I guess that it's my turn to start a financial thread.

[Page]

(It's better to start something new at this point than to perform thread necromancy by digging up one of the old ones) I'd like to hear from Str8up and anyone else who has their sh!t together and knows what they're talking about.

I'm getting ready to invest in real estate very soon (I'm hoping to have something by early to mid 2006) yet I'm running into a few obstacles.

I'm currently going through a realtor b/c I really don't have the time these days to find properties on my own, (I'm in college full time and I don't have the time to spend driving around looking for property)


The people I've been doing business with lately handle everything in-house, frm realty to loans. This past Friday, i went to the place, met my realtor for the first time, and asked to see investment property valued at under $1 mil. I got a stack of papers containing mostly 4-plexes and the occasional 6-plex, with monthly cashflows ranging from $3k-$6K. (minus mortgage and other expenses, of course). Prices range from $850k - $950K. I could live comfortably on $3k a month with my current needs, so this suits me just fine.
I would love for prices to drop a little bit, but I'll take what I can get.

However, my BIGGEST OBSTACLE is that I have absolutely no money to start with, nothing signifigant by any means. All the cash I have is the contents of my wallet, about $10, if I recall correctly. This means that I have nothing to use as a down payment if I want to buy a 6-plex (my lender is willing to give me 100% financing on a 4-plex, but for a 6-plex I need about 25% down, and I simply don't have it.)

My second problem is that I have no steady cash coming in right now, and no paper trail documenting steady income. I've heard that its possible to start with nothing, and that's simply what I have: Nothing. I do a few odd jobs here and there to survive on, but nothing steady by any means. I'm not working a steady job b/c I have to focus on college, and I'm a one-track kind of guy, since I can only focus on one thing at a time. If I try to focus on college and work simultaneously, the whole damn thing is going to fall apart. I haven't had a real steady job in about 2 years. My lender confirmed what I already knew-- banks require proof of income for most loans documented over several years, so tghis has me a little bit on edge.

My only real weapon that I can use right now is seller financing, assuming the existing mortgage, and/or various no-down techniques. The only trick is finding a seller who is desperate enough to agree to do that, and I sense that the market isn't quite that bad yet. I plan to talk to my lender about these possibilities tommorrow.

My lender pretty much gave me the following advice: Get a job and dump all of my cash into the bank before I spend it to create a paper trail for lenders to follow before I start investing. According to her, this should take about 2 years, but the problem is, I really don't want to wait that long. As far as I'm concerned, working a job is taking a step backwards from where I want to be, and since I've already been "unplugged from the matrix" or so to speak, I know that I'm going to hate every single minute that I spend working at a job. there simply has to be a better way, I don't know if I could bring myself to accept the alternative.

I'm really confused and I'm not really sure about how to go about this. any help sorting this out would be appreciated.

 

[STR8UP]

You sound like you are getting ahead of yourself.

I am all about stepping outside of your comfort zone, but if you truly have no money and little credit I wouldn't recommend tackling a sixplex unless you were able to get the deal of a lifetime and had the means to keep it afloat.

The truth is, when I started, I had already built a little credit to back myself up. Over the years my ability to expand my investments increased with each increase in my borrowing power. What happens if you get into a pinch? Where is the cash gonna come from to get you through? It doesn't necessarily have to come from YOUR pocket, but you better be able to secure from somewhere before you go committing to a million dollar mortgage.

When you purchase a property there are several pieces that make up the pie. Lets say you are lacking a down payment. In that case it helps to have better credit. Lets say your credit is shaky. A big down payment will make that a non-issue. What if you don't have credit AND no cash? You better be a creative MOFO when structuring the deal. I'm not saying it can't be done, but the fewer pieces you have to the puzzle the harder you have to work to make everything fit.

Maybe you should try to find a partner who brings a few of the missing pieces to the table?

 

[backbreaker]

credit is key... either get it, borrow it, or **** someone with it..

In my case, we ended up giving a nice portion of our compaines stock for just using a couple of people's credit.. however it was one of the smartest ideas we ever came up with and worked out fine.

