looking for guidance: pre-investment plan

[klewlis]

hey everyone,

a bit of background before I get to my questions:
I spent most of my 20`s racking up debt... student loans, car loan, consumer debt... then when I was 29 I realized the grave that I was digging for myself and changed my erroneous ways. Since then (18 months) I have been focusing on paying down my debt. As soon as I am able, I want to start investing in real estate. I have been reading a ton of books--finance, real estate (including Campbell`s book), general business. My income is not huge, but it`s enough that I have been making good progress on my debt. The high-interest stuff will be paid off by mid-2009 and then it`s just the lower interest stuff.

Anyway, I want to get your thoughts and feedback on how best to proceed, and to spend my time wisely until I can buy my first property. I want to:
- pay down my debt enough to improve my credit rating and become eligible for a mortgage
- put away some cash for a down payment
- learn as much as I can so that I am well-prepared when the time comes

So, my questions:
1) my "to-read" list includes books on real estate, property management, accounting, negotiation, and tax law. What else should I include?
2) should I try to get a high-ratio mortgage, or wait until I have enough cash for a traditional mortgage? I don`t want to incur more risk than necessary, but I also do not want to put things off longer than I have to.
3) how do you find the balance between being cautious and never acting? I have a fairly high risk tolerance but I do not want to set myself up for failure by rushing into things.
4) anything else you`d like to share? I have time to research, learn, and save... so any advice you have would be welcome.

Thanks!

 

[mcgregok]

QUOTE (klewlis @ Dec 29 2008, 04:24 PM) hey everyone,

a bit of background before I get to my questions:
I spent most of my 20`s racking up debt... student loans, car loan, consumer debt... then when I was 29 I realized the grave that I was digging for myself and changed my erroneous ways. Since then (18 months) I have been focusing on paying down my debt. As soon as I am able, I want to start investing in real estate. I have been reading a ton of books--finance, real estate (including Campbell`s book), general business. My income is not huge, but it`s enough that I have been making good progress on my debt. The high-interest stuff will be paid off by mid-2009 and then it`s just the lower interest stuff.

Anyway, I want to get your thoughts and feedback on how best to proceed, and to spend my time wisely until I can buy my first property. I want to:
- pay down my debt enough to improve my credit rating and become eligible for a mortgage
- put away some cash for a down payment
- learn as much as I can so that I am well-prepared when the time comes

So, my questions:
1) my "to-read" list includes books on real estate, property management, accounting, negotiation, and tax law. What else should I include?
2) should I try to get a high-ratio mortgage, or wait until I have enough cash for a traditional mortgage? I don`t want to incur more risk than necessary, but I also do not want to put things off longer than I have to.
3) how do you find the balance between being cautious and never acting? I have a fairly high risk tolerance but I do not want to set myself up for failure by rushing into things.
4) anything else you`d like to share? I have time to research, learn, and save... so any advice you have would be welcome.

Thanks!

What do you expect out of real estate in the next 5 years?

 

[chargerharry]

Well, you certainy seem to be aware of where you want to go in life. I wish I was that aware when I was 29. You are on the right track by expanding your knowledge base. Just remember, real estate is not a get rich quick game but rather a slow, methodical process that can make you extremely wealthy over time if done carefully. You do not have to have a high risk tolerance as RE is best done with managed risk, leverage and patience.

The previous post is bang on. You need to know what you want to accomplish over the next 5 years or so. Write these goals down and then calculate how much they will cost. Then you can work your way backwards to start a game plan to achieve that type of cash flow/gains. This is all spelled out in detail in "Real Estate Investing in Canada"

Keep going on cleaning up the credit issue. This will not only help you get out of debt but will also help to establish a good credit record and raise your Beacon score. Whatever your job is, perform it to the best of your abilities. That makes you more valuable (raises and promotions) to your company and more desireable to other companies.

You may not have the ability to get a mortgage now but that doesn`t keep you from talking to bankers about your options. They will help you fine tune your financial situation for maximum benefit.

You may also consider purchasing a personal residence with a suited basement. This will get you into a basic landlord/tenant experience. Just remember to run it like a business. Just because they live downstairs doesn`t mean they get special priviledges.

Hope this helps. Good luck
Harry

 

[klewlis]

QUOTE (mcgregok @ Dec 29 2008, 04:38 PM) What do you expect out of real estate in the next 5 years?

That`s part of what I`m trying to figure out... I don`t know yet! How do you figure out expectations/goals that are both ambitious and realistic?

 

[klewlis]

QUOTE (chargerharry @ Dec 29 2008, 05:17 PM) The previous post is bang on. You need to know what you want to accomplish over the next 5 years or so. Write these goals down and then calculate how much they will cost. Then you can work your way backwards to start a game plan to achieve that type of cash flow/gains. This is all spelled out in detail in "Real Estate Investing in Canada"

I`ve read the book but haven`t bought it yet; I`ve been waiting for the 2nd edition to come out (next week, I believe). Once I have it I will work through it again more slowly and try to come up with a plan. Currently, I`m reading Donald Trump`s "Think Big", which is very inspiring and makes me think that my goals should be really ambitious... but I know that I`m not Trump and so I may need to adjust my goals accordingly!

