My grand father is ready to start investing in real estate. He is a homeowner and his home is paid off. He may sell his home or keep it for family. He plans on living with his brother. He wants to start investing. He is approved for a $200,000 mortgage. What steps should he take? If he decides to sell his home he would get about $100,000. He is thinking about buying a forclosure, fixing it up and renting it out, then selling it in about 2 years. When he does sell, should he buy another property with the profit?
if he wants to know whether or not he should sell his home, what steps to take to get started, if he should buy a foreclosure, if he should then rent out or sell the foreclosure or other property he has acquired, and if he should buy another property when he does sell…it sounds like he may need a well experienced and trustworthy mentor.
Good Luck.
Never, never, never, never, never, never, never, never use the equity in your primary residence for investing in real estate…never! Bad choice. Do not risk any money you cannot afford to lose.
Start with something that is manageable and small in the event there are mistakes made or ‘bumps in the road.’ Do not overextend to a point that a mistake can pull your business under.
Lots of options that are low risk and inexpensive.
Rob
Rob are you saying that all of the Gurus who say leverage your home and then buy as many properties as you can with leverage are wrong? If you refi and drain your equity of 200,000 that could buy your a million dollars or more of debt.
You sure have been hard to deal with lately… This all knowing dialog you have been typing is, from my perspective, rather narrow… There have been a lot of gurus make a ton of money selling this practice of how to lose everything you have through leveraging your home to become a real estate investor…
Man are you kidding me…
Michael
OK, Mikey…very funny…I just sprayed a mouth full of vino all over my computer screen! You need to work a bit harder on your imitations of my other fans on this site. You are not quite sarcastic or nasty enough!!! Bring it on homey!!!
However, anyone who puts up their personal home equity to leverage other property investments needs serious medication. This is a bad move and I am willing to be called difficult or hard to deal with by sticking to my guns on this one.
Rob
Good advice guys.
Don’t risk personal assets to invest.
If you can’t make money via wholesaling (assigning contracts etc) where $10 of your own personal money is on the line, you may not be ready for the real deal where you are putting youer personal credit and cash on the line.
Please learn the basics while you limit risk using strategies such as wholesaling and then move from there.
Dennis
Obviously no one read the question. He didn’t ask about using equity, he asked if his grandfather should sell the home. He also said the grandfather was approved for a mortgage of $200,000 which is the money he would use to purchase his next investment.
Now to answer the question.
In selling the home or renting, that decision has to be his as he would have to deal with renters. Is he ready to deal with two investment properties as opposed to one?
If he rents to family members then he has to make sure he gets paid because we know how family members do.
However, he probably should keep it and pass it on to his family since he doesn’t need the money from it as he’s approved for a mortgage.
I would hold off on buying a foreclosure until he gets his feet wet like Recoachdennis says. Maybe he should start with assigning contracts because rehabbing foreclosures is very detailed.
Either this or just find a good investment that is habitable (already fixed up) that can make a decent monthly profit (I personally like $500 or more monthly).
Hope this helps.
Yeah, not sure how the equity thing came into play, though I do agree that is extremely risky and can backfire. Not a good idea at all. Neither is getting a mortgage for $200K, not in these times. Why get burdened with personal debt?
Low money down strategies, as already pointed out in previous comments, would be a good way to get started. Just depnds on whether you want cashflow (lease options, sub2 etc.) or chunks of cash (wholesaling).
Best of luck!
Great post. Its really hard nowadays to make real estate decisions. We should not jump into conclusions that in the latter, we realize we are just invested instead of aiming for investments.
Whether he’s using equity in his house or just getting a loan, I would still recommend taking this slow.
GEt one or two good wholesale deals done first and if you can pull that off, you are ready to start risking your cash and credit. But start first where you risk is minimal and see if you are profitable. Prove it first in this arena, before moving on.
Dennis
Hi,
You can start by checking out several [url=http://Real Estate Investment[/url] sites such as this one. You may find quite a few that you might be interested in.
Using equity from your current house to invest in more real estate is probably not the best idea at this time at all. Seeing how our current market is where it is this could turn into an extremely harsh situation if the value of his house falls out. The best and only way to invest is if you have capital that is free to place in different markets without posing a threat to your wealth if you receive some losses along the way.
so first thing we do here is he should buy a foreclose, then rent out and if he will buy another one when the house was already sold… he also need a good adviser for that.
sa far as renting to family bad idea. unless you dont mind them not paying rent on time or fixing what they break or not taking care of the place.