Anyone here into real estate investing?

[BAJAvol]

It’s an 8-12 month commitment, so we’ll see how it goes. Cold calling will always work, though.

Ehh, that cost money too if you hire it out. Plus you have to pay for the list sources. I like free leads. But I do know some guys that do a million a year on PPC.

 

[Fun coupon VOL]

Exactly. I have a 200k HELOC at prime that i use to fund my purchase and renovations. Then pay it off at the sale or refinance of the property. This goes back to 95% of the population has no idea how to use debt, and the ones who do retire at 35. Why would I want to use my own money when I can use someone else's and become financially free doing it?

Your example is fine as long as the market is stable. If you see any decline or inventory staying on the market longer, you will become less profitable or take a loss.

As long as you have multiple sources of income that are not all tied to SFH sales, you will be fine.

I wouldn’t being investing in R/E right now, unless I have liquidity not tied to a heloc.

The over abundance of available buyers in Tennessee markets is going to dry up in the coming months.

Private equity funds are slowing or have completely left the SFH market. Prospective blue state transplants are a couple months ahead of trends in red states.

The rental Retail side is really questionable for me right now. Free cash or liquidity is leaving middle class families who, IMO, spend more time in these facilities than any other class. Which affects your tenants.

Office space is going to be a blood bath IMO.

 

[BAJAvol]

Your example is fine as long as the market is stable. If you see any decline or inventory staying on the market longer, you will become less profitable.

I wouldn’t being investing in R/E right now, unless I have liquidity not tied to a heloc.

The over abundance of available buyers in Tennessee markets is going to dry up in the coming months.

The market has no affect on what I am doing with a HELOC. I rarely flip. I buy and hold. Mainly because that creates real wealth, the tax advantages, and the cheaper renovation costs. When you flip, you better be putting all of todays trends in it. When your plan is to rent, you don't need to do this. You only need to make a quality product that looks nice. Tenant doesn't like like it? Well, GTFO then. Can't be that way when you are flipping.
Look at it this way, I buy these houses at a discount anyways. 70 cents on the dollar usually. I buy it, fix it up, and pay off the HELOC with a 30-40 year fixed mortgage. It takes me 3 months to do this. I literally make 2-3 interest only payments on Prime rate HELOC. So it costs me around $750-$1,000 total to use someone else's money. That is not risk. Risk is taking out $150,000 of your own money and sinking it into a house.

 

[Fun coupon VOL]

The market has no affect on what I am doing with a HELOC. I rarely flip. I buy and hold. Look at it this way, I buy these houses at a discount anyways. 70 cents on the dollar usually. I buy it, fix it up, and pay off the HELOC with a 30-40 year fixed mortgage. It takes me 3 months to do this. I literally make 2-3 interest only payments on Prime rate HELOC. So it costs me around $750-$1,000 total to use someone else's money. That is not risk. Risk is taking out $150,000 of your own money and sinking it into a house.

It 100% does. If the market decreases 15 or 20% within a short period, your 30-40 year fixed mortgage is not being put in place because the LTV won’t work. Also, what bank is doing a 30-40 year mortgage on SFH rental property? Are you using private equity?

70 cents on the dollar sure, but you have cost to remodel before flipping or holding long term for rental income.

Renters are going to be in a pinch moving forward. Retail and restaurants are already closing which tend to be where renters are employed.

The bigger question is does the fed have the gall to hold rates higher over the next 18 months, or will they cave?

If they hold high, people are going to need to get rid of toys and convenience or go bankrupt. If they cave, the race is on again. I prefer they hold rates high and bring people back down to earth.

 

[BAJAvol]

It 100% does. If the market decreases 15 or 20% within a short period, your 30-40 year fixed mortgage is not being put in place because the LTV won’t work. Also, what bank is doing a 30-40 year mortgage on SFH rental property? Are you using private equity?

70 cents on the dollar sure, but you have cost to remodel before flipping or holding long term for rental income.

