Real Estate or Entrepreneur?

[aa2202]

Would you guys say that getting an REO loan ( i think that's what it is called. the loan used to purchase real estate) during this bad economy would be smart? I mean think about it. If you do your homework and research the real estate market where you plan to purchase, you can buy a nice house in various states for $90,000 to $150,000. Yeah I know that it will depend on the apr on the loan and for how many years but I think that if you get good rates, this could really be lucrative. I'm sure that owning property would be much less time consuming than taking care of a business (one that isn't managed online). Is there any pros or cons to taking a loan out to purchase real estate? I just briefly read about it so I don't really know much about the topic.

[armenh]

First off, I think you are referring to a mortgage ( real estate loan). In this economy there are both pro's and con's, now it is considerably harder to get a loan because of the regulations that have been put in place since the bank crisis. But on the upside the interest rates are fairly low. In order to qualify though you need to have a lot more assets and show the bank you can sustain paying them your monthly mortgage payments in order for them to consider providing you with a loan.. Nonetheless, there are plenty of deals out there in real estate which have potential. I am no real estate professional but logically speaking it is a good time to rent out a property and when the market picks up sell it then. Problem is we don't really know if the market has bottomed yet.

Regarding the time consuming part, don't think it is a free ride. Many developers go through many problems with tenants, the bank and other troubles they meet along the way. For that reason it might be a bit tough as a starter to invest into a property you haven't personally visited or seen.

[BusinessAdviser]

I don't advise it for a first-time investor. You have to know what you're looking for, even in this market. Best advice is to find an investor, find a prop for them, get in on the deal that way, but not take it out on your own.

[sanvister]

I think real estate investing is risky. Risky investments can lead to greater profits especially,if risk can be minimized through hard work and due diligence before investing.

And other field for successful entrepreneurship, in the real estate business you need to understand the importance of location, location, and location. You cannot take it for granted when you buy any property for your business or sign any lease. Entrepreneurship in real estate business requires careful selection of the broker no matter whether you are buying the property or selling it.

[byzantium]

Real estate is in flux right now, nobody knows where the prices will go and everybody's got an opinion. Some say it will keep going down, others say that it's hit bottom. It really depends where you are. Real estate is not easy either, you have tenants and if your property has any cashflow at all you likely have trashy slum tenants because your rental is in a slum, and they will keep you up nights. Slumlording isn't my thing. The profit margins are thin right now too, rents are cheap and getting cheaper because good tenants are hard to find. Most landlords require a credit check, and since everybody has poor credit they don't get apartments. If you're asking if you should invest in RE or start your own business, I would say definitely start a business, then worry later about where to put all the money once you make enough money to invest.

[DerekS]

Real estate is a business. But there are 100 different ways to make money with it, you don't just buy a house and make money. Some cashflow, some buy and hold, some flip. It depends on your budget, your source of income, and your stomach for the business.

[ZingerIntl]

Real estate is in flux right now, nobody knows where the prices will go and everybody's got an opinion. Some say it will keep going down, others say that it's hit bottom. It really depends where you are. Real estate is not easy either, you have tenants and if your property has any cashflow at all you likely have trashy slum tenants because your rental is in a slum, and they will keep you up nights. Slumlording isn't my thing. The profit margins are thin right now too, rents are cheap and getting cheaper because good tenants are hard to find. Most landlords require a credit check, and since everybody has poor credit they don't get apartments. If you're asking if you should invest in RE or start your own business, I would say definitely start a business, then worry later about where to put all the money once you make enough money to invest.

This is not true at all. Except the first sentence. There are 1000s of families of GOOD people that need a place to rent. If you thnk that landlords only go off of a credit score and would rather have a vacant house you are crazy. On a credit score it shows years of history. Thousands of NOW renters have perfect payment history until a few months ago. Prove their new income and you have a renter. The cash flow problem you explain is just ridiculous. There is nothing but margin, if you know what you are doing. True... is does depend on where you are, but I can easily find you properties, very cheap, in good locations, and give you a rent-o-meter value.
here are some properties I have in contract waiting for the bank. Should be this month. This property had a $104,000 note on it.

406 E Bruce Avenue #B, Gilbert AZ - Trulia
$36,000 contract purchase price. I could hard money this thing for 30 years and cash flow. A 30 year 18% hard money loan is only $542. A reg mortgage is $193.26/ month @ 5%

1295 N Ash St APT 624, Gilbert, AZ 85233 - Zillow
This property had a $141,000 note on it. I have it in contract for $49,000. even at $49,000 a mtg payment is only $263. Plus HOA and Taxes I am looking at $400/month.

