Saying hello and asking for advice

General Real Estate Investing
1

Hello Everyone,

Glad I found this site. I have been very interested in real estate investing since about three years back. I read a lot of books and did a lot of research back then but have set all that aside up until now. A lot of the interest came from watching all those house flipping shows and books saying how easy it was to make money in real estate before the housing market took a poOp. The shows were interesting and it gave a lot of useful advice on how to stage and upgrade according to the market value, but I knew they were not portraying an accurate account of the real market and how difficult it was to get into the field.

The reason I had put REI to the side until now is because I recently joined the air force as an air traffic controller two years ago. I have another four years to go before I can even think about doing anything tangible with real estate. I really don’t like my job too much and real estate investing has always been a dream. I have about a year and a half left before I get my degree in management and I am debt free except for about $6,000 in student loans and no car payments to worry about. I have a few more financial obligations before I can really save up for REI. I am hoping to walk away from the air force with about $20,000 saved up.

I am just now starting my research all over again. I have perused the beginner section and have learned some interesting stuff. I am not completely sure yet but I believe I want to eventually get into rehabbing and renting. I will look into wholesaling to start off but I am mainly here for the next four years to learn as much as I can. So here comes the questions.

I currently live with and work with a really close friend of mine. We’ve been together ever since tech school. He is a very good guy and we get along very well. I feel like I have a good business sense while he is very meticulous and is handy with tools and has prior experience in construction and really has a good eye for design. He is not very business minded but I think our skills would complement each other. I have come across a few post that suggest not having a partner because it could be a lot of headaches. I have taken a note of that but I wanted to see what everyone thought about the partnership idea.

I have came across a few conflicting ideas on whether to invest with as little money down as possible or use as much of your own capital as possible. I still have a lot of learning to do on this topic but I wanted to hear the veteran’s opinion on this.

As it turns out, the market is a lot different than it was before the housing market crashed. And after reading some of these posts, I realize it is going to be a lot of hard work and risk involved if I want to be successful one day. One concept I am unclear about is buying and holding your house to had to your “portfolio.” I am just scared that having a lot of debt in my “portfolio” is a risky thing. I also realize that you can’t just get rich over night but would like to get a better understanding of how land-lording works. It appears that you would have to have quite a properties in order to make decent money.

I would be 32 when I get out of the military and would love to be financially independent and strictly invest my time in REI by the time I am 40. How likely would it be to earn an income of about 60-100K a year halfway or 3/4 of the way through my goal of being financially independent?

Sorry if that was too long

Seeking

2

Welcome. Here are some of my thoughts regarding what you’ve written:
My wife is my business partner. She’s about the only person in this world that I’d start a venture like this with. Other people have gone into business with family and friends. Sometimes it works. Often it doesn’t. You would have to be very clear on the agreement between you and your friend up front and that still might not be enough to smooth out all the bumps in the road. It could work out for you, but be very careful.

Capital - One of the great things about investing in RE is leverage. You can take a portion of your money and control an asset worth many times more than your money by buying a property with a down payment. You can buy a property in cash and have the income from that one property or you could put some of your money down on many properties and control more properties (bringing in income on all of them if done correctly). I would be worried about too much debt too, but only if that meant I owed too much on our properties because we purchased several bad deals. Overborrowing on a property to the point where it doesn’t cash flow is a bad thing. Finding an outstanding deal and getting into it with no money down while still getting cash flow is a really good thing.

In general, you have to work hard and take on some type of risk in order to be successful in any type of venture. You have to be willing to do this or you can sit on the sidelines and be jealous of others who are taking the risks.

What you’ll generally find about using your personal house as a rental is that it won’t cash flow. Once the acquisition cost gets so high for a house, the market rent generally won’t support those higher costs. You’ve probably already read it on here before that a house you would live in generally makes a horrible investment.