These huge adjustments usually only affect higher end homes in the 400 plus category and it's usually why I only target homes with ARVs of 250 or less. These homes are rarely hit too hard and even when they are, it's immaterial. Again, when you're buying at 70% ARV minus repairs, it offers a cushion. For long term financing, I use DSCR loans from portfolio lenders. Their rates are typically about a percent more than what you see at a bank.

 

[Go aeiou]

The market has no affect on what I am doing with a HELOC. I rarely flip. I buy and hold. Mainly because that creates real wealth, the tax advantages, and the cheaper renovation costs. When you flip, you better be putting all of todays trends in it. When your plan is to rent, you don't need to do this. You only need to make a quality product that looks nice. Tenant doesn't like like it? Well, GTFO then. Can't be that way when you are flipping.
Look at it this way, I buy these houses at a discount anyways. 70 cents on the dollar usually. I buy it, fix it up, and pay off the HELOC with a 30-40 year fixed mortgage. It takes me 3 months to do this. I literally make 2-3 interest only payments on Prime rate HELOC. So it costs me around $750-$1,000 total to use someone else's money. That is not risk. Risk is taking out $150,000 of your own money and sinking it into a house.

There is no difference in the risk. If you borrow from the bank you have to pay them back with interest. If you use your own money you will not be able to use it for anything else.
If you do not insure your house and it burns down your loss will be the same whether you borrow or use your own money.

 

[BAJAvol]

There is no difference in the risk. If you borrow from the bank you have to pay them back with interest. If you use your own money you will not be able to use it for anything else.
If you do not insure your house and it burns down your loss will be the same whether you borrow or use your own money.

Ok. We have two separate viewpoints/definitions of risk.

 

[Deathandtaxes]

Making money work for you instead of the other way around is definitely key. I'm no expert by any means, but I feel like I can try to help get you started in the right direction. I had analysis paralysis for a year before I took the plunge!

My best tips:

1. Jot down a list of the niches you think you may be interested in. For example: house flipping, long term rentals, short term rentals, wholesaling, etc. After doing this, order a minimum of 2 highly rated books on amazon related to those niches and also listen to some podcasts during commutes. Your niches may change overtime. I only wanted to flip and wholesale when I started, now, my strategy has evolved into 80% rentals, 15% flips, and 5% wholesale. STAY AWAY FROM SO-CALLED "GURUS" AND NEVER BUY A COURSE. Everything you need to know can be found for free in a book or online, or from someone you know. If you have the luxury of knowing someone who has been successful in what you want to do, reach out to them and pick their brain. Take them on as a mentor. But remember, you need to provide value to them. I didn't have this luxury except with one person. I took him out to lunch a few times and offered to hook up some sinks at one of his flips for free. A mentor is great, but you need to provide some type of value to them. I also became close with a different guy who is big in the buy/hold game. He needed help with QuickBooks (which I am great at). I offered to help him with that if he could help me with advice.

2. Once you know what you want to do, formulate a plan on how to do the first deal. It is all about the first deal. I know I have already spoken on books, but The Book on Flipping Houses by J Scott is phenomenal. Even if you aren't wanting to flip, this book will give a start on how to find houses and how to build a team. Which brings me to my next point..

3. Build A Team: You may not realize this, but the most successful people in real estate have a team. I don't mean going out and hiring someone. I mean developing strong relationships with people you need. For example, build relationships with excellent contractors, real estate agents, and other people such as CPA's. Unless you plan to use your own money (which I never recommend), build relationships with lenders. Know who you are going to use to finance your transaction so that it is ready to go when you are. Lastly, work with folks who are great at finding off market deals. It's tough to find anything on the MLS with meat on the bones, and even when you do, you will have retail buyers bidding up the price. And do that now! You don't want to have to build a team after you find your first deal.

4. Stick to markets you know. When you first start, I suggest trying to work in a market you live in. You need to know your numbers and it doesn't matter what niche you choose. You need to know After Repair Values, Repair Costs, Rent Prices, etc. This is so important. You have to become an expert in knowing these things because you HAVE to know where your purchase prices need to be at. You literally make your money when you buy. If you overpay for a house, you cannot rehab a house enough to get your money back.

