How does true Real Estate Investors earn a living?

General Real Estate Investing
21

Are you saying you want to have 2k/month of disposable income to be able to invest before you start investing in rentals because of possible expenses with a rental property? Sorry…probably just late and I should understand what you mean here.

Having a reserve or a good income source is key. You never know when you’ll need a few grand for a big ticket item. Most of our places do ok after we get them rehabbed and occupied. We have, however, gone thru about 15k in the past six weeks for rehab/repairs to get a few places up and running.

Don’t know about wholesaling…we just jumped right into rentals. Looks like if you did it right, you could get some money in your acct from that though.
We started our venture with help from our CC. Some of my old posts have that story in there.
If you’re wanting to do rentals, I’d start trying to figure out who you’re going to use for different things (insurance, plumbing, electrician, HVAC, roofing, flooring, lawyer, etc). It’s nice to know who to call for a repair/rehab item rather than just dialing down the phone book listings.

22

@Justin

No, I’m saying that 2000/mo is my rental goal. I want to be able to earn 2000/mo in cashflow. I don’t know how long that will take so I’m going to say it’s a 4 year goal of mine.

I think that the big guru’s know that most people won’t implement what they just brought because it goes outside your comfort zone, (I went door knocking two days ago and BOY! was that outside my comfort zone).

So does the guru spend less time on content because they think that us newbies won’t implement the techniques anyway?

23

That time you spent door knocking last week was TELLING YOU SOMETHING…

That is…You need to spend MORE time door knocking!!!

You should do so much of this that it becomes EASY for you.

Start watching the TV show AMERICAN PICKERS…Watch how those guys APPROACH people. They’re VERY laid back…They’ve been doing it for DECADES, and it SHOWS.
The BEST part of that show for me is seeing how they deal with people that DO NOT want to sell ANYTHING, and they end up buying a van load of antiques!!!

The KEY to this is being RELAXED…The only way to become relaxed is to do it…

One KEY tip here is deceptively simple, yet extremely effective. DRESS for the neighborhood you intend to visit. A BLUE COLLAR, working class neighborhood is going to respond much better to you if DO NOT wear a suit and a tie.

A approach these people with a good STORY…I don’t mean LIE…I DO mean more than just I BUY HOUSES…I usually start by explaining to them that I buy OLD/OUT DATED houses and rehab them. Hand them my card and explain that if they KNOW anyone with a house like that and they send me the contact info and I BUY that house…THEY GET $2000 for a finders fee. THAT gets their attention. THEN…you explain EXACTLY what you’re looking for…The OLD, CAT FILLED, junk piled to the ceiling, needs paint, JUNKER of the neighborhood. ANY neighborhood. Do they know someone at work that knows someone with a house like that??? You’ll SEE the GEARS start turning as you talk.

EDUCATE these people…TELL THEM most of your houses come from people that have been left a house by the passing of a relative. The houses are OLD, need repair, can’t be bank financed in their current state (at least not EASILY financed). Tell them to keep an eye out for any property like that…I could mean a $2000 pay day for them.

There’s what ACCOMPLISH by doing this…

You end up with MORE EYEBALLS out on the STREET looking for YOU. You’ll get calls on houses, on streets you never knew existed, from people you never met. MAKE SURE your business card mentions that FINDERS FEE!!! I have a bunch of different business cards I use…ONE looks like an old WILD WEST “WANTED” poster…It says what I do…

                                         WANTED
                                 $2000 CASH REWARD
                                            For
                                    OLD, OUTDATED
                                         HOUSES

                                      CASH BUYER
                                     555-555-5555

It gets EASIER…The better you get at TALKING to people, the more properties you hear about. Neighbors love to talk about their neighbors…JUST ASK!!!

24

@FdJake

Thank you for that advice, at first I thought you were obnoxious at first, (The capital letters…etc) but I read up on your past post and you seem like a straight shooter…I like that and you also give good advice as well. Thanks again!

Update that Real Estate Agent from RE/MAX spilled the beans and told me that he really doesn’t INVEST in Real Estate he just sells houses. I had to give him the 3rd degree first.
So no mentor for me, I’m leaning toward doing it alone, trying to find a mentor takes up too much time especially going through people that don’t know what they are talking about.

