I need a little more information. Are you working with Section 8 or other community programs? What is your current screening process?

Spex, how about a seriously open-ended and completely vague question?

Suppose you are 23, a few months out of school, living in the northeast. You have a reasonably well-paying job and would like your poker earnings to go into real estate. Say you have ~30K for a possible RE investment. What kind of property would you purchase?

Note: I know virtually nothing about RE and plan on reading up over the course of the year. I anticipate making a move in RE next winter.

We have one tenant that is section 8. I have been trying to find out if section 8 facilitates matching landlords and tenants; do you know anything about this? Are section 8 tenants a bad idea?

Are there other community programs that I should be aware of?

My current screening process is admittedly poor: I confirm employment primarily other than that it isn't very structured. That is why I am really looking for information and guidance.

I have a local guy that does my repairs and such, but he doesn't handle the property management part. He has been the source of a couple of placements that have largely worked out well.

Hi Spex,

Are your investments all within driving distance of where you live? If so, where do you live? I'm in San Jose, CA where the average price of a single family home is around 600k. (The prices haven't dropped too much in silicon valley)

That makes it a bit hard to invest as a new RE investor needs a bit of capitol. I know there are ways around this and it's possible to use other peoples money, but it's still tough to get in.

I currently have a few rentals out of state, 3 SFH's and 2 duplexes. I plan to sell them in a few years and get into a small apartment complex. Something like 30 units or so, probably out of state as well.

Do you have any recommendations on out of state RE investing? Where to invest?

This is what I am trying to get started doing. I'm in SoCal where the prices are dropping steadily, but prices are still too high to yield a positive cash flow.

I really do not want to miss out on this buying period, but I can't see the sense of acquiring several properties with negative cash flow.

What would you recommend in this situation?

I am a college student and plan on living in the area for the next 2-3 years... How much cash would I need up front to purchase a 150k 3 bedroom condo and live in it/ rent it out to two other people, then once I move out I will continue to rent it out

I am 21, will it be impossible for me to get a loan, so basically the answer is 150k?

I was asking about this in another thread, and it was thremp who told me that my parents could not cosign since they weren't living in it, he seems to be more knowledgable about this stuff then me, but just wanted to make sure

are there any other options for me to raise the necessary funds, I figure I could max out on student loans....

basically I am interested in doing this, and I am just trying to learn how possible/impossible this would be for me.... thanks

Great THREAD spex...with spot on answers/ideas/suggestions!

Stephen

Great THREAD spex...with spot on answers/ideas/suggestions!

Stephen

*EDIT: its SO good ...I double-clicked it by mistake...lol

If I had $30k and I was just starting out, I'd start by focusing on mobile homes. I've got a young guy in that works my mobile home parks. He buys the homes for wholesale - maybe $2500 or less. He does minimal repairs to them. He then sells them on a note for the retail price - maybe $6000 to $20,000 depending on the home. Usually he charges 13%+ interest on his notes. When I was starting out, nobody ever thought of financing mobile homes a way to quickly increase your cash for investment, otherwise I would have done that.

Ok, so creating mobile home notes is not exactly real estate investing. But its a good way to take $30k and turn it into 100k in just a few years. During that period you can learn more about REI and decide what you'd like to do with your bankroll. It will also give you a pretty good idea of what being a landlord is like even though technically if you sell a MH on a note you are not renting the home. I think that you're drawing from the same basic population though.

So many poker players have this obsession with buying condos as investments and renting it out.


You buy a condo for standard of life, not for investment purposes.


Buying a condo is one of the worse things you can do as when you start renting it out you will essentially lose money or breakeven for years down the line while you continue to have the headache of maintaining it.

The better idea would be to buy a duplex or triplex and rent that out while you live in one of the units....

I have to agree with Tien here,as my WORST real estate rentals were BOTH condos back in the early 90's when the market was horrendous.As far as buying one with intention to live in/way of life choice,with the potential financial gains down the road...is fine

But along with the 'standard' rental headaches(esp. in this depressed market)....there are MUCH better RE investments out there IMO

Stephen

I don't know how it is where you are, but where I live there is a 3 year (!) wait to get Section 8 money. Do you know what happens when a S8 tenants gets evicted? The get shoved to the bottom of the list! That means that S8 gives me a really strong control over my tenants.

The first thing that I do when tenants come to me is ask if they have any money. One month deposit and the first month's rent are required. I have a 13 page application that includes the previous 3 year's residency and job history. The application must be filled out in its entirety including all phone numbers. A tenant that isn't motivated to look up a phone number in the book is not going to take good care of my property. The tenant must list all criminal violations. They must also include all evictions. They must sign a waiver that allows me to check their credit history and verify all information. The non-refundable application fee is $30.

