All Forum Posts by: James Z.

I misused the word short-term...I suppose I mean long-term but with an extreme emphasis on cashflow. A small apartment building, maybe? 

He understands the concept of leverage, so I assume financing.

One of my friends who has had to listen to my incessant ranting about REI had a question for me the other day, and I felt sheepish that I had no idea how to answer him. My plans are largely centered around SFH buy and hold, long-term investing, and my knowledge ends there. He is well-to-do and has money saved up, and was curious about how much cash flow he could get with it in the short-term.

So, my question is this: if you had $150k in capital to blow, were just starting out, and you were mostly concerned about getting the max amount of cash flow in the near future (and if possible setting yourself up to get some more long-term benefits) what would you do? 

Two extra criteria.....he lives in the Washington DC metro area, so things are pricey (but probably willing to look farther out) and seems averse to house flipping.

Thanks @Shayne Brescia ...I'm all for getting a DC license, but I'm under the impression that if I take the class and get the DC license, then decide I want to do one of the states, I have to go back and do the class in whichever state and take their test to get my license there. 

I also have been lead to believe that if I do it the other way around and get one of the state licenses first, then I can take a one-evening class in DC regarding their real estate law, then take the DC test and get licensed there, making myself only take one class and two tests as opposed to two classes and two tests. 

Is this incorrect?

So I have made the decision to get my license and become a real estate agent, both for income and to augment my REI plans. So my big question is: DO I GET LICENSED IN VIRGINIA OR MARYLAND?

My geographical situation is a bit unique. I live in Washington, DC, and have the option of working in two different states and one district. If I get licensed in either Virginia or Maryland, getting a DC license only requires a one-evening legal class and then the test, so essentially I just need to pick between VA or MD. Unfortunately, these two states do not have any reciprocity agreement.

Ideally, I want to choose the state that shows the most potential for both being an agent and for investing in real estate. I could just be an agent in DC, but I want to be involved in (and gain knowledge in) one of the states' markets, as I won't have the capital to invest in the city. I suppose for right now that the prospects for being an agent are more important to me (if I REALLY want to invest in the state I don't pick a few years down the line I can get a license there too)....I'm hoping that some of you might be willing to discuss your experiences and opinions on which state might show more promise for someone in my situation.

some personal factors that might influence my decision:

-i grew up in VA and know the northern areas of it extensively, don't know Maryland at all

-but driving to VA from DC is considerably more difficult than driving to anywhere in MD

-I will only be able to part-time until I build up a good network - and in rush-hour (when I'd be able to show homes during the week), driving about 10 miles away to somewhere in northern virginia (to show a home) could take up to 2 hours.

And another question: Is it possible to find a brokerage office in DC that does both DC and one of the states? Or even all three?

@Andy Collins  Thanks for the input. I do understand that buy and hold is more geared toward building wealth over a long period of time. I think what I am beginning to realize is that I want more of a balance between building wealth over a long time and getting some cash flow now(ish).

So my question to you is this....if cashflow is what you are more geared toward, how do you get there? If you were working with a similar amount of capital (enough to finance several $200,000 homes with conventional mortgages) what would you do to get the cashflow you desire with increased equity in mind? I'd really appreciate any ideas....even though I am going for long-term gains I also have cash flow on my mind.

Thanks for bringing this up, @Wade Sikkink . My interest in REI originally leaned heavily toward apartment buildings. I still have that interest, but I thought maybe I was getting ahead of myself jumping in that direction too quickly.

From what I have read it seems that getting financing for such a thing is a different beast - that banks are looking more at your business plan than your bank account. Do people usually buy smaller RE investments before they go to something bigger like that? I just kind of imagine that even if I had the downpayment ready to go in my bank account, and walked into the bank with a folder explaining my business plan, I might get laughed out the door if I have no proof of experience with this sort of thing.

@Bradley Benski@Chris Kennedy 

These examples make it clear that a little bit of fixing up can really augment a buy and hold (or at very least "hold for awhile") strategy. I think I just had it in my head that buy/hold and flipping were two strategies that could not both fit into one Venn diagram.

