newbie with knowledge created investment plan, any other advice?

Question

I been learning and studying the real estate game the last few months. Of course of I don’t know everything but have confidence and faith to just get started. I created my investment plan which includes my criteria, lead generation model, and acquisitions. I will also be have different types of strategies for the deals I come across of each month.

Any other advice or something you should have done different when you got started.

Mysonne Johnson · Answer

Yessir, fix and flipping. My first milestone is that  I will flip one house a month of the course of a year and buy and repair a high income home twice out the year. By starting with this the end goal I  gain the capital of theses profit of theses flips to get into buy and hold and having tenants in apartments to create passive income   @Blake Choisnet

Account Closed · Answer

Looks like you'll be flipping. What's your end goal? Short term cash, flip and hold (passive income), etc.

What is your criteria and what types of properties will you be focused on? Are you doing the rehab work yourself or contracting it out?

Mysonne Johnson · Answer

@Evan Polaski So what approach should I take? Wholesaling with no skin in the game, no cash no credit.

Or

Fix and Flip with a rehab talking to lenders on financing my deal using a source of credit?

Because honestly I want to do both. But with fix and flipping having the capital is a roadblock that I definitely go through.

Evan Polaski · Answer

@Mysonne Johnson, okay so you are viewing this as a wholesale deal, not a flip/rehab.  I wasn't sure if you meant using an end buyer to finance a rehab for you, which I would list as highly unlikely.

In terms of getting your credit lined up, having a credit card is a great option.  There are loan products out there, private lenders and hard money are some of them, that could work with you on flip financing.  But as mentioned, I am speaking less about having a credit score, which is very important, and specifically about the cash needed to get a deal done.  Even hard money and private lenders will require the borrower to have cash in the deal, assuming you are talking about flipping/rehabbing and not straight wholesaling.

If you only intend on wholesaling, you only need enough for a handful of earnest deposits to be sitting out at any given time, and likely won't ever need a lender, since you will never be purchasing the properties.

Mysonne Johnson · Answer

@Evan Polaski Thank you for that information. What do you recommend I should do to finance the deal? I could go the bank loan route but I’m 19 and I just now bought a credit card to bulid my credit.

But for using the end buyers money it’s called ￼transactional funding. Where at closing the end buyer bring the money to the table and pays the seller for the property (and earnest money deposit) Then with the remaining would be my wholesale fee. I’m the middle man

Evan Polaski · Answer

@Mysonne Johnson based on what you outlined, are you talking about wholesaling deals or being the rehabber?

If you do indeed mean flipping rehabbing, while in theory your concepts for financing the deals is great, I don't know how successful you will be in practice.  Currently, both my lenders and hearing from others here, the days of 100% financing from hard money and private lenders are over.  There may be one or two out there, but I would not count on it, especially being new.  You can often get better terms (including higher leverage) if you have a long, successful track record, but even then most of my colleagues are still having to put money into deals.

As for using end buyers money, I am not sure how this would work.  Are they offering a loan to you?  Are they buying the property and securing their own financing, and you are acting as the contractor?

Mysonne Johnson · Answer

@Evan Polaski I’ll be creating a system where I generate leads and dissecting them from prospects to suspects to getting the deal under contract.

You asked: how are you going to finance the deal?

I’ll be talking to loco lenders (Private and Hard money) to send them my deals to show I have a good deal and will execute. By then providing soft and hard proof of funds to the seller or agent (if working with agent) to go with the deal.

Or using the end buyers money to fund the deal.

Contract: I’ll be doing research on contract in my state and will be adding clauses to protect myself and to back out of the deal if needed. Also including a 10 day inspection to run due diligences.

ARV: I’ll be looking at ARV by looking at comps in the area i’m selling in using my formula to find ARV to create my Maximum allowable offer. Also talking to minimal appraisals to back me up.

I know I’m all over the place right now but i feel like I have a suitable foundation to get started and take action and get off the sideline and learn as I’m in the game!

Evan Polaski · Answer

@Mysonne Johnson how are you going to execute on the investment? Blake mentioned rehab yourself or contract out?  Are you hiring subs or a GC?  Who are they?  How are you underwriting deals?  What are your sources for ARV? How are you financing deals?

There are generally three main buckets of a deal: acquisitions (which everything you outlined seems to fall into), financing (debt/equity/partners, anything with the money piece) and execution (actually doing what you say you will and hitting the returns).  You don't have a deal without all three.  You need to flesh out the second and third piece on my list.

Another way to think about it: setting your target, generating the leads, and having a deal teed up are useless if you can't close because you don't have the money lined up, and both will stop very abruptly if you cannot execute on the plan you set in place at acquisition.