I still can't freakin decide what I want to do

General Real Estate Investing
1

I’ve been doing some pretty heavy reading about a couple areas of real estate and I still can’t freakin decide which one is most profitable for my time
 (at the moment I make good money doin somethin else and I can do it whenever I want)

How do these generalities stand?

Rentals- Good long term wealth, just get + cash flow. Lot of work with tenants though. (good book propertymanager, keepin it real!) But you have to own sooo many to make a worthwhile realized profit or a profit worth your time. What is a realistic monthly profit on SFH? 100-200 bucks?

Apartments- Rentals on steroids but higher vacancy and less quality tenants. Lower on maintinence though. Selling them off is not easy.

Short sales- ??? Haven’t read a page about these. Fill this in if you want.

Flipping- High stress and needs lots of experience to do right. A little riskier, but can payoff huge.

Lonnie Scruggs mobile homes- fastest way to get cash, low investment. Lots of trouble with getting your money from the buyers but their lack of cash is why the sellers are so persuaded to sell at 50% fmv.

And all of these make MOST of their money in a discounted purchase price, which is acquired by finding a desperate seller. This is by far the biggest determining factor in the scheme of making money in real estate.

Also I have heard it is wrong to assume that the market will eventually go back up. Rentals seem like a good idea (+ cash flow of course) because I would attain so much unrealized equity when the market goes up and I own 20 properties, but I don’t know if I can make the assumption. If you look at a graph of the supply and demand of housing it seems like it’s bound to go up within the next 10 years for sure.

Summer is coming up, I need a plan!!

The more I think about this stuff the more each of them becomes “meh”. I really need to find a lead here and get started. I got a summer and 50k, help!! School sucks and I don’t have a plan for any awesome job like a doctor or something, so I would love to generate 70k/year+ in real estate.

Please any thoughts or comments encouraged. Also include any whole areas of real estate I missed.

2

ANALYSIS PARALYSIS
Start by figuring out what you can’t do, and whittle your way down from there.

  1. You’re probably not going to start out buying large multifamily apartment buildings. You need both a fair amount of experience and capital to get going, generally not a launching point for new investors.
  2. Unless your long term goal is to be a mobile home magnate and own parks, I don’t think mobile homes are it, theres more knowledge to be gained from traditional SFH.
  3. Buying SFH, you get exposure to a wide variety of things, including: buying/selling process, financing, dealing with bank, dealing with contractors, construction issues, the list goes on and on.
    You can buy SFH that are very light rehabs (paint and carpet) and still get the deep discounts. Fix them up and if you can find a buyer right away, great, flip it. if not, rent it out, either way you make money.
    Then decide if you like this particular aspect of the business-then you can go on to buy larger buildings, all the while honing your other skills.

It goes back to the classic KISS principle, Keep It Simple Stupid! (I’m not calling you stupid, you get the idea!) Now get a move on!

3

analysis paralysis. I’m not surprised. Same thing happens when I try to decide my college major :banghead

4

If you’re making good money doing something else, why do you want to get involved in real estate? What is it you hope to accomplish with real estate? If your goal is to generate $70K per year, how would you do that with each area of real estate you’re considering.

Here are my comments on your specific points:

A realistic monthly cash flow on rentals is $100 per unit per month ($200 per unit per month if you do all the managment and maintenance yourself. So, to generate $70,000 per year, you would need 58 rentals if you hire the management and maintenanc out, or 29 rentals if you do the work yourself.

Mobile homes are not necessarily the fastest way to get cash. Far from it! In fact, mobile homes are really no different than any other rentals. If you’re trying to sell them, they can be quite expensive when the tenant stops paying the rent (depending on your state laws and the way you have the deal structured).

Huge payoffs from flipping? I don’t think so! Nothing is ever as good as it sounds at first glance. Besides the obvious problem of trying to flip in a variety of market conditions over time, another huge issue is the taxes you’ll pay when flipping. The profits from flipping is taxed as ordinary income - OUCH! So, you’ll need to generate a LOT more than $70K with flipping to actually keep $70K.

Good Luck,

Mike

5

right now I play poker. It’s just a means to an end for me because the future of poker is really not something I would like to rely on. For right now poker makes way more than starting up real estate would for me. But I would like to invest in something I know is reliable in the end. I would like to find a way to use the excess cash I get from it. And there is plenty more excess cash to come, but after like 5 years, I’m not so sure if I want to play much of it anymore.

