Starting to get scared…and I know I know fear is the #1 reason people don’t invest so I keep telling myself STOP!
It’s just that some of the forums and posts that I have read lately have been discouraging…Like I’ve stated several times, I am a 21 year old prospective investor who is very very very interested in the possibilities provide.
However, there are two things.
I recently got a book called: Rich Dad’s Advisors: The ABC’s of Real Estate Investing. In the book he flat out says he doesnt agree with 0 dollars down. However, thats all that I can afford, I just started my job and am looking for real estate to bring my income up to about 60-70k within the year.
So back to the point of this email…
I have started the process and am scared. So far I have picked a location which is New Haven/Hamden CT (06518). I have contacted realtors who have started to send me MLS listings.
Heres where the help comes into play.
I have started sifting through the prior rent that the home generated compared to what the monthly mortgage payment would be if I took a loan out with the principle being the list amount. The homes that are profitable are the ones that I have flagged for further review.
Sound good so far? doing everything right?
Now like I said, i have $0.00 to put into this project and am looking to do it entirely with OPM. What are the next steps that everyone recommends I do?
-Negotiate the home to get 70% of list price?
-Fix the home up(But with what money?)
-Rent the home out?(What if I can’t cover the first 2 months with no rent?)
Are there any step’s I am missing and any advice that people can give me?
The Timid New Investor who will become a GIANT
first, you need to be figure in more than just the mortagage payment to figure out whether you are at breakeven. You need taxes, insurance and probably need to think about prop. mgmt as well since you don’t live in the area. I saw where you quoted some book that told you you should be $1000 positive each mon th a property. That’s so far from reality its funny. As you are finding out and will see, find properties that are truly breakeven is real work and requires a lot fo looking.
second, you can forgot about offering 70% of list price in this kind of real estate market and getting any takers. You might get lucky and find some one in foreclosure, but then probably a 70% offer will leave them upside down.
third, you got to have some cash to deal with repairs and make the payment during vacancy. You don’t need a mint, but you really should have a couple grand handy otherwise you will creat fianancial havoc for yourself. The is truly counterproductive.
if you have not already done so, go talk to a mortgage broker and figure out what type of loan will work for you and how much you borrow. in the meantime, you need to be not spending every dime you make from your job and buy a little pool of cash to work with.
Last and not least, don’t be in a rush!!! take your time and find the RIGHT deal that works for you. don’t gte sucked up into the thinking “prices will be higher tomrrrow so I have to buy today”.
I don’t want to discourage anyone’s dreams, but I don’t think that you should be focusing on rental property just yet.
There are stages that every investor goes through in their career, unless they are born with money or have a high income from another source. At just 21, you have many things going for you, so use what you have to your best advantage. Also, avoid the things that can bring you down.
Rental property is great for building long-term wealth, but it does not cash flow well until it is free and clear. You need to have some reserves and some staying power for this program. Save this type of investing for later when you are ready for this stage.
Right now, you need to concentrate on getting your cash flow and income up. One of the very best ways to do this is bird-dogging and wholesaling. You don’t need very much money or credit to do this, and the paydays are pretty good.
Plus, the education you will get doing this will give your career a high-octane boost. You will really learn your market, and you will be able to quickly recognize a good deal when it comes along.
Done right, there is very little risk to wholesaling. The most you might loose is a small earnest money deposit. This should eliminate the fear that haunts you now.
Without the burden of fear, what could ever stop you?
You have youth, energy, and time on your side. Use these advantages to find deals for others who don’t have them. There is plenty of time later for building up a rental portfilio when you have the resources to be successful at this.
Thanks for the advice and I look foward to seeing what else you have to say. Do you have any advice on bird dogging, i am COMPLETELY new in that area and could use a crash course. Long Island is a very expensive area to buy, so perhaps my best still to look out of state.
I basically have a <2 year goal of making this a permanent job.
Getting started is important…like the others the right deal is really what you are looking for…If you are limited on your on cash…do the opm thing but realize you will need additional if you plan to hold on to the property for any length of time (for repairs & etc.)…I would suggest maybe subject 2’s or lease options as a start to build your cash reserve then you can delve into long term investment properties…Another wild Idea! get your real estate license in the state you are in…Once you learn the game from the inside out your fear will all but disappear and to boot you will be able to earn cash as you close deals that can be used to build your cash reserve…
Awesome, once again growing my knowledge base. How much on average do you need to add to a monthly payment for homeowners insurance?
I have done the work of scoping a location, then a sub location where there is a high need for homes. The population is growing as well.
Like I said baby steps, I am going up to the area this weekend to look around and see a couple homes an agent had sent me via MLS. Any advice?
one of the easiest ways to get into RE investing is to buy your own home and rent out the rooms to
this is not possible in extremely expensive markets nor is it advisable. if you can’t do this, then
definitely look out of state. you will definitely need capital to pay for vacancies, repairs,etc.
if you’re short on funds, i recommend getting a 2nd job to bootstrap your savings.[this could
be birddogging or just a regular job]. one of my friends had a part-time job at denny’s.he worked
a total of 80hrs/wk for 6 months but he had 20k in savings after 6 months. more than enough to
cover any vacancies on 2-3 properties.
learn as much as you can about investing AND real estate cycles and the economy in general.
this will definitely help you.
Those are great quotes! Do you mind if I steal them?
The Bird Dog, Wholesaling Forum is a good place to start. Also, search the archives.
Read the free stuff in the Investor Information section of this site.
After you read the free stuff, you might want to invest in your education by buying some of the courses and books offered from this site. Bill Bronchick’s book, “Flipping Properties” has good information to get you started. Also check out Steve Cook’s stuff. For a little more money, Vena Jones-Cox has a wholesaling course that’s good. (There are other good one’s, I’m sure, but I haven’t got experience with them to offer an opinion.) “Real Estate Jobbing 101” by Barry Grimes (on this site) looks interesting for a beginner, but I don’t have it. Anyone else know?
And John $Cash$ Locke has a Bird-Dogging book that is currently being updated. You probably won’t want to miss it whenever it becomes available again.