Question: First Steps

[lee_mre]

I'll admit, I chained to my job. I don;t want to be, but I am.

I'm 30 with wife and kids. I know it can be done but I'm not sure how to start. I make a good living, but I'm saddled with some bad debt I aquired through college.

I am in the process of paying down my debt (cars and credit cards...what else is new) but I feel like I need to continue making foward movement and can't bear the thought of loosing motivation.

I'm interested in getting some multi family units such as a 4 plex or something. I think I could qualify for a loan in a year or so. But I'm hesitant to do anything now. I think I should be looking around at units or something to get a feel for the market and what not but I have some concerns.

Maybe I can get some advice

1. What kind of real estate agent would follow around someone who is "serious" in mind but not in finances.
2. Are my personal finances even really tied with the idea of aquiring a property? Are there more sophisticated methods? Would an agent be able to help me learn about them?
3. Am I thinking about this from the wrong direction? Here in seattle things have gotten pretty crazy price wise. I see data pointing to other places in the country. How wise would it be to try to find a first deal elsewhere (I've been thinking...IDAHO ).
4. Am I nuts?

Knowing what y'all know know now, how would you do it differently? Is there a system you've learned that even a beginner can use it? Or do beginners need to learn it the hard way.

Any thoughts would be appreciated.

Thanks

 

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[Runum]

If you aren't able to make any moves now you can still spend time learning what will make a good deal or a bad deal. You could check out the MLS and see the property listings for your area. Many real estate agents will have a link to MLS access on their websites. You select a few properties that catch your eye. Work on figuring out the expenses for the property, i.e. property taxes, insurance, principal, interest, maintenance. Then work on finding out local rental rates. If the income from rental is more than expenses you may have a winner. After you run the numbers for several deals it becomes easier and you get better and more accurate. Good luck.:cheers:

Greg

 

[lee_mre]

When running numbers, how concerned should I be with the list price? The numbers I've been crunching suggest that some of the properties I'm looking at would need a 30% haircut. Is that the experience others have had? Is this a case of the 100:10:1 rule?

Also, so far I have been looking in newpapers and other local publications for rental rates. Am I on theright track? Where else can I research this kind of information?

 

[andviv]

Find the RE investors group in your area and join. Start going to their meeting and start networking heavily, so you get to know the players in your area. They are your potential mentors and partners.

Email a couple of realtors and ask them to add you to their distribution list so you can see the properties that they have, that way you start getting a better idea about the prices. Yes, maybe they will need a 30% reduction, that's why it takes a lot of time/effort to find them (and, what a coincidence, that's why you will hear people saying 'buy properties at 70% FMV')

 

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[NoMoneyDown]

andviv is correct - nothing is as important in this business more than YOU. Joining your local REI club is paramount to the things you need to do. Network with those who do this actively. You'll find when you go to the meetings that probably 60% (or more) of the people are newbies like you, and most won't ever even do a deal. The big players know this too, so you have to separate yourself from the other newbies and show them you are in this for the long haul. The old saying goes, "if you have no money and no knowledge, then TIME is your asset." Ask some investors if they'd be willing to trade some knowledge by helping them with some of their projects, etc.

Once you gain some basic knowledge, start forging out. By this time, you should have a list of investors and their criteria. Start finding properties, running numbers, and get paid for your leads. Once you have some reserves, start buying your own properties.

 

[Runum]

When running numbers, how concerned should I be with the list price? The numbers I've been crunching suggest that some of the properties I'm looking at would need a 30% haircut. Is that the experience others have had? Is this a case of the 100:10:1 rule?

Yes that is what I have experienced with list price on advertisements. Most of the properties that look good at first blush won't cash flow. I also chalk it up to the 100:10:1 rule, as you suggested. However, you have to persistant in your search and when that one does come you will recognize it and be ready for it. Examples: There was a 3-2-2 that was an REO that just sold recently nearby. Retail was about 85K, the selling price was 34k and needing about 10k of repairs. I missed that opportunity by a condition on my bidding contract. I just scoed a deal on a quad at about 40% of FMV and will cash flow very nicely. I have been looking and getting ready for 3 months for this deal.

I do pay attention to how long the properties have been listed. If it is a property that is in the right location and will do for me what I want it to do, I will offer a lowball price just to see what will happen. I do get a lot more no's than yes's. Oh well.

About rental rates, I have called landlord to ask about the rent on vacant properties. I have called and asked when it wasn't vacant and sometimes they will tell me and sometimes they won't. I also check the newspaper and Craigslist.

The RE investors group is also a good option for networking and knowledge. If you get to know some of them they may refer renters to you when they have no vacancies.

The deals are out there. Will you be ready when opportunity knocks?:cheers:

Greg