When I get an application I first do a reverse look up on whitepages.com to find out if the phone numbers given are registered to who the tenant says. Lots of tenants will give you fake information or put the phone number of a friend or relative rather than the former landlord. If I find discrepancies the application is rejected immediately. I note why the app was rejected and file the app for three years.

Now I run the credit report and criminal history. NOw, be aware that the federal gov't in their infinite wisdom has passed a new law requireing that small landlords jump through lots of hoops in order to do legal credit checks. YOu should prob look into those regs to protect yourself.

Anyway, I look for certain things on the credit report. All my tenants have bad credit. But I want to know WHY their credit is bad. Debt due to medical bills is really common. So is bad credit due to divorce. But mostly I'm looking for prior evictions or outstanding collections from past landlords. If there is outstanding debt to other landlords I require the tenant to clear the debt before I'll lease to them. Nobody has ever taken me up on it, but its my small way of trying to give back to other investors. I also verify that the addresses listed on the CR are the same as those reported by the tenant on app. If not, the app is rejected.

If the credit report jives w/ the app. I move onto criminal history. I reject anyone that has been convicted of and sex crimes or domestic abuse. I don't allow abusers in my properties. Tenants are required to disclose if they have ever been ARRESTED for domestic abuse. This is harder to verify. So often the abused person will not press charges. Either way, I don't accept them.

For S8 tenants I don't require income verification b/c S8 already has done that. But for non-S8 applicants I require the last two pay stubs w/ the ytd earnings.

If they pass the criminal check, its time to pick up the phone and start making calls. When you talk to employers, don't say "Does John make $9.50 per hour?" You say, "how much does John make?". Use lots of open ended questions. "how much was the rent?" and that kind of thing. You're trying to catch lies, so try not to give up too much info. Sometimes I've had HR departments that won't give me any info even after I fax in the release. If you get someone like that try a question like, "john said he makes about $9.50 per hour, is that correct". That'll usually get you the information you want.

THE NUMBER ONE RULE OF TENANT SCREENING IS ASSUME EVERYTHING IS A LIE.

After you make all the calls, you can approve the tenant.

Now, according to federal law you can't discriminate on the basis of race, sex, religion, ethnicity, or disability. If a disable person in a wheel chair wants to move in and needs a lift installed you say, "Yes, that is fine, however the lift and all installation of the lift will be at your expense and the removal of the lift will be at your expense at the end of your tenancy." Some states also have more discrimination codes like, sexual orientation, age, children, etc. Check your local laws.

Other than those though, all other discrimination is FAIR game. You CAN legally discriminate against sex offenders, cat owners, dog owners, people that drive purple cars, smokers, non-sex offenders, etc. Just be sure to write out your criteria in order to avoid legal problems. If you don't write down your criteria (dated) and note specifically why you rejected an applicant based on that criteria, you could be in trouble if an applicant makes a discrimination claim against you.

Yes, all of my investments are within driving distance of me. I don't invest out of state because I can find enough deals in my area. All my properties are within a few hours drive.

The idea is to buy properties for less than market value or to buy properties where you can add value. What you're proposing is buying properties for market value just because the market value is lower than it was a year ago.

I assume that you're hoping that the value will increase rapidly in the near future. But how do you know that the values will increase? You don't. Apparently it hasn't occured to you that a year ago the prices might have been so inflated that they won't reach those heights again for many years. So here is my question for you: What is your plan if the property doesn't appreciate at all for 5 years? What will your ROI be? That scenario is very possible.

If you are serious about getting into REI, I'd recommend that you move to an area where you can get started with just a little money, or you get some money an start investing out of state.

Not necessarily. If you've got 20% to put down and a reasonably credit score you might be able to get a no doc or low doc loan.

Ask your banker. His opinion is the only one that matters. As far as I'm aware your parents can cosign a loan. But I don't really know for sure.

mmmm....I THINK that its illegal to invest student loan proceeds. Not that you have a huge chance of getting caught or anything. Maybe some of the other posters would have more info on this.

I, like Tien and StephenNUTs, think that condos are a poor investment as a rental. Condos don't normally cash flow. Also, you don't have any control over maintenance fees. My brother lives in DC and recently sold one of his three condos. Luckily for him a few weeks after closing the condo fee went up to $1,000 per month! That'll put a damper on your cash flow quickly. Normally condos are governed by a volunteer board that makes all financial and property management decisions for the facility. I've found that as a general rule volunteer boards of nonexperts tend to be incompetent, petty, arrogant, and short-sighted. Dealing with volunteer boards is part of REI. But I would never put so much of my investment into the hands of a volunteer board as you would have to in a condo.

Just my two cents.