Help!!! I'm at a road block!

General Real Estate Investing
1

This is long, but I’m at a road block, so I appreciate the help:

Ever since I was introduced to the book Rich Dad, Poor Dad last summer, my perspective on money has changed dramatically. It introduced me to real estate, finding businesses, trading, you name it. I also started reading other books and right now I am past the motivation part. What I’m having trouble with is the DOING=RESULTS part. Let me tell you what I went and am going through so that perhaps one of the tried and true experts here can tell me what I need to do to get results.

Right after I finished the Rich Dad book I decided to become a real estate agent like my friend did. The reason for this is because as a real estate agent, I can get commission off of properties even though I’m buying it for myself. With little experience I started looking for single family homes and I have seen over 50 already. At first I was going to do the Option-ARM and interest only ARM loans to get me a jumpstart, but even those proved too risky as I have no money down and I don’t like the idea of negative amortization the way appreciation is going right now.

Here is my financial situation with my spouse:
• Both of us have good credit scores in the 700 range
• Just bought our 1st house last spring for $270,000 100% financing, 1st mtge is 5.50% fixed for 7yrs interest only, 2nd is at 6.50% current interest rate which amortizes (interest rate can not go up more than 1% each year, and can never go beyond 11% of life of loan)

Homes in our area have only been appreciating less than 3% last year and is truly a buyer’s market right now. We’ve done lots of updates to the house including new roof and floors.

• Net worth of negative $35,000 with debt minus liquid assets and real estate (includes 2% appreciation).

Because of the rising interest rates I have not been able to find a property that would provide even a break even cashflow. Right now there are a lot of foreclosures and a lot of homes that are below market value (based on tax assessed value). The only financing that we would qualify for are 100% financing interest only loans with high interest rates between 8-10% on 1st mortgages and over 13% on 2nd mortgages based on our debt ratio. Again, based on the rental market, almost any property I look at would not cash flow after PITI for single family homes. I do not want to buy a house that would have a negative cash flow of say $400 and count on appreciation, tax deductions, and depreciation when I learned in my RE class that cashflow is the only one out of these 4 that’s most reliable. Besides, I’m still trying to stick with the Rich Dad philosophy on the cash flow quadrant.

After looking at several homes and each home proved to be the same scenario, I started to look at buying an existing business to produce extra income. That proved to be more risky than real estate since I can never be certain of how much that business really makes. The one I was really concentrating on was a Laundromat, but there are hardly any Laundromats in my area for sale! The only one that I found, the owner was too stubborn and wasn’t willing to negotiate a deal with me. Then I got involved with trading with stocks and I’m currently in the process of learning about options. The way the stock market is going, trading is basically a gamble just like the casino.

So back to real estate…when I go on the MLS I see that the commercial and multi-family units are the best bet. The problem again is financing. To get a commercial loan they need like 10-20% down and the interest rate is much higher. I’ve search for properties where the seller is willing to do a contract for deed or any seller financing but again they want money down. Lots of money.

So far I’ve been to 4 seminars on real estate, motivation, trading, and real estate. All of these seminars they’ve told me the same things they mentioned on TV, “Yeah, I have 200+ properties, zero down, I was just like you, but now I’m worth zillions of dollars…if you want to know how I did it just sign up for another one of my BS seminars for only $20,000 more…money back guarantee within 3 days.” What kind of bull sh*t is that? BS to have conned me the 4th time of going. On the 4th one I finally got fed up and walked out early. BTW, they were offered by Robert Allen, Learning Annex, Investools, and James Smith. I signed up for the Investools and it has great info, but I just paid too damn much for it.

I have heard the word “mentor” over and over, but I can’t seem to find a mentor that I want to be like or one who would want to help out. Everyone I talk to thinks I’m gonna be the next William the Conqueror or something if they tell me their secrets. Please, I need help. What do I do? I am at a road block every where I turn.

2

Xanga,

Absolutely enjoyed your post. Sorry you are having a tough time of it but you seem light years ahead of many newcomers with your understanding of the situation. Your description of your market and your situation was very refreshing. You have great potential.

You are what I call " In the groove" . One of thousands of wannabees trying to get in the game with the 100% conventional financing of fair market value properties. You know how it’s done, you got the FICO scores and the brains and understanding. Everyting but cash flow.

I have an investor friend who I mentored in the no money down investing arena.

He was lucky to get into four properties financed 100% the way you described. He had good cash flow but the market prices and financing went up and now he’s singing your song looking for new deals.

Where are the deals??? Where are the deals???

My advice to him is that he has to get away from the 80/20 100% financed notion as a way to buy a house.

I told him to find a way to come up with the dough to buy a property with cash. Cash offers will save you a fortune off the selling price and put you right at the front of the line over financed buyers. Seller’s see a quick exit and grab your lower offer.

