your monthly income, maybe not, or, maybe not enough to meet your monthly income goal.

Hard to tell since you have not really defined your goal for us. Goals don’t have to be long term and far reaching either. I have a very simple one year goal, the same goal every year – increase my net worth by 5% during the year.

Now, what is your goal? Is it objective, measureable, and constrained by a specific deadline to accomplish it?

Thank you Dave for the response. That is a fair reply. I suppose if it were to be summed up in a single sentence, then it would be this,

To increase my rental income by 6K per year.

Is this too vague? While it is specific in regards to dollar amount, I am not sure if I need to expand upon this in regards to acquistion of rental properties.

A second question,

What is the minimum number of units to qualify as a mulit-unit rental?

The reason I am asking this is because of the area I am looking into, York, PA where there is a lot of homes that are 2 units, and others are 3 units. While I know there are many more that are 15-units and even 300-units, what is the minimum?

19

1 to 4 units is single family. More than 4 is multi family

20

I like the goals that people articulate on this site; especially propertymanager and DaveT. I think the goal of increasing rental income by 6K per year is a good thought, but I believe that a goal such as:

I want to buy 25 rental units in 5 years, each unit will have a positive cash flow of $100, and 20% in equity. At the end of 5 years I will have a positive monthly cash flow of $2500. I will also have at least $250,000 in equity.

That is a realistic goal, it speaks not only to the income, but also to the expense side of your financial statement. It also addresses your net worth. You can also stop after one year and look at the results and ask yourself:
“Self…am I moving toward my goal or not?”
This is a business that has a lot of people with personal agendas…so the real estate agent and broker want their commissions (if they‘re good, they deserve them), property managers want you to use their services, contractors want you to use their services, tenants often want improvements and services that are beyond what their rent will buy.
A lot of people will be ready to sing you a siren song about getting rich. A lot of people will ask you to spend money that you may not need to spend. You need to ask yourself if your plan is working. The only way to gauge this is to look back at your goal.
You mentioned using an accountant, but a professional representation of your finances can be accomplished with a bookkeeper. Or software like the what’s been mentioned. You would be fortunate and smart to find a good accountant, but you will not need him or her until you own your own business, or have rental properties, and need to do your taxes.
One point that you didn’t mention, is capital reserves. The bank wants you to have 6 months of principal interest taxes and insurance payments in cash reserves, and this is a good policy.

Good luck and have fun getting started!