My First Real Estate Book Part 2

In this post I will continue my analysis of the book "How To Invest In Real Estate?" by Joshua Dorkin and Brandon Turner.

Chapter Five 

In this chapter we are met with a variation of real estate investing strategies. There are a lot of different roads you can take depending on your goals, interests, knowledge and more. As I've already said I want to start my real estate career with the flip strategy. I want to begin with single family houses in quite cheap neighborhoods, then move to markets that have higher prices. After I have acquired enough cash from those deals I will want to start renting homes for the cash flow. Two strategies mentioned in the book are, house hacking and rehabbing a house while living in it and selling it only after two years in order to get tax benefits. I hope to be able to experience these two strategies because one of my dreams is to get my masters degree in the US. I believe they will be a good way to have a smooth transition from flipping houses to holding them for rent. In my mind the timeline would work like this: 
Buying a small multi family home, fixing it up, living in one unit for a year and renting the rest. This way I can get a good experience in being a landlord because I can be around to see the problems and I'll have an easier time learning the ropes. After a year I will buy a single family house, fix it while living in it, hopefully doing most of the work myself. I like doing construction work plus I think it will help me get even better in the flipping business cause I'll have a better understanding of how the work is done. After living there for 2-3 years I'll sell it. From that point forward I'm hoping to only buy real estate for renting and finally, once I have enough cash and a good knowledge and experience in being a landlord I'll move on to big apartment complexes which will hopefully generate enough cash flow for all my needs 

Chapter Six

Chapter six lists 27 ways for finding good deals. I will talk in depth about the methods I found interesting and which I believe, as an over seas investor, will be accessible for me.

1. Real estate agent- I think this will be the easiest way for me to find deals. The up side is that the realtor will do all the paper work and will be able to find deals better than me through the MLS and just from being part of the market. The down side is that I might choose a realtor that wont be able to generate good leads for me. In order to minimize the negative outcome I'll need to put a lot of effort in to finding a good reliable agent and I'll have to really know what to look at when evaluating a deal in order to have as little dependence on the realtor's opinion as possible. One other thing I'll do is search on different sites myself to broaden the search and increase my chances, in the book they recommend zillo and realtor.com‏.

These next few options are controversial to me because most of them are either build on sale by owner or are significantly more beneficial that way. In my case I'm not sure I have the option to deal in real estate that way, I might be only able to operate with a realtor.  

2. Direct mail- This method scars me a little bit mainly because I don't really know how to use it. If I use direct mail I will need to do a thorough inspection on the subject and see how well it can help me reach my goals.

3. Court house steps- There is a very big down side to this strategy, there isn't an option to see the inside of the house before the auction. This can cause a lot of problems cause there is no way to know how much the rehab will cost and obviously it can make the whole deal lose money. I think i will use this method only after I have a strong financial structure in order to be able to withstand the unexpected repairs.

4. eviction records- There is an option to look at the eviction records of all the properties. In some cases the owner might not want the hassle of being a landlord and will be happy to get rid of the property. while this might be an interesting way to find deals, because I'm looking to flip this might not be the best way because the houses will probably be in good states. But there's not really a way to know so I'm leaving this option on the table. One last thing to take in to consideration is the costs of evicting a tenant because that can eat my profits.

5. craigslist- There are a few different ways to use craigslist.
The first thing you can do is write a post offering to buy real estate. Second option is connecting with people that are offering to rent houses and offer to buy that property. The lest thing that craigslist is good for is looking for people that post about selling there houses. you can use a key word search that will notify you when a post relating this topic is mentioned.

6. For sale by owner- There are sites that people can list their houses for sale. I will be able to go on these site and I might find people that want to sell a house but don't want to work with a real estate agent. Sites: fsbo.com forsalebyowner.com

7. expired listing- Some homes don't sell until the end date and then they go in to the expired list. This list is only available for real estate agents but the say you can pay one a small amount of money to excess it and than you can try to reach more people.

8.wholesaler- From different forums and investors I will try to find wholesalers that have good deals. I really like the idea of wholesalers because its really a win-win-win situation. The seller gets his money and gets rid of the property, the wholesaler gets a some of money for relatively little work and I get a good deal that will still make me a nice profit.

