My Plan...stupidity, Or Possible?
Iv been trying to learn as much as possible in the past few months...about real estate...and will continue to do so until i die
my problem is, starting off small...it doesnt really fit my personality....i want to go for it, dive in head first
im only 20 years old, no money, no job(recovering from surgery) im very smart, and highly motivated
i want to get a property, my first one...commercial maybe 50+ units
i want to make millions and wont be able to do it until the properties i am acquiring are worth atleast 2-3 mill
my plan, without any money...would be to have the seller ONLY sell me the building, and hold his land instead of the down payment, in which i will lease to buy from him
he will gain appreciation in the land as well as getting paid monthly
i could take out a loan for whatever has been paid off and entice the lender to give me the loan by offering him interest on a higher loan then they would actually give me
example. Property ----1,000,000
exhisting loan balance --750,000
i could take out a 250,000 loan and pay the mortgage company an extra 4% or so to make the payment on the first mortgage for me as i would give them enough money each month for both loans, and interest on each for new lender...
they would be making interest on a $1 million dollar loan, with parting only with 250,000...im sure the higher officers of the company would be excited about this oppurtunity
paying a management company wouldnt be a problem, and id make sure every decision involved me...even if it wasnt for my input...so i could retain the decisions made by experienced property management companies...
so how could i really mess up? is there any reason a lender wouldnt go for it?
now, my question, do yo think this is STUPID or somewhat promising?
im going to go for it anyway, iv got nothing to lose...but i would appreciate input
~Andrew[ Edited by Young_Inno_Vative on Date 12/24/2004 ]
No offense but you need to get some experience. This whole scenerio makes little sense. You need to get some business experience to learn how the real world works. Where is all this extra money going to come from to pay 4% higher interest,management company fees, you are making so many assumptions do not take into consideration usary laws lenders are subject to. Maintanence,utilities,vacancy,legal fees,taxes. Why would a lender not go for it? Reasons are many. You have picked numbers out of the air and have not taken into consideration cost of borrowing money,closing cost etc. You say starting off small doesn't fit your personality. Thats fine, you sound like you have convinced yourself that this is the way to go. Now it is Christmas 2004 and I will venture to say that you could learn this business and do some deals in 2005 and be on your way to financial independence. Or you can sit around and dream up scenerios that are not real and not make any progress. I believe if somebody puts their mind to something they can accomplish great things. But people set themselves for failure as they set goals without knowing the real commitment involved. Instead of spending your time dreaming up scenarios get out and start looking for deals. Hey if a good deal comes along and its a SFH do it,if its a commercial building go for it. Look for deals not your dream scenerio. Whatever it is you better learn quickly about doing due dilligence. Real world will teach you that you have a lot to lose,even if you think you have nothing to lose. I do admire your ambition at 20 y.o..
If you persist and take action you can reach your financial goals. You do need to learn more on how money works,real world. If you don't predatory sellers,lenders,business people will have a field day at your expense.
Good Luck
Getting a loan for a building in which you do not own the land might be a bit tough. There is a difference between starting big and moving to the top, quick. It's going to be hard for a person to manage a 50+ unit building when they have not even managed a single family home. Your goal should not be to start huge, but should be to move up quick. Start with a SFH, maybe only do 2 or 3 instead of some people doing 20 or 30 before they move up. The seller gaining appreciation in the land would be pointless, since you are lease optioning it. You can entice the lender all you want but think about it from their position. Would you give a $250,000 loan to someone with no management experience, no REI experience, no job, and no cash? You can say you'll pay them a higher rate all day long, but with no money/experience/cash flow to back yourself, what would make them think you could pay them at all?
The reasons a lender wouldn't go for it is lack of past experience and lack of money/leverage in the deal. When you put your own money into it, the bank looks at that as you having something vested into the investment so you are less likely to walk away should something go bad.
Also, how can you say you have nothing to lose? Credit, perhaps? Money. Learn more and start in a smaller investment.
Dive in head first, but make sure you know how deep the water really is, first.
Quote:
On 2004-12-24 12:23, Young_Inno_Vative wrote:
Iv been trying to learn as much as possible in the past few months...about real estate...and will continue to do so until i die
my problem is, starting off small...it doesnt really fit my personality....i want to go for it, dive in head first
im only 20 years old, no money, no job(recovering from surgery) im very smart, and highly motivated
i want to get a property, my first one...commercial maybe 50+ units
i want to make millions and wont be able to do it until the properties i am acquiring are worth atleast 2-3 mill
my plan, without any money...would be to have the seller ONLY sell me the building, and hold his land instead of the down payment, in which i will lease to buy from him
he will gain appreciation in the land as well as getting paid monthly
i could take out a loan for whatever has been paid off and entice the lender to give me the loan by offering him interest on a higher loan then they would actually give me
example. Property ----1,000,000
exhisting loan balance --750,000
i could take out a 250,000 loan and pay the mortgage company an extra 4% or so to make the payment on the first mortgage for me as i would give them enough money each month for both loans, and interest on each for new lender...
they would be making interest on a $1 million dollar loan, with parting only with 250,000...im sure the higher officers of the company would be excited about this oppurtunity
paying a management company wouldnt be a problem, and id make sure every decision involved me...even if it wasnt for my input...so i could retain the decisions made by experienced property management companies...
so how could i really mess up? is there any reason a lender wouldnt go for it?
now, my question, do yo think this is STUPID or somewhat promising?
im going to go for it anyway, iv got nothing to lose...but i would appreciate input
~Andrew
<font size=-1>[ Edited by Young_Inno_Vative on Date 12/24/2004 ]</font>
You might try looking in Camden, or some other blighted area... use public money to create affordable housing.... but without a feasibility/pro forma... and some creds, you won't get too far.
Why not first invest in yourself? See if you can get an entry level job in a property management firm? Learn the ropes. Learn the rules. Learn the players.
recall you were the one who posted about reading the TRUMP "book how to get rich" yes that book motivates you but it doesnt give you the knowledge that he has.
bare in mind Trump started out working for his father who was a major developer in low income housing. he started by collecting rent from his fathers buildings. and worked his way into manhatten.
get some experience working for a property managment company, developer, major contractor or a commercial realtor. then go for it. books wont teach you what people who already have experience will. especially trumps books
knowledge is power, ignorance wil get you no where.
[ Edited by ZinOrganization on Date 12/25/2004 ]
Experience and wisdom is needed at this time. As long as you have the 50 unit as a goal you will get it. As each person is different I've been a landlord of 4 years I'm 26 and stil have much to learn. Now you asked if this is stupid or promising, I'll be honest and answer what you asked; its stupid! If you every have to question something like that, then it's probaly no good. You must go into you deals with confidence and you are going to win. I don't know of any institution that 's going to give a loan w/ no job or money or credit.
P.S. are you teasing us!!!
i appreciate all the feedback...
i kinda knew of the answers i would get ebfore i got them but the insight is what i was looking for...
when it comes to doing research, i wouldnt pass up my due diligence...when i say dive in head first thats not without checking my angles...
i set my hopes high, which could never be a bad thing but i guesse the 50+ unit building should be a goal to work towards...
im not being ignorant, i dont think anything will be that easy, although i have the determination and drive to make anything easy...some might not follow that
either way, thanks for the feeedback, its time for me to work out a clear plan to stick to...thanks again
~Andrew
oh yea, the 'getting a job with a management firm, commercial realtor, etc. is a good idea.'
im in the nj area, ayone know any way i might go about seeing to get a job with these people...
i would work part time for a minimal fee, the knowledge is what i want