5. Repetition and Consistency: Like anything else, skill comes with repetition. The more you do something, the better you get. It's like practicing a golf swing. It's going to seem stressful and daunting on your first deal. I remember I used to be scared as hell to do anything that needed more than paint and carpets. Now, I will buy anything standing. I don't care if it is a gut job or a cosmetic job. That came with repetition. On consistency, unless you get lucky, it will be awhile before you find that first deal. But don't give up! It took me months to get my first deal. But after the first one, they kind of just fall in your lap. I turn down 3-4 deals a week.

I hope this helps you a little. It is probably full of typos, but I am on mobile and I still need coffee this morning!

Thank you so much! How much do you need to start the process? Or a good first step toward flipping?

 

[BAJAvol]

Thank you so much! How much do you need to start the process? Or a good first step toward flipping?

This is probably a bit of a stretch, but I completely separated my personal finances when I started doing this. I had about 6 months reserves for my personal finances set aside. Then I saved 25k and set it aside to start my business with. This was enough to pay for hard money loan fees, float me on over budgets, etc on my first flip with sweating it.

 

[Go aeiou]

Ok. We have two separate viewpoints/definitions of risk.

Financial risk is the possibility of losing money on an investment or business venture .
That is the generally accepted definition of risk when it comes to finance.

What is your definition?

 

[BAJAvol]

Financial risk is the possibility of losing money on an investment or business venture .
That is the generally accepted definition of risk when it comes to finance.

What is your definition?

If I borrow your money and I'm paying you 500 per month to flip a house while I have 150k sitting in the bank, anything that goes off course will not be an issue. When I take that entire 150k to find a fix/flip and something goes off the rails... I am literally ****ed. That's just a simple/one example that came to mind. But there is a reason why wealthy people never use their own money. Here's a different viewpoint as well. If I use your money to fund 3 deals at once that will make me 50k a piece. If I had all of my money tied up in one house, I would have to pass up the other two deals. So instead of paying $1500 to you in interest for 3 Months, I just lost out on 100k

 

[Go aeiou]

If I borrow your money and I'm paying you 500 per month to flip a house while I have 150k sitting in the bank, anything that goes off course will not be an issue. When I take that entire 150k to find a fix/flip and something goes off the rails... I am literally ****ed. That's just a simple/one example that came to mind. But there is a reason why wealthy people never use their own money. Here's a different viewpoint as well. If I use your money to fund 3 deals at once that will make me 50k a piece. If I had all of my money tied up in one house, I would have to pass up the other two deals. So instead of paying $1500 to you in interest for 3 Months, I just lost out on 100k

I guess it depends on your definition of wealthy. When I developed real estate I would use my money without bank financing if possible. If a project was too large I would borrow.
Have bought out partners(father,son) because they wanted to take out as much profit as possible and owe as much as possible (a bankers dream). The father was financially conservative, but the son had read a (book,article?) that said always use other peoples money.

I would call your $150k a cushion or a safety net. You definitely need that. You might also get to a point of so much cash flow that you decide not to invest any more.
Do you manage your rental property or pay someone to do it for you?

 

[BAJAvol]

I guess it depends on your definition of wealthy. When I developed real estate I would use my money without bank financing if possible. If a project was too large I would borrow.
Have bought out partners(father,son) because they wanted to take out as much profit as possible and owe as much as possible (a bankers dream). The father was financially conservative, but the son had read a (book,article?) that said always use other peoples money.

I would call your $150k a cushion or a safety net. You definitely need that. You might also get to a point of so much cash flow that you decide not to invest any more.
Do you manage your rental property or pay someone to do it for you?

That definitely goes back to most of the population has no idea how to manage debt (other peoples money). I've done well so far, but I honestly haven't taken but the minimum draw required by law from my business. I just keep rolling the profits back into other projects. I currently have 5 doors that I self manage. Li remodeled them all mostly top to bottom so my maintenance is minimal and I use a software for rent collection and paperwork. I definitely plan to hire it out once I get to 10 and may do it sooner since I work a W2 as well. I know a girl who I plan to hire soon to do all of my property management. We don't have a property management company in this area worth anything so I went on the hunt of hiring someone directly. My goal is 25 buildings total then I plan to retire. I'm working on the 5th right now. I'm not sure how much it will slow down since everything is volatile. My plan is to retire on 10 years at 38 with 25 units. My 4 right now cash flow an average of $435 per month after expenses. Idk if I can keep that same cash flow for long. My minimum is $400 but may need to lower it.

