hey all, i am new to this site as well as this whole real estate thing. i am a very self motivated type of indivdual that is wanting to earn a living in the real estate field. the question is, which i’m sure all of you who have been on this forum have heard time in and time out…HOW DO I GO ABOUT GETTING STARTED IN THE REAL ESTATE BUSINESS? is flipping the answer or renting? please if any of you savy folks on here can chime in, please do so. again, i am highly interested in making some green here the west tx housing market. thanks
Oh wow. This question can be answered in a number of ways. It depends on your risk tolerance, cash on hand, time you have available, and market knowledge.
I’d say to do your research first. Build a business plan and attend your local investment club meetings. Talk to as many investors as possible to find out what their deals are like and how they got started. I started with a simple buy/hold strategy while others go straight to flipping because they had a money partner.
Read some of the recommended books on this forum as well as the articles to learn as much as you can before you jump in.
thanks for the response…
Hello, I have to agree with Dee. Hi Dee.
It is better to do the research, educate yourself, and network with your local club first. Also, build up your cash, build up your credit, then start looking for projects to invest in.
This is the plan I am following in Houston. You may and probably will be different. You make the same either way you go. If you get 20 houses with each getting you $200 to $300 positive cash flow per month yields you an income of $60k to $90k depending on vacancies with about 1 make ready per month (10% vacancy rate). With buy fix up and sell, you can make $20k to $50k per deal. But honestly I can’t do more than 3 or 4 per year (each deal takes about 90 days to fix up and sell). That is $80k to $100k per year. But you have to look for deals everyday. The income is about the same, but when you look at time to make the money rent is better. The ideal thing to do is to get about 20 houses (or a small apartment building) use that for steady income of about $90k per year. Then only look for 3 to 4 flips per year for boosted income. The flips will make you $80k to $90k per year until your equity is high enough that you can refinance the rentals and get the cash flow that will allow you to become truly rich (sit around the pool and drink beer or teach a class at the local community college).
While you are acquiring your 20, you buy every house you find that is 90% the retail purchase value in a neighborhood that rents rapidly (within 1 month). Use them to gather your 20. If you find one that is 80% of retail value in a neighborhood that sells within 90 days, flip them. So the deal dictates rent of flip. It takes you longer to get your 20, but it is my way of doing things.
wow, that is alot to take it, but thanks for the response. btw, how did you all get your first initial start in real estate? did you have alot of money to start out w/ or sell your home that had a little equity in(this is what im thinking of doing) and start from there? thanks again for the helpful replys.
I started by putting down 10% on single famly houses and renting them. The 10% assured me between $300 to $500 per month cash flow. I later found out that I didn’t really need to put down any cash, I needed to show it to qualify for the mortgage, but could buy houses, fix them up and still cash flow $150 or so per house. This only takes a 620 credit score and 6 months PITI to show. I would not sell my house, I would take out a home equity loan, that way I still own my house, and can still use the money it my house.
If you purchase a house at 90% of retail price (or even better market value) with 10% down, how could you assure to have $300 to $500 cash flow? I live in Dallas, and sometimes I feel it is hard to have $100 - $200 postive cash flow, can you please explain? Thanks
What are the market rents in the areas you are buying these houses?
I applied your 90% strategy to a house that is on my street that has been sitting on the market for almost 80 days. Not to the list price, but to what I believe the actual value is (about 15,000 less than list). Then I times that amount by a n/o/o I/O mortage rate of say 7%. I come out with a monthly payment around $1400. That’s before taxes, maintenance, and insurance, vacancy, prop mang, and all that good stuff. I know that I cannot rent that TH for much higher than $1400. Even that is about $100- $150 too high.
I wish I could implement this in this part of Maryland but I think I need to go with the 75% or less purchase discount to even get a cashflow of $200. WAAHHH! :-[
again, helpful info. on here. the jist of it is, im a 26 y/o married male w/ a soso paying job that has a mortgage and is willing to do whatever it takes to get started in this venture. the problem im having is where too start. dont know if i should find a “fixer upper” have it financed and sell it after i put some money into it or go in a different area. thanks again for all your helpful thoughts… 
JWrealestate I have 10 houses that are all 3-2-2 they are from 1200 to 1500 square feet. These houses have cost $75k me to $80k. I typically financed $65k - $80k with a PITI of from $550 to $700. The houses rent for $950 to $1100. Remember I have found these houses and bought them at 90% of value and put 10% down. This is the same as an 80% discount. That pushes your cash flow up a lot. If I go 90% with no money down I get the numbers you seem to be seeing $150 to $200. I have about $100k of my own cash in these houses for that return. The return on my cash is nice, but the return on $0 is infinite. That is much better. It also preserves my cash. The last 2 houses I did were at 90% value with no money down.
Immy, I am in Houston. I have houses in north and west Houston. There are, however, 2 neighborhoods I found one in West Houston and one in North Houston that all cash flow. It is a funtion of low purchase prices and high rents.
Awesome Bluemoon06! I really appreciate your detail information. This definitely a great help, and look forward to reading more posts from you.
I am on a business trip right now, but when I get home I will tell you how I found those 2 subdivisions. I got one from a guy at one of my real estate clubs. He told me about this neighborhood that every house cash flows. I then looked for these attributes in other subdivisions and found another one.
My numbers are pretty much in line bluemoons’s (the sales price is a little lower, as are the rents but the cashflow is strong) and I have at least 20% equity in each property…the one I’m working on now cost $64K and is renting for $850.
Keith
This house will have a PITI of around $600 with rents of $850. That will give you about $250 positive. I will take that all day long. If you put $7000 down you are only buying another $100 per month. That is a return of 17%. I don’t know were else you can get a 17% return, but no money down and get $250 per month is an infinite return.
Actually, this is Louisiana…the PITI will be about $490 or less…the insurace is running me about $250-270, taxes will be about $700…I will cashflow about $360 (plus maintenance and negligible vacancy)…
Keith
1). Does PITI include PMI? If you put 10% percentage down and 90% loan, don’t you have to pay PMI?
2). Do you get loan from convertion mortgage lenders or from hard money lenders? I talked to a local CTX mortgage office for a 100% finance on a 100K property. They offered me 80/20 loan, and interest rate is 7% and 11% respectively, and I thought it was a little bit too hige based on my credit score (780) and moderate income.
Thanks for any input.
JW
Bluemoon06,
I’d love to hear about the subdivision attributes so I can see if I can apply that here where I live. I am willing to drive around and find that area if I know what to look for. Right now I have no idea because the low purchase/high rent situation is not too common around here.
JW,
I NEVER pay PMI…it is a rip-off insurance that only protects the lender. My credit score is the the low-800s for a reason – I pay my bills!
All of my properties are bought below retail, then I rehab, and then do a cash-out refi at 80%. If I buy right going in, I get almost all of my front money back at closing.
Keith