Debt free, building a home, looking to invest afterwards

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Debt free, building a home, looking to invest afterwards

Curtis Curley
Rental Property Investor · Houston, TX · Member since 2014 · 47 posts · 5 votes

I spent the last 3.5 years paying off all of my debt except my home.  I'll be selling my existing home in order to purchase a new live-in residence.  After all of this is done, I would like to get into real estate investing.  Here are a couple of questions I have about this game.  I have a nice corporate job but would like to dictate more of my personal economy if that makes any sense.  There's no reason everyone is allotted 24hrs a day and some people make $300 in that day and others make $3000.  I want to make $3000.

1.  I see many people have a buy and hold strategy about them.  The only issue I have with that idea is it takes a long time to break even in my opinion.  Why would I pay 10% of a $150k house ($15k) up front just to make $1200 a month?  It'll take me about two years to break even after taxes and licenses.  I haven't made any moves yet so I don't understand the financial strategy with this.

2.  I like the idea of fixing houses and flipping them but there's a lot of risk involved.  I like the idea of doing this all with cash but it'll take a while to come up with $150k.  There's the idea of hard money lenders but that doesn't usually drive up your net work, which is my goal.  I don't want to be in business just to pay other people.  I want to pocket the money.  I need help with this concept.

Thank you to whoever understands my questions and concerns.  And if you're in the Houston area, feel free to network with me to give me more game on this investing strategy.  My goal is to not HAVE to work for anyone else and to dictate my own schedule.  Thanks again.

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  • Sohrab Khosravi
    Lender · Houston, TX · Member since 2013 · 154 posts · 28 votes
    11y

    Hi,

    Please keep in mind buy and hold is for long term and you need to have patient with it. No investment can make you $3000. 00 a day you want overnight.

    On the other side, flipping is very good to make some money little bit faster so you can invest more on you buy and hold.if you want to start flipping you need to educate your self about the market and everything it goes to this business in order to minimize your risk.

    Granted, all types of investment is carrying a level of risk, but if you prepare for it and you have done your homework it should not be any problem.

    I am my self new in to invest in real estate (some where around 2 years) and I and learning everyday from the mistake I make or networking with others.

    Biggerpockets is the best place to start and learn about this business.

    Good luck

    0Reply
  • Nazz Wang
    Investor · Maui, HI · Member since 2012 · 232 posts · 96 votes
    11y
    1. Think about it like a saving account. Instead of "breaking even", let's assume you make back your down payment amount in two years, you just got 50% interest for two years on your investment, which is very impressive. Now, you have problems with your math. You will not be making $1200 a month net with a $150k property. Your expenses excluding mortgage should be about half of your rent, and let's hope your mortgage is less than Hal so there is something left. Your down payment doesn't disappear, it is your equity in the house and you will get it back plus some when you sell the property, if you do it right. 2. Flipping is very time intensive too. If you have a full time job, are you sure you can show up everyday to check on progress? Getting an experienced partner is a good approach. In my opinion, you either have to have experience or money. When you have both, you can flip or rehab with calculated risk. When you have neither, it is gambling.
    0Reply
  • Michael Kevorkian
    Realtor · Chicago, IL · Member since 2013 · 103 posts · 44 votes
    11y

    Hi @Curtis Curley I really like your discipline and where you're heading mentally to get yourself financially free. I have to agree with @Nazz Wang on her post as you need either time or money to get into this business. Sometimes just a little of both, if you have the money to invest you can find companies that will get you in and out of deals (specifically flips) pretty fast so you can gauge the process better than buying and holding with a company or on your own which can tie up your capital for a longer period of time. 

    I think the best thing to do would be to either be a hard money lender or equity partner with a rehabber/flipper whereby your money isn't tied up too long and you are pretty much hands off. You put up the funds, they do all the work and you get paid. Obviously equity position has more upside profit potential but usually not the monthly cashflow to go along with it. In other words, you wait until the property sells to get paid but the payoff is higher than hard money lending in most cases.

    Regarding your comment on "a lot of risk" with flips.... What makes you say that? I do a lot of rehabs / flips as my "job" and have learned to mitigate the risks in this business as most experienced rehabbers will learn over the years. There is no risk free investment out there but also don't think that just because you hear things in idle conversation that it makes them true. If that were the case this blog might be called "thinnerpockets" or something like that. The truth is if you align yourself with the right people who have a proven system and business in place then you should do just fine. 

    If you have any questions I'm always happy to answer them so please feel free to message me anytime. .

    Thanks, 

    Michael Kevorkian

    0Reply
  • Curtis Curley
    OP
    Rental Property Investor · Houston, TX · Member since 2014 · 47 posts · 5 votes
    11y
    Originally posted by @Sohrab Khosravi:

    Hi,

    Please keep in mind buy and hold is for long term and you need to have patient with it. No investment can make you $3000. 00 a day you want overnight.

    On the other side, flipping is very good to make some money little bit faster so you can invest more on you buy and hold.if you want to start flipping you need to educate your self about the market and everything it goes to this business in order to minimize your risk.

    Granted, all types of investment is carrying a level of risk, but if you prepare for it and you have done your homework it should not be any problem.

    I am my self new in to invest in real estate (some where around 2 years) and I and learning everyday from the mistake I make or networking with others.

    Biggerpockets is the best place to start and learn about this business.

    Good luck

     Thank you for reaching out to me.  This website is amazing and I will continue to learn as much as I can.  My $3000 a day was exaggerating of course but everybody gets 24 hrs in a day and different people get paid different amounts. That was the overall point.  Where are you in the journey?  2 years later, what do you wish you had done differently?

