I'm wanting to get started but don't know what to do?

Question

I'm wanting to get started in real estate investing but am clueless about where to start. Let me give you a little information about me. I'm 57, looking at retirement in the face very soon with about a 1/3 of what I desire for retirement. I ended a 36 year career last year and working 40 hr a week, $15 an hour job I hate. I have about $5K in savings (uncle Sam just took over $6K of what I had thanks to self-employment tax - it's a long story), and about $200K in equity in my house (only 9 payments left + a small second mortgage of less than $20K). I do have other funds but it is tied up in retirement accounts that I don't want to touch. I also have access to other cash via my father if need be.

What would you suggest I do? I don't even know all the terms to make suggestions, but I need a success rather quickly. Would wholesaling, flips, rentals, other be a best direction to go?

I've met with one "investor/mentor" but am not certain about going this direction. There's a $1,200 fee plus giving up a substantial amount of the profit on the first 3 deals (greater than 50%). I'm hoping to meet with a couple of other investor/mentors next week to at least get a second opinion or look at what it is going to cost me to get started. I realize that nothing is free and that there is a cost to pay. I'm just needing some direction at this point.

So what would you do, looking back on your own experiences?

Jeff Wallenius · Answer

@Brad Courtney I would not touch the equity in your home, this is your safety net. If your new to real estate I would get with the mentor and do a couple deals with a proven investor. Who cares if you give up over half the profits, it's a learning process that you will pay for one way or another. Either you pay by giving up a large portion of the deal, or you pay as a new investor with limited knowledge making a mistake and risking your equity in your home or hard earned retirement money. The choice to me is easy...... Best of luck!

Cortney Jones · Answer

@Brad Courtney, I also agree with @Jeff Wallenius, for now, don't touch the equity in your house and working with a mentor to feel comfortable doing a few deals is a great way to go.  So you give up $5k to make $10k, who cares?  As long as you're coming out ahead and learning, it's worth the time savings for most people and it will give you guidance, confidence and direction.  If you were to wait and do it on your own, it may take you 2 years to learn enough to feel comfortable to take action.  I see it all the time!

Educate yourself quickly with a good overall real estate book on the different business model options and find a mentor that does one you're interested in.  Paying someone for their expertise and experience is a very inexpensive way to ensure you can get to where you want to go.

Jarrod Weaver · Answer

I'm very conservative and agree with @Jeff Wallenius, leave your equity alone. Don't risk what you have in hope of being a successful investor. Instead, grow your business organically allowing PROFITS to do the work for you. Use the cash you have, no matter how small the amount, to be your seed capital. It can be done and you will be better for it if you grow your portfolio from there. Leverage cautiously never putting your personal finances at risk. Eventually it will snowball, becoming a valuable asset and source of education along the way. Be patient and persistent. This way you can sleep at night and keep peace in you family.

Alex G. · Answer

@Brad Courtney   The good thing you've got going for you is you're retired - you got time to  spend on it. When you are getting started, one thing you need a lot of is time. Time to learn, time to formulate a game plan and most importantly, time to find and pursue opportunities.

The other thing you need is a whole lot of energy. I'm in your age bracket and the energy level just isn't the same as when I was in my 30s or 40s. That's the fact of life. The only way to fight it is to take care of your body, exercise, etc. - so you can get the most out of the time you have on your hands.  The most valuable skill you can acquire early on in this business is finding great opportunities.

A typical progression for a new investor with no or very little capital is: 1) Bird-dogging / wholesaling2) Rehabbing3) Investing for long term cash flow (that's your final objective from what I understand)You can start by looking for deals for other investors (bird-dogging). You don't make offers, don't sign contracts, don't take any risks with money or liability -- just identfy the opportunities and pass them on to someone who can take advantage of them. You'll earn small fees. For instance, I pay up to $5,000 for something like that to various folks who might turn up a buying opportunity for me. With 5K start up capital you can make offers on propeties at a discount with intent to resale or assign the contract (wholesaling). These kind of activities don't expose you to a lot of risk with money (but some liability on contracts) while still help you learn the art of finding, evaluating and negotiating deals. With a contract to buy a property at a huge discount, you can make from $5K-20K assignment fees... And sometimes quite a bit higher, depending on a size of the deal and how juicy it is.

Once you build up your capital with the activities above, you can move on to buying, rehabbing and reselling. The checks from rehabbing in these area often start in the 30s and could be as high as 6-figures.

Rehabbing is the riskiest form of investing in my view, but it builds up capital in large chunks. With more capital at your disposal you are on a path to buy long term cash flowing assets, like rental properties or notes that will supplement your returement income, invest in hard money loans to fund others.

And since you've gone the full investment circle yourself - you can partner up with people who find opportunities but lack capital and experience that you now possess.

I've been in the industry for 25 years. You happened to be starting in the hottest market we had in my memory.The biggest  challenges of today's Austin market is - really good deals are very hard to find. Everybody is after them, everybody wants a to be in real estate. On a positive side - if you do find one, it's like money in the bank. Somebody will want to pay you for it, you can find partners and/or lenders to fund it.

With a good opportunity you can also find mentors willing to partner and do a deal with you for a share of profit, or buy it from you and still keep you alongside watching how they run it from start to finish and cash the check on resale. There is no better way to learn but by watching someone else do it in front of you, step by step, from offers, contracts, negotiating, funding/closing, to managing a rehab, and finally to resale. You'll learn this way a lot faster than by reading posts on a forum or taking a class, though you still should pursue those.

Last but not least, join a few local REI meetups and get a feel for what's going on in the market, what other people do, meet hard money lenders , conventional lender and other providers who often sponsor these meetups.

By the way, I'm heading to the Investor Underground this Wed night at 6:30 PM at Abel's North. If you'd like to connect and chat there PM or email me.

Good luck.

I'm wanting to get started but don't know what to do?

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