QUOTE Keep going on cleaning up the credit issue. This will not only help you get out of debt but will also help to establish a good credit record and raise your Beacon score. Whatever your job is, perform it to the best of your abilities. That makes you more valuable (raises and promotions) to your company and more desireable to other companies.

My credit isn`t terrible, but definitely can use improvement. I work for a non-profit office of six people so there isn`t room for advancement there, but I am keeping my options open; I do not love my job so if I find something better I will take it.

QUOTE You may not have the ability to get a mortgage now but that doesn`t keep you from talking to bankers about your options. They will help you fine tune your financial situation for maximum benefit.

Good idea--and this is something I have considered. I`d like to sit down with a lender and ask them what I need to do in order to be ready to go, and see what they say. Then when the time comes I`m prepared.

QUOTE You may also consider purchasing a personal residence with a suited basement. This will get you into a basic landlord/tenant experience. Just remember to run it like a business. Just because they live downstairs doesn`t mean they get special priviledges.

Hope this helps. Good luck
Harry

Very helpful, thank you.

Currently I rent... but my rent is extremely low so I am not in a hurry to move, even to own. I`d rather buy a place and rent it out than buy a place to live in (I only pay $350/month, shared).

 

[mcgregok]

QUOTE (klewlis @ Dec 29 2008, 05:32 PM) That`s part of what I`m trying to figure out... I don`t know yet! How do you figure out expectations/goals that are both ambitious and realistic?

I started out by having a goal to retire at or before 55. From there I worked out how much $$ I would need. Then I looked at how I could get the cash required. I picked real estate since that was what the demograpgics was telling me. There is different veichals to get to your financial goal. You just need to know what is your goal then pick the route to go.

 

[Thomas Beyer]

QUOTE (klewlis @ Dec 29 2008, 04:24 PM)
hey everyone,...



4) anything else you'd like to share? I have time to research, learn, and save... so any advice you have would be welcome.

Thanks!


follow this thread here .. answers/suggestions sounds VERY familiar !



Newbie asks .... http://myreinspace.com/public_forums/Real_Estate_Discussion/62-8920-Dire_Situation_4_Newbie_Any_suggestions_on_how_to_begin.html

 

[klewlis]

QUOTE (thomasbeyer2000 @ Dec 29 2008, 07:33 PM)
follow this thread here .. answers/suggestions sounds VERY familiar !



Newbie asks .... http://myreinspace.com/public_forums1/Real_Estate_Discussion/62-8920-Dire_Situation_4_Newbie_Any_suggestions_on_how_to_begin.html




good stuff! Thanks.



I am going to work on long and short-term goals this week. And I'm going to dream big... that will help keep me motivated and excited.



I'd also like to increase my income... I already have two jobs so adding another isn't feasible, but I may be able to replace one or both with ones that pay better. I don't plan to change unless I find something really great, since both of my current ones are stable, and I need stability right now.



Did any of you get involved in the real estate industry prior to becoming investors? For example, I was thinking that if I'm going to find a different job, I should look for something in a real estate office, or a property management company, or anything in the field so that I can learn more about it. Any experience with that? Any former (or present) Realtors here?

 

[RobMacdonald]

Hi,

Have you been working with a lender or mortgage broker that has experience working with real estate investors. I`ve come across many clients that had drawn all kinds of conclusions for themselves, and most were because of bad advice. Be sure to get 2 or 3 opinions as to what your options are at this point. You may be closer than you think. (I guess you could be further, as well).

The advice above is very good. Try to figure out what you want real estate to provide for you. When you start with the end goal in mind, then you can plan the steps towards that goal. Buying a residence is usually the first step for most people. It is easier to qualify and you have far more options with the lenders. You may be surprised at what you would pay monthly for a house with a suite. It could be comparable to what you pay today.

Anyway, keep reading and setting your sights. Assemble a team of professionals to support you and take action.

 

[Thomas Beyer]

QUOTE (klewlis @ Dec 29 2008, 11:09 PM) Did any of you get involved in the real estate industry prior to becoming investors? For example, I was thinking that if I`m going to find a different job, I should look for something in a real estate office, or a property management company, or anything in the field so that I can learn more about it. Any experience with that? Any former (or present) Realtors here?
learning is always good .. for example after I bought my first 2 condos in 1997 and 1998 I was on the condo board, first as a board member, later a VP and then a president of a rental pool board .. so this was valuable time spent learning .. however I did own a condo then .. and did not do it before hand as I probably would not have appreciated the nuances !

If you do not own RE yet some knowledge is useful .. but does impact your ability to make money in your current job .. so focus on the current situation .. but keep your ears open .. maybe work P/T at a realtor`s office or PM office ..

 

[Thomas Beyer]

QUOTE (RobMacdonaldCMT @ Dec 29 2008, 11:52 PM) Assemble a team of professionals to support you and take action.
yes, but not too early !

If you have no money now and envision buying in 3 years at the earliest it does not make sense to assemble a realtor team, lawyers, brokers today !