First time to post on these boards. I have read this and other forums for weeks now. I have listened to several books and read several more books focusing on Real estate investing.
My first question is, what is the differences in Bird-Dogging and Subject-to type strategies? For what it’s worth, this is a broader question. What other similar investment techniques may be helpful to a first-come real estate investor? Where can I learn more about them?
My basic plan today is to take the gained knowledge into action by beginning to look for those “Deals” that can begin making me some money. I hope to use Subject-to investing techniques to build my initial cash flow so that I may make bigger leaps into REI. By learning to “Find” the deals I hope to better my understanding of what makes up the best deals. After accumulating some cash and having a better understanding of what it takes to get things done I plan to move toward investing more long-term.
Once I have the cash and some first-time mistakes out of the way I plan to purchase investment properties to be used as rentals for 5-7 years to and resell.
How does this plan gage? What documents and tools will I need to begin both Subject-to strategies and Home investment purchases? There a 1,000’s of legal documents out there that relate to REI. What ones will I need? Do I need to have a legal adviser review and make changes to these?
What are some great books you may recommend reading on my plan? What other “First time” REI tips can you give other than what can already be found in several topics on these boards?
Since we don’t know much about you situation, it;s hard to give you advice. There are some basics that I know. Here they are.
It helps a lot to have a FICO above 680.
For new investors, it’s easier to find a duplex/mult- fam and live in it while you rent out the other units. Then you can leverage your equity for a down payment on another property.An owner Occupied finance requuires less money down.
Books I find helpful:
" The Millionare Real Estate Investor" by Gary Keller
“The ABC’s of Real estate Investing” by Ken McKelroy.
Most of the “Rich Dad Poor Dad” series books.
If you you’re handy or can manage a renovation project, you can try the Rehab/sell or rent strategy.
Tell us more about your situation so we can help you better.
when you say “subject-to” deals are you talking about asingning contracts to other investors?
if so i think you and me are at the same place as beginer re investors. let me know if you run into any interesting info on those subjects and vice versa
Let me add some additional details, however, for the sake of maximum efficiency in terms of helping others, my specific situation shouldn’t be the only thing to consider. I think many first time REI are in the same boat I am.
At last glance I had a fico score of 600. This should be 650-750 at this time as I have made numerous improvements to my score since my most recent request.
I am currently working a 9-5 at a good job. I’m planning on maintaining my current posistion until I can surpass my current income with my assets. And by surpass, I want montly cash-flow that matches my current job+benefits. Before I leave.
Purchasing a duplex/multi-family home is certainly one major option I am looking into. I’d love to locate my first investment property in a multi family unit that I can live in for a period of time. I see several benefits to this.
Though I work the 9-5 I don’t want to actually spend any noticeable volume of money on starting my REI strategies, other than actual learning materials. I’d much prefer to build cash to spend in other investments via, bird-dogging and other “Referal” or “Finders fee” strategies and work with that money instead of cash generated by my job.
IMHO you need to learn to buy Subject to NO credit or cash… Keep in mind that Subject to buying can be profitable for both highly leveraged transactions and transaction with a ton of equity…
You need to learn the difference between the two and their very different exit strategies…
Well, it depends on how much money you can raise with your job or birdogging etc… You’ll want to join your local landlord/RE investment clubs. What you’ll gain is advice and networking contacts. You may find youself in competition with other birdoggs,wholesalers etc… In the short term, do this. Go to equifax.com and spend the $40 for their 1 yr. subscription. Get the the one that gives you a total of 4 credit score reports over the next year. Then you’ll have a good idea of your score. They also have a product that gives you all three credit beureus report. Then you can contact you local bank/mortgage broker and tell them you’re looking to get a 2 to 4 unit owner occupied home. There are a lot of financing options available. You have to pay money for rent anyway. But in a multi fam you may be able to live virtually rent free. Doing this will do two things for you. You can build equity and use some of it for a down payment for your next property in a year. Also, you can still continue with your birdogging option. If that option doesn’t work out like you think,you can always use the equity in your home for a down payment on your next investment property. Then repeat the process again… Just be careful with how much equity you take out. You don’t wan to be maxedout in you r equity. One final point. If you can live in a multi-fam that needs work, you can learn to do a l of sweat equity work to the property. This happens because proerties that need work sre usually very cheap. But the after repaired value could be high enough for you to take out $20k -$30k in a refi or home equity loan to start your investing career.
Ultimately, after establishing a few rentals and finding success in Bird-dogging or other “finders fee” strategies I hope to add “subject-to” deals to my list of money generating options. I think your talking about me purchasing subject-to deals to use in bird-dogging. Is this a smart way to invest in properties? Wouldn’t transferring the property from one hand after another complicate things and lessen the potential for profits?
I’m still not 100% clear on the leveraging concept. Tons of equity is best in subject-to deals, to the best of my understanding, how would a highly leveraged property differ from one with a lot of equity? Aren’t leverage and equity one in the same, for the most part?
