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Updated over 15 years ago on . Most recent reply

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Nick Dunin
  • Real Estate Investor
  • Longview, TX
28
Votes |
111
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So much info, where do I even start?

Nick Dunin
  • Real Estate Investor
  • Longview, TX
Posted

Hi guys,

Im new to all this. I've been reading these forums the last few days and I think I'm more confused now than before I started. So many acronyms and topics discussed that I have no basic understanding to know what is being discussed.

Is there a book out there that talks about the different types of real estate investments that can be made and describes the basics of each? I need some kind of foundation first so I can figure out which way I want to go.

Thanks,

Nick
Longview, TX

Most Popular Reply

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Jon Holdman
  • Rental Property Investor
  • Mercer Island, WA
14,128
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22,059
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Jon Holdman
  • Rental Property Investor
  • Mercer Island, WA
ModeratorReplied

A major problem? No. A minor problem, yes. To hold rentals (the only true form of "investing" rather than a real estate related job, IMHO), you do need some cash. I'd recommend that you have at least six months rent or $5000 in the bank when you buy your first rental. That way you aren't put in a pinch by a major expense or a tenant flaking out on you. Once you get to 10 houses, you probably don't need that much for each one. The odds of a big bill on several all at once is pretty low. OTOH, with 10 houses you can pretty much count on a multi-thousand dollar bill for something each and every year.

If you want to get conventional financing, you should expect to put 20% down. If that's a problem, you'll need to get creative. There are several ways to do that. Owner financing is a good method. That starts with straight out owner financing where the owner holds the note on a property they own free and clear. That's how I bought my first house many, many years ago, down in Rosenberg, TX. You can also "wrap" an existing note with a new one. So, you pay on a new note while the owner is paying on their existing note. You can do a land contract. That's like a car loan where the lender (seller, in this case) holds the title (deed), but you make payments and have possession. Or, you can do a lease option.

You can also buy subject to where you buy the property subject to an existing loan. Basically you're "taking over the payments" and you start making the payment on their loan. The loan stays in the seller's name. That's not illegal, but does violate the due-on-sale clause in the note, giving the bank the right to call the note due. If that happens, you'll need to refi quickly. Probably low risk as long as interest rates remain fairly low and banks are busy with foreclosures. But eventually they will catch up, and I think 10%+ interest rates are not out of the question in a few years. In 1982 when I moved to Houston, rates for home loans were 16%. If that happens again, you bet banks will call notes.

Another approach is to buy junkers with hard money, fix them up, get them rented, then refinance. You still need some cash, but less than a 20% down payment plus the costs of rehab.

Lots of discussion here on all these approches. Read the old posts, use the search function, and ask specific questions where its not clear.

I do believe in reading books. No specific recommendations, since I think most writers have something useful to offer. Read a dozen books on real estate and you'll have a pretty good understanding.

Get out and meet people. Check our Texas REIA listing. There are several in Dallas and Houston, though I don't see anything closer.

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