Question for REIpro and SteveO

[yveskleinsky]

Just curious what avenues you (and any others) have as far as starting down the path to REI. Would you advise that a person start with SFR residential and then branch off into multis or start with multis? If you guys had to do it over again what would you have done differently and why?

Thanks for all your input- you guys (as with most everyone here) are a wealth of info, and I really appreciate you sharing with those of us who are just getting going!

 

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[SteveO]

David and I have taken very different paths so you are going to get very different answers from each of us.

I feel that starting with multi's with a plan and direction will get you a larger net worth at a much faster rate than with single family homes. Vollucci's book outlines how to get to $1M in ten years. That number is easy to beat.

Here is one of your older posts where I answered part of your question.

http://www.thefastlanetomillions.com/showthread.php?t=545

 

[andviv]

interesting question...

For me, I think I'd start sooner with partnerships to go into bigger properties (more units). The reason is that having more units allows you to get some economies of scale that are almost impossible to reach with SFHs. Interesting to see what David answers... (and sorry for answering even though the question was not directed to me )

 

[yveskleinsky]

Steve-
I have read both Berges and Vollucci. I have to say that I am impressed that you were able to digest and apply both so quickly. I think I have trouble understanding the math. I understand the basic concepts, but the application of those concepts is where I get stuck. ...Knowing what you know now, what would be the top 5 pointers you would give to someone interested in commercial? ...This question is open to everyone!

Andviv-
The reason that I singled out SteveO and REIpro is because they both have such a different background in real estate and I was looking for a wide array of answers. Of course your opinion is always welcome!! ...As is everyone's here!

REIpro-
Can you talk more in depth about pointers you would give, or hurdles you want others to be aware of?

Thanks again for your time.

 

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[SteveO]

Math makes the investment world go round. Financial intelligence is critical. This should be a heavy focus for you to learn.

 

[yveskleinsky]

Couldn't agree more- I have come to realize this over the past month or so. Pretty basic aha moment, but it was an important one! Thank God my offer on the 7 didn't go through. I use a spreadsheet (that I got here) for basic analysis and that has helped immensely. It's the struturing of financing that I'm having trouble with.
...Right now my focus is on handling what I already have. I know if I were to add more to the mix I would probably crash and burn.

Where were you with your financial intelligence when you made the jump to apartments? ...These might be too personal of questions (and this goes out to everyone who is successful)- but what weak points did you have to iron out in order to move forward? What strengths did you best utilize? How did you iron out the weak points?

 

[SteveO]

..Right now my focus is on handling what I already have. I know if I were to add more to the mix I would probably crash and burn.

Then your plan should be very clear. Develop a plan that includes all the barriers that need to be overcome. Include how you will overcome these. Don't forget a timeline to keep yourself honest and focused.

Where were you with your financial intelligence when you made the jump to apartments? ...These might be too personal of questions (and this goes out to everyone who is successful)- but what weak points did you have to iron out in order to move forward? What strengths did you best utilize? How did you iron out the weak points?

I went home from my job and spent hours a night for a few months on my plan. By the time I was ready to invest, I understood the math. There was still plenty that I learned along the way, sometimes the HARD way, but that is all part of it.

Make a plan and attack it. You will learn your weak points. Add them to your plan and attach them.

 

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[reipro]

I am currently out of town workng on some of the deals that we have. I agree with steve my answer will be different. Once I get back in town i will give a good answer

 

[reipro]

Just curious what avenues you (and any others) have as far as starting down the path to REI. Would you advise that a person start with SFR residential and then branch off into multis or start with multis? If you guys had to do it over again what would you have done differently and why?

Thanks for all your input- you guys (as with most everyone here) are a wealth of info, and I really appreciate you sharing with those of us who are just getting going!

I like Steve O's answer. The directon we are headed in is multi-family and commerical. We currently have both and have been trading our SFR's for bigger units.

We started with SFR's since we could buy them much less than market value. We can purchase a SFR for around 75 cents on the dollar thus creating instant equity in the property. Lets use the for an example:

Buy a 100K SFR for 75K hold it and rent out at break even cash flow for 2 years. Sell SFR and have 25K gain which you 1031. Buy 2nd SFR worth 125K for $100K have also have $25K down payment from 1031 now you owe $75K on house worth $125K. Get some positive cash flow for 2 years. Sell house for 125K and 1031 $50K . Buy house worth $160K for 125K put down 50K from 1031. Now you own house worth 160K and still only owe $75k. Sell this house in 2 years and have $100K to 1031. You can now buy a great multi-unit with big down payment.

This is what we are currently doing. You can buy and sell as many as you want in a year so we have 20 properties that we turn every 2 years so at the end of 6 years we have $2,000,000.00 in equity for down on a big project.

Hope this answers your question