In my ideal world. I would like to flip a few summer mobiles to make a few k this summer + get experience, then purchase a rental, then another, then another, and then go from there all 200 bucks of cash flow because I probably won’t own too many. Right now (although plans will highly likely change in future), I would like to sell my rentals off when the market eventually goes up in some odd years from now, (again I’m not sure if I can really make this assumption).

I would really like to get some rentals. But I don’t have much income to put on down payments on houses. Houses in WA aren’t nearly as cheap as in other places (from my experience). I mean, the cheapest POS houses in ok-ish neighborhoods around here are 100k, and they are rare. A ghetto area around here I could find few for 70k, but that is about as low as it goes. I thought mobile homes would be a much easier plan and less risky for the summer to buy, possibly fix, and sell to somebody who pays me monthly (not renting). The prices mentioned are asking prices, but regardless of my bargaining skills acquiring a decent amount of these rentals seems difficult.

Also about renting right now, new information tells me rentals aren’t too hot right now. I found very few rental adds in the paper and they were low rental prices. Great, even tougher to get a + cash flow going. Found 2 other houses today I had interest in, both bought by the time I called. God I need better networking, hopefully this REI club meeting Tuesday gets me some better leads.

6

Mike, my accountant told me that if you have another income (i.e. - job, self-employment) that flipping income generated would be considered an investment and taxed at the capital gains rate… do you know something different?

7

This article might help. In addition, you might want to google “when is real estate taxed as ordinary income”.

http://www.nuwireinvestor.com/articles/real-estate-dealer-or-investor-51401.aspx

Good Luck,

Mike

8

Thanks for the article… it opens some quesitons up that I will have to meet with my accountant on… Like, how does 1033’in affect dealer status?

Anyway, thanks for the info…

9

PositiveOutlook,

My experience is with fully furnished rentals as bringing in double or triple the rent of unfurnished. If you are in a middle-class area there may be a good demand for people who would rather stay where there is a washer/dryer/ dog yard, all utilities paid.

Big urban areas, Wash D.C., tourist areas, near colleges and hospitals–there is demand for that kind of temporary housing.

Furnishedowner

10

Your accountant is an idiot.

11

Sorry, but WTF?? (Not trying to be vulgar or mean, but that question caught me off guard. If they are making good money, WHY WOULDN’T YOU want to start inveting in RE?? It is paying off better than ANY other investment that I know of, and a heck of a lot more control over the investment.

The issue is exactly what was first posted… Analysis Paralysis… Listen, it is better to get your feet wet in one thing than “wait around to figure out what way is best” and do nothing. Just pick something that interests you, and DO IT!!! if you find out that there is something better that you want to do, then DO THAT! Once you chose, you are not bound by it for the rest of your life. I change all the time, depending on the market conditions and what interests me at that time.

Something is better than nothing, and while you are waiting to find the “perfect formula” (of which there isn’t such a thing) opportunities will pass you by. Take ACTION! Take the leap!

if you have a good bed of savings and income to fall back on, you are 10,000 times better off than the many that don’t and took the risk to become financially secure, so take the leap!

BTW… If you have tons of $$ laying around, that you don’t know what to do with, let’s talk, I could get that money working for you at a good rate of return, and you could do nothing, but be my private lender. :shocked (Which is not a bad thing either, since then you don;t need to worry about what is best at the time, as I will do that, you just sit back and collect.)

Well, hope I helped!

Michael Suess
The REI Training Warehouse, LLC

Modified due to Forum Rules violation

12

Michael,

No way you can use that abbreviation and not come off vulgar. I would rather you did not use profanity at all, then you don’t have to apologize for it later.

13

I guess just diving into an area I should probably shoot for mobile home buying and seller financing for this summer. Eventually I really want to get into rental homes, but I don’t have enough money to put down payments on a couple of them. A lot of my other considerations are a bit complex for now.


I hear that vacancy rates are not the greatest right now, but the eventual realized equity 10 years from now is great

^ is that a valid thought for pursuing rentals?

