STOP THE PARALYSIS!!!!

General Real Estate Investing
1

OK THATS IT! haha

I need help in order to get my first deal underway. I have read numerous books, listened/read the sheets course and I STILL have questions about coming up with the money.

Lets take an example…

So far the steps I know to take are as follow:
1)Screen newspaper and websites for homes in your market that fit the criteria you want which are in my case 3br, 2 baths where i can get 1% in rent of the purchase price.
2)screen the sellers via phone to see if they are motivated to sell
3)if they are, schedule a visit
4)appraise the property with one of the many methods(comparing to local homes, etc)
5)make sure the cashflow is positive of $150 a month or more.
this is where it gets hazy
5)make a deal 80% MAX of the asking price.

Ok so I know how to get that far. I have good credit about 807 and 790 and I want to know the way to get a home for about 300,000 with no money out of my pocket.

Do I contact lenders, if so where do I find them?
Do I go to convential banks like Chase, Washington Mutual, etc?
Do I get a line of credit from opening credit cards?
Do I sell stock and pay cash?

Then there is all the mumbo jumbo about assumable loans, wraps, etc. Which I am clueless about.

So these are all the things I am confused about and that are holding me up on my first purchase…please help me clear up the confusion with the most in DETAIL answer you could give…

PS-Feel free to comment on the steps that I THINK I have under wraps, if I am doing something you feel is wrong or that can be done better let me know.

2

start running an ad in your local paper and when you get calls start making deals. The old adage I’ve found in most REI books is if you can get a great deal, the easy part will be getting the money to fund it. With your credit you should have no problem with banks and if you keep the LTV low (like 65%) HMLs will love you too.
Good luck!

3

Hi,

I see you have already got your system, and i think is a good one, with good understanding of the correct investing principles ( feel free to tell me which were the books you have read that most contribute for it).

About your doubts, who haven t ?
But remember, we only can overtake our fears by facing them, so go for it.
I m also in an identical position, although i m not absolutely begining my investment career, but restarting it after some painful mistakes. As i m not felling confortable with the idea of investing much money, so i m thinking in doing my next few businesses as sandwiches lease options deals. It could be a good way for you, also.
What do you think about it?

Thanks,

4

The first step you should take is to get pre-qualified for an investor loan. The best place, imo, to find the widest range of loans is through a good, preferably referred, mortgage broker. You can get a referral through another active investor. The best place to find them as at the nearest REIA group.

If that doesn’t work, you find them by looking through the phonebook and calling them. Call several and ask if any of there brokers specialize in investor loans. If they do, ask how long they’ve been doing it and if they’re investors themselves. The last question doesn’t have to be a yes, but if it is, you can rest assured that they’re going to find the best loans available.

Finally, choose one to go with. You’ll probably go through a dozen or so if you continue investing before you find someone that you really click with, so don’t get emotionally attached :slight_smile:

Now, on to your steps:

1)Screen newspaper and websites for homes in your market that fit the criteria you want which are in my case 3br, 2 baths where i can get 1% in rent of the purchase price.
Good idea to get to know properties and to practice your phone skillls, but be prepared for a long wait on the “deals.” It’s better to have them call you instead of you calling them. AND it’s NOT 1% rent of the purchase price! It’s 1% of FMV. Hopefully, you’re buying below FMV. Also, this is just a rule of thumb. However, the “thumb” may not work in your area. That’s something you’ll have to research.

2)screen the sellers via phone to see if they are motivated to sell
If they call you, they’re motivated. This is where most people screen themselves out of the business. If they’re interested in selling to an investor, then setup an appointment.

3)if they are, schedule a visit
See above

4)appraise the property with one of the many methods(comparing to local homes, etc)
Let the appraisers do the appraising. What you need is a good idea of what the property is worth, so that you can get it under contract for a discount, THEN let the appraiser loose on the prop.

5)make sure the cashflow is positive of $150 a month or more.
this is where it gets hazy
Positve cashflow is good. The more, the better

5)make a deal 80% MAX of the asking price.
Nope. You make your offer based off of FMV, not asking price. Asking price may be more, or less, than FMV. Everybody has there own personal figures to decide what IS a deal. The general guideline is 70% of FMV minus repair costs, but you have to use whatever works for you.

Raj

5

Wow thanks for the response, thats exactly the kind of responses I am looking for they are direct and help SO much.

Ok I think I found a problem, what do you mean by FMV compared to asking price, I know theres a difference but just not toos ure what it is.

Also, you recommend getting an appraiser for every property I check out, at what stage do I ask them to come check the house, how much are they?

