A little discouraged

[Christopher Smith]

Hello everyone,

This is my first post so I guess introductions are in order. I am a 31 year old from knoxville that has recently caught the REI bug.

I would like to be successful in Real estate so that I can eventually leave my job. Not because I do not like working but my current occupation is very physically demanding and keeps me away from home for weeks at a time.

I am complete newbie to all of this. This is why i have been scouring the forums and reading as much as possible to try and get ahead. The only problem is that it feels like information overload. Meeting people locally is also difficult being gone so much of the time. One thing I am sure of is that I would like to invest in SFH and MF. I am looking for cash flow. I would like to be able to replace my salary with income from properties so I can spend more time at home and actually network and pursue something I enjoy

I started looking at properties in Knoxville and wasnt having much luck. Im originally from Orlando and have an Aunt threre who is a successful real estate agent. I called her and she told me she would work with me to find properties there. Basically she gave me access to the MLS and told me to let her know if I found anything.LOL. Well I actually did find something. A foreclosure in a great neighboorhood that was within my budget. It is a 3/1 that could potentially rent for 1300 a month. The asking price was 106,900. Based on my numbers the property would have cash flowed at over $500 a month with 30k down.

When I went to make an offer the agent told my aunt that they had a bunch of offers. Then she tells me that there is a good chance that many of them were cash offers and cash will beat financing any day. So how am I ever going to get I good deal without having all cash down??? I can come up with cash pretty quickly but I was hoping to stick to only using 20% down on properties to get the best return on my money..

I guess I am looking for any suggestions from experienced members that could help me out.

Also what are some of the better books that would help me get ahead?

[Will Barnard]

Based on those numbers, your monthly rent to purchase price ratio is 1.21%. I can guarantee you that your cash flow is not $500 monthly when the total rent is only $1300. Read up on operating costs, the 50% guideline, and creative buying strategies. Most good deals are not found on the MLS (there are some but it takes persistence, lots of offers, perfect timing, relationships, and a bit of being in the right place at the right time), they are created through direct marketing, referrals, driving for dollars, probates, trust sales, BK's, divorce situations, etc.

Also, placing more money down does NOT create more cash flow as you must account for a return on your money. Leverage increases ROI, and you need a return on your money. So a break even property with 100% financing vs. the same property with 50% down and $500 cash flow does not mean the property has $500 in cash flow. Perhaps I am not wording this properly if that does not make sense, hopefully it does. An investment must stand on its own merit so to compare apples to apples, remove all financing in your calculations and compare each deal as if you were paying 100% cash.

Now, to your next question, how do you compete with all cash? You come up with all cash (can be borrowed funds from a private lender, JV partner, family member, etc., find a deal not on the MLS so you are not competing with anyone, or create relationships to get in on deals on the MLS that provide you first opportunity. Otherwise, you will always be competing with all cash offers.