New Questions

hi everyone.

i am just getting started with real estate investing and looking at rental properties for cash flow, and hopefully capital appreciation, opportunities. I have bought houses and land before and done well with that but never rentals.

i have also formed an llc to get started and have a good amount of capital to work with.

question. most books say borrow borrow borrow to buy the property and have the rents pay the mortgage and expenses. some properties however the cash flow is minimual if i were to borrow the majority of the amounts. however if i put down more and borrow less the cash flow comes out much better (of course). So my question is this. With this in mind should i borrow as much as i can regardless of cash flow?

also any tips on getting over the paralasys by analysis problem? after looking at cap rates, rate of returns, etc. seems like the more rental properties i look at they all start to look the same.

thanks for any tips.

what is a good amount of capital? meaning, what are you considering a “good amount”? that is a relative term.

your questions all depend on what you plan to do.

if you want to build your rei portfolio slow and steady, then putting a good amount down on a good property is a wise choice. as long as you leave yourself a good amount of funds liquid to manage it.

there are so many different ways to conduct your re investing, that’s what makes it a very good financial choice - it gives you control.

some people will talk alot about “net worth” and others will talk about “cash is king” and on and on.

the main thing is that you manage your re investing as a business. cash is extremely important to any business. you can have everything else looking wonderful, but if you don’t have cash, your business will die.

that’s how i’ve approached rei so far. i’m not concerned with “analysis of whatever”. if you’ve done some deals already, then you certainly aren’t stuck in that.

i’ve said this alot before [because i’ve read it so many times, and if you want to run a successful real estate business, to me, this is the most important thing, it just makes sense] - you have to buy BELOW MARKET, in order to be a real estate INVESTOR.

so now, think about that as i often do when i look at any properties. if you’re putting 25% down on a property to “make it cash flow” because you’re buying at 5% “below market” - then that’s not really engaging in real estate investing. it is “investing” somewhat. it’s a different kind of investing. it’s slow and steady and safe. buying a house in an appreciating area at about market value with a good amount down so you can make a comfortable cash flow is investing.

but what you’re referring to in your post (i think), is a strategy that is much faster, riskier and offers alot more cash potential, alot more property buying and a bigger business…that’s rei business. looking at properties, finding them with a potential to get’em at 30 to 40% below market- doing the numbers at little to no money down-and coming up with offers that get your business at a good cash flowing amount is the true nature of the business of rei.

does this make sense? think about coca-cola - they don’t sell one soda a month - they produce 500,000 soda’s a week and pump those suckers out all over America. they know how much to make, where to send it, who’s buying it and they know exactly how much the consumer will pay - it’s business.

the choice is yours for your business/investing strategy. both are good strategies, one is more risky than the other because you’re engaging in high leveraged positions on multiple properties at one time. but if you know what you’re doing - then it’s less risky, obviously.

That is exactly my philosophy. I am not trying to hit any homeruns. I am trying to get my 3 cents per bottle on 5 million bottles. In our case I find out what the market offers me. In my case I can find houses the cash flow about $200/month pretty regularly. Then I ask myself what does that mean to me? In order to answer that question I look at how much it takes me to live. Everything from house payment to dry-cleaning. (I got my last 3 months bank statements to determine my cost of living I did not develop a budget because budgets get filled with wishful thinking) I came up with a number. Say that number is $3000/month. That means that if I have 15 houses I never have to go to work again. In order to give me a safety margin I target 20 houses. That gives me enough to live on and some for fluctuation.

You need to develop a strategy that means something to you. I could look for larger margins or put more money down to get larger cash flows, but that would impact my lifestyle. And remember it not about the money it is about the lifestyle.

That means that if I have 15 houses I never have to go to work again.

Also means a lot more time for prudent thinking and planning for a next level of investment. But the next level requires much less hastiness…you can be a lot more methodical when you’ve established passive streams of income.

Excellent post…btw.