I intend to run my own real estate investment company and would like the following questions answered. My understanding is that the pros use hard money to fund their deals and if they dont sell the rent the property. After some analysis i realized that after rehabing the property and you decide to rent, 90% of the time the rental doesnt cover the mortagage. How long do you have to carry the negative loss assuming you have 10 properties at one time ?
5 Comments Already
May 15th, 2011 @12:19 am
You may have negative cash flow the entire time you own a rental. Eventually you might be able to get a positive cash flow but you could be waiting to sell to profit. If you are paying cash it should cash flow immediately but you will tie up your cash. Only mortgage enough that you can afford to carry the house for months empty and have a reserve for repairs, cleaning and raising taxes.
May 15th, 2011 @12:50 am
Easy -
They use OTHER PEOPLE’S MONEY – for instance
the money they get from selling people via the internet – books, cd’s and other schemes to make a buck off of others.
I suggest you realize that rich people never carry a negative loss – and that’s where the real people CUT THEIR LOSSES.
The only thing that works is if you have a good crew, and fix up the property and “flip it” in 3 to 4 months and make $10 to $50,000 depending upon the area. However, you have to be able to invest $20,000 to $100,000 in the fixing and most of the time it’s so much sweat equity.
Remember – currently with foreclosures and bank owned property, more people are filing bankruptcy – and staying rent free for the 2 years that it takes to evict them.
GOD bless us always.
MBA-Boston Univ.
CPA-retired
May 15th, 2011 @12:57 am
To begin with, they start by buying properties with equity in them. (forclosures, short sales, motivated sellers)They do not need to get mortgages for 100% and thus have positive cash flow on rental properties. Second, they sell many of the properies they buy. If you can buy a place with equity that will only break even or lose money, sell it at full value, collect the equity and buy another place.
As far as finding them, use contacts. Get a few realtors to come to you when they find great deals. We are always looking for new investors to buy properties we are trying to sell. It helps us get rid of them fast, and gets you a great deal.
If you want to buy in San Diego contact me.
May 15th, 2011 @1:18 am
The most successful real estate investors I know, use their OWN MONEY.
Using other people’s money is an interesting concept, and many have made money doing so but the MOST SUCCESSFUL RE Investors I know, use their own money.
They may have started off doing a few homes with Hard Money, then moved to 20% down scenarios (to cashflow), the all cash.
generally they have investors. It is not 2-3 people. I do the same. I own several properties. Now I do not work because all the rent covers the mortgage, taxes, maintenance, and my lifestyle.