    0Reply
  • Curtis Curley
    OP
    Rental Property Investor · Houston, TX · Member since 2014 · 47 posts · 5 votes
    11y
    Originally posted by @Nazz Wang:

    1. Think about it like a saving account. Instead of "breaking even", let's assume you make back your down payment amount in two years, you just got 50% interest for two years on your investment, which is very impressive. Now, you have problems with your math. You will not be making $1200 a month net with a $150k property. Your expenses excluding mortgage should be about half of your rent, and let's hope your mortgage is less than Hal so there is something left. Your down payment doesn't disappear, it is your equity in the house and you will get it back plus some when you sell the property, if you do it right.
    2. Flipping is very time intensive too. If you have a full time job, are you sure you can show up everyday to check on progress? Getting an experienced partner is a good approach. In my opinion, you either have to have experience or money. When you have both, you can flip or rehab with calculated risk. When you have neither, it is gambling.

     Thank you for your input.  I never thought of rentals like that.  50% is a LOT for an investment.  I'll keep studying.

    0Reply
  • Curtis Curley
    OP
    Rental Property Investor · Houston, TX · Member since 2014 · 47 posts · 5 votes
    11y
    Originally posted by @Michael Kevorkian:

    Hi @Curtis Curley I really like your discipline and where you're heading mentally to get yourself financially free. I have to agree with @Nazz Wang on her post as you need either time or money to get into this business. Sometimes just a little of both, if you have the money to invest you can find companies that will get you in and out of deals (specifically flips) pretty fast so you can gauge the process better than buying and holding with a company or on your own which can tie up your capital for a longer period of time. 

    I think the best thing to do would be to either be a hard money lender or equity partner with a rehabber/flipper whereby your money isn't tied up too long and you are pretty much hands off. You put up the funds, they do all the work and you get paid. Obviously equity position has more upside profit potential but usually not the monthly cashflow to go along with it. In other words, you wait until the property sells to get paid but the payoff is higher than hard money lending in most cases.

    Regarding your comment on "a lot of risk" with flips.... What makes you say that? I do a lot of rehabs / flips as my "job" and have learned to mitigate the risks in this business as most experienced rehabbers will learn over the years. There is no risk free investment out there but also don't think that just because you hear things in idle conversation that it makes them true. If that were the case this blog might be called "thinnerpockets" or something like that. The truth is if you align yourself with the right people who have a proven system and business in place then you should do just fine. 

    If you have any questions I'm always happy to answer them so please feel free to message me anytime. .

    Thanks, 

    Michael Kevorkian

     Anybody ever mess with you about your name?  Very interesting.  Did you have a full time job before you got involved in real estate?  I'm curious to know how money can really be made doing flips.  This is your full time job now.  How long did it take you transition to this level?

    0Reply
  • Michael Kevorkian
    Realtor · Chicago, IL · Member since 2013 · 103 posts · 44 votes
    11y

    Hi @Curtis Curley funny you should ask but yes I caught all kinds of hell for my last name. Mostly during my high school years when the guy was in the news all the time but occasionally someone still asks, "any relation". (The answer is no for all those who are curious). 

    I had a fulltime job for the first 2 years I was in real estate and when the market went bust I actually considered driving a truck over the road to make ends meet until it came back. I was lucky, I had a rehab that I thought would sell for $295K at the time and if I didn't make it on that single deal I was goin' truckin' for a while. I wound up selling it for $245K but it literally saved my butt. I bought it for $140K and put just under $30K in it. I made enough on that one flip to carry me into the next phase of the business and my life and I haven't looked back since. We all have to do what we have to do to make it. I was lucky, determined and never once thought about giving up.

    The way to make money in rehabs (my opinion only) is to find your niche. As Ron Legrand always said, "Don't try to turn a 3 house into a 10, turn it into a 7 or 8". I deal in two specific niches when it comes to rehabs. Light remodels (turning 3's into 7+'s) and gut rehabs where we carefully analyze the neighborhood and if demand is strong we bring "like new" construction to the marketplace at about 30% less than a true new construction of the same caliber would cost. We bring value into our process and projects and that has always done us very well.

    The transition.... It was like a snowball to be honest with you. I started with one, got into two and we consistently do anywhere from 3-5 deals per month. That's an annual average so you know, some months are super busy and some not so much but it comes out to about 50-60 properties per year. 

    My advice to you and anyone else, if you plan to do this on your own, remember you have two eyes, you can keep one on each property and that's about it. When you grow you have to manage the beast and that means more people and inevitable.... payroll or profit share. My average calculations are that for 2 people I have brought into the team, they produce as much as I did on my own. The 3rd person is where I start making money. Sounds funny but that's what the numbers show.

    All the best @Curtis Curley 

    Michael Kevorkian

    0Reply
  • Nick Weidner
    Investor · Houston, TX · Member since 2012 · 19 posts · 1 vote
    11y
    Curtis Curley I was in the same boat as you about two years ago. I was "Anti" debt with a nice corporate job that I really enjoy. We paid off both vehicles, credit card / school loans to become debt free. Also refi our house to a 10 year note. I have multiple friends who do "Buy and Hold". After numerous conversations and running numbers my thoughts started to shift. I am looking at "Buy and Hold" as more of a retirement vs replacing my job. This past year I purchased my rental (Duplex). I look for properties that cash flow $500+ after expenses. I am looking to pick up my second rental (another duplex) around summer time. We are also in Houston (SE Area).
    0Reply
  • Curtis Curley
    OP
    Rental Property Investor · Houston, TX · Member since 2014 · 47 posts · 5 votes
    7y

    It's so interesting reading these questions and responses after 5 years.  I've learned so much in that time.

    0Reply
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