Buy as many as I can or slow down?

Question

Hi All,

Over the last couple of days 4 or 5 deals have come my way that seem pretty good (this is preliminary observance... no extensive research done yet).  If they all check out they would be great buys for me.

I have the ability to purchase all of them (some with cash and some with some creative financing (i.e. family, seller financing, etc) but if I do I will have VERY little money to complete the rehabs on them at this time.

My question is is it ok to acquire as many properties as you can now and work on the rehabs for them as you get the money or is it better to purchase a few and finish the rehabs completely before moving on the the next?

I am following a buy and hold strategy and I realize that I am not making money until the properties are rehabbed and tenants move in, but as a newbie I just wonder if it is better to build my portfolio (or is it true that there is always a deal to be had out there?).

Thanks for any responses.

Lynn McGeein · Answer

Christina, my personal choice would be to do extensive research on all 5, pick the one you think is the best investment long term, and use it as a trial run, as you will learn so much from your first rehab.  It will also go a long way to proving to yourself and your family (the ones that may finance you) that you are financially responsible and will protect their interests, too, in the future, instead of jumping head first into a potentially damaging situation where you get in too deep and risk everyone's investment before you know what you're really getting into.

Christina Brooks · Answer

Thanks John.  Your probably right in that I need to learn more about what makes a great deal as I am still new to real estate investing.

For me I define a great deal as one that I can purchase at a low price (even pay cash and own it outright) put a little work into it and be able to rent it out with a positive cash flow at the end of each month.  Please let me know what I might be missing in that formula... I'm sure I'm over looking something.

These deals have been presented from other investors and me contacting owners of properties I'm interested in (and one on the mls where the owner is very interested in negotiating terms for seller financing as she has received the property at the death of her parent and does not want the house... this one needs work).

I have only done one rehab (and that was an experience).  From where I'm standing now these deals would require nowhere near the rehab as the one I completed.

In the end you are probably right in that I shouldn't put myself in the situation of not being able to complete a rehab.  I should narrow these deals down, negotiate the best terms on one (or two) and get it fixed and rented before moving on.

It's tough being a newbie... it's like being a kid in a candy store with so many options in the real estate world.

John Chapman · Answer

I'm a buy and hold guy myself, so here's my two cents.  First, 
it's kind of hard to respond to your post because you're not clear on what you mean by good deals and what your experience is.    I can tell you that when I first started I thought I knew a great deal, but I was wrong.  They were learning experiences and I won't lose any money (in the long run), but I'm glad I did not load up on more and took the time to learn my market.

Also, if you haven't done a number of rehabs, I would really be careful.  They can really get out of control  particularly if you're doing more than one at the same.  I would not not leave myself in a situation where I had very little money to complete the rehabs.

Finally, unless you have been doing some serious marketing, I would seriously question whether they are all great deals.  (if you have been, then they could be.)  My perception is that it's getting super competitive everywhere, particularly on the MLS, and that you really need to hustle to get a great deal.

Tracey Williams · Answer

Christina, 
You'll getting great advice from this post, 
One of the lesson I have learned is that houses don't rent when you think they will & utility bills keeps adding on.
Good luck!

Will Browm · Answer

Christina,

I still consider myself a newbie and was in a smaller but similar situation as you in the winter/spring.  I was planning to buy 3 homes and bid on several.  I bought two.  It took way more time and funds than I expected.  It also took more time to get the homes rented than I expected.  Those two almost took what I budgeted for three.  Go slow.  I am so fortunate some of my bids were outbid.

Ken Latchers · Answer

As a newbie, it is a huge mistake to rush in.  There are so many things that can go wrong, it is not funny.

Many newbies leverage themselves to the hilt, underestimate rehab costs, find out it can take much longer to rent out in some areas than they thought, and can be totally caught off guard by some of the many complexities that can crop up (whoops, not a legal duplex, was a meth house previously, has code violations, mold, lead problems, new tenants trashed the place, etc. etc.)

Two reasons constantly given for business failure is lack of experience in the field and lack of enough money.  You are facing both right now.

Steve Babiak · Answer

There is one really easy answer.  You won't get paid until you have done some kind of rehab on these, and since you say you wouldn't have enough money to rehab if you bought them all - then don't buy them all, so you can do a rehab and get paid somehow.

Kama Ward · Answer

I've learned that good buys will always be there. How often they will be there depends on my investing criteria. What's most important is that I am ready for them.

This means being able to find the deal and make an offer/close quickly. It also means having the appropriate cash in reserve and multiple exit strategies. Most importantly, it means being able to recognize a good deal quickly and confidently!

Go slow at first... Don't tie yourself up with a bunch of potentially mediocre deals.  Once you get the formula down, you can speed up your pace.

Michael Lauther · Answer

Christina Brooks I strongly Agree with Lynn M. The first property I bought looked great and it was just ok. As I progressed through the process of rehab and getting it rented I learned a great deal. I chalked up the extra money I paid to money well spent on education. I know now that I could have picked up similar properties at a better discount and I now have a better handle on what it takes to rehab to get it ready to rent .

Buy as many as I can or slow down?

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