Hi, I’ve been investing for a short amount of time and kind of brand new to the whole idea of investing. I have heard some ups and downs in this game. I was wondering if some of you all who have been investing for awhile tell me what it is that makes most new investors like myself fail in investing in Real Estate and what concerns should I have starting out?
By the way, i’m in California and it’s nice to meet you all.
Mark :shocked
hey mark im a newbie myself but one thing is that alot of investors make a move towards going full-time thinking there ready when there not.its always good to have a second income to cover any unexpected costs.so having a fall back job or alternative income is king.you will find that theres a load of investors that still have a 9-5.plus a lack of exit stratedgies for your particular field of REI, not being able to get out of a bad deal can sometimes scar you for a long time but it all comes down to sticking it out and not giving up.(the more no’s you get the closer you are to a yes.) hope that helped some with me being new and all.lol
PS. your network determines your networth… :biggrin
Hey Thanks Chuck. So what have you learned or anyone in this matter has helped in what exit strategy to choose? I mean, do no money down deals really work like I have read about? What in the world are transactional fundings and how do you pull those off?
Mark,
What type of investing do you want to do (buy & hold for rental, flip, rehab/resell, etc)? I think one of the biggest mistakes new investors make is thinking everything is a good investment. I just looked at an ad today where a Realtor offered 5 “cash flowing investments.” Each was a rented SFH for sale. The asking price was 100 times the monthly rental amount (or the gross rent was 1% of the asking price…just another way to look at it). These houses would be horrible investments. The rent is way to low for the asking price.
No money down deals are possible once you have a track record (and if you’re lucky enough to find one), but I’d say it’s nearly impossible to find a no money down deal in the beginning. That’s a lot of the reason we’re in this RE mess anyway. Banks just started loaning anyone who could fog a mirror money.
Justin,
Hi, thanks for the advice. What i’m looking to do is to buy and hold eventually. I want to try to wholesale a couple of deals but there are so many foreclosures out here in Cali where I’m at and being limited on funds is kind of tough if you know what I mean.
I’ve read somewhere that said you don’t want to be emotionally attached to the property, but why? I’ve looked in my local newspaper but it seems like everyhome is for sale by a realtor and no more FSBO’s anymore, so where would be the best place to start looking to invest and why. Do you know of a way that I can find good deals quickly to start generating instant CASH?
There is also a lot of hype about these virtual internet investors, what is that about? You don’t have to leave your home? :help
The way I see a lot of Californian investors fail is they can’t get it out of their head that prices are different in different areas. Their investing battle cry, when they go out of state, is “But it’s so cheap!”
That’s right. It would be cheap if you could move it to San Diego, but right here, it is worth half of what you are paying and you’ll never get your money back out of it.
We sit around hoping a California investior will show up and pay us “California prices”-- yes, that’s what we call it when somebody over-pays by a huge amount: “California prices”
I suggest you start with options and lease options. They are virtually risk free and require little out of pocket capital, and will generate fast cash upon assigning them.
I suggest you start with options and lease options. They are virtually risk free and require little out of pocket capital, and will generate fast cash upon assigning them.
Sorry to sound so vague but could you elaborate a little more in what your talking about?
You said you were looking for fast cash. Assignments are one way to get that. There’s one technique called a Cooperative Assignment that is a type of lease option which allows you to make your cash by putting the deal together and stepping out of the way. No middle man means more money in the homeowner’s pocket, meaning less resistance and more deals done.
One of the biggest mistakes people get into when it comes to investing in property is the illusion that you make more money by trying to do everything yourself. In my initial investment, I lost a lot of time and money trying to do it myself. If had outsourced the construction I would have saved in repairing my very own repairs while getting things done faster.
Thanks,
MJ
I would say that may be true based on a person’s ability or lack thereof for repairs. Also if someone is able to make the repairs, but drags it out for a year that could be a problem.
Some people want to be hands-off with doing buy & hold for rental. It can get expensive in a hurry if you’re not willing or able to do anything.
Hello fellow investors.I myself am a new investor looking for ways to get started with little capital involved on my part,simply because… i dont have any.But someone mentioned earlier about Cooperative Assignment could someone explain that in more detail.