But it seems that with some contractors and smarts to fix up the right thing, I could significantly increase cash flow and then eventually sell some of the investments to either get more properties or just increase equity in another investment. I'm beginning to see how the wealth/business can add up in a decade.

Thanks guys, this really helps.

Thanks all, these are very helpful posts! 

@Jordan Archer and @Chris Kennedy ...I have read a bit about seller financing, but currently only understand it in it's textbook sense. Would one of you mind explaining how finding seller financed deals would benefit me or otherwise enable me to acquire property faster? Is it just on better terms than a conventional bank loan? (less fees, less interest, etc?)

Also at Chris - Talking about these rentals that cash flow at $400-500 a month....do you mean that you are getting these returns "right out of the box?" As in once you acquire the keys and rent them out they are making that much without many upgrades or repairs? Because that is what I am hoping to find, and I'm wondering if I look within a far enough radius of my area I can find places like that. Might be foolish to hope for such a thing in my area though.

@Bradley Benski I'm really interested in the concept you brought up of buying multiple properties, and eventually selling them off to gain serious equity in or completely pay off another one of the properties. I initially planned on just blowing my resources on one good property and renting it out - then the concept of leverage clicked. If I'm understanding correctly, what you just outlined provides a way to eventually hit that point of benefiting from total ownership without shooting myself in the foot and denying myself leverage.

Also at Brad - The example you gave of buying at 70% ARV...this sounds very appealing, but I am not a particularly skilled handyman, nor do I have much knowledge about repairs, or appraising how much repairs would cost. Is working on a type of deal like that do-able (and worth it) to someone who does not particularly plan on going into flipping as their strategy? Can it be done with a lot of research and a good contractor? Or do I need to dedicate myself to flipping to really benefit from a deal like that?

Several of you have mentioned using flipping/wholesaling as a way to acquire more starting capital to invest with. I am not against either of these things, but at the current time, while I am still trying to get a grasp of all the moving parts involved in buy/hold investing, I do not want to spread myself too thin. 

Hi all - I am working on establishing what I hope are realistic goals and trying to form a business plan around them. As I do so, and attempt to crunch numbers and look at listings for practice and to get a sense for the market, I'm running into some walls in my theoretical business plan.

I will have the resources in the next few years or so to get a conventional mortgage on maybe 4 single family homes that are worth about $200,000 each, standard 20% down. But after that my resources that I can devote to REI will be exhausted, and I'm hoping that my initial purchases will provide the financial foundation to continue expanding. In reading through these forums, it seems that a lot of new investors seem to get maybe somewhere around $150 in monthly cash flow from each of their single family home investments in this price range. I know that all circumstances are different, but that range seems to be something I have seen people post frequently.

If someone is only getting maybe $600 in cash flow monthly from their four investments combined, how are they realistically able to expand their business and build significant wealth? I understand that just by holding them and paying the mortgages that equity is being built. But even then, especially considering the fact that you are paying more interest than principal for the first several years, it seems like it would be a long time before the equity on those four properties would amount to something that you could refinance and pour into more or bigger purchases.

According to the math in this super simple (and probably flawed) example, the investor would be earning around $7200 in cash flow a year (before tax), and building equity in his properties. Even if all that cash flow is saved, it could be a few years before it was enough to purchase a fifth property, which would not necessarily tip the scales toward rapid growth.

I am hoping someone can cast some light on this topic in general. What am I missing? Some question points in my mind:

-Is $150/monthly/per unit in cashflow pretty low on the spectrum, and therefore skewing my sense of the business? My novice calculations would imply that one could get more from a $200,000 property, but I am fairly new to this and don't necessarily trust myself.

-I intend to be a buy and hold investor, but possibly sell some of the investments when the market is right. Is the seemingly low amount of cash flow just a reality that you deal with, and then the real wealth is built when the market is just right to sell off some of the investments and re-up with more/bigger properties?

-if my desire is to build this into a business and make it my full time job within the next 5-10 years, is this unobtainable without having a significantly larger amount of starting capital to pour into a larger amount of properties?

Sorry for the long post. Please feel free to answer any of these questions and elaborate on any related points; I really appreciate it, and know that there are other novices here that are having similar questions and concerns.