20 Yr Old Investor With Large Start Capital: What REI Avenues Are Best?
Can someone please give me some advice. I have 174k to start in the real estate market I also have 32k in equity to tap in my own home.
Only problem with that I just purchased 6 months ago, but hey it can be tapped eventually.
Anyway, my question is:
I am 20yrs old and still establishing and struggling to solidify credit . My aim is to get in on short term REI, purchasing properties I could then soon quickly turn around and sell (recouping my intial capital, tied up in it). I would have wished to have done this with very little of my initial capital. As you can imagine however, without credit lines, securing investment loans, my loan officer informs me, will be hard. This does not particularly trouble me, because I believe with a shrewd enough purchase/investment I can ofcourse
recover my downpayment and realize a net gain.
On that note, I could also do with some information on finding out what forms of
short term REI options I can pursue to allow me to make returns within a space of a few months of buying and selling a property.
My research currently consists of
three real estate agents specialist scowering the Dallas/ Fort-Worth Area for properties that can provide a 20k return and above.
I have also networked with loan officers and bank managers who have owledge on REOs and have managed to squeeze their contacts to proven rehabber investors they know. I have learnt about municipal grants (which I used to purchase my own first home) and government low interest loans
for rehabilitation/ gentrification of distressed homes for the accomodation of government aided people (elderly, disabled) groups.
These forms of REI and others I would like to pursue further once I can at least make a positive return from my first REI purchase. I need only to make 20k or more to leave my job as a pharmacy technician. I have no debt and could live for a year on such a marginal return so as to allow me to delve into the many REI prospects throught Dallas and Texas. My main goal would be to
scower regional property markets and municipal grant programs for nationwide available REIprospects.
Just need to take the most succint avenues to seeing a return on my intial start up cash, I was particularly interested in what was said about negoitiating with lenders on a discount on deliquent lienholders debt, for the quick turnaround sell. I would like to also circumvent loan seasoning hinderance (that prohibits one from selling the secured property within months of purchasing the property) and would need to know about hard money lenders also.
Thanks-- sorry for the long message
P.S. Anyone in any investment groups in Dallas/Fort-Worth vicinity?
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[ Edited by JohnLocke on Date 03/03/2004 ]
winter59--(TX)------------
Well, it is hard to give such a young person as you are good advice.
First, you posted this on a specialized forum, which deals only with tax liens and delinquent property tax deed investing. Actually, that type of investing is very good in TX and you might want to look into it. I have bid at a tax sale at Athens, Henderson County, and saw two more sales at Ft. Worth (Tarrant) and Centerville(Leon). I bought a house at Waco (McClellan) which was redeemed, but paid me 25% for 3 or 4 months holding period. The areas all around Dallas and Tarrant Counties seemed good to me for tax sale investing, say in Smith County or Wood or Leon, or, well, the whole area seemed ripe to when five and four years ago when I was looking there.
The problem is that you are so young that you probably don't have a good sense yet of your own weaknesses and strengths. And that is the real answer to your question: invest in the way that fits your own personality, skills, knowledge, and predilections, as well as your resources, which is much more than just the money. You probably have not had enough experiences in different situations and jobs to know what your personal strengths and weaknesses are.
Now, from my perspective you are being silly to talk about investing anywhere in the country. That is not a good idea. A large part of real estate investing is knowing the local market places. You will put yourself at an extreme handicap to other investors in places you do not know. So forget that silly idea. It is because you are not yet clear on your own limitations that you have such an unrealistic view of investing, I figure. That does not mean that you cannot invest in different places, it just means that you should not try to do so without studying them first. Besides, some techniques will not work well in some areas.
My advice: study your local market. Start by studying up on the different methods to buy properties at bargain prices. The best source of information on this is, in my view, Jack Reed's "How to Buy Real Estate for at Least 20 % Below Market Value" book which is available only on his http://www.johntreed.com website. This is an overview of about 3 dozen buying systems. Pick out two or three that seem good to you and sound like they could work where you are.
I do agree with you that you should get out of that job. I'd recommend that, if you really have that money available in cash, you quit your job today. Use the $20K or so to live and the remaining $150K or so to invest. Spend all your time studying real estate in your area and studying real estate investing, instead of wasting your time at job you don't like. And then go out and do it.
Good Investing*****Ron Starr**********[ Edited by GlennI on Date 03/04/2004 ]
Hi, In many ways, you're in an enviable position; many here are succeeding without having much in reserve at all, at least at first. Having such funds available could cause you to get sloppy and tempt you into taking less creative shortcuts and possibly 'muscling' a deal with raw cash, which could result in expensive lessons.