 

[Deathandtaxes]

That definitely goes back to most of the population has no idea how to manage debt (other peoples money). I've done well so far, but I honestly haven't taken but the minimum draw required by law from my business. I just keep rolling the profits back into other projects. I currently have 5 doors that I self manage. Li remodeled them all mostly top to bottom so my maintenance is minimal and I use a software for rent collection and paperwork. I definitely plan to hire it out once I get to 10 and may do it sooner since I work a W2 as well. I know a girl who I plan to hire soon to do all of my property management. We don't have a property management company in this area worth anything so I went on the hunt of hiring someone directly. My goal is 25 buildings total then I plan to retire. I'm working on the 5th right now. I'm not sure how much it will slow down since everything is volatile. My plan is to retire on 10 years at 38 with 25 units. My 4 right now cash flow an average of $435 per month after expenses. Idk if I can keep that same cash flow for long. My minimum is $400 but may need to lower it.

How did you get into real estate? What has been the biggest lesson you learned?

 

[BigOrangeMojo]

Everyone in 2006 thought they knew how to use debt as well...

Until my most recent purchase, my entire real estate portfolio was from people who were over-leveraged.

 

[BAJAvol]

How did you get into real estate? What has been the biggest lesson you learned?

I've just always enjoyed it. I kind of "flipped" my first house that was the first primary residence that I bought. Realized the potential it could do. Then I met a friend of a friend who retired at 34 thanks to real estate. Well when I say retire, I mean he walked away from his day job and lived exclusively off his rental income. I flipped my first house and nearly made my salary. I just got fed up with working for someone else and real estate was that vehicle to freedom. My biggest lesson is you can never stop learning or creating relationships. I want to master my niches and I will do what it takes to do that. Secondly, I learned to get rid of friends and family that didn't support my goals and surrounded myself with people I wanted to be. Never take advice from people who don't do what you want to do. For example, everyone that doesn't even touch real estate has an opinion on what to do and what the market will do. I choose to take my advice from the guy with a 40 million dollar rental portfolio that cash flows 35,000 a month and plays golf and bass fishes most days of the week. Meanwhile everyone that has a negative opinion works a soul sucking 9-5 and will probably die before they retire.
Sorry for the long post, but my biggest advice, surround yourself with the people you want to be. Your network is your net worth.

 

[BAJAvol]

Everyone in 2006 thought they knew how to use debt as well...

Until my most recent purchase, my entire real estate portfolio was from people who were over-leveraged.

Most of mine came from inherited properties or tired landlords.

 

[Deathandtaxes]

I've just always enjoyed it. I kind of "flipped" my first house that was the first primary residence that I bought. Realized the potential it could do. Then I met a friend of a friend who retired at 34 thanks to real estate. Well when I say retire, I mean he walked away from his day job and lived exclusively off his rental income. I flipped my first house and nearly made my salary. I just got fed up with working for someone else and real estate was that vehicle to freedom. My biggest lesson is you can never stop learning or creating relationships. I want to master my niches and I will do what it takes to do that. Secondly, I learned to get rid of friends and family that didn't support my goals and surrounded myself with people I wanted to be. Never take advice from people who don't do what you want to do. For example, everyone that doesn't even touch real estate has an opinion on what to do and what the market will do. I choose to take my advice from the guy with a 40 million dollar rental portfolio that cash flows 35,000 a month and plays golf and bass fishes most days of the week. Meanwhile everyone that has a negative opinion works a soul sucking 9-5 and will probably die before they retire.
Sorry for the long post, but my biggest advice, surround yourself with the people you want to be. Your network is your net worth.

Thank you so much! When building relationships who do you go after? Or who would you go after first? Also do you live in the East Tennessee area?