What you all need to understand about Real Estate. The wealthy know this and avg people do not. REAL ESTATE IS THE IDEAL INVESTMENT

I ncome (money made off rent)
D eduction/depreciation (write offs) (deprec. is fair market value divided by 27.5 years it takes for your house to become worthless. Ask for more info if you want)
E quity (Amount of principal paid off by tenants)
A ppreciation (only the amount your out-of-pocket cost becomes upon sale of property)
L everage (The amount of profit you make off of borrowed money) Obviously you dont pay the bank a portion of your profits equal to the portion of the house they paid for.

So if you want to say that there is a lot of risk involved in RE beacause the monthly cashflow is kinda small then you are missing all the money.

This calculated over a 10 year exit strategy can equal as much as $1800/month in your pocket if not more in extreme conditions that we have seen. So do not think about the $100 you make every month on rent, think about all the hidden money you can take home if you do a little research.


Remember what Trump did in the 80s? Buy when everything is on its way down, keep buying, keep buying, keep buying, its on its way up, wait wait wait and sell it all. So it does not matter to me if its at the bottom, the only way to know for sure is to watch this amazing opportunity pass you by and look back and say "Ahhhh that was the absolute bottom there on ___fill in date___."

[ZingerIntl]

Real estate is a business. But there are 100 different ways to make money with it, you don't just buy a house and make money. Some cashflow, some buy and hold, some flip. It depends on your budget, your source of income, and your stomach for the business.

Absolutely, well said.

As for the future of real estate,
Any economist that has any merit will tell you tho, that we are less then 1/2 way through this mess, which is making my life amazing.
1) Sub prime bubble popped. (preditory lending=foreclosing on houses people bought that they really couldnt afford from day one) because of this the market started on its way down and trillions were lost which is now causing 2) Prime bubble, to pop. Its the mortgages that people got that could afford them, who then lost a good job and are now losing their house. (Not to mention, the people that bought a house 2-3 years ago that can afford them still but are "giving them back" because they are upside-down $100,000+.) A Moritorium - was put in effect on CitiBank UofA and Wells Fargo in late 08. This means that for about 6 months the banks delayed all foreclosure processes in order to stop the flood of the market which in turn drives prices down. This was lifted from the banks this summer. This means that the Foreclosure process has been started on 100s of 1000s of houses which are just starting to hit the market now. This is also causing our next bubble. 3) Retail - with the avg family consumer debt (unsecured credit cards) being at an all time high, we are seeing a huge increase in bankruptcy, and decrease in available credit. This is effecting the retail buyers and of course business owners, and will only get worse as more people lose their jobs and houses. This will then lead into 4) Commodity Bubble - the exact way that the tech bubble, was created (1000s of unproven tech co. going public, raising millions,using projected value and having no sustainable business model) is being created in commodities. As we see, the price of oil everyday. It no longer correlates with the price at the pump. It is now manipulated by paper futures. It is bought and sold hypethetically on the future price, not supply and demand.

Long Long story cut short states that this is the greatest time to buy real estate IF you have the proper knowledge to buy right, and have the ability to carry out a good exit strategy, which you should have at least 3 exit strategies.

[myfayt]

Buying real estate is a really great investment, plus it enables you to get loans much easier and quicker.

[ecbautosport]

Real Estate Investment always sounds good, but like a lot of others have said location is everything. Neighborhood, schools, tax all that come into play. Also there are many different regulations and licensing requires you have to meet just to flip houses. There are limitations on the number of homes you can sell as an individual without a license and in some states you have to sit on a home for at least 1 years before you can turn it without a real estate license without taking a nice penalty. Especially now when all you hear on the news is housing prices are at all time lows it sounds like a great investment, just make sure you do a ton of research and planning before you spend a cent.

[BusinessAdviser]

The problem is if you don't know what you're doing, which is the problem for many people.

[aliendavid]

The problem is if you don't know what you're doing, which is the problem for many people.

This is applicable for everything in life.

[cube3]

i think real estate investing in America is hard....looking at how bad the mortgage really is now and no one can predict how long this is going to last.

[DerekS]

i think real estate investing in America is hard....looking at how bad the mortgage really is now and no one can predict how long this is going to last.

Anything worth doing is hard. If Real Estate (and most businesses) didn't require dedication and intimate, industry-specific knowledge, then every idiot would be getting rich "in their spare time." Now is the time to make moves, not 4 years ago when "everyone was doing it."