buying super low.. advantages and disadvantages!?

Question

so I am a newbie ... I want to invest In real estate but my cash flow doesn't allow me to take the plunge

I look everyday on the web at houses in the Massachusetts and n.h. listings at houses under 100k. the monthly mortgages will suit my income as of now and seem possible to get my feet wet. I've seen properties for 30k-60k that obviously need work and time.

are there any advantages to buying super low like I said and holding until I can rehab and or sell for a higher markup.

are the disadvantages to discouraging to start now even though I will be obtaining an asset when I currently have none?

just looking for advise in how or when I should finally start my dream in investing in real estate.

thanks!

Rich N. · Answer

@Martin Mclaughlin

Real Estate is a good way to go.  Two strategies (and a lot more other ways as folks will attest to here) are fix/flipping (including house hacking) and buy/hold methods.

Usually to start off with low or no income is to team up with others and work like heck (sweat equity) and go the fix/flip route.   You will learn a lot and hopefully make more money quicker than buy/hold.

BUT please do not go this alone as a newbie! There are so many gotchas and if you do not know about such things as building codes, rental codes, business law, and what needs to be done to a place to flip can be disastrous.

Good luck and welcome to the BP !

Brent Coombs · Answer

@Martin, I checked out the other post you mentioned (I was the one who gave a vote to Jerry's comments, because his summary is a checklist of many things that CAN go wrong with cheap properties). Obviously there was not enough detail there to be more specific, but comments like "I'm thinking I cant really lose" often warrant such a reality check.

Of course, many times, you won't lose. Armed with the right knowledge, you would NEVER lose! Aah, that elusive dream: "the right knowledge"...

Martin Mclaughlin · Answer

thank you all for the replies.

Brent I have just posted another forum discussion on the property I am currently looking at.

Tim, Rich, and Dave I thank you for your response and I may take you up on that coffee soon. I will look into all that you posted and consider what you guys have shared with me.

again thank you

Tim Wilkinson · Answer

@Martin

@Martin Mclaughlin is exactly right. I know it seems counter-intuitive, but the thing you'd more likely be able to do is throw in your money with someone else's money and possibly even a HML to perform a flip. Sometimes a small 2 BR ranch in MA can still be in the 300s or 400s depending on location. These can be great properties to rehab, as the size is managable. It would be a great experience and you may just find that you have an extra $20,000 or so to play with afterwards.

Do it twice, three times, whatever it takes, but do something. In the mean time, hit the REIAs, get to know some people and see what people are doing. I learned after six months or more of being in business that I had the wrong focus for me and my lifestyle, finances, and wherewithal. You, too, will find your place.

Best of luck, brother. I'm on the North Shore, as well. Feel free to reach out.

Dave W. · Answer

hi Martin,

Where there is a will-- there is a way!

If you don't currently own anything I'd suggest saving up for a modest down payment (first time home buyers can do ~5% and maybe even as low as 3.5% for FHA loans) and buy a 3-4 family in your neighborhood. It looks like your from Malden so there should be a few multi's that would fit the bill where you are.  This makes buying much more accessible since most investor owned real estate requires 20% or more down.

This will help you get a chip in the game and also if done right help subsidize your living expenses since renting out the other units should pay a chunk of the mortgage for you! Now, if you then fix up the house over time (or even add a bedroom or bathroom if feasible) you'll increase the value of your place in both rent you can charge and refinancing and getting cash out... And with that extra cash you might be able to use for another piece of real estate, flip, etc

Alternatively, many folks will recommend thinking about wholesaling as a way in - I'm not pro/con wholesaling but this is a different beast and business to consider as a way to get familiar with the areas, and investor mentality, etc.

Given your close to where I live, happy to meet for coffee and chat sometime if helpful. You can definitely do this if you are ready to make a move.

As for price points (your original question) the answer is a frustrating one -- it "depends" on what your goals are. Low cost isn't necessarily a bad or good thing. Just a different slice of the market that has its quirks to work through...

Best of luck in your early investing!

-Dave

Brent Coombs · Answer

@Martin, all excellent questions; a very understandable quandary, one which is shared by countless others. So many properties, for so little money - grrr!

Would you like to share a sample analysis of something that MIGHT be do-able?

Have you been to any local Real Estate Investors meetings?

Have you been reading blogs and viewing webinars? Set up key word alerts?

As for ones that "need work and time", how good are the neighborhoods?

As of TODAY, are you setting savings goals? ie. DO that! All the best...

buying super low.. advantages and disadvantages!?

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