14
Sorry, but WTF??

Great way to start out on the forum! :rolleyes

(Not trying to be vulgar or mean, but that question caught me off guard. If they are making good money, WHY WOULDN'T YOU want to start inveting in RE?? It is paying off better than ANY other investment that I know of, and a heck of a lot more control over the investment.

Real estate is not the be-all and end-all of life! If he’s making good money at what he’s currently doing and can control his own life (do it whenever I like), then I think it’s valid to ask why he wants to get into real estate. Furthermore, ‘real estate is paying off better than any other investment’ for who? Your signature indicates that you are in the training business and your request for someone to be your private lender indicates to me that you’re not exactly flush with cash. Additionally, the vast majority of newbies fail in this business, so it certainly isn’t paying off for them.

Finally, I don’t take advice from anyone that can’t even follow simple forum rules, so you might want to start by reading the rules and maybe even trying to follow them!

Mike

15

so I’ve thought about why I want to get involved at all. I don’t want cash now really. I want to invest earned cash now and make an income for many years to come. In college right now I’m not finding anything that strikes my interests, but real estate fires me up. So the money now is fine, I would just like some advice as to what is low in time and effort and high in eventual profit (for now, because I’ll be doing my other job). So I don’t necessarily care about the COCR, but as long as the deal makes good money in the long run I’m very interested. I would like to find a real job in real estate investing, and I’d like right now to be my head start. Everybody says the first couple years are the hardest when you don’t have a lot of money and not a lot of investments, I feel I am pretty free of this stipulation with the money I will be making in the next few years on my other job. I just need a smart way to get this money into investments and hopefully I can skip the “slow newbie investment” phase.

16
I don't want cash now really. I want to invest earned cash now and make an income for many years to come.

So that leaves out bird-dogging, wholesaling, flipping, and rehabbing.

I would just like some advice as to what is low in time and effort and high in eventual profit (for now, because I'll be doing my other job). So I don't necessarily care about the COCR, but as long as the deal makes good money in the long run I'm very interested.

Low in time and effort, and high in eventual profit? Uh-oh! That eliminates residential rentals unless you can find an excellent property manager. When you don’t put in the time and effort, you greatly increase the risk. You could also become a private lender or hard money lender. Those require almost no time or effort. Being a private lender is lower risk IF YOU FIND A COMPETENT INVESTOR TO LOAN THE MONEY TO, but the return is relatively low. Hard money lenders charge outlandish fees and interest rates, but the risks are enormous! You could also do commercial real estate, but again the risks are different/higher.

Low in time and effort, and high in eventual profit? Let me know when you find that!!!

Mike

17

Hello Everyone,
I believe that every REI was a newbie. Everyone had to start from somewhere, I don’t understand why the more experience investors always have bad things to say about new investors. I read a lot of comments on forums that put down new investors. By putting new investors down will discourage them from achieving there goals. Instead of discouraging new investors I think everyone should encourage, because I believe everyone had to start from somewhere. And everyone make mistakes that why you learn from them and whatever you did wrong that time don’t do it wrong the next time.

Thank Punkin
Buffalo, New York

18

True. All investors have to start from somewhere, but so many people watch the late night infomercials and think this is all a gravy train. FAR FROM IT!! The point about learning from mistakes is to educate yourself and learn from other people’s mistakes so you don’t have to make your own.

19

You need to determine your risk tolerance and time horizon.

I have a low risk tolerance and place a long time horizon on my investments (5+ years), so I will comment on those investments.

For rentals vrs apartments, they have the same type of tenants, you just have to screen them properly. Make sure you do a credit check, and talk to their employer and previous landlord. Make sure you ask them specific questions and see how quickly they respond. You want to make sure that you are actually talking to that person, and not the renters friend pretending to be that person.

Apartments are better as you get into economies of scale. It is way cheaper to call a plumber for 3 jobs than for one.

Also, apartments equally easy to sell, there are just as many buyers for rentals as there are for apartments

If you have a high risk tolerance, then go for flipping, although you could win big, you could also loose your shirt.

If you go for the long term horizon, its a relatively safe play. And yes, over the long run values will increase. I can guarantee that in 10 years pretty much any property in will be worth more than it is today.

20

Why do you think you can only make 100-200 a month??? If you are putting down 20% you should be getting at least 400-500 a month… I guess it depends on where you live… I’m talking about Northern VA.