What strategy did others use when getting started?

Question

My wife and I are just at the start of our REI education and was wondering how other investors started out and did they change their strategy? I eventually would like to incorporate a buy & hold strategy for passive income, but at the time being I don't have the cash reserves to purchase a home out right. I am unable to get a loan as we were forced to foreclose on our first condo (bought in 2004 and foreclosed in 2012 after a job relocation). Please don't judge, my wife got a job transfer and when I called up the mortgage company to change the mailing address of where my statement/payment coupon was being sent to they asked what I was doing with the property. Well, we were over $100k underwater so we couldn't sell it so I told her we were planning on renting it out (already had a renter and property manager lined up). She told me that my loan (CalHFA) did not allow me to rent out the property. I needed to write a letter to the 'investor' who granted us a 1 year allowance to rent out the property at that point I needed to pay off the loan or continue living there as my primary residence (well neither of those was going to happen). We also tried negotiating a short sale, but the investor rejected the multiple offers we had. During the time prior to the foreclosure we were able to purchase another residence that we live in now, and have equity in. The sticking point for us is the foreclosure, so we are unable to get any kind of traditional financing (we are just coming up to the timeframe that the FHA allows for a primary loan).

Has anyone else been in a similar situation? How did you get started? What strategy did you use while you were unable to secure financing?

Has anyone else been in a similar situation?  How did you get started? What strategy did you use while you were unable to secure financing?

Account Closed · Answer

In this current go around in REI after some problems early in my career, I have learned a few lessons -

- I only buy in cash or borrow cheap short term cash from private investors for ~2 years

- I now mostly owner finance so I do not have repairs

- I work with experienced investor/agents who feed me good deals not usually on MLS.

Michael Moikeha · Answer

I started by studying and reading info here. Next step which should be done immediately is finding local REI groups and networking with others who are working in the area.

Lastly, I started sending letters to home owners. I would start this last step before understand everything about investing, BECAUSE YOU WILL NEVER UNDERSTAND EVERYTHING!

David Echeverria · Answer

I empathize your situation.  We tried to do a Deed in Lieu as well but they declined that as well.  So we just said "F it" and stopped paying them.

I wish that was the case here :-)  Starter homes start at $500k and you might be able to get a small condo for $200-300K.  I've contemplated investing out of state, but am not comfortable going into a market blind.

David Echeverria · Answer

Thanks Gary.  I do have some money, but would it be better spent marketing ourselves in the wholesale market or going in as an equity partner like you suggested for a fix 'n' flip?

Amanda Hoening · Answer

I had to do a Deed In Lieu in 2012 on my primary residence.   Divorce, neither could afford it on our own, bought at the top of the market, couldn't sell.     Since then, I haven't had a blemish on my credit what so ever.  I have no credit card debt, just student loans which are paid just like they should be.   My debt to income is very low.   I found two portfolio lenders that will lend to me.  I just have to put down 20-25% and the deal has to make sense to the  lender 20-25% in my market is around 8-10k.

Account Closed · Answer

many new investors start off by wholesaling because basially all the money you need is to market and you get your check instantly.

if you have some money you can find equity partners or hard money lenders to fund the deal for you and you can do the fix and flip yourself

David Echeverria · Answer

Thanks Amy.  Yeah, I've been lurking on the forums and reading books etc.  I was just curious if people in a similar situation when they started, started with wholesaling, finding subject to deals, etc. until they accumulated wither enough cash to make a purchase or got past the 7 year period until they could get financing.  Or have they continued doing the same thing even though they can now get financing.   Living in one of the most expensive areas in the country, I don't expect to be able to do any cash deals here for a loooong time.

Amy Brocious · Answer

Hi David ... I have a similar situation and am just beginning to study our real estate options.  So far, the most important thing I have done is to spent time on this site, and soaking in the information .. and realizing that there is not one "right" way to do things.  So, I have a feeling that we will have to get creative with financing, think outside the box, and have a lot of patience ... but I am hoping it will pay off in the end!

Curious to see if others have suggestions too!  Good luck!

Victoria Winters · Answer

The situation you described, unfortunately, is not uncommon. The good news is, all of that is in the past. You cannot do anything about the past, so move forward with your investment plans. Start by assessing where you are today.  Write a goal and then a plan to reach your goal. Take the first step toward your goal.

I know this may sound a bit superficial, but that is the truth about how to move forward. There are a lot of choices for getting started in real estate investing. Pick one.  Choose an area that you are interested in pursuing and get going. Help is readily available along the way.

Feel free to contact me.  Also, contact other investors here on BP. This is a wonderful resource for both new and seasoned investors.

What strategy did others use when getting started?

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