Starting out....

Starting Out
19yFollow

Starting out....

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Member since 2008 · 5 posts · 2 votes

I've been researching non stop about Real Estate investing. I'm 18 years old and my dad left me a house that would need a lot of work to get into livable condition. I've decided to just sell it before a deliquient tax certificate is issued, where I could loose the house, or atleast have to owe more then I have to pay now. After I sell it I'll have a good $18,000 in the bank to do whatever with. Most kids my age would probably go and buy a car and take their girlfriend out for a nice dinner but not me. :mrgreen:

I want to turn this small amount of money into much much more. 18k of course isn't enough to do a lot with, but if I'm set on this I can secure more private funds through relatives.

I've discovered a few ways that investors acquire properties for so cheap. I think the most effective method is contacting home owners that are about to their home foreclosed on or are in foreclosure, and see if you can work out a deal with them to buy their home at a cheap price so their credit doesn't drop through the floor. It seems like a win win situation, they don't loose their credit, you get a property for cheap, you can give them some extra money that you didn't pay for the home as some incentive, and they won't tear the crap out of the house like most people do when their home is foreclosed on.

What are the risks involved? I'm talking about all the legal stuff. As far as the numbers go, neighborhood ceilings, construction, appraisals, I'm comfortable with all that. What I want to know is what can go wrong legally where you can get screwed over by acquiring a home, fixing it up a bit and reselling it.

How do mortgages work in this aspect? How about home equity loans that may be out on the property. Will all of this carry over to you?

Are there any other ways of investing in Real estate with a smaller amount of money that can get one started? What is "wholesaling? Thank you.

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  • Jim Gordon
    Residential Real Estate Agent · OH · Member since 2008 · 553 posts · 24 votes
    19y

    It sounds like you already own your first rehab property. Get the money to pay off the taxs. Fix it up and pocket more than the 18k that you say you can get now. As for pre forclose deals most people are so upside down on the properties that they have to go with a short sale if the accept reality at all. Most wait until the very end and some of that is the lenders fault. The collection people at the lender will tell them whatever they want to hear to get more money out of them. They will tell them that if they send in at least xxx dollars they will delay forclosure. These people think that the bank is working with them all the way up until set out day.

    The property you own is what most investors get so get started.

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  • Tom McGiveron
    Residential Real Estate Agent · Moriches, NY · Member since 2008 · 635 posts · 9 votes
    19y

    someone correct me if i'm wrong, but if you're really late on your taxes, you have to bring them currect before you sell or have in the contract that X dollars will be going toward paying delinquent taxes. this will of course complicate the sale as well.

    also, i agree, you've got a property, why sell it? bring the taxes current, using all your resources - get it done. then do some rehabbing, live in it for a while or rent it out, either way, refinance and use the money to purchase another property. now you've got two. rehab the second, rent it out, refinance and do it again. along the way, manage your money correctly, don't spread yourself too thin (being a landlord is no picnic) on each property - leave some for op funds for each house.

    there's alot that comes along with this, but it's a general idea of what to do.

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  • N/A N/A
    Member since 2008 · 28 posts · 3 votes
    19y

    You should consider:

    1) Dollar-wise, how much work is it going to need to get it livable?

    2) What exactly will it cost to bring the taxes current?

    3) If you did the work (or had it done) what would the property be worth?

    4) If you got a loan to bring the taxes current and do the repairs, could you rent it high enough (and consistently enough) to cover the mortgage and other expenses?

    5) If you got the loan, brought the taxes current and did the repairs, would it be worth it to move in yourself?

    6) If you got the loan, brought the taxes current and did the repairs, what could it sell for? Look at the other for sale homes in the area, call some local agents... How fast do homes in that area sell?

    7) Think about what kind of investing you really want to do. Do you want to continue to rehab, do you want to own and operate apartments? How involved do you want to be? Or do you just want to put that money
    somehow into real estate?

    If you just want to invest it and forget about it, you should look into putting it into a reit. Or a reit mutual fund. Or that no-load reit index fund that Vanguard offers. If you've got school or other things to worry about, you might just want to put it somewhere safe, like those or even government I bonds (which are guaranteed to keep pace with inflation) until you're really ready to spend time doing real estate invesments.

    As to avoid getting screwed over by someone else, just don't ever sign anything until you've read and understand it. That means ALL of the fine frint.

    To avoid screwing yourself over, you need to make sure that your decision is based on real life numbers, not "I think it'll sell for x."

    The risks of flipping homes basically boil down to this:
    1) The house might take a long time to sell. You have to cover motgage while it sits on the market. That bites into your abiliy to make money.
    2) The house needs more improvements that you thought. The house might have serious defects that needs to be fixed that you didn't forsee.
    3) You "over-fix" the house. You spend too much money fixing things that don't really help the house sell better.
    4) The house just isn't worth what you need, or what you think. You have to cover any agent fees and whatnot, too, and you can't just take one guys word for how much the property is worth.

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