All Forum Posts by: Traver Freeman

Originally posted by @Kevin Yoo:

@Traver Freeman

Now you are thinking. This is creative real estate in action. And you are using every possible avenue to do real estate which means you will eventually succeed. 

And there are tons of opportunities in San Diego. Honestly, if you cannot make money in your own backyard, that's an interesting problem. And even if you plan to the teeth not to rush into something foolish, you will look and feel foolish more than once. If you don't ever feel that way, you are not investing or not investing enough. 

Lastly, don't save money to buy real estate. Use OPM. You will have made it when you use OPM and make OP good money. That is how you do good real estate investing. Otherwise, it's just a hobby. (And there is nothing wrong with that.)

What I probably need to do to get a decent multifamily that will cash flow in San Diego is find a property that isn't on the MLS and buy it for less than its worth to take it off a frustrated owner's hands, use an FHA loan wrapping the rehab costs in with a 203k, then living in one unit. That really may be my best option for buy and hold in San Diego. Otherwise, I will have to look at some other form of investing locally.

I really would rather do it here than out of state though. I'm very hands on and would rather be able to physically see the property and keep an eye on things without relying on other people or taking time and money to fly out of state. 

To echo @James Barnes, I greatly appreciate the straight shooting, it's helped me confirm my hesitations about getting involved somewhere I am unfamiliar. Based upon your advice, I'm going to talk to a few connections from Florida where I lived for 8 years and my uncle in Pennsylvania. Either my uncle or a friend from my old church, who I recently discovered is an investor, may be willing to go in on a partnership with me and split the downpayment.

If they're interested, that will give me the boots on the ground that I need. Plus, a party with an invested interest in the property is better than a property manager with no motivation to see the units succeed a rental. As I've heard so many times, and again on the podcast I most recently listened to, 50% of the income is better than 100% of no income.

If neither of those options pan out, then I will look a little more locally in San Diego for other opportunities to invest not involving buy and hold. From there, I would do as @Chris Clothier recommended and build capital for a future quality purchase + emergency funds for the worst case scenario.

I have plans to meet with a friend in San Diego on Friday to discuss his plans for investing as he is just starting out as well. I am not planning on rushing into anything foolish, and once again I appreciate every piece of advice this thread has produced so far.

Originally posted by @Jay Hinrichs:

@Traver Freeman

  I did not read the entire comment.. however putting your credit up for others is highly risky and to be done in a Very controlled manner.. I will let others chime in on the wisdom of that one..

 I don't know a lot, quite obviously, and that one seemed apparent to me. The only way I think I would consider it is if I 100% trusted the person. For instance, my uncle who owns a few properties in Pennsylvania.

Originally posted by @Kevin Yoo:

@Traver Freeman and @James Barnes

Traver,

Late to the conversation but I like the discussion and as always I have two pennies of my own to contribute.

Let me first say, you are a sucker in the making. I know this because I was a sucker once and took my money and bought up rentals thinking I could generate some passive income for my family. I did this alone without much planning and without a team. I lost everything. If you take your money and buy a few rentals out of state without a good team (and a plan) in place, you're just giving away your money. 

I still buy rentals but now I have a team in place and it looks so much more promising and returns are very very good. The problem with your approach is not the asset you are trying to buy, it is the lack of support from others such as agents, turnkey operators, property managers, lenders, etc, etc. You have to have your team in place. 

A post like this from an inexperienced investor wanting to know how to make it in real estate is so common and the response the BP Community to such posts are so predictable in that although we call ourselves a Community, we keep trying to show these novices how to do it alone when we know that real estate investment is a team sport. 

In a real estate deal there are five things you can bring to the table and they all have value: 1. Cash, 2. Knowledge, 3. Network, 4. Time, 5. Credit.

Cash is easy to understand and you have very little of that. 

Knowledge and experience is also easy to understand and you seem to have very little of that. If you have this, it can make you money. Look at all the gurus.

Network and who you know. The more people you know the wealthier you are. Some real estate investors make a nice living simply referring one real estate investor to another. And wholesaling/bird dogging in many ways is this. You don't have this. Go out and develop it as quickly as you can.

Time otherwise know as sweat equity. If you are working 2 jobs, you may not have much of this. But I believe this is one of the two items that you can bring to the table. I pay a lot to use other people's time in my real estate investments. 

Credit. I am going to assume you have a good score and W-2 income. This is a rarely thought of strength in a real estate deal. Find an investor that will use your credit and their cash to buy rentals and share in the passive income and equity play. I pay a lot to use other's credit in our rentals. THIS IS HOW YOU WILL CREATE THE PASSIVE INCOME YOU ARE LOOKING FOR. Keep your money in the bank. You will need it later.