THEN you 100% finance AFTER you own it at the lower price and then you have some cash flow. If you finance at 7.00/thousand and get a house for 20k less… that’s 1648.00 year more cash flow. It happens, I do it.

Now you’re thinking “HEY JEFF you’re an idiot!!!”…HOW do I pay cash for a property when I don’t have cash???

THAT is what ‘those gurus’ charge 3,000.00 to find out.

My fingers are tired from typing this so I will give you some clues later…unless someone wants to volunteer some before that.

When they told me the answer, I didn’t believe them, just like you won’t believe me. But when I did what they told me, I ended up owning real estate.

I bought 10 properties in 14 months. Lease options, assignments, rehabs, no money down, seller financed, partnerships, etc. I was on fire! I’m relaxing a little now.

The most ‘CASH’ I ever laid out for any of this was $3,550.00 and I even financed that a month after closing.

JeffinCt

3

xanga…

the good news is that we’re entering a real estate down cycle.

Jeff,

does the Carleton Sheets program offer good advise on what you’re talking about…(paying with cash at discount below FMV, then refinancing).

I’ve only read a book by home…and have yet to get his program.

-Mike

4

…I wish I knew what you are on about. I’m rather confused. :-[

5

Ok just a newbie stab at it, this is just an idea only i had driving home today!!!

Use some unsecured credit cards, I’ve heard of business lines of 40K from citi-bank. Two of those would do nicely. I think you have to have an LLC for at least 2 years and good personal credit.

Put 20% down on property with at least 20% equity using these cards. Then do a no-season refi at around 75 - 80% LTV. Try to roll closing costs into as much of the loan as possible. Pay off cards. At closing have your property conveyed into land trust. Sell it to an 80% buyer to pay off your 80% then owner finance your 20% equity you bought in for one percent below what bank would give the seller(for his 2nd). Make sure you include a pre-payment penalty for at least 2 years to maximize your profits.
Charge him closing costs equal to your land trust setup cost(cheaper than buyer would pay for convention loan closing costs and he is paying for your protection). Give buyer 100% interest in the land trust with him pledging beneficial interest of 20% back to you as collateral for your loan. A UCC foreclosure is quick and easy as it’s personal property at that point and not real property. If he forgets to pay his 1st lender, than you are in a pretty good barganing position with that lender.

6

Hi XANGA!!!

I know exactly how you feel and what you are you thinking. I am in the same situation. I even have been taking advantage off. A few (3) investors from the REI club from my city trick me in difrent situation to get me out of the deal without paying me a cent for my hard work.
I found a mentor on another REI club cross town. I simply poor my hart out on a email to the president of this club, he got upset for my situation and he personally is mentoring me now. We have done quite a bit together.
On your subject on commercial you have to get a really motivated owner and flexible. The property has to value more than the asking price. You can get a first mortgage covering more than half of asking price and seller second mortage for a little more than half. This will generate cash flow and cash back at closing.
Example:
Property ARV 1.M
Seller willing to accept 700K
Get a first for 500K
Seller Second for 400K
Give the seller 400K
Keep 200K for repairs and holding.
Don’t forget to make the terms good enough for you to get positive cash flow.

They are rigth in here you can’t go and buy properties at fair market value. Some how you have to find them bellow market. Pre foreclosure distress (divorse, death, transfer).
I think like you the best deals are in multifamily properties.

I am no expert I am very new at this and I am still lerning every day, so bare with me please, if I say something wrong or out of place please forget me and feel free to correct me. But I feel their pain I am in the same situation I see other investors just trying to get rid off the competition. Doing all they can to get you out of the game, keep your faith and head strong.
DO NOT RETREAT DO NOT SURRENDER EVER!!!

Mike Orlando FL

7

XANGA,

THERE IS NO SECRET - PERIOD! The gurus don’t have it; I don’t have it; and nobody else has it! If you paid ten bazillion dollars for a seminar, you still wouldn’t get the secret because it doesn’t exist. In fact, the only secret that the gurus have is the secret to separating newbies from their hard-earned cash in exchange for the promise of some non-existent secret.

What the gurus do have (and you should already have learned) are many different techniques to buy real estate. These include things like Subject 2, owner financing, getting bank loans, lease-option, etc. You should also have learned the basics of the real estate business like buying at a discount; evaluating deals; learning your market; selling strategies; dealing with tenants, etc.

What the gurus almost never tell you are all the costs associated with running a business; all the troubles with contractors, tenants, buyers, sellers, etc.

Running a real estate business is HARD WORK. The VAST MAJORITY of newbies fail. Learn to run a business; join your local REI club; and be prepared to get your hands dirty and work hard for many years!!! That is the true secret to success.

Mike