I’m going to use this site as well as the courses that I read to go out there and give it a try. So I ask everyone on this site to hold me accountable. I work a demanding full time job and I get home I don’t want to do anything but “veg out” but if I want better for myself and my family I got to get the plane in the air…you know?

So as a recommendation what do I do for starters? If I go door knocking and someone presents me with a deal, how would I know what a deal is? by Comparables? Should I select a target area or go where there is deals?

Any help would be appreciated! Thanks again!

25

@Clearwater

I was lucky like many to start my investing career when the market started to turn hot. I bought my first home in 2004 which I lived in but in 2005 market started moving. I sold my home for a 6figure profit right away, bought something else in the same range and used profits to buy preconstruction homes. My CPA was involved in REI and showed me how easy it was to just assign preconstruction homes for quick large profits. I bought land in 2004 in Cape Coral before it was on the map. In 2006 those $5K lots sold for 50K+. I started grabbing land cheap in other areas of FLorida and selling in early 2007 when market was high still. I was assigning preconstruction homes that required no knowledge really and making 100K plus a month thanks to my CPA.

I then got into rehabs and rentals slowly. Had my hand in large projects where I had townhomes built with other investment groups which had great rewards. I branched out to several different area’s and kept adding and changing my powerteam if someone did not produce, I looked for new fresh young blood.

Rentals take time. Its hard to find good ones, however the vast majority have been bought over the last 12 months since the deals are great. Now I am buying homes for 60K in areas that sold for 300K during boom and these homes are remodeled. I love it.

26

@Yrush

Do you reside in Florida?

27

Yes I am I south FLorida

28

@Yrush

Cool!! I was hoping to find someone that is Investing in Florida. As you already know I invest in Florida, Clearwater to be exact. How do you like the market here in Florida?

29

@yrush,

1st off, thank you for telling it like it is. I went to a 3-day R/E seminar and was given a sales pitch of 4 hours of it then made to feel like a bad parent for not investing the $10-$75k in the “advanced training”. Problem in their sales pitch was that the instructor informed us that he never took it and was worth millions in R/E.

2ndly, I’m looking to get started too and was thinking of wholesaling due to the fact that you don’t have to use any of your money. You mentioned that you didn’t wholesale but your assigning of preconstruction sounds like wholesaling. Can you explain the difference? Also, how else would you recommend someone get started w/ little capital?

I’m from NJ and the land values and prop. taxes kill any cash flow even w/ a reasonable mortgage pmt.

Thank you for any advice.

30

@12sju12

Assignments of preconstruction is how I started out. It was similar to wholesaling since i was selling contracts. I do not wholesale either because I do not have the time commitment with my current career. Everyone takes a 1 or 2 areas of REI that will make them a fortune. You can not master all areas of REi, just like a doctor or lawyer specializes in 1 or 2 areas, same as a RE investor. You can dabble but master one thing first. Find what you like and stick with it.

I like rentals and rehabs. I do flip some rehabs once completed but for most part, I tend to rent them out it cashflow is there. Why sell when I can make cashflow and in 10 or 15 years the market will be better, then I will sell or use property for a 1031 tax exchange (another discussion)

@Clearwater

FLordia is a good market in many area’s since prices crashed. I did a lot of deals early on in Springhill, not far from you. I remember buying 20 preconstructions at a time from Mercedes homes with $1,000 deposits and assigning the contracts for 25-35K profit per contract when they get about 5 months old which was half way through the buildout. Like was good.

Florida can be a tough for cashflow still since condo’s can kill you with fees and assesments, insurance and taxes are high in most areas. Buy right and you will be fine. I have many properties outside of Florida ranging from SFH to retail buildings being leased on NNN leases. I like Pittsburgh, Buffalo, Alabama and NC. Military towns are goal minds as well as college towns.

31

Now I am buying homes for 60K in areas that sold for 300K during boom and these homes are remodeled. I love it.

yrush is telling the truth…I do about %95 of my business in Florida and I agree with everything he has to say…Its a great place and time to start in the RE industry…The market has crashed and its a perfect time to start aquiring cashflow properties and buying quality homes…Being that he knows the terrain makes it all that much better for him…Know your market and it makes all the difference…

Good posting yrush

32

@12sju12

I know how you feel about those seminars, I have been to a few of them and it was tempting to have a someone teach you “The ropes” but I did some research on the seminars and the gurus they assign to you are Real Estate Agents.