Without offering specific directional advice, I can say that by so freely sharing your financial situation (even in a way cool forum like this), you'll open yourself up to offers and partnerships, some of which may be great, others that may be more designed to help relieve you of some of your money (as your Realtors may be doing already). At the risk of frightening you off, be very careful about who you affiliate with and who you trust until you get your bearings. Find a good real estate lawyer you can trust and run everything past him/her too; probably your wisest investment at this point..
Hello,
Cash is King. You don't need partners, period. What you should do IMHO is get into rehabs/flips/rentals, paying cash for the properties and the rehabs.
Scenerio 1
Purchase for cash (at least 30% under FMV after repairs), then rehab and sell them.
( I average at least 10-15k per property and do 1-2 per month in this area).
Scenario 2
Purchase for cash, rehab, and rent. The same 70% rule applies but in this case instead of cashing out via sale, you cash out with a refi. I leave 20% in equity, get my inital purchase and rehab costs out PLUS an additional 10k or so. The beautly of this one is that you have two additional benifits.
1. You do NOT pay taxes on the cash out as it is loaned money.
2. You get positive cash flow.
( I average 10k a property in this area and do 1-2 month as well.)
What you need to do this...
1. LEARN YOUR AREA - pick specific sections of your town and get a real feel for home values, rents, crime, etc.
2. Always build in at least 10k in rehab costs and estimate high in all repairs.
3. Find a couple of reliable contractors, these guys are the ones who are going to make or break you.
Goodluck!
[addsig]
Having a "hot rod" and driving one are two different things. I would say that the first money spent should be on education. THere are many great products here and at your local library, use them...
Set a goal to study "X" amount over time and attend "X" real estate investor meetings over then next few months. When "you" have an understanding of CRE and what venue is the most appealing to "you" then focus on that.
Your local club is a good place to start, you might find someone with experience that would help walk you through a deal for a share. I set up an investor with a money source in a SLC investors meeting last month. They have pooled resources and done their first deal this week.
You have plenty of time, I have lost several fortunes as a young lad because I charged in when I should have been walking.
I wish you well..
RonaldStarr
Question- do you know if John T. Reed ever responds to inquiries regarding his website? I've tried to email him a couple of times and he never replies. And these aren't long drawn out messages asking him a million questions either. Most recently I inquired about his audiobooks he used to sell- no response, not even a one or two word reply.
Other people have told me they've tried to email him (albiet for a different reason) asking why he writes such negative comments about most other RE gurus and he simply just never replies.
onehundredpercent--(CA)------------
He gets a huge number of e-mails every day. To answer them all would take a tremendous amount of time.
He answers some emails. Most he ignores. A lot provide him with no financial reward to answer, so he does not answer them.He has no employees, so he only makes money when he doing money-generating activities.
There are a lot of fakes, charletons, cheats, rip-off artists, salesmen, and the like trying to sell mediocre and worst real estate investing education products at greatly inflated prices. Also, a lot of people have moral and ethical standards that are far lower than those of Jack. That is why he does not recommend many people. And I mostly agree with his assessments of them. A few I disagree with. He provides information about what he is using to make his judgments. If you feel that some of his judgments are based on weak evidence, you can discount them.
You can use his BS artist's detection list to evaluate people for yourself.
Your question of him could be easily answered just by going to his website and seeing what he lists as for sale at this time.
Good Investing********Ron Starr************
I just completed a wholesale deal in Little Elm. Your local RE INvestment Group is dfwreicoop.
C-
Honing in on the principle quest of my Initial posting:
- to find creative ways in which I could turn a property to realize net gains from my
initial investment.
- I do not necessarily have to cash out of a property to move on as I have sufficient funds
available to me, to acquire other properties concurrently.
-Ofcourse however, smarts would dictate that It is best that I negiotiate going into the
purchase of any investment vehicle the most shrewd terms (making the money/return on the going into buy/purchase). My aims in any investment i should venture into, would be to put as little of my own funds(deposit) into its acquisition, allowing for available funds for the purchase of others.
- Iam aware this is very rudimentary logic, however i hope that you can shine further light on my, perhaps, seemingly naive linear thinking. It is my hope, that in fact, you do.
Without further delineation, my first post to this site should elucidate clearly what avenues of REI I hope to pursue.
Just to answer some responses I have to this post on other boards.
I have raised these funds $174,000 from equity in property my mother and I own in the UK. Principally for investment in the plethora of REI prospects made available on the European continent in the expansion of the EU community this coming May 2004.