The key to success in real estate is not to do it all by yourself. The key to success is to use OP__ (fill in the blank): other people's money, other people's time, other people's knowledge, other people's network, etc. But you have to be a team player and contribute. I have shown you how. 

Awesome advice. I have the best network where I lived for 8 years in Florida. If I don't personally know someone who does it, I know someone who knows that person and I can trust them fully because of that network. Unfortunately, I no longer live in that area. I like where I'm living, I love the area, my in-laws are close by, you can't beat the weather, but I know 100% my real estate investing would be 10x easier out there because of that network and the prices.

If I were still living there, I'd buy a 4-plex in a heartbeat, owner occupied. But I'm not, so I'm faced with the reality of being in a market that won't really let me go the multi-family route (I can't afford a $600,000 property even on a FHA), because if I have even one month without a tenant, my entire month's pay check would go to the mortgage and the rest of my expenses are coming out of my savings account, topped with repair costs to get the unit tenant ready again.

So is what you're recommending even possible? Letting an investor use me to get a mortgage? The questions I have about that are, #1) Wouldn't I need to trust that investor 100% (this takes months/years to develop), and #2) Wouldn't they have any other number of creative ways to obtain the cash that they need rather than choosing to use me to take out a conventional loan?

What are you plans for San Diego? I've been trying to figure something out for buy and hold, but unless you have a large cash reserve, the only way to go is owner occupied, and rents aren't high enough to cash flow in that type of situation. You're lucky if the other unit's rent pays for the mortgage let alone any other taxes, insurance, and repairs/vacancies. Compare that to where I moved from in Florida where I could buy a 4-plex that costs $450/mo and rents out for $2,400 a month ($600/unit) It just doesn't work that way in San Diego. I'm really interested hear any ideas you might have.

@Jay Hinrichs @Chris Clothier

I would like to get into rentals in the long run, but I do see the wisdom of waiting till o have capital. Would a good way of developing that capital be wholesaling or finding properties for flippers and collecting the finders fee?

I went to college for Graphic Design so I could probably put together some pretty strong marketing. I've got a buddy who's seriously looking into wholesaling. We could potentially partner together and I could be his marketing machine. I'm not sure what to expect financially on that, but I could put any and all money earned through that route directly in my reserves for future investment in rentals. 

Is this a viable option?

Originally posted by @Account Closed:

As @Chris Clothier very wisely said, don't buy yet. Investing in rentals is not for people living on the edge financially. What would you do if the first month the tenant stopped paying rent and trashed the place causing $5K+ in damages? Think it can't happen to you? It did happen to me. That caused 6 months vacancy plus over $5K in repair bills. What you need for low end rentals is 3 things: 1. Time horizon of several years, 2. Deep pockets of reserves and 3. Portfolio of at least 8-10 homes. Without that, you are just rolling the dice and you can lose big. And it sounds like you can't really afford the loss.

 Thanks. I totally appreciate seeing the numbers and the real world scenarios. I'm very situational oriented. I could read legalize and not get it, but explain a scenario with numbers and I get it. 

My original plan with buy and hold was owner occupy. And I still might hold out and try to find something workable for my area. It will just take a lot of hard looking as San Diego is not the best buy and hold market. 

Originally posted by @Jay Hinrichs:

@Traver Freeman

then what I would do is forget buying one rental out of state.. you should be looking for a 4 plex were you live.. 3.5 % down FHA even a 800k property is only 30k down.. you live in one unit. the other will most likely cover your nut.. you refi out in one year then do it all over again until you have 16 doors all in SOCAL then you will be truly home free... your right 200 a month cash flow if you cannot get scale is a slow bleed many times. you must be careful with your credit. and our loan slots...

 I've looked at doing that. I have tried and tried to find a good cash flowing property here, but I can't. The closest property I could find to working is a 460k home with a 3 bedroom that rents for 1800 and a 2 bedroom that rents for 1600. I can't afford 20% on that. If I could it would cash flow. But if I live in it, I can rent the 3 bedroom, which honestly, is renting low for my area, 2000-2200 is more realistic. 

That would pay for my mortgage. But id still be paying the taxes, mortgage insurance, and insurance out of my own wallet. Not to mention water/utilities depending on current arrangement and repairs. And that's the BEST multifamily I could find. I found plenty of 600k properties that only rent for 1000 per unit and they only have two units. It just doesn't work. 

Originally posted by @Jay Hinrichs:

@Traver Freeman

YOu would not qualify for most current PPM type deals you must be accredited. but you can buy stock in a REIT.. or find a HML who brokers individual loans. or in CA. a broker that does fractionalized lending those you would qualify for .