6

Ok I think I found a problem, what do you mean by FMV compared to asking price, I know theres a difference but just not toos ure what it is
FMV (Fair Market Value) is what the property is worth today. Asking price is what someone is asking for the property. If the FMV of a property is $100K and the seller is asking $120K, and you offer 80% of ASKING price, then you’ve just paid retail. On the reverse side, if the FMV is $100K and the seller is asking $50K, then it’s already a good deal. Why risk losing it because you offer 80% of asking price?

Also, you recommend getting an appraiser for every property I check out, at what stage do I ask them to come check the house, how much are they?
No I did NOT recommend gettting an appraiser for every property that you “check out.” You need to learn what properties are worth in your area so that you have a good idea of their FMV when you do look at them. You don’t need an appraiser until you’ve gotten a property under contract. Not sure how much they charge in your area. Here, it’s about $300-350.

Raj

7

FMV is Fair Market Value. Often times asking price is only the seller’s opinion of how much the house is worth which is of course very biased.

You do not want to get an appraisal on every how you look at. Rather a part of your REI education should be getting to know your markets so that you can acurately estimate FMV on every house you look at so you can make an offer quickly. When you make the offer you make it contingent of financing, appraisal, and inspection. Then once the offer is accepted you have the inspection and appraisal done.

You will need to screen appraisers in your area or get a referal from an investor in your area. They can run up to $300 a pop but most investors work out a deal to get them around $150 or so based on the repeat buisness.

8

JP,

Almost everyone has recommended that you get to know your market. The best way to do that is to get out there and look at houses. You seem to have a reluctance to do that. If you can’t get motivated to go look at 100 houses in the area where you want to invest, in my opinion you’re not going to make it. Looking at 100 houses does not include houses that you see on your computer screen - I’m talking real houses that you can touch. You can’t get started in REI sitting at your computer - get out there - look at a bunch of houses and meet people. Being in the rental business means dealing with people every step of the way.

You can’t pick a random number to use for cash flow. $150 per month might be a great cash flow on a very low priced house and horrible on an expensive house. I described in great deal how much cash flow is enough - re-read my earlier posts (from another thread).

All of the experienced investors have basically given you the same advice - you just don’t seem to want to follow it. You seem to be flailing!

Mike

9

Good assessment Mike!

I strive for at least $125 a month ($1500 a year) positive on all my properties but you can literally but a rental property here for $40K. If you have to pay $300K in Connecticut, then the PCF should be stronger! If not, your cash-on-cash return will be pitiful.

I also stated in the past that JP seems all over the map and needs focus…I think that is really showing through now.

JP - listen to what Mike is telling you – he’s “been there, done that” and probably has a drawer full of t-shirts to prove it! We are not trying to hurt your feelings here, but you need to know the hard realities of it all! I, and I’m sure Mike and all the other seasoned investors, have a pretty good appreciation for market value in their chosen areas…this is gained by working your areas and knowing them cold! You’ve got to know what houses are selling for, what houses are renting for, how much taxes are (approximately), and what insurance will cost you. Otherwise you will have no idea whether a property will cashflow or not. There’s no magic website, there’s no spreadsheet, and there’s no tag on the side of the building that will tell you this.

There comes a time in your investing process when you have to stop what you are doing and GO GET IT DONE! You have to go meet sellers, go meet financing folks, go meet realtors, go meet other investors! GO!

Keith

10

OK I apologize…

I just ask questions I gues to get the greatest amount of clarity and focus to my work before I start. I guess thats the wrong way, I was told once that asking questions is never a bad thing. Perhaps I am asking way too many questions…

I am going to start reading more and viewing homes, my parents are giving me a lot of first hand advice on the value of homes in NY and Long Island since we have lived here for the last 30 years.

I also have an aunt who is a real estate agent, perhaps I can get in touch with her and have her start sending em MLS properties that match my specifications so I can visit those homes and learn to assess them.

11

jp,

No one is criticizing your asking of questions (though you do ask a lot!)…people are questioning what it is that you are doing with the information that you are garnering.

Keith

12

Ok cool. Well I come from a school of thought that you could never have enough questions asked. The questions I ask are building a solid base of knowledge that is helping me.

I have been learning about investign for about 3 weeks, and my knowledge has increased a hundred fold. I plan within the next week to start looking at tons of homes, going to every open house that I can just to see what homes go for, to see the taxes, etc of my area.

I appreciate everyones criticism, and if I ask too many questions just tell me.

13

it’s kind of like the saying goes JP, “the more I learn, the less I think I know”