I would wish to free myself of my time consuming occupation, in being able to realize and capitalize on these prospects.
Beyond this, my interest in real estate at age 20 has been long held
[addsig]
winter59--(UK)-------------
Oh. Well, I don't know about European real estate investing. I'd suggest you look for books on the topic so you can understand better what is going on.
Also, didn't you say initially that you were willing to invest anywhere in the country? Were you talking about the UK?
Anyway, you need to narrow your geographic focus. Figure out what route to money-making you want to take.
There are thousands of different ways to make money with real estate. Most break down to Cash flow from rental property, Appreciation of value--perhaps over a long time, and Tax benefits of real estate investing: C A T. I don't know anything about the tax benefits outside of the USA. Then there is the issue of long-term hold or quick turn-over of properties. You seem to be aimed at the latter. Nothing wrong with that.
However, that means you have to know ways to buy properties for below matket value. That is usually not easy. That is why I recommended John T. Reed's book to you, to give you ideas to use. However, you will have to have somebody in the USA buy the book for you and mail it to you, as he does not sell overseas. How applicable it is in Europe, I don't know.
When you first start out, I'd recommend that you only work one deal at a time. You don't know how much work you are getting into. Trying to do too much too fast is one of the big two mistakes that beginning investors make, as I discuss in my pamplet on how to be a successful real estate investor. After you have done three or four deals, you might be in a position to start doing more deals.
While in general it is good to use little of your money when buying property, when you are buying bargains this may not apply. When you buy bargains, it is often the case that you have to buy all cash. The sellers need QUICK relief from their pain, or you are buying at all-cash sales such as foreclosures. This also suggests doing one deal at a time, since you will often not be able to afford to buy more than one property.
Good Investing**********Ron Starr***********
Quote:
On 2004-03-06 00:02, winter59 wrote:
in REI right here in Dallas, Texas and statewide.
Yes I will move one deal at a time, but with the release of my time (now consumed greatly by full time work), achieved through REI, I will then invest more of my time in the research of other U.S. regional markets, in attempt to seek more and greater lucrative properties.
I could do to know more about
hard money lending, note buying and other short term REI ventures that could accelerate my extensive pursuit of the many realms of REI --specifically, rehabbing. But at present, note buying and or quickly turning property with minor to moderate cosmetic defects would be ideal.
If anyone could shed further light on any of these aspects,
I am an investor active in both the US and UK markets at the same time. If you have questions which can be best explained by comparing the two let me know.
As to note buying, I can offer specific advice. You should also look at the other forum that focuses on this area as there are other pros there.
John
PS. If you lack time refurbishment (rehab to the US investors) is not a great idea. Maybe with a partner who can chase down contractors and materials.
John
Yes, yes you are indeed wordy. It is my suggestion that you turn around and once more examine the EU market.
I know you are a little on the downside being in US Dollars on this occasion. Your capital should be elsewhere. My estimate along with others at the Economist and Augsberg is, the start some time in early August.
Your first target area should be near the Thames working close in and around Gravesend. It is ripe and perfect. Counsel houses being terminated and no replacement housing.
Very simple, merely option the lots and hold them ready to close. Your option period should be about 12 months.
You will of course receive a visit from Inland Revenue shortly after close. But then perhaps between your mother and yourself you can pad the blow.
Much cleaner game then Dallas/Fort-Worth. Besides you will be able to understand them a lot easier.
Estimate your (simple) profits at about 300%. Transaction time about 4 months.
Suggest you crisp your posts, pretend you are from Warton, or Scorton. Or perhaps you prefer the Cinque Ports, they are nice and dry. Cuts down on the Crown and Church holdings and created masses of Freehold.
Cheers Lucius
Winter,
I am 24 and I am like you (that I want to buy all these properties at once)except I had no money 2 years ago, but now I have 15 units.. I will say I wish I didn't close 3 properties back to back because I have been making 4 mortgage payments a month and have maxed my credit cards.. I thought they would rent sooner, what can I say. Anyway, there are ways.. It seems like everyone is trying to help you without telling you the actual "Big Secret". I originally wanted to quit my tech job as well but I just switched my hours and I am holding out. Lendors like to see a good job and high credit.. Now that I have 2 year tax returns with rentals, I could be considered a fulltime landlord, but I choose not too because I can get better rates by keeping my job. I think the "Cash King" said it best when he simply said, "Buy, fix, and sell" or keep as a rental (lease/option).. If your lendor is good he can lend you the money for the house and the repairs, then all you need to do is find a good handyman (contractor) and advertise in the paper a house for sale or rent.. He makes 10k every couple months doing this, now why can't you?