 

[Shiftkey]

Hey Page, how've ya been?

Our situation is pretty similar. Same age, same financial situation, same dream of a career in RE investment. We even live within an hour of each other lol (isn't the SoCal market a b1tch?). I haven't started investing, as that obsticle seems out of my range at the moment, but I am doing little things to help me.

What I've been doing is gradually trying to build a credit history and pick jobs that I can learn from. My last job was with a homeowner's association management company, and I plan on getting a job as an apartment leasing consultant in January. Both jobs don't directly deal with real estate investment, but they're in the same general field. My last job really helped me understand the ins and outs of HoAs, and I got a lot of exposure to many different contractors. I wish it could've lasted longer, but my boss was a real b1tchy micromanager so I had to quit. My next job will hopefully teach me skills that will help me with renting out properties. Before my job with HoA management, I was a restaurant server, and even that helped me by increasing my social skills and confidence with strange people.

 

[Bible_Belt]

It's hard to start from nothing. The second million comes much more easily, or so they say...

Most people who are fairly rich got that way by saving their money from a job, which is something that most people don't want to do. If you want to speed things up, I suggest that you learn basic carpentry skills and buy a house to which you live in and make an improvement. Turning a garage into a bathroom/bedroom, enclosing a unenclosed garage, or sometimes just paint and new flooring will increase value to get equity. Do-it-yourselfing saves money. For example, cheap hardwood laminate flooring may be bought for as little as 99 cents/sqft but the same flooring can cost $10/sqft to have installed. Also, gains on the sale of principal residence held for at least two years are Federal income tax-free.

If you want to have the things that most people can't have, you must do the things that other people won't do. This is inherent in the supply-and-demand nature of our economic system.

 

[STR8UP]

Originally posted by Bible_Belt
It's hard to start from nothing. The second million comes much more easily, or so they say...

Even the second HUNDRED THOUSAND is easier than the first. But yea, when you have a million as a foundation the ballgame changes DRASTICALLY in your favor cause you no longer have to stress over the things others do. Two words- STAYING POWER.

Most people who are fairly rich got that way by saving their money from a job, which is something that most people don't want to do.

True....MOST people get rich over the course of 30-40 years by saving and investing conservatively. I don't think Page wants to wait that long, however.

If you want to speed things up, I suggest that you learn basic carpentry skills and buy a house to which you live in and make an improvement. Turning a garage into a bathroom/bedroom, enclosing a unenclosed garage, or sometimes just paint and new flooring will increase value to get equity.

That's a good start. It allows you to get your feet wet without feeling like youare in over your head.

Do-it-yourselfing saves money. For example, cheap hardwood laminate flooring may be bought for as little as 99 cents/sqft but the same flooring can cost $10/sqft to have installed.

Have to disagree with you here. Doing it yourself COSTS money when you consider that your time is much better spent putting together deals than saving $10 per hour in labor cost.

I did a buch myself in the beginning. It's a good way to learn about remodeling so you know how to hire others to do the job later on, just make sure that if you are serious about being an INVESTOR that you move yourself past that stage as soon as possible.

If you want to have the things that most people can't have, you must do the things that other people won't do. This is inherent in the supply-and-demand nature of our economic system.

Very, very true. While all of my friends were partying and spending their money I was living modestly, buying real estate and starting businesses. Man, I'm GLAD I did that stuff when I was in my 20's...

 

[sapphire]

I agree with what the others said regarding building up your credit. An excellent credit rsating will open up many opportunities especially with regard to RE.

Several years ago, when I started investing my credit rating was fair. As the result, lenders were very hesitant to give me a loan at a reasonable rate. My first property had to be co-signed by my ex-wife who had much better credit. I took it upon myself, thereafter to build my credit since I knew I needed it to have any success as a real estate investor. After about a year, my credit score went from a 610 to a high of 760. Now my middle score (which lenders look at ) is a little over 700.

