LagunaLauren
Bronze Contributor
1) Before you ever signed the papers and got a property, what were the first steps you took? did you have cash on hand, were you able to do it while in debt? (Basically, I don't have a lot of liquid assets (or any assets) at the moment. Can I still get this done?
2) Can some-one explain to me a nonrecourse loan in lamens-terms? How do I go about obtaining one?
4) If you could go back and start over again, what would you do differently?
5) Are apartments a good place to start? what does the perfect first time property look like in your eyes?
Thanks.
1) First steps I took before investing were definitely read, read, read. So many people have done what you want to do. Learn as much as you can from them. It will minimize learning the hard way in practice. I bought my first property with a loan from my parents. It was my first primary residence. I made $200k on that investment in 2 years and reinvested that to get my start. You can start with no money. You need to find a property owner who is willing to do a carry-back for financing or Master Lease Agreement (lease-to-own). You can do an AITD where a property owner puts the property deed into an LLC that you both are a part of. You take over the payments on the property without putting a down payment. Can do conventional financing and a hard-money loan, but think those are higher rate, short-term loans. Keep reading stuff...
2) Nonrecourse loan basically means a lender is taking more of a risk because you are not personally responsible for the loan, etc. For example, I rolled my 401ks into a self-directed IRA LLC, from which I can invest. Theoretically, I can buy a property with these funds in the LLCs name, but it would be a non-recourse loan because the LLC would own the property. The lender would not come after me personally for the money should the property go into foreclosure. For a non-recourse loan, typically you need at least 40% down and not many lenders are willing to do non-recourse loans these days. Don't think this is right for you right now.
4) If I could do it over again, I would have done the high-end multi-million dollar primary residence home flips every 2-3 years like I did (but the market was great for that back then.) I wouldn't have bought high-end condos-the HOA kills you and if anything goes wrong, somehow the HOA isn't responsible and you end up buying your downstairs neighbor a new ceiling, new walls and foundation repairs. Single Family Homes were OK investments, but not worth the property management issues and vacancies. Apartment buildings are great, but you usually have to have some big money to be a serious player. And if you don't know what you're doing, property management and repairs can kill your profits.
5) Any property that makes good financial sense on paper. Buying below fair market value. Something that positive cash flows. Not too much risk. In a good or up and coming area.