I bought my first house (a bit of a fixer upper) a year and a half ago to take advantage of the new home buyers tax credit and hopefully turn a little profit at the end of the 3 years. I’m still not sure if I did well on the deal - but it did spark my interest in real estate. In may of 2013 I’ll have hit my 3 years to keep the tax credit and am hoping to rent the house for 300/mo cash flow.
Ultimately - I think I’d like to build a portfolio of rental properties for semi-passive income to supplement a move to part time consulting.
Presently - I’m about to refinance the house to use the added value (+some extra cash) to drop PMI and my interest rate. This will wipe out any investment money I’d have for anything for the time being but I have a 6 figure income and live well below my means so I can aggressively build up some cash for investing.
Question - with little to invest now, but a high income and about $3000/mo disposable income to invest, what should I be doing over the next year to either set myself up to get started or actually go ahead and start (if possible) getting into real estate investing in the Dallas market.
I would start looking at potential properties. Even if you’re not ready to buy, you’ll get an idea of what people are asking for different size places in varying conditions. Figure out what areas and price points you’d like to target for buying properties. That will give you some direction. You could talk to banks and see who is lending on investment properties. Note: with changing financial times, you may find that a bank will tell you they’re not lending on non-owner occupied (NOO) properties now, but they may start again some time in the future. At least you could see what percentage down the banks will want so you know how much you’ll need up front. Look at LL/tenant laws for your state as well as eviction procedures in your local area.
If you buy a place, find out you don’t mind being a LL, and do ok at it, you can start adding properties as your money allows. When you have a couple years worth of success, it should be easier to work with banks at that point.
first go slow, just buy property and give out on rent for 2 to 3 years.this way you can generate easy cash flow. soon after 3 years market will start recover hopefully than sell your property, you would get benefited with store of value .
Have you thought about getting into wholesaling (i.e. finding properties at deep discounts, gaining control of the property either through option to purchase or actually putting it under contract, and then flipping the contract to another investor or end buyer by assiging your contract or doing a back to back closing)? If you have time and cash to invest in a solid marketing plan, this could be a way to start making money in real estate now. It will also allow you to build a network of buyers and sellers, and other real estate players.
Wholesaling is a great idea. I’m trying my hand at it now to build up some investment capital. One of the most important parts is building a buyers list. I made a form on my website to try and build mine and it’s working out really well. It doesn’t do any good to get a property under contract if you can’t assign it to somebody else (if your intention is to wholesale).
Look at LL/tenant laws for your state as well as eviction procedures in your local area.
Texas is one of the easiest states to evict tenants. I have not yet had to deal with it but my grandma, who got me into real estate investing, has had rental properties for more than 40 years and has never had problems the times she has had to evict somebody.
Also, how much cash is it going to take you to drop your PMI and what is your return? (How much is it going to lower your monthly payment?) I would look at that and also look what your return would be if you, instead, put that cash towards an investment. Depending on how much money you’re talking about it would be worth it to me to pay an extra $100/month or whatever your PMI is if I could buy another $300/month cash flowing property or do some wholesale deals with that cash instead… but if you have the ability to rebuild your investment account by the time you’re ready to invest then it probably wouldn’t be a bad idea.
i want to expand my business from Ontario to other cities of Canada. i am seeking your guidance about funding? what should i do? i have 3 houses, out of which i have given out 2 on rent.and one for my personal use. if i move to other cities either i have to give out the same one on rent or sell it.
Depends on your numbers. How much revenue could you generate using it as a rental vs How much cash can you get by selling it, and how much revenue could you generate with that cash. Whichever is higher is your answer.
Question regarding wholesaling for a new individual as well.
When you wholesale there is zero financial risk if you cannot find a buyer for the property under contract, as long as you dont go over the option period date and forfeit your earnest money (if required) correct?
I was under the impression if you find a property to wholesale (whether REO, probate etc) you have the exclusive rights to sell the house for X amount of days (or the option period). The wholesaler then charges and assignment fee to the end buyer such as an investor and that’s the wholesalers profit. If the wholesaler is unable to find an end buyer for the property then they back out of the contract and forfeit the rights to sell the house, but the wholesaler is not obligated to close on the house.