Having a good credit score allowed me to puchase property with a lot of leverage. Meaning, very little to no money down. I just recently bought two houses totalling $700,000.00 with a down payment of only $4,000.00. I expect to make profit of at $150,000.00 when I sell them about a year from now when they are completed. That means my return would be about 3500%. There is no investment vehicle I know that could match that. Whatever profit I make I intend to roll into a commercial property agwqin using leverage afforded me by good credit. That essenctially is how real estate fortunes are made. LEVERAGE (using other people's money to build wealth).

The point is start working on building your credit because it is absolutely crucial.

I have heard much about no money down deals even if you have poor credit, but in todays market that is just not realistic. Most sellers will demand at least 10% down in a seller financing situation when you can't get financing from the bank.

 

[Skel]

And there is always a time you will be in a pinch. What you gonna do when that happens, WHEN not IF.

Actually i didnt read the thread and have no idea what im talking about. Sounds smart though

 

[A-Unit]

Re:

How the rich get richer...

I recently have returned from a meeting with a gentleman who's net worth exceeds 2.5 million @ age 65.

First, the beauty in making millions or any money, is the millions of ways YOU can do it.

Second, current generations DO NOT WANT TO WAIT. I agree, everybody want's to be FREE, but few want to WORK for it, whether it takes 30 years or 10, few want to. Especially those in their late teens, or 20's.

What if you could intern or apprentice under someone making 100's of thousands and doing well in sales, learn their habits, then move on up to the next person? Would you take it?

You can't learn to sprint, without crawling, then stumbling, then walking, then running. So begin there and apply this philosophy to LIFE and WEALTH.

-------------------------

Back to HOW he did it. He was a worker in his youth. At 65, his generation was taught to work from under 10. So he always worked. He didn't begin making 6 figures until he was in his 40's and 50's, then he was banking $400,000/yr+ with benefits. He was very conservative and so much of his money sat in banks until it was redeployed into various investments.

-Real Estate
-Fixed assets
-the stock market

He was offered a severence package to quit, which amounted to $100,000, plus unemployment. Throughout his career, he received stock options and stock shares. He always invested in his 401k, but oddly enough, THAT was his smallest asset. His home he BOUGHT years ago and has stayed there since. He bought a good, stable, middle age home. He had FEW needs, outside of his 160k boat. His wife spends MORE money on their grandkids. Of all the presidents @ his level within his company, he has MORE money than most IN pocket. Other guys make 6 figures selling, but MOST spend ALL of it.

When he finished worked, and took the severence package and social security and pension, his younger son, who has experience in the same field, began a company. It's just gotten off the ground now. They began it with little equity, say 100k from a private investor. They didn't ask for it; another young 'kid' in his 30's who was working there came from money and his father offered to supply cash in exchange for some equity ownership.

They received the equipment CHEAP, from companies liquidating and findint it hard to operate in the US. So they bought 100k worth of equipment for 7.5k, VERY CHEAP. They've solidified contracts through sales, and alliances. He doesn't need the $$ and has supplied little of his own. If he does, he'll own the co., manage it, and take a small salary.

His keys...

-he watched his money like a hawk and always LIVED below whatever his means were.
-he has cash on hand to take adv. of opportunities.

The reason we met was b/c he's buying a plot land from a developer who went bankrupt on it. The guy tried to buy a bunch of acres, build on it, and overprice the homes he was building and got fawked, so the gentlemen scooped and got it for $250. He'll build on it for 300k, and down grade from his 1.1 million dollar home to that, and pocket more dough, since he doesn't need such a big home anymore, even if he could have it.

Why??

Don't need the space.
Costs more to heat and cool and keep lit.
Property taxes.
Water.
Upkeep

He manages his economic resources.

--------------------

The biggest thing a small fish like any guy here can learn is from the above story, AND that if you learn to manage small assets to larger one's, it get's easier. But if you never learn that, you'll never grow to 1 million NOR be able to keep that or grow that. It's the statement of mind that endures beyond the money. Since money is only an illusion, people must have the eyes to make it happen.

The hardest thing is doing it, since most guys look around @ whatever body else does or says, or hears, and stops doing it, because it's new and hard and scary and other's say you can't.

But it's the fact you are ALONE doing it that matters.



