So what's holding you back?

[Frank Patalano]

When I help new investors with buying their first property I often want to know what is holding them back from pulling the trigger.

So I'll ask here. What is holding you back?

[Catalina Goffredo]

I don’t know where to start with only $15,000 dollars. Also, how do I buy my second property? I want to make a 5 year plan. 

[Greg Gaudet]

I would say lack of enough capital for the price of the deals I've been finding - or you could say that I'm waiting for the right deal to come up because I'm looking at higher priced properties now (there's a promising one I'm working on). I have about 100k accessible for the right deal, but that would include borrowing from a heloc, so it would have to be a really profitable deal to justify that. 

I'm in a high priced market, of course; but last year I was able to buy 3 condos for under 100k each that rent for 1600 each (the first one has already doubled in value). This year I'm going for a 700-800k property with 3-4 units that will gross 8k in rents. Slightly lower COC returns, but much greater appreciation potential. But because the numbers are much bigger, I'm taking my time and analyzing them very closely. The good news is I pass up deals all the time just because I don't have the capital to pursue them all!

But I do close on another condo next week, brought a partner in on that one, she put the 100k in and I brought the deal and will manage the rehab and the rental. So I'm not - not doing deals - just being very careful to make sure the next deal is as good as the last few, especially with the uncertainty of where the market could be in a year or so. Also making sure that if I bring a partner in, there has to be a good enough return for everyone to make money.

[Greg Gaudet]

Originally posted by @Catalina Goffredo:

I don’t know where to start with only $15,000 dollars. Also, how do I buy my second property? I want to make a 5 year plan. 

Long distance BRRRR You sound like the perfect candidate for the book on long distance investing

[Frank Patalano]

@William S.

I understand exactly what you're saying. It is much better to buy in a place where you have a team especially if you're moving around alot. At the same time if you find an area that you really enjoy and the numbers look good on a lot of deals I would also consider building out a second team for that new area. Good luck. Sounds like you're doing fine.

[Frank Patalano]

@Mike Roy

Obviously I agree with everything you said. Fear is the main thing holding you back and education is the main way to break through. I have a background education and have been investing in real estate for over 10 years. We are working with a lot of new investors through our educational programs, mentoring, and podcast. It's funny that you said motivation because I'll be posting some motivation on Instagram since it is Motivation Monday.

[Nate Wilson]

@Frank Patalano

I am a beginner from New Hampshire and what's holding me back is finding the right deal. I also wonder if I may be better off being a hard lender until the market settles down.

[Greg Gaudet]

I'll also add to @Mike Roy -  Fear and lack of education held me back for 15 years. The craziest part was that I had been in real estate since the day I graduated, I was an appraiser, an escrow manager, then a property manager. But I knew nothing about the fundamentals of investing, even with all of that professional experience, I thought investing was all about appreciation. I made tons of offers over the years and thought I was safe if the property could break even. It wasn't until I started listening to podcasts and found BP that I got the real education I needed. Then I bought my first deal within months... And my second 3 months later.. and my third 3 months after that...

[Stephen Brodman]

@Frank Patalano I do and I don't like where I live and that is why I'd like to move. Also if I increase the amount taken out on my HELOC, then that just adds to the current bills. I could cash out refi, but then I lose out on my sweet 3.125 APR. I'm still very new to REI, so I don't feel so bad about waiting a little and finding a good place for my family first. Both my wife and I will feel better about it that way.

[Frank Patalano]

@Catalina Goffredo

Quick question. Do you own one property now? I agree that $15,000 is not a lot of money and just want to make sure you have at least an emergency fund in place.

If you don't own a house I would house jack a multi which would allow you buy with a lower downpayment.

[Catalina Goffredo]

No i do not. I’m trying to convince my husband that we can be financially independent if we put our heart into this right now, we are only 23 years old. So we have about 20k saved up, we then find a good deal  with a lower down payment since we do not have much saved up but I don’t know how to explain to him how we can then continue our goal for our second property. what is the strategy then? 

[Frank Patalano]

@Greg Gaudet

Sounds like you are being appropriately conservative at this time in the market. I would say that you are blaming a lack of capital for passing on crappy deals. You are probably doing fine. If you find a profitable deal I am sure that you will find a partner. That's what I would do.

[Frank Patalano]

@Nate Wilson if you have the cash, hard money lending is a great way to make money in this market. Just make sure that you're being conservative on your lending standards and that you're willing to take over the property if the market starts to do poorly.

