All Forum Posts by: Angela Harding

Syed,

It depends on so many different factors. Do you have the ability to use good financing? Do you have other income coming in? The first thing I have to say is how I started. I turned one dollar into two dollars. It wasn't with real estate at first, it was with a small cleaning business I started. Same philosophy though. What I do now with real estate is take $30,000 and turn it into $50,000 buy buying and selling. Then I do it again. Every two properties I buy and sell creates cash for me to buy and hold one for cash flow. My strategy is cash flow. I personally don't like to finance any houses but I'm in area where I can buy so low compared to many. If I had to buy in a higher priced area I would do the same thing except use my "earned" funds for a down payment so I could acquire more and set them up to be paid off within 10 years with my cash flow. So back to the beginning, it depends on what other factors are in play, how much houses cost in your market, what the return on the investment is, what the cash flow is and also how much experience you have. 

I hope that gets you thinking a bit and heading in the right direction.

Angela

John,

I really recommend looking into getting your real estate license. The benefits are incredible starting out. The education is the best because it focuses on every area of real estate. I strongly recommend the Keller Williams educational resources also once you get your license. In fact, get Gary Keller's book that he wrote on investment years ago. It's old school but written by someone who's whole life is real estate investment and business. Even if you decide on not getting your license, the classes are worth taking. 

Book education is a good place to start. Reia's are another but be careful and find people that are truly doing well and not just talking about doing well. Just because they have the biggest sign on the wall doesn't mean they are the best. In fact, look for the quiet ones. One of the best educators i found years ago when I went to 7 real estate meetings a month, sat in the back and had grassed stained tennis shoes and a t-shirt on, with Levi jeans. He personally worked every aspect of the business including mowing grass so he knew what it took to take care of every house and every dime he spent. He's retired now. He's only 45 and did it in the worst market ever. I personally don't know who would want to retire from real estate, it is just too much fun. Don't be afraid to get your hands dirty and dig in to help someone else out on a deal. It's a great education. The best thing I've ever done was show up and tear off a roof, paint a house, clean a house .... you get my drift. It gives you a respect and understanding when you talk to contractors and build that team. 

It's exciting to see new people come into the field. All the resources you have compared to some of us that started in real estate is amazing. 

My final advise is to really look into people you meet as professionals. Look for reviews, BBB endorsements, and listen to your gut also. I wish I had people in Orlando to recommend to you but I only know good people in Miami and Tampa. 

We are actually studying an area in Tampa right now to invest into. When I come back down there can I look you up? Be happy to show you what we look for and how we research before we buy. 

Angela

Actually we do have a desirable market because of the returns when done properly with honest people in the market. However, with being one of the leaders in real estate fraud and dishonest people taking advantage of out of state investors, and out of country investors, we tend to see a lot of people end up with boarded up houses and be scammed into buying properties at inflated values. Experience in our market is what will get the high returns and high cap rates here. I didn't say no one should invest at an 8% cap. I just said I wouldn't do it. Didn't mean to offend. I know that's good in your market. I have several investors from California and Washington who diversify their investments with some out there for more appreciation and some here for more cash flow.  And if you want to see an example of fraud here in Toledo, just google it and you will see one of our largest real estate brokerages and property management company in the news last week being indicted stealing government funds. Took over 8 years to catch him. A few months ago another leading real estate broker arrested with over 2 million in a safe. You wouldn't believe what some professionals here will do for the next 5 grand. And it's sad because if you know what you are doing here. There is amazing money to be made. 500 K invested here correctly would produce retirement cash flow. But if the management is bad, its completely wasted money. Sorry if offended... didn't mean it that way. 

Rod has given the best advise here for any market of renters. I have a property management company so we have certain people designated to complete certain procedures before we show a home. The first is when we get an email, we don't email back, we make the call and do a pre screening. (And yes people lie on the pre qual and sometimes don't qualify.) But it makes people walk through certain steps and some won't waste our time. Second, our employee that does the pre qual then sets an appointment for our showing agent. Our showing agent does the 1/2 hour call ahead and if they do not answer or call back within 15 minutes we do not go out. And yes some people confirm and still don't show but it does eliminate some waste of time. In our market we do not do open houses for rentals they are worthless. (Many times it's just people scoping out the house for the plumbing). We never give a potential tenant a lock box because well, we wouldn't have a furnace and plumbing left. But we are a licensed management company so we do have to function with strict regulations. 

Make the phone call. Have a list of questions that don't violate fair housing laws and ask every potential applicant the same questions every time. Our main questions that we are concerned about are....

1. when do you expect to move in (if its not within 30 days we encourage them to call back when they are ready)

2. have you ever been evicted? (we do not allow any evictions)

3. Do you have funds available for first months rent and security deposit? 

4. Do you have a criminal record that includes drug charges or violent felonies, sex offenses? 

There are many more questions about 15 of them, but those are very important and when we notify people of what will disqualify them, they are less likely to waste our time on setting a showing.

I would never put myself on the line for 500 k if I did not have experience with the transaction type, or have reserve funds of at least 6 months in the bank, nor would I ever buy a deal with a cap rate as low as 8%. But I invest in Michigan and Ohio so our returns are just higher because our properties are so affordable. 

Just remember creative financing landed multiple people in jail and their defense was "everyone is doing it." Definition of creative financing for me is using private funds where there is no government requirements on what you are doing. Also, land contracts. However, don't try and figure this out without someone who specializes in financing. I sat with my local bank last week (as they took me out for steak and lobster for my business) and went over all the new regulation on Freddie Mac and Fannie Mae investment financing as well as the portfolio commercial loans that they have for investors. Yes, I'm an investor and real estate broker now but I wrote loans and had a mortgage branch for 10 years before I changed careers. "Ghost money, ghost seller seconds is absolutely mortgage fraud." Disclosure is everything. There is way too much true private funds that people lend on the merit of the deal to try and get "creative" with federally guided money. Just be above board on what you do. Talk to your banker. I've seen too many people in trouble because "everyone else is doing it" or "i learned it from a national speaker." 

Some really good posts here. I have to caution anyone on using other people's funds unless they do have the experience and know their market very well. I recommend newbee's to start with a realtor license and really know how to use the resources it offers. Find out who is really doing well in your area and offer some time to help them and be a part of what they do for a few deals. Confidence is what helps you borrow funds and talk to people. When you are confident and excited about what you do then you won't even have to ask. The money just comes to you. I do a lot with different types of partnerships, my own money too, and borrowed funds from IRA's. Now I have so much opportunity that I have put together a private placement fund and will combine all the money into one investment fund. This was not an over night project. It has taken years to get to this level and many professionals that I learned from first hand. Not national speakers, not videos or books, just showing up when ever and where ever and doing it as a real estate broker first, then an investor. Working with people within my community that are really making good money, successful, and working honestly without taking advantage of people.