Just starting out. Anyone have any tips.

[Dustin M.]

Hi.

This site is great! I wish I would of stumbled upon it years ago!

I'm a 28 year old just getting started in real estate investing (so if you guys have any tips please feel free to share). I'm investing with my mother. She has had rental property for the last 20 years. She is kinda new to flipping homes since she is a buy and hold type of investor. We both have excellent credit (around 750 or more for both of us). My job as a software engineer enables me to save around $2,500 a month that I can use in real estate investing.

Last September my mother and I purchased a home from a house auction for $36,000 put $5000 more into it fixing it up and sold it contract for deed a month later for $75,000 at 10.5% interest a year. I was so happy with the result. I paid cash for my half of the house and now I'm collecting $330 a month in payments from the person that purchased the home.

We went to another house auction in December and purchased another home for $58600. It has a fair market value of $95,000. We plan to put $6000 into it fixing it up and sell it at the fair market value price of $95,000. We will either sell it contract for deed or sell it outright and use the money and a 1031 tax deferred exchange to purchase some more property. I had to go to the bank to get a 3 year loan home equity loan at 5.9% for $27,000 to pay for my half of the house. My monthly home equity loan payment will be around $330. I currently have $6,000 in savings right now and I will probably use most of it to pay for the rest of my half of the home and the costs needed to fix it up before we can sell it.

Question 1: Did we do a good job on our first home that we purchased?

Question 2: How did we do on the second home. Haven't sold it yet but we plan to put $64600 into it and sell it for $95,000 so LTV would be 0.68 right? Is a LTV less than 0.7 usually a good deal?

Question 3: We love going to house auctions, especially because it is fun to buy a box of knick knacks for a dollar before they sell the home. Are estate auctions a good place to buy homes for investing in real estate? Should we be focusing on other avenues to invest in real estate?

Question 4: We would rather not have to deal with renters right now. Would you recommend focusing on selling the homes outright, selling them contract for deed, or is there another option for us that we haven't considered yet. Maybe we should sell it to whoever wants the property first regardless of the situation they are in.

Question 5: If we sell the second house that we just bought contract for deed and we buy a third home I won't be able to use a home equity loan to pay for my half (since it is nearly maxed out now). We will either need to get a mortgage for the home or some creative financing. Any suggestions on what type of financing we should go for?

Question 5: We need to setup a company to deal with the real estate investments. Would you recommend an S Cop, C Corp, LLC? From talking to the banks it sounds like we should get a corporate line of credit. Sounds like there would be less bank fees with one.

Question 6: Do you think it would be worth the time for me to get a real estate license? Can I find extra special deals with one?

My goal for 2010 is for us to buy fix and sell four more homes. I think that we will be able to do it. I also plan to spend at least thirty minutes a day on this website learning as much as I can about real estate investing.

Any help / suggestions / criticisms welcome

Thanks in advance,

Dustin Michaels

[Clint Chancellor]

Dustin,

It is so good to hear about your success so far. Keep at it.

As for question 1. That is a perfectly admirable deal. No one can tell you if you did good or bad because that is subject to what you were looking for. Either way you did not lose money so, it has to be somewhat good. If you were looking for cash flow, that is what you got. You probably could have sold it out right for a profit also and that would also be good. It just depends on what you want.

2. You did good. Most real estate coaches will teach their students this method for wholesaling. ARV * .70 - repairs - your desired profit. So if you are not planning on wholesaling then you can drop the desired profit because your profit is in the 30 percent discount. The more discount you can get the better, but 70 is a common goal for a lot of investors.

3. That is the beauty of this real estate game, there are hundreds of ways to play. If you enjoy the sales and you are making money at it, it's good. Now obviously there are other ways to do it, you could keep doing it this way or research others. If you are looking for buy and hold, cash flow deals, look around your town for we buy houses signs and call them and ask to get on their email list. They will send you deals at 30-70 % arv.

4. You can always look into a property management company. They will deal with the renters and send you a monthly check.

5. You can always ask the sellers you buy from to keep a note for you. Then wrap the mortgage. Research wrap around mortgage. If you are buying and selling out right, hard money can be an asset you can use. The third and most important to begin working on if you are going to keep with this is private money.

5. This is something an attorney would be best to answer, but from experience an LLC is the most practical for a real estate investor. You are also in good shape and for and LLC to provide the most liability protection you need more than one owner, you already have two which is great. Get this done asap, if something happens tomorrow, both you and your moms personal assets (your moms rental homes) are in possible jeopardy.

6. Probably not, it is easier to pair up with a realtor, if you were a realtor by trade and in the trenches day to day you might find a deal here or there, but nothing special. As a realor you have access to mls, but you can get that if you forge a relationship with a realtor.

You best bet for your goal is to stick with it, and find a wholesaler in your area. As I said, call the we buy houses signs.

Good luck and let me know if you have any other questions.

Always here to help,
Clint.