My Real Estate “Guru” is going to be this website, there are so many good minds on here, RookieNYC, YRUSH2000, FDJAKE to name a few. These folks have been talking about Investing a long time now judging from the previous posts. Hopefully, with some time under my belt I can be as good as them. Thanks guys!

My goal is to start out Wholesaling and with the profits I can get into rental’s so I can have some passive income instead of being employed with no medical benefits, (A common occurance here in Florida).

Thanks again for your input so far keep it coming. Off to the wholesaling boards.

Update: I did go door kncoking today and gave out some cards but I got threatened with a Gun today for just knocking on the door…ONLY in FL … :anon

33

If you invest in bad neighborhood, remember there are 2 guys always for hire to help collect your rent. Their names are Smith and Wesson :shocked. Just make sure the tenants see them coming

Clearwater. If you want a cheap mentor, I always recommend checking out your local REIA clubs. Many clubs offer mentorships at low cost around $1200 a year which is a very small price. Plus great place to build your powerteam with locals.

In your area, I check out Tampa area for buying. Also SpringHill was a big pre-construction area so I am sure some great deals out there as well.

34

Start watching the obits pages in your area. Yea, Yea, I know it sounds tacky…But the bottom line here is this…

SOMEONE is getting the house…Why not make that person YOU???

Make a list of the properties where recently departed owners lived and contact the heirs.

GOLD MINE!!!

35

@Yrush

It’s funny because the area I targeted WASN’T a bad neihborhood it is a area with homes that range in price from $88,000 to $250,000. The place I got threatened was a nice property which goes for about $175,000. It was a foreclosure and I guess the owner was sick and tired of people coming to his house to ask about his property. He threatened that it was trespassing to come and knock on his door so he has a gun and he will shoot me onsite.

I’m not a gun person at all although I don’t mind if other people have them…that is their business. I couldn’t carry a gun, I’m just not wired up that way. Besides, the percentages go up really high to actually get shot if you have a gun in your possession…with your OWN gun.

Now back to Real Estate:

@Fdjake that is a good idea, I will start with mailings. I don’t see it as taking advantage of someone deceased you might actually help someone out that needs their home sold fast. It’s not like you are putting a gun to someone head and saying sell your home at this price they have to accept it. (Laughs) There is that gun thing again…Oh well.

36

I use to door knock back in 2005. Hated it with a passion. I use to do the probate thing too, hated it too. Never found any deals. Trying to sell my rentals too. Down to 7 of them right now, wish I was at 0. I HATE TENANTS THE WORST!!!

Flipping is where its at, at least for now. Tons of great deals out there, and if you can snatch up a property for less than half of what it’s worth, and be the cheapest house on the MLS when you resell, it will sell, even in this market.

I’ve been buying stuff straight from the foreclosure auction down at my local courthouse before the bank takes possession. Usually involves a second mortgage being wiped out by a first, or somebody who has lost their job but been in their home since the 90s. Those are about the only two situations where there is adequate equity to take the risk in the foreclosure scene around here. You gotta know your state laws pretty well before buying. Try and find a paralegal that does foreclosure work a lot to help you.

But like FDJake says, you have to have money to be a RE investor. The foreclosures are nearly impossible to finance, and must be bought cash. The cheaper homes have more competition, so if you have a large amount of capital your deals get better, at least around here. The last house I bought came complete with previous owners that had to be evicted. I owned it for 3 weeks before I got to see the inside for the first time. He turned out to be pretty cool and I helped him out buy buying all of his nice stainless steel appliances I needed anyways.

Great thread, hope things go good for you.

37

Hey John,

I deal with previous owners all the time…Usually it’s a dead beat, crack head, SON or COUSIN living in the house I’m buying from their mother or relative and these LOSERS have been living RENT FREE for sometimes YEARS…

I’ve found a great way to get rid of these dead beats that saves me a TON of money on evictions.

I offer them $500 to move out!!!

Here’s how I do it…

I knock on the door and politely explain that I am buying this house and they WILL be moving out. I then tell them that if they want…I will pay them $500 if the house is BROOM CLEAN within one week. I then explain that my attorney has already started the eviction process (TOTAL BULLSH*T) and they WILL be going, one way or the other…Their CHOICE is…Do they want to leave with $500 or NOTHING.

