Friday, December 31, 2010

Goals for 2011

Well, here we are on the last day of 2010, all in all it has been a very good year for me. My first income producing property has now officially one year in the books and is performing better then I expected.

As we are approaching 2011 in a hurry I figured it would be a good idea to list my goals for 2011 here, maybe that will help hold me more accountable since it is all out here on the world wide web.

I do try to set all my goals according to the SMART principle (S=Specific, M=Measurable, A=Attainable, R=Realistic and T=Timely).

The main goals for 2011 are as follows:

1. Finish building my team of experts. All real estate investors needs other professionals to be able to be successful. I have already built a team that consists of real estate agents, attorneys, title companies, contractors, cash buyers. What I have left to find is a good CPA that is either an investor by him/her self or is used to working with investors.

2. Find additional sources of funding, today I have several Hard Money lenders in my network, I would like to expand that with at least two small local banks and some private money investors. I have cash on my own and good credit but to be able to fully reach my potential I always need to have money available.

3. Purchase, Rehab and retail at least two properties, I have yet to do one of these so I set my goals fairly low for this year.

4. Find at least one more income producing rental property, I would prefer a small multifamily (2-4 units) but a single family home would do as well.

If I can reach these goals by year end of 2011 I feel confident that I can grow the business enough to be able to retire from my day job within the next 10 years.

Happy new years to all of you out there and please feel free to comment or ask questions.

//Stefan 

Thursday, December 30, 2010

What strategy would be the best fit for me?

Within Real Estate investing there is a few different areas one can make money. I am going to try to describe the most common ways here.

First we have the wholesalers (or Bird dogs as they are sometimes referred to). What they do is find a motivated seller, negotiate a discount from the actual value of the house and then assign the purchase contract to other investors that will either keep the house as a rental property or fix it up and sell for a profit. In my opinion, the two most important skills for a wholesaler are, being a great salesperson and knowing how to accurately estimate repairs. Without these skills it will be hard to negotiate a great deal with a motivated seller or finding another investor willing to purchase the contract when the repairs turn out to be 2.5 times the estimated amount.

Second type of investor is the landlord, these people usually don't look for immediate cash profits but rather for a way to build long-term wealth. The Landlord investor usually buys houses at a discount (70% of market value) and look for the property to immediately cash-flow. To figure out if a property is going to cash-flow the most common formula used is the 50% rule (50% of the gross rent goes to operating expenses, the other 50% goes to the debt-service and profit).

The third and maybe most commonly known investor type is the "Flipper", this is an investor who buys a outdated, ugly, vacant house, renovates the house and sells it to a retail buyer at a profit. This is the type of investor that is usually portrayed in the TV-shows (Flip This house, Property ladder etc). There is still a lot of this going on, even in today's economy. The downside to flipping is that it is not as easy as it looks on TV, contractors, inspectors, appraisers, lenders and all other people involved makes flipping houses the riskiest kind of investing in my opinion. The upside is that the greater the risk the higher the profit so if you can get really good at this, there is money to be made.

There are other ways to make money in real estate as well, you can invest in notes and Tax-liens, you can become a private money lender etc. But these are still fairly unknown to me, if I learn more about them I might post some later on.

So which type of investing should I choose? My long-term goal is to be able to do flips while at the same time building a rental portfolio, doing this would enable me to reap the cash-benefits of flipping while enjoying the wealth building of being a landlord.

As I mentioned in my first post, I already have my first rental so what I would like to do next is flip a house. In a perfect world I can find a partner for the first flip that has done it before, it would be great to be able to just learn while doing. If I can't find a partner, I will offer to work for free for other investors just to learn.

Stay tuned..

First post

Welcome to my little slice of the world wide web. In this blog I will try to describe the trials and tribulations of trying to become a successful real estate investor. I will try to describe in as general terms as I can, no sugarcoating and probably not always politically correct but what you will get is true and tried experiences from real life.

The first important lesson that I quickly learned is that there is no easy way to riches or wealth. I can not spend 99$ on this great book that will teach me all the ins and outs of investing in real estate and then kick back on a beach with lots of beautiful women around me. what I do get for 99$ is a book that describes how to buy the next book or boot-camp for 1000's of Dollars making someone else rich while I am still looking for that magic way of doing nothing and earning lots.
 

My overall goals with real estate investing is to one day generate enough income so that I can one day walk away from my day job and never look back. I don't hate my job but I dislike all the politics that comes with working for a large corporation (really any corporation). I am also somewhat of a control freak so I like making my own decisions (Good and bad which I am sure you will see soon enough)..

So what experience in Real Estate do I have?

I have done and still do a lot of renovations and home improvement to my own home, my father taught me a lot when I was younger, he bought a summer/vacation home that we constantly remodeled or improved, I can do most things on my own (electrical, drywall, flooring, cabinets, paint etc). What I do stay away from is anything related to foundations, Plumbing/Gas and HVAC, there is a reason these guys are paid well, they know what they are doing.

So far I have managed to put together a rental portfolio consisting of one house (yeah yeah I know not much to write home about). That house is cash-flowing nicely in a stable neighborhood with a few percentages of appreciation every year. I have owned it for 2 years and found a great long term tenant that so far has never been late and since I did quite an extensive repair before I rented it out I have not had to go out on any repair calls apart from the annual AC inspection/tuneup.

I think this will have to do for a first post. Please come back and view my progress, feel free to leave comments or questions.