All Forum Posts by: Ehab Shoukry

I agree with starting small and getting your feet wet before trying to hit a grand slam.  Even with property management in place you want to understand the business so you know how to manage the management company.  Since you are restaurant people, it would be like me going out and buying a restaurant having never managed/owned a restaurant in my life.  I would have no idea what to look out for or even if my manager was doing a good job.

With smaller deals you can also experience the BRRRR strategy which I think you will like by owning property with little/no money invested in the deal. Once you get a taste of that, you will not want to put $100k into a deal and just leave it there for many many years.

Good luck!

@Jordan Leu Just know that on BP you are going to get several points of view and much of it will be based on personal experience or local markets.  

I personally do not recommend using your cash to buy real estate.  Cash is king and if you tie up your money in one deal it doesn't allow you to scale and you are putting a lot of your money at risk without knowing what the future holds (i.e. Covid).  

I would rather pay the hard money costs or interest to your private money lender just so that my money is not tied up in a deal.  Imagine an amazing deal is presented to you while you are in the middle of a rehab and you have to pass on it because all of your money is tied up because you bought with cash.

Now if you have a million dollars in the bank and are talking about using cash to buy a $100k house, I would probably say go for it.  But 99% of the time I recommend using other people's money.

Good luck!

Definitely your credit score is hurting you but you have options.  However given your credit situation, just know that you are going to have to work harder than the next guy who has a 750 credit score.  Just be okay with that.

Call all your hard money lenders and see if they have a buy, rehab, refinance program that could work for you.  A lot of times the refi will be based on rental comps so as long as it cash flows banks will lend to you. If they don't have a program, ask if they can refer you to a local bank that will lend to you as long as the rent is enough to cover the mortgage.  

Reach out to your local FB investment group and see if there is a lender who has a no doc loan program.  In Houston there are several lenders who will do that.

Now keep in mind you are going to be paying more to borrow the money because of your credit score but you should be okay with that for the sake of continuing your investment career.  Once your credit score improves go back and refinance.

Good luck!

Those rules are worthless with today's modern BRRRR strategy. The best way to build wealth through real estate is through buying and owning real estate. Since In most areas owning just one home won't make you rich, you have to own multiple properties which means you have to buy in a way that lets you get all or most of your money back with every deal.

Having said that my most important criteria is can I buy, rehab and refinance with no money invested in the deal? If I can and it will cash flow just a little, I’m perfectly content with the appreciation, mortgage pay down, and tax savings. 

If you’re putting a bunch of money down just to try and meet a 1% rule you will eventually run out of money. I know this from personal experience and after I quickly blew through a couple hundred thousand dollars. 

I bought 8 houses in 8 months putting 20% down and just like that I was stuck and couldn’t buy any more. Focus on the metrics and strategy that matters and allows you to grow and scale.

good luck!

Hi all!

I received this advice in my early 20's that has stuck with me to this day (I'm 44 now).  I was having a conversation with an experienced investor and I emphatically told him that I wanted to be a millionaire one day. I was in my 20's so what do you expect?! His advice was simple and foolproof and it went like this.

He said, "Ehab, save your money and over the next few years go buy 10 affordable houses (under $100k) and finance them with 15 year mortgages and rent them.  By the time you are 40, these houses will be paid off and you will have over a million dollars worth of real estate FREE AND CLEAR."

It was so simple yet so ingenious and I'm happy to say that I am already there.  I think many people put unnecessary pressure on themselves to get financially free quickly or learn all these different strategies that they forget that just buying and holding a handful of properties will create a ton of equity one day when they are all paid off.  If where you live has higher home prices then maybe you just need five $200k homes or three $350k homes.  

The moral of the story is JUST GET STARTED and it's okay to start simple.

Good luck!

Ehab

Nice post but I unfortunately have to disagree as have a few others.  To generalize and say that this is not a good environment for new investors is simply not true.  I agree it's a risky environment for flippers but for buy and hold investors it's a great time to pickup rentals from tired landlords and distressed sellers.  

Especially if you know how to properly buy property right and leave yourself with 30%+ equity there is plenty cushion there to weather the Covid storm.  Also as you mentioned, people are scared to buy and make long-term commitments so it's a ripe time to own rentals because the pool of renters has grown.  

I'm teaching investors how to BRRR so with the proper guidance this is a great buying opportunity. I will say that if rookie investors DO NOT KNOW WHAT THEY ARE DOING then ANY environment can be potentially disastrous for them not just our current situation.

Thanks,

Ehab

You should come to Houston! I've been seriously investing for 5 years and recently quit my job. I BRRRR'd my way to about $40k a month in rental income. I currently have three rehab projects going on and I'm getting ready to start a 14 house new construction project.

Hi @Steven Yang.  I would highly discourage you not to use all cash to buy rental property.  First off, I mentor investors all the time on how to buy with no money out of pocket which minimizes exposure and risk.  It also gives you the ability to scale and grow if you can continue to use your $800k as working capital to buy, fix up and refinance your way to a small empire.  I've been able to acquire over 20+ rental units starting with $200k in seed money so there's a lot you can do with $800k if you know how to buy right.  Good luck!

Hi @Angela Marie Federico! Just by reading your post it sounds like you need to learn a little more before you pull the trigger.  As others have mentioned, you are discussing cap rate for a single family home when that should not be the measure to determine whether it's a good deal or not.  You also need to make sure you understand all of the expenses that need to be considered along with the rental comps because those are the important factors needed to determine whether something is a good investment or not.

Lastly, you can minimize your risk if you learn how to buy with no money out of pocket, put in a solid rehab and then refinance to cash out any money you may have potentially in the deal. At the end of the day, if you do not have any money invested, then you have very little risk and infinite ROI. Good luck!

@Doug Smith yes definitely include the rehab in the hard money loan. You will come out of pocket the costs to get your rehab started and then request draws from the lender as work is completed. If you use a credit card you can float a lot of the costs so you come less out of pocket. 

For example if you have a $50k rehab, you might start by doing $20k if work before requesting a draw. Half of that $20k May be payment to your contractors and the other half was materials purchased from Home Depot on a credit card. When you get the $20k draw from your lender you’re pay off your credit card and reimburse yourself for contractor payments. 

At the end of the project if you managed costs well you should have very little out of pocket when you refinance.