Getting started: what would you do if you were me?

Question

Hi there,

I'm wondering if I can get some advice from some experts on how to achieve my goals.  I'm feeling kinda stuck.

I recently went through a divorce and sold our primary residence, along with a single-family rental property my ex and I owned free and clear for several years (was a good cash generator).  Now I have roughly $100k to invest in real estate, a large portion of which I'd need to reinvest via a 1031 exchange in order to avoid the capital gains taxes.  I also have some relatives who could loan me additional funds to increase my purchasing power, and I have some investment accounts and 401k's I could borrow against for short term bridge funding.  I'm currently renting a place in Portland, Maine.

GOALS:

1 - Eliminate my negative housing cash flow by either: purchasing a multi-unit that I could owner-occupy, or one that has enough cash flow to cancel out my current rent payment.

2 - Increase my net worth by $2 million over the next 5 years, primarily by purchasing real estate.

PROBLEMS

- I'm self-employed.  It's been challenging to get financing. I may be able to get private financing from relatives.

- I live in Portland, Maine.  The market is overheated right now and it's hard to find any deals at all w/multis.  The cap rate's are ridiculous, and cash flow isn't great, certainly at offer prices.

- It's hard to find any deals (see above).  I'm picking through Realtor.com, Zillow, and I have a couple agents sending me the lastest MLS listing reports, but I feel like this is a very inefficient way to find property.

- I understand the basics (NOI, cash-on-cash, cap rate, 50% rule, 70% rule, etc.) but I sure could use a mentor to help me focus and be efficient.

QUESTIONS

- I'm thinking flipping houses would be the best way to quickly amass cash that could be eventually reinvested into a large portfolio of investment properties, and I think I can do a decent job estimating costs.  But how can I find good flips, preferably that dozens of other people don't also have their eyes on?

- How do people amass 12, 30, 50 units?  It's obviously not dependent on their personal income.

- How do I get over the financining hurdle?  I have a decent amount of capital to get started.

- What would you do, if you were me, to reach the goals I've outlined?

Thanks for reading....

Jim K. · Answer

@Rob Landry

First of all, please accept my sympathies for the divorce. It can't be easy look at doing this alone, but if you're determined, organized, and focused, it's of course possible. So the money's gotta go back into real estate, and we're talking in the Portland area.Goals:1. This is probably a good idea.

2. That's ambitious, especially in this market.Problems. You have four of them here.1. Well, if you can prove self-employment income, that's not SUCH a problem.

2. Yes, the market is overheated

3. I doubt that you are going find two million bucks in undervalued property sitting behind your computer. Despite rumors to the contrary, this is still real estate and there's a significant gap between what's going on in reality and what's portrayed as the state of things on computer. Your best bet to reach your goals is to get to deals before they end up on the MLS.

4. Lots of videos and podcasts here to help you out with running the numbers.Questions.  You have four of them as well.1. You need to study the videos on flipping here. The basic question you're asking is pretty simply -- the thing that you can do that many others can't or won't is get out from behind your computer to look for potential deals. Mining the local court systems are very useful for this, but there are many other methods that you can learn about here. My personal favorite is contacting long-service agents in your area who often work with investors and telling them you have cash in hand and are looking to buy.

2. People amass lot of rental units by extending their debt as far as it will go. The most common way of doing this is the BRRRR method. You can study the blogs and videos here to learn more about this.3. After learning everything you can here, start talking to the banks in your area. It's as simple as amassing a very long list and making appointments with each one at a time.

4. If I were you, I'd find the agents in my area who might have some pocket listings standing by, get on some wholesaler lists, and start learning the court system inside and out. I would also start carefully studying my area. Soon, I'd pick out a target area, print up a big map of it for my wall, and spend a lot of my free time walking it with a clipboard that has a small map of the area on it and a cell phone with a good camera on it.  I would systematically devour all the free real estate investing "Ultimate Guides" on this website, followed by all the videos on this website, followed by all the podcasts on this website, and then I could go to the blogs here. I'd follow along in the forums looking for people who seemed to know what they were talking about. I would look for my local real estate investing groups and join them. More than anything else, I'd look for local people who had achieved a measure of success in real estate locally and see if I could also do what they were doing, or at least if there were things I could learn from them. One caution: I would stay away from people who made claims that they had exclusive information to sell you through a coaching system guaranteed to make you filthy rich. Anything that would involve marketing that included pictures of people on a bike on top of a hill, relaxing on a boat, jumping ecstatically on a beach at sunset, taking selfies at famous tourist sites, and the big one, any pictures of desirable cars would be included in the list of stuff to stay away from.

Good luck, Rob.