Owning RE (What Qualifications Do I Need?)

[john voight]

I am 20, have no capital, no credit, and no skill in RE.
I would like to get some property, such as fourplexes, or apartments, to create a cash flow. This is down the line, not in the close future, but more like 2-5 years from now.
My dad would greatly help me in this, he rents out a few houses that he owns. He is no pro, but he would help.

So lets say, I have my eye on a 600k apartment complex in Texas. The apt is a 6-10 unit complex, and it has a positive cash flow. How would I finance this venture?

Furthermore, how would I need to change my life in order to take care of the buisness, would I have to dedicate 8 hours a day to the ppl living in my apt? or would it be more like 8 hours a week?

Any tips of how to not get screwed when dealing w/ RE?

Lastly are there any resources, or apartment/RE forums, where I can increase my knowledge? I would like to heeb up my property throughout my life, so that I would have a good physical net worth.

BTW the example I use is apartments; it does not have to apartments. It can be any type of property with a positive investment expectation.

[Tien]

Some really hefty broad questions you have there Mr Voight.

Answers will most likely overwhelm you and not do you any good.

Learn this business piece by piece if you are willing to wait long enough. When I jumped into real estate, I had to know everything, and also spent all my time figuring out the answer to the 23455 questions I had.

EDIT: I still do that to this day, but I love learning real estate so I don't mind.

Not everyone will take my approach.

For someone who wants to get started and learn some ABCs, the book "The real estate millionaire investor" by Gary Keller is like a must must read.

Good place to start. I would also start by asking your dad to take over management of the properties he owns.

[ncskiier]

I've become very interested in RE as well. Check out the Rich Dad Forums . This is the new investors page, there is alot of information.

[lgas]

I am not an expert, but I think I can address your specific question re. purchasing an apartment complex as I've been looking into the same thing recently.

The "default" way to purchase an apartment complex would be to get a loan from a bank that is in the business of financing these types of deals. From what I have found, most banks that finance these types of deals regularly will use the cash flow data from the commercial property to back the loan, meaning that you will not necessarily be personally guaranteeing it. This is good, since most budding young real estate investors don't have the type of credit required to get a big loan like this, but it's not as wonderful as it sounds... there are two big caveats. First, the bank usually wants you to put 10-20% down so you have some skin in the game, and second they will only do deals where the cashflow is really good (although this is good for you because it means it will be harder for you to put yourself in a deal that screws you if you go this traditional financing route). From what I understand they like to do deals where 50% of the net profits will cover the debt service.

The alternative way to purchase something like an apartment complex is basically the "creative REI" route which is limited only by your own creativity and circumstances. The simpliest example would be doing an owner finance deal where the current owner carries a note on the property.

Hope this helps.

[AmadisSB]

I bought a 4 unit townhouse when I was 22. Put 60k down, mortgaged the rest (was 224k). It had positive cash flow from day 1 with minimal work needed. I spend about 3-4 hours a month taking care of it (unless I'm changing tenants, than it goes to like 6-12 hours a day for a few days).

Its a decent business. still not realizing a profit, but it takes care of itself. Ive had a few rough tenants though. Been to court too. When everything is rented, you are laughing, but when you are down 1-2 tenants, it can get rough to cover the mortgage payments and taxes (4k taxes/year~ and $1100 mortgage /month)

The downpayment was made by using my parents line of credit, which i paid back half of in a couple years than transfered the rest to my own LoC.

hope that helped

-sb

[SurferEd]

I am an RE agent.

Use a buyer's agent that works only on your behalf, never use the seller's agent as the pitfalls are too great.

Ask for proof of permit, and everything they have that has to do with taxes.

Get a good inspector. Do not get someone who works for themselves. LandAmerica/InspecTech has the best IMO, if available in your area.

If you decide to take on partners, make sure they are compatible with you in a business sense. Also, make sure you have a plan for when one of you wants to bail on the project. A real estate attorney can do wonders here.

[Tien]

[ QUOTE ]
I am an RE agent.

Use a buyer's agent that works only on your behalf, never use the seller's agent as the pitfalls are too great.

Ask for proof of permit, and everything they have that has to do with taxes.

Get a good inspector. Do not get someone who works for themselves. LandAmerica/InspecTech has the best IMO, if available in your area.

If you decide to take on partners, make sure they are compatible with you in a business sense. Also, make sure you have a plan for when one of you wants to bail on the project. A real estate attorney can do wonders here.

[/ QUOTE ]

What are the common things that a seller's agent would do which are pitfalls?

[VeryTnA]

"no capital, no credit, and no skill in RE"

Kinda like me saying I want to win the Indy 500, BUT I don't have the entry fee, no car and have never driven over 50mph.

At least go to real estate school and learn some basics. The skills will last you a life time and pay for themself many times over.

There is a real estate bust coming soon. Educated investors will clean up as usuall.

[SurferEd]

[ QUOTE ]
[ QUOTE ]
I am an RE agent.

Use a buyer's agent that works only on your behalf, never use the seller's agent as the pitfalls are too great.

Ask for proof of permit, and everything they have that has to do with taxes.

Get a good inspector. Do not get someone who works for themselves. LandAmerica/InspecTech has the best IMO, if available in your area.

If you decide to take on partners, make sure they are compatible with you in a business sense. Also, make sure you have a plan for when one of you wants to bail on the project. A real estate attorney can do wonders here.

[/ QUOTE ]

What are the common things that a seller's agent would do which are pitfalls?

[/ QUOTE ]

Their duty in dual agency states (where it is considered legal for one agent to represent both parties) is to represent the best interest of both the buyer and the seller.

First off, consider that some states have outlawed the practice of dual agency.

As you can imagine, it is very difficult. Depending on the ethics of a dual agent, they may let the seller know of how high you are willing to go (of course the reverse could also be true, but remember that agents are paid by the sellers usually).

The rate of lawsuits that are filed as a result of this practice is more than twice the rate with two agents involved.

When you have your own agent representing you, you are much more likely to have someone who is doing their best in getting you the best deal and finding out the most about a property. This person wants to close the deal, but they also want your referrals, as well as future business.

When you have an agent that is tied to both parties, their allegiance almost always falls with the seller. There are several reasons for this.

1) If the seller gets the notion that the agent is working too hard on the buyer's behalf, he/she can cancel the listing contract if a deal falls through. The agent spent time, money and energy on the listing and now they won't be getting paid.

2) The seller may be buying a replacement property and the agent wants to get paid on that one as well.

3) The agent and the seller may have a history together

If you must go through the seller's agent, make sure you work that much harder to make up for the above.

[sMethod]

Im 22 and Just completed my first realestate transaction, my father and I bought a 90 year old run down house to fix up and flip I gave him 10,000 for the down payment and helped restore the place every step of the way. Escrow is closing in 2 weeks and even with the market in a down swing we still made a hefty profit. They way me and my dad worked the deal was I helped with the down payment helped fix it up and I could live in it as soon as it was ready until the day it sold and he would pay the mortgage while we finished. It sat on the market for 7 mounths before selling. The advantages of this deal were I had a nice place to bring women back to that couldnt believe I was a poker player / realestate investor. I dont know if the extra vagina was worth not having cash flow from renters for 7 mounths but it certainly helped. When your done you could have a 5 bagger on big money and capital is nice.