E V E R Y S I N G L E O N E of these dead beats has taken the money and my realtor can not BELIEVE how well they clean these houses out. I set up a pre-arranged time for the inspection…I tell them they WILL NOT get a single MINUTE extension on this offer. If we agree that their out by 12 noon on Saturday and there’s still crap in that house at 12:05…I’m GONE, their $500 is GONE, and my lawyer takes it from there. Funny…they ALL cry about the one week time limit…But they ALL MEET IT!!!

One other thing…I ALWAYS have my lawyer send a letter stating that the eviction process has been started. I have that letter mailed THE DAY I meet them…It’s beautiful!!! I show up, make the offer, the next day the lawyers letter arrives RE-STATING everything I told them the day before.

DONE…GONE…All in one week with NO BULLSH*T!!! The house is cleaned out, on the market, and these DOPES actually THANK ME when they get their money!!

38

Man I will use that next time around! Thanks. I am always worried about retaliation tactics. Maybe I worry too much. Have you ever had them just destroy the house out of spite and say screw the 500 bucks? I’m always assuming there are emotions involved and I might be seen as the bad guy, though that hasn’t happened yet.

I decided with this one just to wait and let them live there without knowing any dates until one day I showed up with the sheriff’s deputy, changed the locks, and put in one of my cameras that emails me every time it senses motion. So when they came home from work, they had to call me and I got to supervise everything with the move out those next few days.

39

As far as retaliations go, this $500 bonus works like a charm.

I ALWAYS play it like this…

First, I start off by telling them how SORRY I FEEL FOR THEM!!! I honestly look these LOSERS in the eye and tell them "I really feel bad about the situation with you and your family (or whatever the problem is). I’m sure you understand that I can’t get in the middle of it, my lawyer handles all these things for me and he does not screw around…

But I want to make you an offer."

Then I lay out the $500 payment plan.

I usually listen to 10 minutes of every excuse on earth about why they haven’t rerpaired anything, paid anything, sent any money to their relatives, ect.

The KEY to this is SEQUENCE…

The First part is the CARROT John…I always START with the carrot…the carrot is the “How sorry I am for them.” They don’t expect it, and it screws them up.

Then I take out the HAMMER…The HAMMER is “You’re going, you just get to pick HOW. WITH $500 in your pocket, OR with N O T H I N G.”

Then finally the CANDY. The $500 on move out day!!! These MORONS actually shake my hand and THANK ME!!! These idiots don’t understand that THEY just CLEANED OUT MY PROPERTY, SAVED ME AN EVICTION PROCEEDING, COURT COSTS, LAWYERS FEE’S, and LOT’s of TIME and MONEY…and they thank ME!! GOD I LOVE THIS COUNTRY!!!

I always tell them that if ANYTHING is missing from this house from NOW to the day I show up with their money…THE DEAL IS OFF!

I just used this on a crack head living in HIS MOTHERS HOUSE…This LOSER’s only “JOB” was to collect rent from the 2nd and 3 rd tenants and MAIL it to his mother in Florida. Of coarse he NEVER did this, and his mother was at the end of her rope. I told her I could have him out in ONE WEEK…BUT she would need to back me up…All she had to do was tell him she SOLD the house and the new owner would be contacting him.

She did exactly what I asked…I made LOSER an offer of $500 to leave.
On the pre determined dated I showed up…BUT he wasn’t completely moved out. BYE I said…Kiss your $500 good bye @SSHOLE…At that point he KNEW he screwed himself!!! So he LITERALLY BEGGED me to give him one more day.

I did agree to that…But that one day would cost HIM…$250!!! TAKE IT OR LEAVE IT!

The next day I showed up, inspected the property, everything was GONE and I gave him his now $250 payment.

That idiot was THE ONLY ONE that ever went past the deadline.

THEY ALL TAKE THE MONEY!!!

ALL OF THEM.

40

Ha cool. I would love to use this with my deadbeat tenants that stiff me, but I just can’t see myself paying them after they hosed me over. By that point there is no dealing with me, just the court. But this should work pretty good for the foreclosures. Can’t wait to use it.

Thanks again Pete!

John