A-Unit

 

[Bible_Belt]

btw, it is often worth attending your county's tax deed auction to meet people and learn. Some properties will sell very cheaply, but one has to do the necessary research to know about the property being sold. The vacant lot next to my old house was sold at a tax deed auction. I bought it for just $700. I only did so to prevent myself from getting annoying neighbors, and a year later when I moved, I was able to instantly sell it just to get my money back out of it. Real estate is not liquid in general, but it is not hard to sell a $700 piece of land.

 

[Not Quite There]

Originally posted by Shiftkey
Hey Page, how've ya been?

Our situation is pretty similar. Same age, same financial situation, same dream of a career in RE investment. We even live within an hour of each other lol (isn't the SoCal market a b1tch?). I haven't started investing, as that obsticle seems out of my range at the moment, but I am doing little things to help me.

I'm in a similar position myself, I have just started work as a property surveyor, and as much as I have got to learn, I just want to get my foot on that ladder asap.

like socal, land here in the UK is maddly expesnsive as well, I work with commerical property, but I think I am going to invest in a house first and let it out, the rent should cover the mortgage, and in the long run the capital value will go up....hopefully.

Thing is, I really want to move out of home, but if I do that, theres no way i can invest in other property, but i guess its priorities....

In the future, I want to go work in eastern europe on a british wage, land is dirt cheap their now, but in 10-15-20 years tim2 who's to tell how much it will of gone up? I know in Ireland property was dirt cheap 20 years ago, now its as expensive as anywhere else.

 

[Not Quite There]

Originally posted by Bible_Belt
btw, it is often worth attending your county's tax deed auction to meet people and learn. Some properties will sell very cheaply, but one has to do the necessary research to know about the property being sold. The vacant lot next to my old house was sold at a tax deed auction. I bought it for just $700. I only did so to prevent myself from getting annoying neighbors, and a year later when I moved, I was able to instantly sell it just to get my money back out of it. Real estate is not liquid in general, but it is not hard to sell a $700 piece of land.

Man, a medium size plot of land for a house here in the UK even in a rough area is probably worth about $60 000, and in a good area $400 000

 

[Desdinova]

This means that I have nothing to use as a down payment if I want to buy a 6-plex (my lender is willing to give me 100% financing on a 4-plex, but for a 6-plex I need about 25% down, and I simply don't have it.)

This is where my RRSPs that I had been putting money into became useful. Here (at least in Canada), you can withdraw your RRSPs to put a down payment on your first house. That's exactly what I did.

My second problem is that I have no steady cash coming in right now, and no paper trail documenting steady income.

That's going to work against you, big time.

As far as I'm concerned, working a job is taking a step backwards from where I want to be

Very untrue. Look at the patterns:


You need a credit rating to buy property
You need a down payment to buy GOOD property
You need a job to save up for a down payment
You need a steady job to apply for a credit card/loan

Getting a job and holding it is the FIRST STEP to anything. You can't just jump to the top of the ladder, you need to climb it.

Here's how I got a good credit rating:
1) Held a job for over one year
2) Applied for a credit card
3) Used the credit card, never miss a payment
4) Applied for a loan to buy a vehicle
5) Paid off the loan

If you're living at home, It's much easier and faster to build up your credit rating since your expenses are minimal. I had to do it the hard way, since I got kicked out of my parents' house.

I've now bought a property and a second vehicle, no questions asked, no problems encountered. Unfortunately, I was limited to the type of property I bought because of two factors:

1) Income
2) Down payment

These two will play the biggest part in buying a property, and that's if your credit rating is good.

The only way you're going to get a head start is if you inherit property from a deceased relative. I've been begging my parents to leave me their house (which is paid off) instead of selling it since I'm not getting any kind of an inheritance anyway. If I inherit it, I will use that to work my way up the ladder even further.

In short, you're not going to get anywhere if you don't have any structure. Anyone can say "I wanna be rich", but few will look at the structure to get there, take advantage of it, and actually do it.

 

[backbreaker]

as far as the entire working for "the man" thing, trust me, I hear you, but you have to check your ego at the door if you want to be successful.