[Kevin Marcucio]

to many problems.

living in my wifes fathers house that we were going to be buying.   It is far less than what it is worth.  was hoping on buying this property and using equity to buy another multi family to rent for profit.  its worth about 215-315k ish i believe. we will be buying around 130 -140k

1.  I have no down payment

2.  I will be strapped until I find another multi family to start making more profit.

3. the house is listed as commercial i believe.  The property started out as 7 acres with a pole barn on it.  They were using this to build and sell modular homes.  then they built a house in back of it.  so getting a loan will be trickier and more of a down payment.

4. baby will be born within a few months.

5. i work about 60-80 hours a week and also have two daughters lol. Not much time.

6. the property needs work.  when the owner lost it he ripped a lot out of the commercial building (pole barn).  and in the main house too.

[Frank Patalano]

@Catalina Goffredo gotcha. House hack the first one. Pay the full rent on your unit and start to build that as a fund to invest in the second property. Once you invest in that first house you'll understand the market so much better with your newfound experience.

[Catalina Goffredo]

By “pay the full rent on that unit” you mean that I should rent it out and let someone pay the rent on that unit?

[Frank Patalano]

@Greg Gaudet

Good point. Ya it's all about the Cashflow 😎

[Nate Wilson]

@Frank Patalano

Thanks Frank do you know where I could find out more information about the topic. I posted a thread but didn't get much feedback.

[Frank Patalano]

@Stephen Any Brodman

Anything that you add to the HELOC would be paid back by rents. The HELOC strategy is one way to build assets if you are conservative on your purchases. You don't need to do it that way. Downsizing is another fine approach.

[Frank Patalano]

@Kevin Marcucio

Wow. Sounds a lot like my situation 10 years ago. Keep educating yourself. You have to sacrifice somewhere. Right now you are sacrificing your dream of being a real estate investor. When you are sick and tired of being sick and tired, you will find a way.

See if you can squeeze in a monthly real estate meeting. Go there for Education and Motivation. You got this.

[Frank Patalano]

@Catalina Goffredo when you do a house hack some people try to live in their unit for free but if you put away that amount of money every month you will eventually be able to build that Nest Egg to buy the second building. Over time the rent / profit generated from your buildings will allow you to continue to buy properties. That is one way how people grow in real estate.

[Mike Roy]

Originally posted by @Frank Patalano:

@Mike Roy

Obviously I agree with everything you said. Fear is the main thing holding you back and education is the main way to break through. I have a background education and have been investing in real estate for over 10 years. We are working with a lot of new investors through our educational programs, mentoring, and podcast. It's funny that you said motivation because I'll be posting some motivation on Instagram since it is Motivation Monday.

 @Frank Patalano - Maybe the education itself is holding people back too?  Biggerpockets has revealed so much back-of-the-napkin wisdom about the 1% Rule, the 50% Rule, the 70% Rule, etc. and the lack of availability of those deals may have some new investors frozen in place.  I'm hearing more and more smart people on podcasts say they are holding cash; waiting for opportunity; that historic cash flows and price/income ratios suggest a cycle top; that interest rates have nowhere to go but up ...  That must have an effect on listeners.  Maybe that "inaction" of not buying is actually the "action" of raising cash and being patient?

So many successful investors have built empires over the past 10 years on lucrative cash flow deals that just aren't there anymore.  What made money in 2010 wont' work in 2019.  This is all to say that, for education to create action, the investment thesis must be compelling.  In 2019, buy-and-hold multifamily is likely not it for most new investors.    

[Frank Patalano]

@Mike Roy

The investors of today are definitely a smarter Bunch than previous Cycles. Having extra cash is not a bad thing. I'm disappointed because I feel that the internet has made it tougher to easily make money in this business. Perhaps I'm just too old school.

[Jean Joseph]

@Frank Patalano

Nothing held me back lol

After listening to Jim rohn, Earl Nightingale, etc

I was READY. I've saved every pennies from my many jobs over the course of two years. Bought my first single family out of state in February this year(cash flow well) and closing on my 2nd property in April.

I did not read on real estates too much or too little to avoid paralysis and too many mistakes.

🤗🙌🏿🤷🏿🙏🏿

[Frank Patalano]

@Jean Joseph

Nice job. Congrats. Keep pushing through.

[Mike Roy]

@frank patalano - I agree that the internet has created a ton of transparency into cash flow real estate, and that may indeed have reduced some competitive advantage related to market inefficiency, but the pricing mechanisms have not changed.  Prices are still constrained by the ability to service the debt.  We just seem to be at the upper end of the band. 

I tend to think that low interest rates globally and the "chase for yield" are largely responsible for the price appreciation and low cap rates we see today.  But I also think that there has been a lot of malinvestment from inexperienced capital that would not be in real estate but for low rates.  A lot of inventory seems to have been priced for and bought with the expectation of perfection.  When the imperfect finally happens, I think the field will thin, the syndication money will drain, and the deals will come back to those with their own cash.