Have potential private money investors, but I'm a newbie

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Have potential private money investors, but I'm a newbie

Michael Haynes
Retail Manager · Chicago, IL · Member since 2015 · 22 posts · 6 votes

I've been researching and talking to anyone who will listen about starting to invest in rental properties for at least 6 months now.  I just found out that a family friend wants to invest with me as far as money goes, they believe in me and my passion to make the deal happen.

So far I've decided on an area, I want to do college rentals in a town about 90 minutes from where I live.I've been crunching numbers, but I don't have my team in place.  Where do I start, I know I need an attorney to create the contract for me and my investors, I know I need an inspector, a contractor, and I'm sure some other key players.  How do I find these people, in what order, and what do I say to them?  

I just want to start putting the pieces in place so that I can bring a solid deal to the table for my backer to get things started. Any advice on the order in which I need to build the team, when to file an LLC with my investing partners, and anything else that would guide me through my first deal.

Thanks! 

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Priscilla Z.
Rental Property Investor · Palm Bay, FL · Member since 2009 · 511 posts · 290 votes
10y

@Michael Haynes - Get a Realtor first, or a wholesaler to find you the house.  Once you have a contract on the house, THEN people will listen.  Take the contract to a title company or attorney, however your state does it.....have them open escrow.  

Call an inspector to do an inspection on the house, then call at least 3 contractors to give you an estimate.  Not necessarily looking for best price, you want to make sure they have the experience and workmanship you are looking for.

Once you have estimates then you can run all your numbers, and tell your private money lender what you need.  Attorney or title company will write up mortgage for you to be signed at closing.

Again, my recommendation is to get the house first, then everything will fall into place.

Good luck!

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  • Priscilla Z.
    Rental Property Investor · Palm Bay, FL · Member since 2009 · 511 posts · 290 votes
    10y

    @Michael Haynes - Get a Realtor first, or a wholesaler to find you the house.  Once you have a contract on the house, THEN people will listen.  Take the contract to a title company or attorney, however your state does it.....have them open escrow.  

    Call an inspector to do an inspection on the house, then call at least 3 contractors to give you an estimate.  Not necessarily looking for best price, you want to make sure they have the experience and workmanship you are looking for.

    Once you have estimates then you can run all your numbers, and tell your private money lender what you need.  Attorney or title company will write up mortgage for you to be signed at closing.

    Again, my recommendation is to get the house first, then everything will fall into place.

    Good luck!

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  • Michael Haynes
    OP
    Retail Manager · Chicago, IL · Member since 2015 · 22 posts · 6 votes
    10y

    I suppose I'm scared to put a contract on a house without first having things spelled out for my backers.  

    Perhaps what I need to do before that is bring them examples and get a budget worked out.  Then I'll know I can move forward with a contract, and the rest will follow.  

    I literally just found out yesterday that someone my mother is friends with is more than willing to invest with me.  I need to sit down with them first.  

    Thank you for your quick response. 

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  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    10y

    @Michael Haynes, I would talk to your mom's friend first. Just because they want to invest doesn't mean they can or will fully fund the investment. See how much they will commit. See how much you have on your own. Will you still need a loan or do you have enough to invest? 

    Find an agent who can set you up to receive MLS listings so you can start to get a feel for the market.

    Start looking for an attorney, but you don't really need one until you have found a house and your investor wants to give you money. 

    Ask everyone you know if they have any contractor recommendations. Just as valuable is a contractor to avoid. I had a roof put on my house, and a few months later my neighbor asked me if I would recommend him. NO!!! I made sure he didn't use my roofer. Yes, the roof doesn't leak, so it does its job, but it took him almost a month of working an hour here half an hour there to get it finished. Major construction going on throughout, so it wasn't a huge deal, just annoying...

    [email protected]Podcast Guest on Show #261
    BiggerPockets
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  • Jacob Sampson
    Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
    10y

    @Michael Haynes

    Math skills and self discepline will be far more important than passion.  Like poker, if done correctly, real estate is a grind. 

    Mixing money and family scares me, start slow and small.  Make sure your mistakes are small ones. 

    I would take the advice people have given in this post, get a realtor, learn the area you are going to invest in, define your goals and the strategy you intend to use to reach them.  Oh and start small!!

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  • Westen Barnes
    Real Estate Agent · Cassville, MO · Member since 2016 · 15 posts · 1 vote
    10y

    I would have to agree with Priscilla Z.

    I'm at that point where I have potential deals but afraid of getting them under contract becous I don't have any one lined up especially a lender but I've been really trying to break away from those worries because I know they are just going to hold me back and dela making money

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  • Michael Haynes
    OP
    Retail Manager · Chicago, IL · Member since 2015 · 22 posts · 6 votes
    10y

    Jacob, I'm scared of mixing family and money as well, which is why I politely declined my mothers backing.  Her friend on the other hand is loaded and removed enough from me personally that it's not the same.  I'm approaching it the same as if it was someone I didn't have any connection to aside from business.  

    I've got several deals in mind, so I'm going to meet with the woman, find out how far she wants to go, then put one of these under contract and get going.  

    I'm scared, excited, and so ready to get started in this.  Thank you all for your input, and please continue to offer any other insights. 

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