You have to look at the big picture. When my company was stuggling when we first started it, my mom kicked me out the house. I was forced to get a job... actually a pretty damn good job now that I look back on it, but a job nevertheless. I kicked and screamed all the way there, but I had a talk with myself and realized that I had to do what I had to do, and I would be where I wanted to in due time.

Turns out I kicked it in overdrive once I got there, being there made me realize how much I didn't want to work for another company, and ended up working there for a little less than a month when it was all said and done

 

[Page]

BTW, has anyone here heard of the Nouveau Riche group? (inwiththenew.com)


Its basically a group of Real estate investors that have developed a system that is designed to produce results incredibly fast (one guy I talked to is with them and he acquired 3 asset properties in 6 months, which is incredibly fast growth).

NR makes their own materials, which you have to buy to get in. the price tag is about $4k, with $200 installments. However, when you buy in, you get the materials plus full membership in the community. (read: connections). Also, NR focuses on owning properties around the country, not just locally. NR also provides management and will keep the places rented.

the price is a bit steep, but it seems legit. I really don't NEED these people to get started, but their network would instantly give me connections that it would take me awhile to build on my own. What do you think about this?

 

[Bible_Belt]

There's an inherent contradiction in selling an investment or investment education in that if the opportunity was really so great, the vendor would take it for themselves.

$4,000 is better spent going toward your first property. If you want to meet investors go to auctions and tax deed sales. Also, I bet much of what they teach could be learned for free by just going to the courthouse and practicing your own title searches, etc. If you ever do find a really great investment and have no money, another investor would usually be happy to pay you a 10% finder's fee.

 

[Page]

Originally posted by STR8UP


Maybe you should try to find a partner who brings a few of the missing pieces to the table?

I've thought of that, but like you say, I have no pieces and therefore nothing to offer to the deal. In such a situation, I would be hard pressed to convince a partner that he needs me to make this thing work.

I'm definitely working on building my credit.

 

[STR8UP]

Originally posted by Page
I've thought of that, but like you say, I have no pieces and therefore nothing to offer to the deal. In such a situation, I would be hard pressed to convince a partner that he needs me to make this thing work.

I'm definitely working on building my credit.

That's why you offer to work for someone who knows their stuff for FREE.

That's right, you offer to do WHATEVER it is that they don't want to do, don't have time to do, whatever. In return they must agree to teach you what and who they know. Even if you have school or a normal job or whatever, anyone who has the resources you seek would more than likely be very understanding and accomodating to work with you, so long as you always show 110% effort. NO slacking.

I've said it before and I will say it again.....if you aren't willing to wait for an indefinite and uncertain payday, you will have a very hard time doing what you are trying to do. I'm not saying you aren't willing to do that, I am just repeating a very important point that you need to remember.

I can automatically tell if someone has what it takes by their attitude towards getting paid. The more tied you are to "work today, get paid tomorrow" the LESS likely you are to ever get ahead.

So, get out there and find someone who knows their sh!t. Introduce yourself as an aspiring investor. Show this person that you have a basic understanding of what it takes (and I know you do) and that you want to trade whatever you have of value (at this point all you can offer is time) in exchange for learning the ropes. Tell this person that if at any time you slack, deal is off. Maybe write up a basic contract that shows you are serious.

Seriously, if you lived around here, I would do it. And I know several other people who would DIE to have a go-getter to help them out while they show them the ropes.

Remember my first "Millionaire tip of the day"? The one about the slacker? Well, if you were willing to detail cars and do a good job and you lived here you could take this guy's job away from him in about two seconds. You would get to drive Porshes and Mercedes and BMW's from time to time. Do a standout job and you would make a decent hourly wage, and on top of that you would be exposed to people who have answers to many of the questions you seek. If you were willing to sacrifice for a year or two I would be willing to bet that before you know it you would be making GOOD cash AND learning AND if you were willing to get out and start looking for deals for your boss he would be happy to pay a finders fee.

Point is, I don't care how little you have to start with, there simply isn't an excuse not to start if that's truly what you want to do.