Creating a rehab proposal to give to a private investor

[Alex Henriksen]

I have been interested in real estate for many years now and I know its where I belong. It is the only thing i feel passionate about iv come to learn. I have come to this site to gain knowledge from the experience of its members. So here is the skinny. I have a possible private investor that I haven't approached yet about my plans. Im looking to start out by purchasing a property for under 30k and putting no more than 20 to 30k into it and than selling for profit. I would like to hear experiences on how any of you have secured your first private investments to get started in the business of real estate.

[Jack Bobeck]

Alex Henriksen Welcome to BP. If you are starting out, it is always easiest to work with a partner who can assist with duties and responsibilities, as being on the hook with someone else's money on a 1st time has a lot of pressure. It is not impossible to get private money on a 1st time investment, but you have no track record. Would you invest money with a kid out who is in his 1st year at a brokerage house with no track record? I would look to build some credentials of some sort, a credibility kit, get a mentor from the local REIA, get some experience and backing to help you on your journey. Credibility is the key with private money, I have found.

Best of luck to you and welcome aboard!

Jack Bobeck

[Alex Henriksen]

First off thank you for responding.
Can you go into more detail on how I get experience. And what are the benefits of getting a mentor from the local REIA.

[J Scott]

Originally posted by Alex Henriksen:

Can you go into more detail on how I get experience.

Go find a local rehabber and offer to work for him for free for 6-12 months in return for allowing you to spend time on his jobs, learn the business and gain some experience.

[Alex Henriksen]

J-scott thank you for your response.
You just gave me an Aha moment thank you for that! There is a REIA group meeting on monday that I will be attending as well. Hopefully ill connect with some rehabbers.

[Paul Crowson]

Welcome to BP and totally agree to connect with a local successful proven rehabber to get going....it worked for me and was well worth what it costed.....

[Alex Henriksen]

Thank you Paul for the tip! Going to a local REIA meeting tomorrow. Can't wait to start networking!

[Blake C.]

When I first started I too was very concerned about having the money for the deal. At the time, I didnt even own the place where I lived, but I wanted to invest in real estate. What i ended up doing was buying a house for a flip, but I lived in it. I was able to do this because I could get easy financing on an owner occupied place. Also, because I was single, I could live in it while it was under construction. Additionally, I was able to do most of the work myself, and even work on it during weird hours or for short shifts. This saved tons on expenses and made it more affordable. While it would have been nice to complete the project faster, I had to work with that I had.

My next step was to bring in a roommate. It was a 3/2/2. The plan was to get two roommates. I ended up getting just one roommate, but he agreed to pay half the mortgage and half the bills. I didnt cash flow per say, but it did in comparison to where I was living. In addition it allowed me to get into the game, capturing equity on purchase, building equity through rehab, and paying down principal with someone else's money.

After a few years, I sold this property for a decent gain and have used the money to fund my next investments.

This might not be what you were thinking, but its one way that a small, young guy got started. Basically, the is no set path. You have to be able to see all the options and roll with the opportunities that come your way.

[Alex Henriksen]

Thanks for sharing your experience of your first deal! Your right on about there being no set path and that you just have to roll with the cards your dealt. My cards could possibly yield OPM. But I need to learn more before I try to tap it. Part of that is learning how to talk to an investor and knowing what to say. I feel like that is my obstacle right now.

[Brian Burke]

Speaking of cards...I did my first flip using credit cards because I had no money and no track record. That set me on a path to acquire both of those.

Not for everyone, but it's an option in the right circumstances. You've been given good advice so far, but this could be another arrow in your quiver.

[Alex Henriksen]

Nice Brian!! Talk about super risky. What would you have done if you ran out of money on the cards for the rehab?! Glad it worked out for you.

[Glenn Espinosa]

I also started off using credit cards to fund a good chunk of my first rehab. Brian is definitely right when he says it's a good arrow in your quiver.

[Jeff S.]

Alex Henriksen most people need to fund business with debt. The type of funding isn't the risk, it is the type of deal. If you think about it credit cards (unsecured debt) offer the least amount of risk because they really have the weakest teeth.

[Alex Henriksen]

Thank you guys for giving me another tool to put in my toolbox!

[James Hiddle]

Brian Burke how did you pay off those cards if you didn't have money funneling in? I imagine that you needed to pay off costs associated with those flips.

[Brian Burke]

Originally posted by Alex Henriksen:
Talk about super risky. What would you have done if you ran out of money on the cards for the rehab?!

I would have been in debt and it would have taken me a long time to recover, and might have ended my RE investing career. But...WHAT career? I hadn't flipped a house before, I had no money, and I was living paycheck to paycheck. I was young and really had nothing to lose. You've got to start somewhere/somehow, and I'm glad I did. Fortunately I had applied for every credit card that sent me an offer, so I had a lot of credit available.

James Hiddle, I paid them off when I sold the house. It wouldn't have worked if I had planned to hold the house (or got stuck with it unplanned) but since I fixed it up and resold it in just a few months I was able to pay them off from the sales proceeds. After it was all said and done I had a $1,500 profit. Kind of laughable but at least it was a positive number, and I had more experience than I had a few months earlier. :)

[Alex Henriksen]

@Brian Burke thanks for your shared experience. You wanted to be in real estate and you did it any way possible. Unfortunatly I can't follow in that path. I work full-time but I'm married to wowman that goes to school and works part time. She brings in a fraction what I do so I'm almost positive the banks will count her debt mine and make me count her also as a dependent. :( I did the math last night cause my goal is to buy my first home this year. I alone can borrow around 140,000 but when I add her to the equation it drops it big time to a fraction of that. Anyone no anyway around that?

[Brian Burke]

Alex, dont sell yourself short. At that time, I was making about $16/hr working full time, and my wife was going to school and working part time at $13/hr. This was the 90s so adjust for inflation but it was far from big money. I bought the first one subject to an existing mortgage that was in default, and used the credit cards to bring the loan current and fix up the property. Because I bought it sub2, I didn't have to qualify for the loan (just had to get the cards but that wasnt hard) and it didn't take a lot of credit. I don't remember the exact amount but it was probably around $30K - $40K. This would only work on a flip, the structure isn't good for holding, too expensive.

[Alex Henriksen]

Still can't go the credit card route. Does anyone one know if I can get a loan alone without my wife being in the equation. I know I could just go to the bank to figure this out but I want to test the BP knowledge. :)

[Alex Henriksen]

Went to a lender 2 days ago and I was able to answer my own question. Wives or husbands don't need to be apart of the equation if you can get the loan without the need of anyone.

[Sunil Sehra]

Correct...You can apply for credit alone. The only thing (if it matter is) that they will only count your assets.

Good Luck...

[Kyle Dee]

This is a really good thread for me. having just started out, beginning money is my big obstacle