Hi all, I’m new to the forum and looking for advice. I have a friend that wants to invest in real estate. I am a wholesaler just starting out. He is looking for deals that will give him some passive income. He might consider doing a flip if the money is right. I dont think he knows alot about real estate, so I was wondering how you guys handle an investor that has money but not sure how to use it right to make money in real estate. I live in Oklahoma and I think my market hasnt been as effected as other markets around the country.
It all depends on the person. If he understands business he probably can get apartments in Oklahoma for $15k per door or so. If he can find a 25 to 30 unit complex, for $300k to $500k 20% down would be around that $50,000 mark. He needs to find a complex that is worth $30k/door to $40k/door selling for $10k/door to $15k/door because of low operating income. That low operating income is usually because of high expenses or low income. That high expenses will require rehabbing the property to bring those costs down, evaluating the management to make sure you don’t have managers that are too expensive, nonproductive or just don"t know what they are doing etc. The low income is either because of low rents brought on because of the poor condition of the property. Once this rehab is done the rents can move up to market rents. The occupancy will increase as you evict drug dealers and criminals and the property is nicer and attracts more tenants. After the income and expenses are back in line where they should be, refinance the property to get his cash back out and do it again.[/flash]
What’s up Bluemoon, only issue I see is he won’t have any operating capital left once he blew the wad on the down payment. I know that was just an example of course, but just wanted to make the point of how important capital reserves are when buying & holding commercial property.
Personally I’d take the $50K and buy deeds on pretty houses with equity. Sell them (using seller financing or rent-to-own) to qualified buyers with sizable down payments/option fees. The buyers are responsible for all maintenance and repairs, just collect rent/mortgage payments and wait to get cashed out on the back end somewhere down the line, hopefully when the properties have appreciated substantially.
Thanks for the advice from both of you, I appreciate it.