Young Newbie In CA Looking For Some General Advice.
Own a home in Brea free and clear. Neighbors home just sold for $425,000 (same model). Looking to use equity to invest in real estate. Read many books on subject and not sure which course to take. Too many choices. Was thinking of buying new homes in Corona area (fist phase) and selling for profit a few months later. Is that a tactic people use? What would you experienced investors recommened we do first? Thanks.
find out how to invest without any money.
Many successful investors suggest that you first determine your goals. I think this is excellent advice.
With all the investment tools out there, you need to determine where you want to be in 6 months, 5 years, etc. Then you can determine what you want from your investment. Do you want long term cash flow? Do you want short term gains? Do you need tax deductions? How much time can you devote to real estate? Can you afford to be 'hands-on' or do you need someone to handle the 'day-to-day?'
Goals are so important. If you need cash now it wouldn't make much sense to buy a rental. However, if you want equity in a home for your retirement then a rental might be perfect.
Once you have a goal then you should determine if the investment makes sense. If you do buy a phase 1 home, then what? You should consider your exit strategy before you buy. The exit can best be determined by your goals. If your goal is cash flow then you could rent it. If you want cash for the next deal then you could sell it outright. If you want a bit of both you could lease\option.
Consider this then post a little more.
I will 2nd what cygnus said. It is first important to get those clear goals. Buying first-phase properties for quick appreciation is one way to go. Obviously, you have an incredible asset in a free and clear house with 400K+ in equity. You may decide that you can find better deals in pre-foreclosures or REO properties. Definitely spend a lot of time on this website and in this forum. Once you have some questions or ideas, start bringing them to the table for more advice.
Our plan is to by properties and convert them into rental cash flow. We have been in touch with a realtor who owns properties himself who is helping us track down homes that are selling below market value. He has informed us of a 2% loan for 5 years that then becomes a 25 year loan at the current CD rate. So the thought is to refinance our current home with this loan and purchase the new property with that money. Then duplicate the process. What do you all think?
Now we got a plan.
I think the phase 1 housing will also work well for your cash flow goals. Brand new. Little maintainance. Clean neighborhood for responsible tenents. On the surface it all sounds good. Now how about the numbers? They will make the decision for you
I think the SoCal market is as crazy as can be right now. I don't think a buy to hold plan is a good one unless you are getting property for waaayyy under market (like $50-$100). If you find something that's $10-15K FMV after costs (both buying & selling) I think flipping or wholesaling is in order. If you buy to hold you may end up upsidedown if/when the market comes back to reality. But I'm just one opinion.