Anything missing from this plan?

Question

1. Fix my credit and get the work history I need to get approved for loan
2. During the next two years educate myself and develop contacts in my area, may still keep an eye out for local foreclosures
3. Buy a BRRRR, SFH, or 2 unit Multi Family depending on the deals at the time, I like the duplex idea
4. Well lets see if I can even get to 3!

I realize now that having 250k cash isn't as useful as I thought, and using all of it on my first buy seems way too dangerous. I should be able to just leave it where its, use only if really needed.

I am still a bit unclear as to how you buy a second home using the value of the first. But I have time to figure it out.

T.

Nathan Gesner · Answer

It's good that you're trying to develop a plan, but I think you're still lacking some education.

You don't need $250,000 to buy a house. You need enough to qualify for a loan, which ranges from 3.5% - 25%, depending on the type of loan. That's one of the primary benefits of real estate: you only put down a portion of they money but you get all the benefits.

Here's my basic beginner advice.

1. Start with BiggerPockets Ultimate Beginners Guide (free). It will familiarize you with the basic terminology and benefits. Then you can read a more in-depth book like The Book On Rental Property Investing by Brandon Turneror The Unofficial Guide to Real Estate Investing by Spencer Strauss.

2. Get your finances in order. Get rid of debt, build a budget, and save. The idea that you can build wealth without putting any money into it is a recipe for disaster and the sales pitch of gurus trying to steal your money. A wise investor will not try to get rich quick with shortcuts. If you can't keep control of your personal finances, you are highly unlikely to succeed in real estate investing. Check out my personal favorite, Set For Life by Scott Trench , or The Total Money Makeover by Dave Ramsey.

3. As you read these books, watch the biggerpockets podcasts. This will help clarify and reinforce what you are reading. You can hear real-world examples of how others have built their investment portfolio and (hopefully) learn to avoid their mistakes.

4. Now you need to figure out how to find deals and pay for them. Again, the BiggerPockets store has some books for this or you can learn by watching podcasts, reading blogs, and interacting on the forum. There is a handy search bar in the upper right that makes it easy to find previous discussions, blogs, podcasts, and other resources. Biggerpockets also has a calculator you can use to analyze deals and I highly recommend you start this as soon as possible, even if you are not ready to buy. If you consistently analyze properties, it will be much easier to recognize a good deal when it shows up. Find Brandon's videos on YouTube for the "four square" method of analyzing homes and practice. It doesn't take long to learn how to spot a good deal.

5. Study the market. You can learn to do this on your own or get a rockstar REALTOR to lead the way. I highly recommend a well-qualified REALTOR that works with investors and knows how to best help you.

6. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. The truth is, you could read 100 books and still not know enough because certain things need to be learned through trial-and-error. You don't need to know everything to get started; you just need a foundation to build on and the rest will come through experience and then refining your education.

You can build a basic understanding of investing in 3-6 months. How long it takes to be financially ready is different for everyone. Once you're ready, create a goal (e.g. "I will buy at least one single-family home, duplex, triplex, or fourplex before the end of 2019") and then do it. Real estate investing is a pretty forgiving world and the average person can still make money even with some pretty big mistakes.

Amy W. · Answer

@Tausen Richmond If you first property gains enough equity, you can do a cash-out refi. Ideally, you pay off the first loan and use the remainder as a downpayment for property 2. I see that as a pipe dream, but if you are rehabbing, then it's more possible.

With 250k, I think you could buy 3 or 4 properties (with 20% down on each) comfortably and still have reserves. RenttoRetirement FAQ says to start out with more than one if you can, to cover vacancies. But dang, if I had 250k... I might jump right into multi-family. Of course, I don't have this 'problem' so I haven't researched in that vein.

I'm working now to figure out who to trust. Not Roofstock so much. Not LiveHomeRoom.

Amy

Chris Seveney · Answer

@Tausen Richmond

I would also add to your list look for potential seller financing opportunities.

Tausen Richmond · Answer

Joe Villeneuve your post are the least helpful of all that I have received. I try to understand what your saying, I get it, I think. But it sounds like your mad cause I didn't do things they way you would do them. Maybe, im just a bit confused. I want to understand the wisdom you are trying to express, as I am sure you have much knowledge to share.

I am sure you have already noticed, I dont know anything about money, I am just learning now. Help me to understand how to better prepare. I only have the 250k, I have been poor all my life. I made a previous post to try and understand what other investors would do. I wanted to develop a basic outline of a plan for myself.

Joe Villeneuve · Answer

The only thing that's missing is a Plan...starting with specific financial goals.  What you've described is what "could be" a series of events, that has no set of criteria for decision making, which would have come from a plan that was based on achieving specific financial goals.  The criteria for each decision would come from the timeline in that plan, with each step in the plan dictated by that criteria so that each of these steps (financial) is dictated by the criteria from the next step.  Think of the financial criteria for each step as prerequisites for the financial criteria for the next step,...kind of like the way curriculum is established to get a degree in college.

The way you build this is to start with the financial criteria, and reverse engineer your plan from there.

Anything missing from this plan?

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