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Originally Posted by eribrav
Soup Man
I"m older than most folks here, and I don't mean to come across as a fuddy duddy, but this sounds exactly like the grandiose plans I heard over and over from stock market mavens in 1998-1999. The average Joe thought he could quit his job, and buy Cisco and Intel stock every day and sell it higher the next day. We all know how that ended, but I can tell you that the excitement back then was infectious, and nobody thought they could lose. Nobody asked themselves if they could handle a declining market and the reality was very few of them could. Those who are left now (and I'm proud to be one of them) are a different breed.
So what will you do if you find yourself in the hole $10,000 on one of your properties? How about $20,000 in the hole with no buyer in sight? Can you really answer these questions? Again, I'm not trying to be a killjoy, but it just all sounds so familiar to me.
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You aren't being a killjoy - in fact, these are the reasons that I've waited so long to begin looking into this.
First and foremost, I'd try to alleviate most of the risk by purchasing only properties that will move relatively quickly. Granted, I can never know for certain, but I should be able to reduce the risk somewhat.
Secondly, I cannot say for certain that if everything goes terribly wrong that I would be fine, but I have saved up enough to prepare for something like this. I can deal with it for a while, but not indefinately. If I lost $10,000 or $20,000.00 on a deal I'd still be relatively fine, but if the figures got up to $60,000+ I'd be in trouble. However, keep in mind that I would not be the only one investing, so I could potentially lose even more money and be fine.
I am going to minimize the risk as much as possible (and still make a decent profit, of course) by researching all I can before I purchase a particular property. I certainly wouldn't jump from property to property - depending on the ones available, even if I found an investor tomorrow, it may be months, perhaps even a year or two, before I actually purchase something. I will wait for those particular deals where I believe the property is going far below market value, or has incredible potential to increase in value with a few changes, ect.
Another advantage of having the property already paid for in cash, though, is that there are nominal monthly expenses after the construction is paid for. Taxes, Insurance, and utilities are pretty much it - keeping the monthly loss fairly low. If I was stuck with a property long term, I could very likely rent it out and still make a positive cashflow while it's on the market.