All Forum Posts by: Jeffrey Lester

@Curtis Bidwell Wow, that really is incredible. Congratulations to your son and his marriage, and I wish him luck with what I am sure will be a very successful future! 

@Will Barnard Will, excellent advice. I used $500 for the sake of simplicity - if only every property/unit could cash flow like that! :-) About the job market growth analysis, that is an excellent tool that I have not yet considered. I am quite certain that I will be moving to Phoenix after college, or in less than a year if I really decide to take on the world! I'll have to start studying that market as a regular practice. Thanks again for the sound tips and advice! 

@Jerry W. Wow, thanks for the offer! If I am ever in the area, I will most definitely contact you. I've been looking for mentors, but I know of no one in my town that would be willing to take up that responsibility, and all of the other Great Falls BiggerPocketers are lame and don't use the site much. There isn't even an REI club in my town!

@Max Householder That Warren Buffett guy really knows his stuff. I love it. Quick question for you (and the others that have mentioned it in this thread) - how exactly do you over-leverage? I understand the concept, which is taking out too much in loans and not being able to sustain the interest, but could you possibly provide me with an example, perhaps a personal experience? I have noticed a common fear is the fear of over-leveraging, so it seems like a concept worth knowing about! 

As always, thanks for all the replies. This post really picked up, and I'm glad, because I feel like it's important for newbies like me to really understand the dark side and dangers of REI!

@Curtis Bidwell Wow, 15?! That's crazy! Is he still doing deals today? 

@Darnell Kramer This is all excellent advice. Thank you! All of these posts have me really excited - I seriously think I'm going to follow through with my idea of purchasing a home while in college. I feel that if I take this year to learn as much about REI in general, learn the college-town market, and make connections, it's a totally safe bet.

Also, even though I'm 18, most people think I'm 20 or 21, so I have that as an advantage! 

Thanks again! :-)

Hey guys, these are all really terrific posts. I'm pleased and grateful for all of these responses, it is really opening up my eyes and making me realize that risks can be managed. 

Seriously, all of these replies mean a lot. Thank you :-)

@Will Pritchett That's exactly how I feel. There's loads of info on how to do this, and how to do that, but I feel rather uneducated on the "why is this dangerous?" portion of REI. Reading success stories is a great thing to do, as it motivates people, but understanding the downsides is equally as important, in my opinion.

@Kathryn M. Hey, Kathryn! That's excellent advice. I do agree that, in order for a local market to have house values drop 35%, something devastating would have to occur, and usually that would be predictable. Examples I can think of are a military base closing, a university or large school closing, or a major employer going out of business or relocating. About the mentoring, I am actually working on securing an internship at a local property management company before I head to college! Then, I'm hoping that I can find some real estate groups in my college town that I can join. Thanks for the comment, it was very sound advice! :-)

@Salvatore Lentini Wow, that is one heck of a deal. I am currently reading The Strait Path to Real Estate Wealth, and the author is a very firm believer in buying with a decent amount of equity once purchased (due to buying below market value). How much below market value do you tend to shoot for? I'm confident that finding homes 15% below value is possible on a regular basis, but finding anything 20% or above seems like it would be incredibly difficult. Also, I am planning on investing in homes that are less than or equal to the 50th percentile of home values in the local area. 

Quick question - how do you usually find your deals? 

@Ned Carey Ned, thank you much for your response. Market fluctuations is precisely the topic I am interested in studying. Do you, by chance, have any books/sources you can recommend that can further my education on that topic? Thank you! 

@Windie G. I have a long list of books to get through this summer, and I'll put that one on the list. :-) I wish the best of luck to you! 

@Pete T. Hey, Pete! 

I am talking more about buy and holds. I have considered flipping, but I'm more interested in rental real estate investments. 

So, are you saying that even if property prices change, rent prices remain relatively stable? That does make sense, because in the town I'm going to college in (Missoula, Montana), rents are pretty low and property prices are super high. It's not a great town to invest in at the  moment. But in places in like in California, rents AND property prices are extremely high. Is that because rents had to increase due to insane property value? 

Also, do you have any methods for avoiding disasters? Some things to me are obvious, like (1) don't invest in economies that are diversified (2) invest in places like college towns, since there's always renters available (3) do invest in places that are growing (4) do not invest in places that are declining. 

I appreciate the response! 

Hello, everyone! 

I have been reading like a mad man, and I feel like I have a pretty solid understanding of financing, renting, selling, controlling the properties you buy and a variety of other techniques and investment methods (I have not actually done any deals, however - I'm only 18).

However, there's still one definite gray area that remains, and that is this: what are the risky  aspects of investing? 

I understand that these add to risk:

• Not understanding your niche 
• Not having a solid team 
• Buying bad deals 
• Lacking the general education needed to succeed in this field
• Lacking self confidence and hope for a prosperous future 

But what I truly do not understand and feel that I cannot prepare for is market volatility. 

Here's an example of what I'm worried about: 

• I study my market and learn it inside and out
• I am very educated in my niche 
• I have put together a reliable and trustworthy team 
• I find a house for 15% below market value (for simplicity - the house is $85k, it is worth $100k), which gives me a significant advantage in that I can have a higher cash flow and be protected against small market fluctuations 
• I put 20% down 
• I start renting out the property with an excellent property manager managing it for me 
• I'm making $500/month in pure cash flow after all fees, mortgage, taxes, etc.
• Two years later, the market starts to take a turn for the worst, and the house drops rapidly in value by 35%
• I try to sell the house before it drops too far, but no one wants to buy properties when they know prices will continue to drop 
• Rent no longer covers the mortgage and fees due to the incredibly cheap housing market, therefore the house is foreclosed and my credit and reputation with many partners is destroyed 

This. This is my worst nightmare. This is what I desperately want to learn about so that I can prevent it from happening. This is mainly the only thing that scares me about REI, so if someone could tell me some strategies, methods, or books that exist to teach people how to minimize risk in REI, I would be eternally grateful.

I'm going to college in the fall and am planning on investing in my first property next year. I'm simply trying to prepare in order to minimize risk as much as possible :-) 

Thank you!

@Will Barnard I want to specialize in buy and holds. I'm looking into my local property management companies today!  

@Tom Reynolds Wow, Tom. What a response! That was very inspiring and enlightening, thank you! 

I really like your idea of focus. I think it's completely correct. You see, I was offered a position as a desk assistant in one of the residence halls, but I got to thinking, "how will this be beneficial to my future? What will I learn? I'll learn how to provide good customer service - but I already know how to do that from working on the golf course". I figured I should try to find a job that can provide some training and experience for later in life that will be relevant. 

I also like your suggestions as to what places to work. I've had a few people suggest working with a property management company, and the more I think about it, the more this makes sense. It seems common for successful investors to believe that management is the most important aspect of being a successful investor, simply because you need to seek out a good management company from a pile of crappy ones! :-) There are two large property management companies in Missoula - I'm going to apply to both of them. 

One last note - I think REI, just like anything that involves you being your own boss - takes motivation. By reading, listening to podcasts, watching videos, scanning properties on the MLS, and using BP, I stay motivated. If I stopped doing all these things, I would drop my motivation. It's the engagement in learning that ignites that flame of inspiration and fuels the hunger to be successful and to make something of myself. If I worked a job that constantly added fuel to the fire, I think that would be invaluable.

Again, thank you so much for your response! I'll stay in touch!