 

[Deathandtaxes]

I've just always enjoyed it. I kind of "flipped" my first house that was the first primary residence that I bought. Realized the potential it could do. Then I met a friend of a friend who retired at 34 thanks to real estate. Well when I say retire, I mean he walked away from his day job and lived exclusively off his rental income. I flipped my first house and nearly made my salary. I just got fed up with working for someone else and real estate was that vehicle to freedom. My biggest lesson is you can never stop learning or creating relationships. I want to master my niches and I will do what it takes to do that. Secondly, I learned to get rid of friends and family that didn't support my goals and surrounded myself with people I wanted to be. Never take advice from people who don't do what you want to do. For example, everyone that doesn't even touch real estate has an opinion on what to do and what the market will do. I choose to take my advice from the guy with a 40 million dollar rental portfolio that cash flows 35,000 a month and plays golf and bass fishes most days of the week. Meanwhile everyone that has a negative opinion works a soul sucking 9-5 and will probably die before they retire.
Sorry for the long post, but my biggest advice, surround yourself with the people you want to be. Your network is your net worth.

Do you do the construction part yourself? Or hire out the job?

 

[BAJAvol]

Thank you so much! When building relationships who do you go after? Or who would you go after first? Also do you live in the East Tennessee area?

This really depends on your strategy, but I went after lenders first. Unless your sitting on a large pot of money, you're more than likely going to need to finance your deals. Next is contractors. Start researching and meeting folks that do remodeling unless you plan to do it yourself. I live just outside of Knoxville.

 

[BAJAvol]

Do you do the construction part yourself? Or hire out the job?

Hire it out. Time is definitely money. If I remodeled a flip myself, I could more than likely pocket six figures. But it would take me 6 months and I would have to walk away from other deals. Hiring it all out allows me to work on other aspects of my business and find more deals.

 

[Deathandtaxes]

This really depends on your strategy, but I went after lenders first. Unless your sitting on a large pot of money, you're more than likely going to need to finance your deals. Next is contractors. Start researching and meeting folks that do remodeling unless you plan to do it yourself. I live just outside of Knoxville.

Ok. Do you have any recommendations as far as lenders go? The reason this is so appealing to me is I work in the remodel world and am about to come into some six figure money so I am wanting to learn all I can about investments period so that over time that money makes a lot of money.Sweet. I live just about 30 minutes East of Knoxville. Would love to get in contact. Email is lightworkremodel@gmail.com if you wanna reach out.

 

[BAJAvol]

Ok. Do you have any recommendations as far as lenders go? The reason this is so appealing to me is I work in the remodel world and am about to come into some six figure money so I am wanting to learn all I can about investments period so that over time that money makes a lot of money.Sweet. I live just about 30 minutes East of Knoxville. Would love to get in contact. Email is lightworkremodel@gmail.com if you wanna reach out.

For sure! I'll hit you up this week. The best lenders I worked with for hard money is longhorn and kiavi. I've got a private money guy now. Paid his ass 3 points and 15% interest when I first started before I proved myself. Once he realized I knew what I was doing, I just pay him 1 point and 8%. Or I just use my HELOC that's set at prime. I'm about to start a BRRRR deal that I plan to document the whole process to help people out.

 

[Velo Vol]

 

[BAJAvol]

Alright I said I wasn't going to buy anything else this year but when something hits your desk that is freaking fire, you gotta pull the trigger. I'll give a number breakdown on the deal for anyone new to this.

Where this lead came from: website

Purchase: $169,000
Repairs: $0 (yep this place is gorgeous)
Current value: $235,000 (super conservative as comps in the area are in the 260 range)
Rent: $2,000

How I'm funding this deal: I'm going with a private money guy so I can recoup most of my investment in 6 months. I pay him 1.5 points and 8% interest for 6 months, then I go to a local bank and do a cash out refi at 75% value.

$2,535 points
$6,760 interest payments
$2,500 in title and recording fees
$11,795 invested up front

The bank will loan me $176,250 after 6 month seasoning. After paying back the private money guy at 169,000, I will have $4,545 left in this deal.

PITI estimated at $1,375 per month leaving me with a $625 cash flow per month and $59,000 in equity. By month 8, I will have recouped all money invested in this deal.