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Originally Posted by cyrnel
Ask what you're bringing to the deal.
Ideas are cheap. Money talks.
You either need rich trusting souls (they're all dead now) or you have to present your idea in a way that protects it while attracting investment. Not easy. The saying goes something like... "If you aren't the salesman then finding him is your first job."
I understand your desire to keep things away from people you know, but one-sided risk usually means seeking out family or friends. They risk the capital and you risk the relationship.
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Agreed.
As far as what I'm bringing to the deal - my ambition, and more importantly, my experience in the market and all the knowledge that comes with working in the business - and having contacts nearly everywhere in this are. Not to mention
some money. I don't know for certain how much I am willing to put in myself - it would likely depend how much the investor is willing to put up. However, I do have somewhere between $35,000 - $50,000 that I could put in as well.
My job basically is salesmanship, and I do pretty well, so I think that providing I can get some people to listen, If they can be sold, I have a decent chance of doing it.
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Originally Posted by DDDDave
NoSoup,
You know, I'm in the biz. What you want to do has been done before. In every town, every day. I hate to make it sound so easy, but put an ad in the classifieds... 'Wanted...real estate investor to partner on real estate deals' Your phone will ring off the hook. As you get older you will realize how much money is out there. Everyone is looking for a way to make money. You have the skills and an angle. You will need to have your ducks in a row, and have a 30 second 'elevator speech' ready. You will need to be able to state exactly what you want......you will get calls from a lot of peolpe in the same boat as yourself. But it only takes one true investor for your deal to fly.
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Excellent - this is exactly what I was hoping for
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Talk to a real estate attorney friend. (I know you know a couple.) This should be your first task. The attorney will know how to structure the deals and probably knows the investor too. (It might be him.) They way for the investor to protect his investment is for the property to be in his name. IMHO, you will need to do the first couple of deals on a 'fixed fee' basis. "We will buy this house for $65,000, fix it up for $5,000 and sell it for $90,000". "Mr. Investor, I will do this whole deal for you and charge you $5,000. You just need to show up at the closing with the check for $65,000" The attorney will make sure that the funds get disbursed correctly, coming and going. Agreed, it is not the best deal or the deal you want, but you need a track record. If that deal goes according to plan, there will be plenty of others.
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Well, I would like to form a partnership - had I wanted to earn a fixed amount, I would likely just have joined an investment group that had offered me a position. I want something I can pour my heart and soul into and make a decent living doing - and have some job satisfaction to boot.
I'm not complaining about what I currently do, but at the end of the day, I've basically just shuffled a shitton of paperwork around. Granted, at the closings it pays off a bit as far as seeing my clients buy their home, but I think actually being more involved with the actual construction portion would be more rewarding at the end of the day.
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What scares me is when you say 'financing them will significantly decrease the profits' Word to the young....when an investor is investing hard money he is not looking for a 10% return, he wants to double his money. In our business, interest expense is the cost of doing business. I don't even do a deal unless I can make 50%. Agreed, I do 1 for every 50 that I look at but it saves me spending time and effort on a deal that will make me 5 grand. Every deal requires the same amount of work, so only do the ones that will make you real money. A RE investor does not want you chasing every deal in town just to make 15%. If you cannot afford to pay 10% interest on the money for 6 months and still make good money, pass on the deal.
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I don't mean to give them impression that I am only looking to make 10% - on the properties that I have been "practicing" with, I have made realistic returns ranging anywhere from 35-50%, in approximately three to four months time. Granted, because I didn't actually purchase them I cannot say for certain, but I've seen them purchased, overhauled, and resold. I've talked with the contractors and know what the work would approximately cost, and providing there was a decent inspection there shouldn't be much more than a 10% overage for unexptected problems. So I think I have a fairly accurate, albeit conservative, estimate.
However, I would prefer not to have to pay interest - if I didn't mind, I'd likely just finance the properties myself. I think that I'm in a unique position because I also work with a realtor that has agreed to sell the homes for a 1% commission. I work with a number of contractors who are always looking for side jobs or additional work and are willing to give me a substantial discount. Between not having to pay interest, the huge reduction in realtor commission, licenced contractors working for a reduced fee, and the additional negotiating power that having the cash up front will give me - not to mention the flexibilty with which properties I purchase - I figure I should be able to pull in at least an additional 15%, being very conservative - more that the typical investor. I imagine when it's all said and done it will likely be closer to 22%, but I hesitate to use such a high figure before I have a few projects under my belt.
Another advantage of making that extra percentage would be that the deals that other investors shy away from because they would only be making 15-20% on, would me much more feasible for myself because I'd be pulling in 30-35% - potentially more.
I certainly won't be chasing every deal in town, but being in the business gives me access to a lot of properties sooner than the general public typically hears about them. I also have a number of contacts that I will have on the lookout and have said that I may have first dibs on whatever properties they stumble across.
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Number one rule.....not location, location, location. DON'T FALL IN LOVE. If you fall in love you will do irrational things.
Good luck. Let me know.
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I couldn't agree with you more. Love has nothing to do with a business transaction - only the figures matter. When I purchase my current investment property, it had nothing to do with how much I did or didn't like it, I made the decision based soley on factual data and my experience.
So far, I've done quite well - if I sold it today, I would net just over $75,000.00 on the deal - not too shabby. Of course, that isn't taking into account the rental income that I've earned over the last year.
Thanks for the advice everyone - keep it coming.
Also, I take constructive criticism well, and although I believe I have thought this through pretty well, perhaps there is some fatal flaw that I am overlooking. I'd love to hear about it if you spot it