Hello all,
I am completely ignorant to things concerning real estate. I’m relatively young (26) with a decent career (firefighter) and I’m looking to invest in real estate to build a comfortable future. I have come across tons of programs and courses but have no clue as to what is legitimate or not. I’m not expecting to become rich overnight, I know it takes time. I just want a solid foundation to build upon and was hoping to get a few tips from the experts out there:) Again, please forgive me regarding my ignorance.
What niche of investing are you interested in learning about?
Buy and hold? Flipping/Merchandising? Rehabbing?
How much money/credit do you have to start with?
How would you describe the area where you want to invest?
That will likely determine the kind of investing opportunities you can capture.
What is the result you want to achieve by investing? Income? Appreciation? Wealth accumulation?
How many investors are already in your area? Is there lot’s of competition?
What is nobody doing in your area?
The answers to these questions will help you decide on where to start and what kind of training to get.
I’m sure once you’ve shared which way you want to go, you’ll get more informed feedback. There’s just too many choices otherwise.
Thank you Jay for your response! I’ve been told that that wholesaling is a good place for beginners to start but, I’m open to learning about EVERYTHING! I do not have much cash to begin with (10-15k) with average credit. With my work schedule, I’m off 3 days a week and would be pretty available for rehabs, etc. I live in Fairfield County, Connecticut. It is a great mix of middle class and upper class families. Actually, I’m about 20 minutes away from Than Merrill and the guys from ‘Flip This House’. However, I’m content with operating on a much smaller scale. I guess my goals would be to eventually gain a substantial income from my real estate investments. From my research, the competition is steadily rising in this area. The fortunate thing is that I live in a pretty central location. I’m 40 minutes from MA, 30 minutes from NY, and an hour from RI. It seems as if a lot of programs out there are catered to experienced real estate investors. I have been reading some of the free articles here that have been helpful but as a novice I think I’m in need of some step-by-step help.
$10-15k is not gonna get you into much, conventionally speaking. You accept that. It’s barely 20% down on a $50K house that needs NOTHING.
Then you’re done buying for a while.
So, you need to focus on something where you can keep buying/investing and building some capital.
Wholesaling is extremely competitive in some markets. It’s so competitive where I’m at that investors are moving up the food chain into commercial/multifamily, just to find “crappy” deals at all.
Lease/Options are great, but you’re also competing with lots of professionals.
For example, Keller-Williams is the gorilla of lease option prospectors where I’m at. They’ve got a team of boiler room telemarketers, everyday calling fsbos, trying to offer them full prices with short term leases and options.
Rehabbing is great, too, if you’ve got a seriously large prospecting machine operating that will beat out the competition, and you’re into ‘rehabbing.’
Of course having a good prospecting machine is the common denominator between all these successful professionals.
Otherwise, it’s like hunting for snipes and hen’s teeth to find enough deals to keep going.
Let me tell you what I bet “nobody” is doing around you… and where the competition is practically non-existent…
It’s buying and flipping low-equity houses. The market is FULL of sellers that want out, but they don’t want to become fsbos, and they can’t afford a real estate agent. Many of these sellers know they’re out of options, especially if they needed out yesterday, and/or had a failed escrow.
Offering to take over these seller’s payments; getting their deeds; and legally reselling the financing is what we do. There’s less than a handful of people in our farm doing this.
A commercial real estate agent first taught us how to do this on two commercial properties back in 1990. He persuaded the seller and us to trade deeds on two rentals and take over each other’s loan payments.
Later we learned how to get homeowners to give us their deeds, and let us take over their loans for sometimes tiny bits of cash. Then we either rented the houses out, or resold them on installment contracts.
Of course the money is made on the spreads. For example we’ll buy at 90% of retail and resell at 105% of retail. It doesn’t take a lot of deals to have gather some serious cash.
Just to just sell this idea… Let’s say you take over a 180k loan on a house worth 200k and you gave the seller 3k to move. And you resold the house, using an installment contract, for 210k. You asked for 15k down (or more) and financed a buyer for the balance. Well, you’ve now got 15k (less the moving money) in your hand, and when your buyer pays you off, you’ve got another 15k.
That’s a 30k profit (less costs) on a house that had only 20k in gross equity when you bought it.
Imagine doing that once a month. What kind of car would you be driving next year?
There’s so little competition in this niche, it’s sinful …and delicious.
Anyway, that’s food for thought.
I found your post interesting, Javipa.
Regarding flipping low-equity houses:
what would you suggest the best way to find sellers is? Can this be done smoothly without a realtor (buyer)?
I have a couple of two-unit rental properties which I bought over the last couple of years and am looking to add some more - either rental or flip.
Thanks
I found the best way to find low-equity houses is to look for them…
Just kidding, but really that is what you do.
You buy a list of low-equity owners and send them a card in the mail.