There are several posts on here about landlording. Some about the way to do it. Some about mistakes to learn from. It’s not always rosy and it’s not always horrible. It is, however, a risk and a responsibility. The resident’s responsibility is to pay you for the use of your property and to use it in a reasonable manner & take care of it. Your responsiblity is to provide them with a good place to live. This means not only fixing things, but also paying ALL bills on time. Would you like to be a tenant who pays their rent on time, but is getting kicked out because their dirtbag LL decided to gamble away the rent rather than paying the mortgage and now the house is in foreclosure?

You have to own multiple properties to make it worthwhile financially. You are not going to make a life-changing amount of money by owning two houses. If you only have two places and one of them goes vacant, it hurts a whole lot worse than owning a dozen places and having a vacancy.

You also may get crappy tenants in those couple places and think that LL’ing will always be hell. You have to screen your tenants and even then, you won’t always weed out the bad ones. Many tenants are like children. They’re in the situation they’re in because they make poor decisions. You as the LL have the money and credit to buy a house. Many times they do not. Many tenants will have things like the biggest flat screen tv they can afford, but they won’t have a dime to their name otherwise. Many times people CHOOSE TO BE POOR.

You’ve given yourself an eight year timeline to achieve your definition of success. Many factors will determine if you’ll meet that 60-100k goal on time. Your credit and income during those years giving you the ability to get loans will be huge. A good banking relationship so you don’t have to put a huge amount down on your deals. Your ability to find good deals in your area. Your ability to run the business like a business. Your financial discipline to make hard but wise choices with your money (not living in the most expensive home and driving the most expensive car/truck you can afford). Etc.

Remember, many many people don’t make money in RE. You’ll talk to people who think owning any RE is a “good investment.” It all depends on the deal. I personally know people who are supplementing their rental “investments” with hundreds or even well over a thousand dollars PER MONTH on a 30 yr loan who think that’s ok because “the rent almost covers the mortgage.”

Thank you for your service. If the USAF isn’t for you, take advantage of all the experiences you can (GI Bill, Tuition Assistance, tax benefits, paid travel, etc) while you’re in because the military will take advantage of you too. Serve your time honorably and set yourself up for a successful future.

A final thought… Don’t count out doing REI activities while on active duty. There are some people on here who have done quite a bit while on active duty. A flight student posted on here about a year ago. He was only at a duty location for a little less than a year, but he got into wholesaling there. My wife and I have built up a good rental portfolio the last few years. If it was easy, everyone would be doing it. There are just some extra challenges for us military folks. Good luck with everything.

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My basic rule is that you should never go into business with somebody you can’t sue. I am not saying you are going to sue them but in a business relationship you need to be able to hold everybody associated with the business accountable.

If you can’t afford to lose the friendship or it will make the next cook-out uncomfortable then don’t do it.

If you look at it on the positive side, wouldn’t it be better if you both started buying houses in parallel. That way if you can handle buying a house a month after a year if you did it together you would own 12 house the equivalent of 6 houses each. If you did it individually you would have 24 houses and actually own 12 houses each.

You get rich faster that way.

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Close friends and business are often a problematic pairing. Tread carefully.

5

I should have seen it coming by wanting to team up with a friend. I did not want to mention it at first but, as I have mentioned before, he is not very business-minded and I do not think he would want partnership/business as much as I would. I guess the best way to do it is go at it alone, all the while recruiting good team members to be a part of my business.

I was curious about wholesaling. Everyone says it is a great way to start out in real estate for a beginner and some veterans say they can make about $5k on a deal on average. If it were that simple, why don’t people do this a lot more and concentrate on it solely for income?

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I was curious about wholesaling. Everyone says it is a great way to start out in real estate for a beginner and some veterans say they can make about $5k on a deal on average. If it were that simple, why don't people do this a lot more and concentrate on it solely for income?

There is an entire Newsgroup Forum for Bird Dogs and Wholesaling. Read through some of the previous posts. You can also use the search function, by your name at the top of this page, to aid in your search. Good luck!!

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Welcome.

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Wholesaling is one of two ways I recommend for a beginner. The other is options and lease options which, in my opinion, are an easier way to get started. With wholesaling, you need to beat down the homeowner to get the price you need to be able to flip it to another investor. Lease options don’t require such an adversarial approach.