The big game changer in my mind will come when Crowd funding is open to all. That will be a huge game changer and as Chris said MUCH safer for most then trying to buy  a rental home no matter were it is.

And to pony on @Chris Clothier

 thoughts  if you can't find a way to build a portfiolio of homes over a fairly short amount of time then owning rentals may not be the appropriate investment.. those that buy one or two can have real issues.. Again like Chris says your either 100% happy or 100% bummed.

best of luck

I would like to eventually own many rentals, not just one or two. My plan would be to scale it as fast as money allows me. The more I get the more I can afford. On paper anyway. But the first few years would be limited. My uncle has been doing buy and hold for years and he only has like 5 properties. But his model was to buy the house, live in it, fix it, then rent it out and start all over.

My goal is more than 5 properties, but I have to start somewhere, and I can't afford to buy 15 properties at a time. Nor do I think I ever will on my current income. I mean I can only put $100-$200 a month into savings. That's maybe $2000 a year. By the time I can save enough to put to good use, properties will cost more and I still won't have enough. 

So I'm in this situation of do something with what I've got, or sit and wait and not get anywhere. I'm more inclined to take action, but well educated and rational action. There's bound to be a way to make it work with what I've got. But I'm open to other options if they make sense. 

I know there are markets out there I can afford. And I understand the risk involved with having only one property. Which is why I'm trying to do everything I can to make the right decision without rushing in to the first "deal" that comes my way.

Originally posted by @Chris Clothier:

Originally posted by @Traver Freeman:

I've been doing research on markets for buy and hold for about a month now. I'm checking unemployment rates, population growth, purchase price, rent rates, percentage of renters, etc. and I'm still having trouble identifying a solid market for my price range. 

My main problem is I don't have a whole lot, but I want to begin investing. I've been interested in investing for about a year, but circumstances have propelled me to start taking action. 

I'm living in San Diego, and starting out here with a family and one income at entry level is relatively killer. I've been working two jobs and still barely paying our bills. We've cut down and cut back on every possible avenue and it's still not enough. My wife just got a part time job, and that will allow us to be positive monthly, but we will hardly see each other and never have the weekends off together. 

So my current plan is to find a good cash flowing property to "help" offset our deficit, though my main goal is to save the positive income for future investments. 

Right now I've got about $28,000 in the bank and $16,000 in comfortable playing around with.

Putting 20% down, I'm looking at buying two $30,000-$40,000 properties or one $60,000-$80,000. I'm looking for advice on which direction to go as well as what market falls into that category. 

I've looked at a few cities that seem to meet the criteria for a good market in that price range, but I have no idea if that's how much the ordinary house costs or if I'd be buying the dumpiest house in town.

I appreciate any and all insight either about markets or suggestions and how to take the few funds I have and put them to good use. 

Hey Trevor, Welcome to BiggerPockets.com. As someone who works with a lot of investors and have assisted new and experienced investors, I would suggest you forgo buying a property for right now and look to build your nest egg in a different way. I would network here on BP and look for JV partners and opportunities - you may find them right there in SD.

I would look for opportunities to put your money to work by lending it in a partnership and letting it grow until you have a more comfortable position to invest in better properties.  

As Curt noted for you, lower price properties are a very, very risky route to take - especially if you are looking to create less stress on your household by providing extra income.  Then again, just buying one property that may cost a bit more can become an expensive headache for you so far from home.  You will only have one house so you will always be either 100% happy with your portfolio that it is occupied or 100% upset with your portfolio that it is vacant.  With one property there is no in between.

I would love to tell you how great certain markets are or all the great things you can do buying houses with your money - but, my advice is to keep building your investment funds by partnering your money first.  It is important to build before you buy.  You can build and provide some cushion for your household at the same time and take less risk than if you purchased just one property or two cheap junkers. 

DO NOT fear that the best time to invest in properties is already past.  You can find good investment deals every day - in every economic cycle and in every market.  You do not have to be in a rush, but you could certainly relieve some stress by earning 10% on your money or more by partnering.

Just my .02 worth of advice - best of luck to you with whichever way you go!

 I greatly appreciate your advice. I was looking at possibly contacting you anyway. I just listened to your podcast (don't remember the number, somewhere around #27) and it really grabbed my attention and really gained my confidence in your business. 

I'm open to looking at other avenues of investing that don't require as much risk, and obviously don't net as much gains, but still investing that money rather than letting it just sit in the bank. You mentioned lending my money in a partnership. How exactly would that work? Basically just let someone use my money and they give me a 10% return when they sell? What ways would you suggest I get started for looking into something like that?


PS. Anyone else reading this message, I have full intentions of replying to everyone as you have all given me great advice, but I've got to run to my second job as the moment, so it probably won't be until tomorrow when I get some time. Thanks guys!