OfflineHi Everyone,
I just finished Dean's book and probably should re-read it to make sure that I fully understand everything in it. I am new to this whole thing so I apologize if I am doing something wrong. I am a Tax Accountant and I make very good money, but the hours I work are ridiculous and I have had a horrible quality of life for the last 10 years. I am finally ready to settle down and start a family and really want to have more time to spend with them. Given the economic situation in this country right now, I think there are some tremendous opportunities in real estate right now and can't wait to get started. Unfortunately, because the banks are in such bad shape, they are not as willing to offer financing as they used to be. I would really like to buy 1-4 family homes and rent them out until things start to pick up. What is the best way to go about financing these types of properties? I live in North New Jersey and the homes are so expensive and I really don't have the money to put down on them. My credit is okay, but nothing great.
I was also wondering if anyone has had any experience in tax sales in New Jersey? If so, what is the process and are you on the hook for any other liens on the property or do you get the property free and clear?
Sorry one more question - If you find a property and have the assignment clause in the contract but are unable to find a buyer within the time period, what happens? Are you forced to buy the property?
Sorry for all the different questions, but any help would be greatly appreciated.
Thank you!
Dennis
Questions about financing real estate in todays economy
Posted on: Tue, 12/23/2008 - 06:27
Questions about financing real estate in todays economy
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Financing is not as difficult as you might think. The banks aren't willing to lend to each other, but they are still giving out plenty of loans for homes. FAH is still doing little or no out of pocket right now the last I heard. You can also look at private money.
The thing is, when you get a deal locked up for say $100k that appraises at $200k, it's not hard to get financing from a number of sources.
Don't start contemplating road blocks until they become road blocks. Based on what you've said I don't see financing getting in your way. Make calls, get it lined up now... assuming you can't get X or do Y will keep you from moving forward. Always assume all of the windows are open until you find out for yourself they are closed. More often than not, the windows are open, and almost always at least enough windows to make it happen one way or the other.
If you find you need more cash than you have to get started buying your first place start with assignments.
If houses are very expensive in your area either look outside it and treat yourself to a weekend out of town at the same time, or even better, just seek out a house the is terribly ran down but has the potential for cheap rehab. These can provide 50-100% returns on the right one.
When a assignment contract expires nothing happens, the contract is basically null, you no longer have to right to buy/assign, and no, you never have any obligation to buy the property for any reason in a assignment.
Tax sales, Dean has done some good deals on those. I think CBR has done a couple if I remember correctly. Some people on here do them, in my metropolitan area the good deals for those are more isolated, so I don't pay much attention, but don't count them out.
Take this approach... start on the premise you will be trying assignments, this gets you going with or without financing. When you find a great assignment that you think could make a great rental/cashflow or rehab/flip then buy it yourself instead of reassigning it.
I say this all of the time... do spend so much time thinking about every angle and what obstacles could be in your way. When you do that you just bog yourself down and start to find excuses not to take action. Start with action, then cross each bridge as it comes. You'll find a lot of those obstacles you imagine are there are really not, and then you'll start say "I can't believe I didn't start doing this X years ago."
Thank you for your advice. I really appreciate it!
FHA is indeed the way to go for these kinds of properties. 4-plexes can be great starter "homes". Live in 1, rent out the other 3. After a few years, sell (1031 delayed exchange) and then either trade up or down.