A Newbie And His Busines Plan (kinda Long)
About me: I’m a total newbie to RE investing. I do have a lot of project management experience, but no construction or rehab experience. I’m located in the Phoenix area. Currently, I’m not employed, but the wife is (over-employed?)…and our credit score is around 750.
Goals for myself:
1. Cash Flow
2. Equity
3. Tax Benefits
Goals for the community:
1. I want to provide someone with a home that they can be proud of.
2. I want to make a positive difference by providing housing near the places people work, decreasing their commute times and auto expenses, and increasing the time spent with their families.
My plan: Short term, I want to get started with rehabs. I’m not really interested in bird-dogging, I’m willing to give up some profit to a wholesaler. Since my living expenses are covered by the wife’s income, the profits from the rehabs will go into other rehabs and to purchase income producing single-family homes, duplexes, four-plexes. Longer term, I would like to own larger apartment buildings and commercial properties.
What I’ve done so far:
1. I’ve visited the local Real Estate Investors Club (I plan to join at the next meeting).
2. I’ve read "Flipping Properties: Generate Instant Cash Profits in Real Estate" by Bronchick and Dahlstrom
3. I’ve read "Buy It, Fix It, Sell It: Profit!" by Kevin C. Myers
At this point I’m still a bit nervous about just running out and buying something. There are a lot of big bad wolves out there just waiting to take my money! On the other hand, I don’t want to over analyze to paralysis either.
Are my plans too grand? Does anyone have advice on getting into the first rehab? Am I moving too fast? Should I be looking for an experienced partner? HELP! I have so much info now, that it’s overwhelming.
Thanks for the advice!
Dave
Hey,
I can clearly see your Project Management experience!!! I have been in RE for nearly ten years and my only Mission Statement has been: To Make Money.
Please do NOT take this as criticism, but must Project people are planners and not doers. It is the nature of that job. So you may need to leave part of your old job out of your new job.
With that said: you need to concentrate on the finanical part of properties. What you can bring to the table, will determine what type of properties you can acquire. Build a team of financial backers (mortgage brokers, HML, etc.) as a next step.
I was given a very good piece of advice: find the property FIRST and then worry about the exit plan. Your first deal could be a flip, a wholesale deal or a long term rental. It all depends on the property.
Happy hunting!!!
In a down market buy all you can. No where to go but up. You can plan it to death like said before. Great to have community goals if you work for the county or City or State. I was rehabbing houses in war zones here in Austin. Neighbors came up and we talked about how wonderful I was doing for the neighborhood. It did make me feel good to have the nicest property o the block but no way was that a goal. I had fun too and that was not a goal. Make money for retirement and the good things in life. Go find a property that the seller has to sell and fix it and sell it. You can do some buy and keep too but make sure they cash flow a few hundred a month at least. Just a few thoughts and hope some helps. Get a hammer and do a deal right now
Good LUCK and HAPPY HOLIDAYS
Hope this helps some
Ted Jr
Yeah, I can certainly understand where you're at; what we did was look at properties, get comps and began making offers.
We try to make 20k/prop after all is said and done.
You know what to do. You've read and you understand. Now, go out there and get a rehab. You can do it!
Thanks,
OnTheWater
I think that with your project management experience you'd be great at planning out the rehabs in advance and doing the numbers. Your plan sounds good to me. Part of what drives me in the rehab biz is the feeling that I get making the community a better place and seeing a prospective buyers eyes light up when they see all of the features of the house. I know that a lot of people jump in fast and buy a lot of properties right away. Then there is the other way and that is to start out slow, buy one, fix it, sell it, and then take most of the money and invest it into the next one or two. That is how I prefer to operate. I will admit that I'm not making six figures doing it this way though. I sell some and I keep some and rent them for a profit later on. It sounds like you are in a very good position to do this because you have a wife with a back up income and a great credit score. It sounds like you are ready to buy the first one. Meet with a banker first so that he/she knows your goals and then go out there and find one.
Thanks for all of the information. I will start making contacts with money people in the morning.
Should I start with my local bank, or just head straight to the hard money people?
Dave
Hey,
It sounds like you are on a roll!!
Talk to everyone, about everything, you can. A ten minute convesation on the phone is free.
I would also start networking with property sources (wholesalers, RE agents, etc.). Almost all of the wholesalers I know, will put anyone on their weekly/monthly property distribution list.
That would complete two pieces of the puzzle.
Update:
I have attended two local real estate club meetings since my first post in this thread. I have started meeting a lot of like minded investors. My most valuable professional contacts so far seem to be mortgage and real estate brokers that are also investors. With this week being kinda broken up with Christmas, I will not be able to sit down one-on-one with anyone until after the holidays.
I hope to get a few rental units under contract in January. Then I would really like to agressively add to my portfolio throughout the spring.
I want to thank everyone for thier contributions to my thread, and to this website as well. The internet's a big place, but everyone here really pulls together to make it a community!
Happy Holidays!
I am not in complete agreement with some of the other responses. You need an exit strategy if you are going to make an investment under terms that have risk. For example if you have a seller carry back with a large balloon in 3 years, you had better have a plan for solving the balloon.
You can certainly start by "doing something" because a number of people are perpetual spectators and if you have fear of ownership, doing it is good as long as you do it safely.
That being said after you get one or two under your belt, you might want to make a long term plan. There is an article (mine) posted on how to do this using a spreadsheet that has you fill in what you are going to do each year. This will give direction to how you can meet your goals.
It also is in concert with your abilities as a project manager!
Happy Holidays,
Ed
if you are unsure start out small. start with a small rehab. project until you fully understand the process it will be your best teacher. then you can determine your ability and build from there. ggod luck. kenmax