Explain A Possible Scenario
Here is my situation. I am a newbie, looking to get into the REI realm. My credit score is 765. My assets are as follows:
401K ~ $33,000,
Primary home equity ~ $21,613.
My savings is pretty much nill because I throw anything I have extra at paying down my debts. I need some seed money to go off and purchase this first property. Knowing this, what would you recommend I do to get started. Do I need to save more money first? Can I use the equity in my primary home as a seed for the investment home? Lots of questions. I am barely making it on one income right now, so I want to start the process of getting residual income coming in. I realize it will not help at first, but as time passes, and I obtain more and more, my goal is to supplement my income as though my wife was still working. Any thoughts??
Forgot to mention, my debt to income ratio is ~ 39.86.
Don't all jump at once to offer help!! Geeze....
Have you decided what type of investing you want to do?
May advice to you is to go ahead and find some investors in your area and start bird-dogging or wholesaling deals to them... Build up a little savings after a couple of deals and move on to rentals, fixer-upers, subject-to, or lease options...
You shouldn't need to tap into your monetary resources too much when sticking with wholesaling or bird-dogging...
Good Luck!
[addsig]
If you can, get an equity line of credit on your house and use some of that for your investing. I would not touch the 401k since 1) this is your retirement savings and 2) you will have to claim anything you withdraw as income and pay taxes plus a 10% penalty the year you make the withdrawal.
You are right that you will need some money to get started. You may need to do some advertising, as well as set up a business, depending on the state you live in. Many investors, myself included, set up an LLC since it has many of the benefits of a corporation without the double taxation. In my state, it cost me $125 to file the paperwork. It also helps to protect your personal assets. You have an excellent credit score, so you should be able to get a 95% loan or better if you need to. There are some no money down or little money deals available if you look for them. Just remember, the less you put down, the higher your monthly payment, so the lower your cash flow. Remember to subtract 30 - 35% from your expected monthly rent to cover expenses (taxes, insurance, repairs), then subtract your mortgage payments and whatever is left over is your anticipated cash flow. If it's negative, don't do the deal.
You may want to work on doing a couple of lease option deals to build some capital and then begin purchasing rental property for the long-term residual income.
Get all the knowledge you can. There is a lot of information of this website, as well as others. If you have a REI club in your area, go to the meetings and find out what other investors in your area are doing. Some of the courses from the "gurus" are expensive, but have good information.
Hope this helps.
How about non-money assets? Specifically, things like have time/skills/willingness/desire to do things like clean, paint, remodel. The ability to do a title search or the time to drive neighborhoods. The bird-dogging/wholesaling suggestion is good but I think most people have some major skill set which could make them money outside their day job which they never think about.
Real estate is about skills/assets/contacts needed. Its not necesary to have all of them but you need to get access to all of them somehow. I wouldn't worry about available cash yet-- go find some deals and the cash will work itself out.