Where Would You Start?

General Real Estate Investing
1

Hi All-

I am a total newbie to this whole thing but really want to learn and get started with real estate investing. I have worked some with a financial adviser that I trust. A few years back three now to be exact I refinanced my house and seperated some of the equity from it. This was with the intention of purchasing a property. However, I have been to nervous and scared to be honest to take the big jump. So how do I get started? Where should I start investing? Maybe a better question would be where would you start?

I was originally looking a new construction houses right outside of Huston and Austin Texas tha were selling for 130’s range. I have also looked a little bit at Indiana for houses in the 50 to 60’s range. The lower range feel more comfortable for me to get started becuase if things don’t go as well as planned the payments are not as huge and even backing out I would not lose as much. I am kind of leaning towards this right now but honestly not sure where or how to do this.

I recently found the following report from CNN Money:
http://money.cnn.com/popups/2006/fortune/invguide_realestate/index.html

And then on the same day found this website which is selling “Turnkey” properties that are rented out with a 1 year lease and most of them are making a positive cash flow of 250 or so.

The nice part about the properties is they are all 50,000 range which feels a little more comfortable for me to jump in. Yet not living in the area and knowing the neighborhood scared me a good deal. Unfortunetly living in Southern California right now there is not a lot of investing in my area for anything under 400,000 or so.

Any comments? How did you get started investing and what should I look for in a first deal? I know the first deal has to be rock solid and I would like to connect with a real estate investor/adviser. I have been looking at the Marshall Reddick’s investors network and even gone to a few meetings. He has mentors that are will to review properties which might not be a bad idea.

Anyway any help would be apperciate!

Thanks
Chris

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Chris, the best advice I can offer you is to slow down a bit, and take some time becoming educated first. You’re a new investor with money in his pocket. That’s a dangerous combo.
Starting out, I would have to say the safest and easiest way to being in with lease options. They are virtually risk free, and will allow you to invest without coming out of pocket any great amount of money. Then, once you become a bit experienced with options you can move on to other techniques. A step at a time, my friend.
Good luck.

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Hi AJ290-

Thanks for the information first of all. I have been trying to move slow and heed your advice. It was two or three years ago that I refi to pull equity out with the intention of starting to invest. However, I know that it is a huge risk and there are lots of things to learn so I have held of from moving on anything.

Can you point me in the direction of where I could find out more about lease options? THis sounds interesting and I would like to learn more about how to get involved as an investor. The way I understand lease options is when selling a house. The buyer can not afford to buy th ehouse out right and therefore the lease and a portion of the monthly rent goes towards buying the house at the end. How does this work from the investors side of things? Would I find a house with a lease option and then get a renter in it or what?

THanks
Chris

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And then on the same day found this website which is selling "Turnkey" properties that are rented out with a 1 year lease and most of them are making a positive cash flow of 250 or so.

I’d say that is BS. There are a million of these companies advertising “turnkey” properties and the vast majority will lose money, certainly not make $250 per month. Real estate investing is a LOT of work and the thought that someone else will do all the work and you’ll make the money is simply a fantasy. Most of these schemes are aimed squarely at newbies who don’t know any better.

I would strongly suggest that you do a lot of study and research BEFORE you buy anything. If you are going to be in the rental property business, it is extremely important that you understand the real world expenses; real world cash flow; and the reality of dealing with tenants. The vast majority of newbies fail in a short period of time. The number one reason they fail is lack of cash flow and the number two reason is inability to deal with the tenants.

I would also suggest that you join your local REIA (real estate investors association). Make friends with the SUCCESSFUL investors in your local area. They will be a great source of information and even deals.

Good Luck,

Mike

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Chris,

I agree with Mike about getting involved with your local REIA clubs. As far as lease-option, high general overview, I like the book Buy Low, Rent Smart, Sell High by Scott Frank & Andy Heller. You can get it on Amazon for $13. It’s a good general overview to start with.

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Chris, first I must say I agree with Mike. Those turnkey package deals that are being peddled are BS. Stay away from them.
As for lease options, the best source in my opinion is The Naked Investor. See my sig for a link. Good luck.

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I started in 1957 by buying a commercial store front in Garden City, MI. I then read Bill Nickerson’s book “How I turned $1000 into $1 mil in my spare time in Real Estate” - so I did. I was a millionaire by the time I was age 30 which translates to over $10 mil in today’s dollars. Point being, you don’t have to spend thousands to take the so-called “boot camps” to learn this business. Just read good books and learn.

What I find totally objectionable today is the incredible BS being “sold” as “fact” by today’s self-appointed Gurus. Be extremely careful as to who’s advice you follow!!! This is a respectable business for professional investors. Keep your ethics and reject the “get-rich-quick” schemes and the “this is how you beat the system” schemes. Just keep an honest prospective on your overall plan. Serve your customer and your customer will make you rich.

Pick an area in which you think you would feel comfortable and then try to learn everything you can about that area. Ignore all the other options to start - plenty of time later to expand your knowledge base. Then make it work. Nothing succeeds like success. Once you feel comfortable, expand into other areas for diversification. FYI, I bought a 4-unit apartment building in Long Beach, CA and parlayed that into the $1 mil I mentioned. But now I own SFR, Apts, Commercial, raw land, etc. Allow yourself time to grow into this business. There is SO much money to be made, it doesn’t make sense (cents) to cheat or break the law. There is NO get-rich-quick scheme. It does take work. This is the easiest way I know to become wealthy but why risk taking illegal chances when the legal way is so easy?