When it comes to subject-to deals and purchasing of investment property. I have some basic knowledge on how-to do these, but not the confidence to actually put money into them. I hope to learn more about REI by bird-dogging for profits to invest in learning how to do these and other strategies.
I guess in many ways, I’m asking some far too broad of questions. To narrow some things, what documents are important to have? Where can I get them? Do I need to have them reviewed?
What if my area does not have any RE clubs? Seriously, we have one… it’s a $200 membership that, honestly, turns me off to it very quickly. Not only do they crank money from membership fee’s they’re also setup booths at each meeting and charge large amounts to each vendor. I still see plenty of benefits in going to a few of these meetings, but don’t think it is the most valuable source of information for me at this time.
Edit: to clarify and add some things
As far as paying $200 for a member fee, I agree that’s a bit steep. But if you can go to the meetings and try itout first, you may be able to network and make contacts. It may actually be worth the $200.
Still hoping to get some answers on my more specific questions. I know there is a lot here, I don’t expect to get everything answered and honestly don’t know how much of a answer you can give to some of these.
What documents do you need or should you have for finders-fee deals?
What documents do you need for Subject-to deals?
Where can you find some of these documents?
Do you need to have each document reviewed by a adviser?
Leverage is often referred to by just about all REI investors, what is leverage in more detail? Where can I learn more about this concept?
Are there other good start-up strategies for REI? Should someone seek to start somewhere other than with finders fees?
What about LLC’s? Why do some say create a new LLC for each of your investment properties and hold them in one master LLC? Do you need to use LLC’s anyway? How often do they save your butt? Any horror stories to learn from?
What about finding the deal? Do you use websites? Do you find that one lead, lets say pre-foreclosures are easiest to find? Do you have any tips for non-web related sources and how to obtain them?
What about your financial advisers? Do you really need a “team” of supporters when you first start out? When you are farther along? How do you find your “team”? What are the best things to ask and to whom should you ask them?
Noob, you might get better answers if you post a separate thread for each question. It’s confusing to have so many, and I look at all your questions and you are literally asking to have someone write an entire book for you.
Equity is the value of your property after you deduct everything you owe on it. That’s what you get to put into your pocket when you sell (minus Uncle Sam’s cut)
Leverage is using borrowed money to controll more property than you could if you put cash in.
A basic example. You have $10,000. You could pay $10,000 for a $10,000 property and you would be debt free and controlling $10,000 worth of property.
If you use leverage, you place your $10,000 as a down payment and borrow $90,000 and you buy a $100,000 property. You have gotten control of $100,000 worth of real estate and only used $10,000 to do it (that is the leverage).
However, when you use leverage, you also get a $90,000 debt, so if you use leverage you must be very certain that you know how you are going to pay back the $90,000 and where that money is going to come from.
Welcome…dnvrnoob - your questions are good ones and for the most part very basic (I mean absolutely no offense by this). That being said, it may be best for you to spend a bit more time “searching” this website and especially this forum. I think you will find that most, if not all of your questions have been answered before.
Thank you for the clarification. This is what my understanding was, essentially. I guess I was just confused by the comment about leverage by Michael and wanted to be sure I didn’t have the whole idea wrong.
It seems he is trying to explain that you can buy properties successfully with either highly leveraged or high equity. This is a fairly interesting concept. From what little I know about subject-to purchasing with intent to re-sell you want to avoid subject-to deals where the owner does not have a lot of equity. Can you elaborate on why a subject-to deal might be worth while if the owner still owes 90% or more?
I also realize many of these questions are fundamentals, and that is sort of the point. I have recently purchased he No-Nonsense Real Estate Investor’s Kit by Thomas Luicer. So far this book promises to answer a lot of these initial questions and fundamentals. I’ll update as to how good it turns out to be.
I’m hoping to sort of narrow the search for myself and others. Many of these questions are merely glazed over in forums and books because they are the “basics”.
A property with only 10% equity is probably not going to be a good purchase. There are a few exceptions, but generally, you want to gain more instant equity than that when you buy.
You always have to consider the quality of the property, the location, how much money it generates.
If you are buying a subject to for yourself, the terms of the loan are a consideration, also. It’s a lot more attractive to take over a 3% loan than a loan that is 14%.
Most of the time, the people who are buying subject to, are intending to turn right around and re-sell the house. If all you’ve gotten is 10% equity, then there isn’t room for both you and your potential buyer to make a little money.
If you are in a tight market, and there is hardly anything for sale, and what there is sells fast, maybe 10% might be the very best you could do when first starting out. Making $10,000 beats making nothing, but you are really at risk of making nothing if that is all the play that there is in the deal.
Usually, your best chance of getting asubjct to deal is in a market where real estate isn’t moving fast and the seller has had trouble and can’t get his house sold. So you search until you find someone who has equity, but is fed up and just wants to get rid of the house.