If you stick with more expensive houses, you can make a boatload more money for the time and money spent on cheaper deals.
Yes, it’s done smoothly without a realtor. You also stay away them. There’s no money to pay them. That’s why sellers call you. They can’t afford to pay them either.
You can add sub2 deals to your income property portfolio. My first sub2 deal was a $1M income property.
Thanks.
I’ve tried Craigslist, asking around, and talking with other invetors to get sellers.
Will try what you suggest. Also just going to the property and asking.
Have great Thanksgiving.
You need a more systematic approach to your prospecting. The hunt and peck method will wear you out, before you ever have any successes.
If you do have a success doing it that way, you won’t want to do it twice, because it’s too much work, frustration, and I did I mention it’s just too much work?
That doesn’t mean you don’t get the word out about what you do, but the easiest, fastest, and most efficient way we know, is to target certain properties (and sellers) with direct mail.
“Going to a property and asking” means what? What do you intend to ask?
Happy Thanksgiving to you, too! :beer
One option is to target landlords. Look in the “For Rent” section in the local paper or check with Craigslist. A lot of these landlords are sick of the renter business and would be interested in an easy way out. Plus, you get an empty home making it even easier to resell on your end.
Sellers who’ve had a problem selling, are great prospects, too.
Call/email on the most stale ads first, then move forward.
Depends what type of property you want to buy. But in both cases I would suggest to find some great real estate agent, residential or commercial, and just talk to them. Ask them what type of properties could make you the most money right now. They will always tell you which properties are profitable and which not so much. The best thing is to find the right person who can guide you in your real estate journey.
Javipa, thanks for the great post.
This would be a great alternative to short sales in my market. I don’t know the legalities of it at all though, could you recommend how I could learn more about this?
Just off the top of my head - mortgages aren’t assumable so what type of contracts are used to take over someone else’s payments? What rights does the seller still have to the property after moving out? If you default on the mortgage, I’m assuming the seller is responsible since the mortgage is under his/her name, therefore, this would only work with motivated sellers who need to sell asap but aren’t able to due to low equity and are willing to take this risk.
Definitely something great to look into.
Regarding short sales:
Yes, sub2 financing is an excellent alternative to a short sale, if the house is in good shape, and the seller is not in default. Curing a default can be expensive, and actually can put the house completely underwater, making the deal even un-salvageable as a Sub2 flip. The primary advantage of Sub2 financing, of course, is enabling a sale to occur without the conventional overhead costs, and qualifying hurdles.
Regarding assumptions:
No mortgages are assumable without qualifying.
Regarding Sub2 contracts:
We have sellers notarize about 10 documents to finalize a sub2 deal. This allows us to solely administrate the loan, handle payments, authorize insurance changes, and terminate the seller’s rights and privileges to the property.
Regarding mortgage default:
We don’t default on any mortgage we take over. That’s a kiss of death in our business. We just cannot, and have not, ever allowed that to happen. Frankly, our ability to handle loans in a professional, hiccup free manner is a major benefit of selling to us. We have lots of testimonials to show this is true.
For the sake of discussion, if the loan does go into default, the seller is screwed like an 80-year old prostitute.
Regarding motivated sellers and taking a risk:
It’s interesting that you would assume a seller has to be ‘motivated’ to do a sub2 deal. The fact is, nobody is willing to risk their credit on some flimsy scheme, even if their current report resembles the ‘credit of the damned.’ They’ll sit in their house, and screw their own credit, before they’ll knowingly let someone else put a fork in them.
Meantime, if you’re not very good at selling yourself, and making the sellers feel comfortable with your ability to handle their finances professionally, the negotiations can become as much of a hard-sell as pulling teeth with a pair of Vise-grips.
However, we are very good at selling ourselves and making the seller feel comfortable with us. So any seller who cares about his credit, and wants to sell, but can’t, or doesn’t want to be a FSBO, will more naturally accept our offers.
At the same time, we sift and profile the sellers we’re willing to talk with in the first place. We’re not willing to help everybody. Only a select few get a chance to say yes to our offers.
That puts us in a strong negotiating position where we can capture more than just the sickly fish that float near the top of the tank waiting to be scooped out and flushed down the toilet with a sub2 deal. No, we can also compel healthy fish to swim right into our net. (And then we flush them down the toilet with a sub2 deal. OK just kidding.).
Meanwhile, any seller that cares about his credit, and needs out, and can’t sell conventionally, just naturally finds our offers acceptable, while the sellers we sift out, get hard-sold by the amateurs. Meantime, we make it safe and painless for the sellers we want to accept our offers.
In other words, if our negotiations become a hard sell, we drop that fish in the shark tank, and walk away.
As far as where to learn how to do this, there’s lots of training courses that will help you with the mechanics of a sub2 deal. I focus more on finding, and closing on, sub2 deals, but I don’t pitch that here.