All Forum Posts by: Riley F.

I like all of the above advice, particularly interning with a local investor, which will provide you with plenty of practical hand on experience. Also, the above books are fantastic recommendations, and will get your mind working in a different way, but are generally light on real content.

It's my opinion that a solid financial education goes a VERY long way in making an investor. My recommendations are going to be more difficult and specific than the above, but they will serve you well for life.

1. Learn accounting - if your high school has a course, take it, if not, get a managerial accounting book and learn the basics.
2. Learn MS Excel - there is not a single real estate investment that can't be modeled using MS Excel, and know how to use it well will put you light years ahead of your peers.

These two action items alone will make a huge difference in your future.

My last piece of advice would be to start changing the way that you think. Always think about what value you can offer other people whom you want help from and offer it. It may be that you can run errands and paperwork around on your bike for a local investor, help rehab and demo crews, help build excel models, who knows. The point is, what do you have to offer? I can't tell you the number of people that I meet who ask for things from me, but don't tell me what they can provide. Don't be that guy (kid), because the conversation was over before it even started.

I think you would be surprised at the number of investors in your town that would consider taking a high schooler under their wing if they were approached the right way. Learn something about the above, and cold call them. You might surprise yourself.

@William Robison

Wish that I could, but I'm flying back from a wedding that day.

I would reckon that even an LLC is somewhat of a head ache from a regulatory perspective - you will need an attorney to draft a PPM, also I believe you will technically become an investment adviser so far as The Investment Advisers Act of 1940 is concerned, and probably an investment manager in the scope of The Investment Companies act of 1933. This will likely have to be a Reg D offering if you plan to do any marketing at all. My $0.02, if you don't already have in excess of $1mm in assets under control, which is not a ton, you may be better off just building your track record rather than raising money. My reason for that is, the fixed costs of launching such a vehicle can be crippling for a small investment pool to overcome.

@Trenton Parks

Can I ask why you'd like to set up a RIET or hedge fund in the first place?

I'll be there.

Sorry to have missed the last one, but my flight was canceled.

Sounds simple, but after pleasantries, I usually start with:

"Do you have a home that you want to sell?"

if yes

"Address?" "What do you think it's worth in today's market?"

Sounds very easy, but if they say "no", then they're just not motivated, as simple as that. Trying to get a deal from a non-motivated seller is like trying to get blood from a stone.

I just sent out my first batch of yellow letters to the Kansas City metro market, and thought people might find the first impressions of a new wholesaler of some interest. My goal was to raise bit of capital to continue to fund my buy and hold investing. I sent approximately 1000 letters which went out 5 days before this post, have had about 30 call, and have learned a bunch and gained some better questions:

1) Not every call is a motivated seller. In the KC market, which is a pretty hot market, this list has already been mailed to several times, so many just want you to stop sending them letters. I have had 1 motivated seller so far, but she held a note that was 75% of the value of the property.

2) As a corollary to #1, think very carefully in choosing your marketing area. If you'd guess it's already been hit several times, it probably has.

3) Don't stay on the phone for 20 minutes with a dead lead. Ask quick screening questions up front such as "Do you have a house to sell?", level of motivation, and expected price. If they say no, or want above market value, I'm going to guess there is a 99% chance that you can buy at wholesale.

4) You are going to start speaking to people with real problems: deaths in the family, money problems, family issues, etc. Try to help them out without lecturing them even if you CAN'T buy their house. Many of the people who preceded me in these mailings seem to have been real jerks based on discussions with some of these homeowners. In short "HELP PEOPLE OUT WHERE YOU CAN"

5) Fielding calls takes a lot of time.

Questions:

1) Do people work these popular lists, or is it better to just say "Already been done too many times" and move on?

2) If there is not motivation, do you bother throwing offers, or do you simply move on rather than insult the homeowner? How do the experienced folks deal with this?

3) Do you find that letting folks screen themselves through voicemail is better than answering each call, or worse? I am starting to think that Michael Q. is on to something with his long winded screening phone call. Seems like a good idea to eliminate the tire kickers.

4) Any general advice would be very appreciated.

I hope that this is useful.

@Darren Sager

I hope to be there - depends what time my flight gets in.

This probably isn't the sexiest question, but for those of you who are buy and hold investors, how do you determine working capital requirements. My initial thought was that I would take PITI x 12 as an initial working capital metric, and start to run more lean as I get some more experience.

I'd be interested to hear how folks who have done this for a while look at working capital.

I have to assume that you have a good use for the money that will produce a yield over and above the rate you'll be paying when the instrument resets. Depending on how levered you presently are, I don't see why you don't go with the ARM.

If you don't have a use, I don't know why you would consider an ARM in this rate environment. There is a reason why high duration fixed income instruments have been selling off like crazy.