I’m new here and to real estate, I’m looking forward to learn from all of you. I have thought of a plan from the small basics I have in Real Estate, but chances are, it is not realistic yet. I’d appreciate if you guys could give me some feedback about it. Keep in mind that this plan is VERY flexible and it will mostly used to give me an idea about what is achievable. My goal is to be worth as much as possible by 40 years old and pretty much retire by then.
So a little background about me:
I currently am 19 years old poker player and am able to save about $75,000/year. (Please assume this is true, I’d prefer getting feedback on the other parts of my plan). I belive I am smart and motivated. Because of my special job, I have a lot of free time and I plan to read as much as possible about Real Estate in the next two years. In about a year from now, I’d start doing small RE investment with my saved funds, mostly to gain real knowledge and improve my credit. (Is this timeframe realistic? Will it take more more/less time to learn about Real Estate?).
4-5 years from now I should have around $300,000 saved. I’d try to get $200,000 in external investment from other investors/family/friends and get a 10% cashdown loan to buy a $5,000,000 building. (How hard is it to get that kind of loan from the bank? How hard is it to manage a $5,000,000 building supposing I don’t have any other major responsibilities but no real experience as a manager?). I expect about $550,000 in revenue and $300,000 in interest in the first year. (Are these figures realistics?) Supposing I reinvest most of my revenue in the building everything should be paid back within 15 years. Eventually, I’d want to outsource the management of the building and start concentrating in other projects. (How much time is it reasonable to wait before doing that? Or should I outsource the management right away?)
Or should I just invest in something totally different, considering my goal and resources?
Sorry for all the questions, but please answer them if you are able to
Iv’e never bought anything in Real Estate. HOWEVER, I know the answer to your question.
You should read this board. Learn as much as you can. Then when you feel you are ready to start investing, START SMALL! You will make mistakes your first investment, and a mistake on a 5,000,000 can be devistating.
For your first investment, buy SO LOW you cannot lose. You will learn from your mistakes, then eventually you will be ready to possibly buy something that big.
Your really young. Don’t be in a hurry. Take your time and learn so you can make good investments. Your only 19.
My question is, if you can sock away $75K in a year, why not purchase smaller properties now ? Especially since you have the flexibility of time to actually be at your properties.
You don’t need to wait several years and jump in with a 5 million dollar property.
From the sound of your post, I’m assuming you are talking about an apartment building/complex. If you’re talking about something else, ignore this post.
What you are proposing is financial suicide. Starting out with a 5 million dollar building is a recipe for disaster, even if you do a small rental or two first. However, realistically, you won’t have to worry about it, because no bank is going to loan a 19 or 20 year old poker player 5 million dollars even if they have some money to put down. They will want to see some significant experience and a steady source of income to loan you that kind of money.
The deal that you are discussing is a retail deal and a sure path to bankruptcy. Throughout the United States, operating expenses run 45% to 50% of gross rents for residential rentals. Therefore, if you are buying a property with gross rents of $550,000, the operating expenses would be about $275,000. Subtract the $300,000 interest payment you described and you have a LOSS of $25,000 - not good! So, the numbers do NOT look good.
That is why you need to do some serious studying before you buy ANYTHING. Then, start small and gain some experience before you think about a larger building.