No one, including me, knows everything. That’s why I’m here on this website - to try to learn something new. I’m very disappointed at all the misinformation being offered and absolutely angry at the liars, cheaters, charlatans and grifters that regularly offer their “expertise.” This site is NOT an exception. There are many on this site who have absolutely NO idea what they’re talking about. You must take the time to learn what is correct and what is hype. Sorry, but that is today’s market option. It doesn’t happen overnight. Give yourself some time to learn.

My philosophy is that income property means “income,” not feed the alligator. In the late 1960’s at least in SoCal, many high-income professionals such as doctors and attorneys started buying income properties for tax benefits instead of for positive cash flow. That put me out of business in SoCal. So I just moved to another area where the dummies hadn’t yet taken over. I’m currently in central Texas. Positive cash flow means that after ALL expenses, you still have money in your pocket. My absolute minimum acceptable rate of return is 10% triple net. That means that after I’ve paid all fixed expenses such as taxes, insurance, utilities, maintenance, management, vacancy factor, I still have a positive cash flow. Note that I did NOT say mortgage payment. If I choose to have a mortgage, that payment comes out of the positive cash flow. So many “gurus” ignore this point that it is absolute scary to me. In reality, I buy properties with 25% to 40% triple net returns. It’s so easy! Why take chances following the charlatans that tell you to go against the current laws?

So read lots of books. Read lots of websites. Keep in mind that the laws of this country apply to you and structure your operations accordingly. If it sounds too good to be true, believe me, it IS!

Do it correctly!

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Hi Chris. I am in the Houston area. If you are buying new construction at $130k you are paying retail for these houses. The problem with new construction is that you will not be able to sell that house for years because there will be more houses being built as you try to sell yours. Why would someone buy your “used” house when there is a new one just like yours down the street for the same money? Also you don’t know what the neighborhood is going to turn out like. If they are selling them new to investors that means they are not able to sell them to natural buyers (which is always the first choice when selling) This means that the neighborhood is most likely going down fast and becoming a ghetto or barrio.

You say that you have separated some cash out of your primary residence. I say good. But that has nothing to do with investing it in real estate. Real estate is no better than any other investment except for leverage. You can get houses fix them up and rent them with no money out of your pocket. What I would do (what I do) is buy single family houses with 3bedroom 2bath 2car garage 1500 to 2000 sqft with an ARV of around $100k that is bank owned and for sale for $70k or under that needs $10k of fix up. That would be paint and carpet and no more that 1 system repair (A/C, roof, plumbing, foundation). Buy it with a rehab loan that supplies the fix up funding when you purchase it. That house in Houston rents for $950 to $1100/month. You should have a PITI of around $600/month. After you buy it and fix it up you would then have $20k in equity and $100-$200/month positive cash flow. Since you haven’t used any of your own cash you can do it again and again until you have covered your living expenses and can quit your job.

Of course this is a rough guide but it is in the general direction that I would suggest.

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Bluemoon: Chris is in Southern California, would you recommend he get started in Houston? The reason I ask is that I’m in the same boat, only in Phoenix. Phoenix is one lousy market for an investor, the rents are so low it is almost impossible to cash flow.

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Houston works. You can almost cash flow buying houses at retail. I looked up a retail house that they are asking $72k with a PITI of $646 that would rent for $1100 the cheapest rent in the neighborhood is $985. I can’t recommend anybody investing away from home, but the climate here is very good. The key to making money in real estate is jobs. If people have jobs they can afford rents. The unemployment rate here is 3.8%. And of course you can actually buy a house for a reasonable amount.

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OldGuy,

That is some of THE BEST advice I have read on this site! People like you are THE best source of information out there. You’ve done it, you didn’t sell people PLANS on how THEY COULD (?) do it.

There is more Bulls… out there than sub-prime loan defaults. I LOVE reading the posts that start out… "NEED TO FIND INVESTMENT HOME …JUST QUIT MY JOB…MUST MAKE $50,000 AT LEAST!!

Good GOD!!! Are you kidding me???

OLDGUY,

Please keep posting here. I know there are lots of people here (especially me) who will learn from your experiences.
Tell your stories…In my opinion there is NO BETTER way to learn than listening to someone who has been successful and just TELLS you the whole show.

I’ve learned a TON from a 70 year old man who has a GREAT memory and just remembers all the small details. Stuff that to YOU might not seem important, to US can be priceless. The guy I mentioned is VERY quiet, he’s short, around 5’ 3", he told me about a building he owned that was leased by a body shop, the shop owner was a great big animal. Bodyman figures this guy’s a push over, late with the rent 4 months in a row. Well my little mentor goes down there and politely explains to bodyman that it is not acceptable, body man starts screaming and yelling, telling owner “That’s not MY problem and there isn’t anything you can do about it!”

Building owners response???

Next morning building is COMPETELY surrounded by DUMPSTERS.

Hey, we got to get a new roof on the place. Sorry, but can’t be helped, guess it looks like YOUR problem now!!!

NEVER LATE AGAIN!!!

Let 'em fly OLDGUY!!!

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OldGuy~

I don’t quite understand everything you are saying, but it sure as heck sounds good to me. Love it!!! Please post more often…BREAK IT DOWN Barney Level!!! :redface Don’t know about anyone else, but I need this. Period.

You know. Hearing the truth, straight forwardness, bottomline upfront advise is so AWSOME!!! We need to hear more of this in here, which is why I find myself searching for comments left by a selected few in here. I personally find it motivating.

Sorry that I am not knowledgable in this business to contribute, but big THANKS to all that do. :biggrin

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Has anyone invested in resort property in the Keys