Thanks. :shocked
I don’t understand. If real estate is so lucrative then why do people wait so long to finish projects? I hear people all the time saying there are millions and millions of dollars out there, especially in Private Money and HML. I thought about HML but how I was told is that they are not suppose to do a credit check and then a good HML will lend against the property and put points in the rear, if I’m right. I could be off but that’s how I understand it.
Justin: why the lack of repairs? what would stop someone?
AJ: why is it that I’ve never heard of these assignments, where do you find out how to do them and what type of home sellers are you focused on?
Mjmccabe76: could you elaborate a little more, what have you tried to do yourself that you would of outsourced?
Mark,
MJ’s point was that he felt he would’ve saved money on his project because of the length of time it took to complete as well as someone having to go back and fix things that he’d done.
My point is that, in my case, I was able to complete nearly all the repairs to the property myself. The amount of rent I lost by taking an extra couple months was more than offset by the amount of labor cost I saved by doing the repairs myself.
REI can be lucrative just like many other businesses. I’m not sure why people take way too long on projects either. Vacant properties don’t make me money so I try to turn them as fast as I can.
Mark,
I recommend you focus on one strategy and become a master. Most investors spread themself too thin trying to learn and do every strategy they hear of and get excited about. Once you master one strategy, delegate, create a system and put it as close to on autopilot as you can and learn and master a 2nd strategy if you would like. Or do whatever you wish to do with your time. Best of luck!
Lease options are a great strategy to gain control of a property with little or no money out of pocket. Essentially you have homeowner who needs to sell. You can offer to purchase their home on a lease option. This is basically a rent to own. The price you are going to purchase the house for is set up front as well as a monthly rental amount and an amount that will be credited towards the purchase price every month. As an investor, you can then find a tenant buyer (renter that is going to pay option money and live in the house) that is going to pay a higher price for the house and also cover your option fees to homeowner. A simplified example of this would be like so:
Prop A FMV 150000 (price the house is worth now)
Purchase price 140000 (price you agree to buy it for)
rents 1000/mo (rent agreed to)
rent credit 250/mo (amount going toward the purchase price)
3 year term (length of contract)
1500 option fee (amount paid for the right to buy the house)
You then find a tenant buyer who wants to buy this house and it looks like this:
Prop A FMV 150000
Option Premium 7500 (cost of you offering a option)
Purchase price 157500 (17500 profit 157500-140000)
Rent 1150/month (2700 profit 1150-1000=150x18)
rent credit 100/mo (2700 profit 250-100=150x18)
18 mo term (in case the first TB doesnt exercise)
4500 option fee (covers your option and pays you 3k up front)
The total profit of this deal would be $22900
This of course doesn’t take into account any transfer taxes or fees but this is just an example to show how a sandwich lease option works.
greetings everyone, I am from so cal and have no experience or knowlege in real estate and work full time in retail with a minimal college backround. I was introduced to the idea of Assignment of Contract buy an organization. How would I go about making money using an assignment of contract. Should i join an investment club first? Keep in mind my real estate vocabulary is at the level of a 9th grader. I dont even know what equity means in term of real estate. Thanks.
Home equity is the market value of a homeowner’s unencumbered interest in their real property—that is, the difference between the home’s fair market value and the outstanding balance of all liens on the property. The property’s equity increases as the debtor makes payments against the mortgage balance, and/or as the property value appreciates. In economics, home equity is sometimes called real property value.
Technically, home equity has a zero rate of return and is not liquid. Home equity management refers to the process of using equity extraction via loans—at favorable, and often tax-favored, interest rates—to invest otherwise illiquid equity in a target that offers higher returns.
Essentially if the house is worth $200,000 and they owe the bank $150000 then there is $50,000 in equity.
Welcome to the board
Hello Wendy…
Is it okay if I disagree just a little… on “Essentially if the house is worth $200,000 and they owe the bank $150000 then there is $50,000 in equity.”
I always look at worth a little differently than what an appraiser would appraise a property for. I break it down into two groups, money value and worth value and I am not certain in either case your example would have 50k in equity.
It would be nice if this business were that straight forward
Thanks wendy although some of what you said was confusing but what about assignment of contracts? should I start out using them like the enlighntened wealth institute said i should? what do you reccommend someone like me should start at? Also what do you think about rich dad poor dad stuff should i ignore it?