To conclude this chapter I will say that there are a lot of different ways to find deals. I will try to narrow down all the options and will focus on a few that I believe will be the most beneficial to me.

Chapter Seven

This chapter talks about different ways to finance a deal.

Privet money- My first approach will be to try and get privet investors to give me money to invest with in exchange for getting some of the profits. I've already started planting the seeds about the idea in my family and close friends' minds and when I get a bit more in to it I'll try to expand the circle. A problem that always rises when I think about this option is, why would someone that doesn't know me would invest with me when I haven't made a single deal yet? That's a barrier I'll be trying hard to brake as I move Forward but I'm hoping that the people who are close to me will have more trust in me and will be more inclined to invest with me.

Hard money lenders- I see this option as pretty much similar to privet lenders, the main difference is the connection with the lender. The amount of money I will need to give the hard money lenders wont be a lot higher than privet lenders but the whole process of returning it can be much less pleasant. Lets say there is a delay in the project, with a privet lender I can sort it out and set a new date for the payment in a much easier fashion than with hard money lenders. 

Partnership- Partnership is not something I'm going to work too hard to get into. It can have a lot of benefits depending on the partner. If the partner brings money to the table it's very similar to a privet investor, if he has some skills and knowledge in real estate there is a possibility to divide the work and one more benefit that can be very meaningful to me is partnering with an investor that lives in the market I wish to invest in. Although all of these can be great, I believe partnerships need to be made naturally. Hopefully I will connect with different people on different forums and if we have a good connection then I might offer to partner up, but I don't plan on doing an anonymous search for partners cause that can cause me to partner with people I don't really get along with and the partnership will fail.

Bank loans- The final option that I will talk about is mortgage, FHA loans and 2O3K loans. All of these kinds of loans will probably not be available for me so I wont go in to them in detail. The reason I am listing them here is because I might be able to obtain one, if and when I live in the us. I am pretty sure that they are only available for citizens but there might be a way to use some of them as a resident in the country as well. I will definitely need to investigate dipper when its more relevant.

One other think I took from this chapter is a quote from a podcast with Craig Curelop that really caught me. In order to get started all you need is a real estate agent and a lender, after you have these two you can start building your team. I will try to flow this advice when I get started.

Chapter Eight

This chapter lists a few exit strategies. I don't really think up exit strategies yet but here are a few things that interested me when I read them.

1031 exchange- This enables a seller to put the money from a deal, before taxes, into buying a new property. The 1031 option is good because it helps the investor get in to bigger deals. There are a lot of rules around these kind of transactions but in general they can be very efficient in growing a business quicker.

Sale by owner- I touched this option in chapter six regarding some deal finding strategies. The principal is the same just the other way around so of course it poses the same difficulties and I will need to look in to the legal possibilities I have.

Real estate agent- Lastly as I said about buying properties the main route I will probably be using is a real estate agent. I will not list the reasons again but in this chapter they quote an investor which is a real estate investor and she says that for most investors trying to sell their deals themselves most of the time the pay more than the commission they pay the realtor.

Chapter Nine

This chapter revolves around making good use of your time in order to build your business more efficiently.
The first advice that's given is to be the general of the operation and not the troop. While this advice is very good, for me it goes with out saying. Because I'm investing from a different country I don't have the option to do most things by myself. This will cause a difficulty in making profits, but I hope to find a good enough team that will get me great deals and do the work efficiently so that my profits will be large enough.

Second is to focus most of my work on the things that really take me forward and not little side missions that are there only to make me feel like I'm doing work. I will be sure to make a detailed list of assignments and I will map them out from most importent to least. That way I can make sure I'm putting my effort where it needs to be.

The last advice regards dead space. In every task you try to accomplish there are dead spaces between each step you take which make the process seem longer and more frustrating than it really is. In order to try and minimize the dead space on my journey I will give exact dates to the tasks i have to do in order to not spread the time between each what too long.

Conclusion

To end this two post long analysis I want to say that this book helped me a lot in getting started and helped me see more clearly what rout i need to take to reach my goals.

Next post I will be talking about some good BiggerPockets podcasts I've listened to.

I'll be sure to continue sharing, stay tuned...

The Book:

https://www.biggerpockets.com/store/how-to-invest-in-real-estate-ultimate