When starting (a blog or investing in real estate)

New investors ask how to start. Normally it takes nothing more than a decision and then some action. Similar to starting this blog.

The first step does not have to be big. It just has to happen.

I started this blog so that I could offer some free advice to individuals who are looking to invest in real estate. For the British in the room I am talking about investing in property; BTL mostly. For the non-British BTL means Buy To Let. We will cover other terms and what they mean later. If something is not clear just ask.

I have direct experience with investing in the US and the UK. A fair bit over 20 years of experience in the US and about half that in the UK. I have property spread over 11 time zones so investing at a distance is clearly something we can discuss.

I prefer to run this as a Question and Answer session so please submit questions. Until there is a critical mass I will be pulling questions that I have addressed from mailing lists and other forums as is necessary.

John Corey

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10 Responses to “When starting (a blog or investing in real estate)”

  1. jon Says:

    In the spirit of full disclosure, some minor edits have been made to the comment submitted by Jon. A typo and some formatting mostly.

    I read you posts on Yahoo answers. Could I ask the following questions?

    Most definitely. This is why I set up the blog. Thanks you for asking.

    -For real estate investment loan companies in both the UK and USA what is the usual minimum amount I would need for a deposit?

    There can be situations where no deposit is needed. It will depend on the situation. What is possible vs. what is common or what makes the most sense will vary.

    As an investor assume the norm for the UK would be 15% deposit (sometimes this can be a discount from the seller). In the US investors should plan for 20% down and then see if they can do better. Lower down payments are common but many times there are other strings when you go that route.

    -What is the minimum amount these companies lend?

    The question is not a simple one. I can provide some guidelines but there will be local market exceptions or differences.

    For a loan involving a mortgage on UK property lenders will not go below 25,000 pounds. If they did then consumer finance rules and regulations apply even if a mortgage is being offered by the borrower. It is a pretty clear line that lenders will not cross. Some lenders will have a higher minimum given the paperwork and other overheads so some only make loans secured by a that are 50,000 pounds or more.

    In the US many lenders stay above $50,000 and a few will not offer loans for less than $100,000. There can be exceptions. Most likely in markets where the average home costs are low ($65,000 buys a home in many parts of the Midwest or the Southwest).

    When every you are near an extreme there will be less choice, special requirements and extra fees. Small loans take the same amount of work while producing less income to the company putting the loan together. A natural disincentive to offer smaller loans.

    -Would you have a list of real estate investment loan companies that deal with typical real estate investors?

    There is no specific list. Best to check with the local market when you are close to a deal. The web can be your friend. In the US focus on brokers who have a number of investor clients. They will have more experience with the investors loans and what the lenders need to see. In the UK do almost the same though most brokers easily cover the full country as distances are smaller there.

    The lenders do change on a regular basis so each time you go to get a loan you may find that a different lender has a better deal. You also have to understand you hold period and other details For example, will you refinance quickly? This might be more likely in the UK as you can refi without seasoning. You also have to take a view on interest rates and if there is a need to hedge against interest rate rises.

    In summary, you game plan for a specific property will drive a lot of the decision.

  2. Beach_babe9711 Says:

    for pre foreclosers and distressed prperties, if you only plan on having it for a 2-3 years at the most, what is the best loan to get?

    i was going to do interest only, 80/20, no PMI and no pre payment penalties, and either a 30 yr fixed, or an option arm 3, 5, or 7 year, or a fixed option arm. but no negative amorization.

    i didnt know if this would be best, of if theres something beter since I would only have the house for a few years at the most?

    There is no best. There are loans to fit specific situations. You have to look at the deal and the loans available.

  3. Beach_babe9711 Says:

    for short term loans, what about the 1% introduction rate they offer, if you plan to keep the house for 2-3 years would you benifit from that? even thought it will keep adjusting?

    See my prior reply on this. Such a loan is a specific tool to be used in specific situations.

  4. Beach_babe9711 Says:

    also if you dont recomend getting a 100% loan, even though i have really good credit, i heard you can get a government grant for a down payment. no matter what your income is, and they’re also for investors. you just need to pay back the down payment when you sell it. I was thinking it should help because it will make you monthly payments lower.

    Rarely are there any government grants. 100% loans are not a universal solution. They are a tool and best used in the right situations.

    and are stated loans really bad? the average house here is 500,000 and to qualify for 100% loan you need to make 100,000 a year. which makes no since becaise the average income in california is about 50,000$ and theres alot of single people living in those houses. it could probly be why pre foreclosers are getting higher. they said i make enough money to make the payments, but its going over their 30% rule. but they said if i go stated then im fine?

    Stated used correctly is fine. Stated as a way to lie is fraud and that can involve jail time if they choose to come after you. More likely when you are speculating and you get it wrong.

  5. Beach_babe9711 Says:

    based on your experiece could you explain what works best for you in the u.s. mostly on the west coast…..short term buying and selling, or buy and hold? for single homes.

    everytime you bought a house, could you count on the seller paying 3-6% of the closing cost? and is it easy to get credit for repairs?

    the only thing i hate is that before along time ago, it was probly easier to buy distressed proerties and pre foreclosers, but now a lot more people know about it so its harder because theres more competition. do you have any experice how to be more successful? i heard theres a way to get to preforeclosers before the notice of default is recorded. but i dont know how to do that. and i thought of a way to go striaght to the source and have real estate agents compete for me, to send flyers to all the real estate businesses with my infroamtion saying im looking for destressed, pre forclosers, probates, and bank reos, and telling them i have a pre qualifed letter and a pre approval letter, and that i would be a long term consistent client to them.

    i heard of people who just got into preforeclosers and they are already getting calls and letter from other people to take over their debt, and it sounds like alot more competition. so thats why i like geting contracts with the option to buy and u have 17 days to choose to buy it or not. i told them if someone else offers something better than me, ill offer something better than them, but they said their not allowed to say what the other buyer is offering becaise they have thr right to privacy.

    This is a really big topic. There are many competing. At the same time you do not need to win every deal. 1-2 a year could be a fine goal.

    Many that are competing are not that experienced. Some are.

    What have you been reading? There are some great books. What works in one market is not the same as what will work in another market. Also markets change so you need to change strategies when there is a change.

    There are answers to all the above but each question could be a chapter in a book or even the whole book. What will work best for you will also vary by how much time, money, knowledge and credit you have (among other things).

    I sense that you are in S California. Right now there are places where values have fallen and some people are really motivated to sell. In other communities prices are rising and a different strategy would be needed. Buying to remodel and sell will also imply a difference compared to flipping a contract or buying to hold as a rental.

    Lets review in more detail you starting point and what your market is doing. Send me some background on you and your market.

  6. Beach_babe9711 Says:

    a lender told me a negative amorization would be ok if i plan to keep the house for only 2 or 3 years if it apprechating. he said i can pay the 1% each month to save money, and when i sell it in 2 years(or less) the apprechation which is 10% will make up for it? would you recomend that? im not sure if i would. but i like the option arm so i havethe option some months to pay only the 1%. if you would recommend it, would you say there needs the aprechation needs to be a certain % for that year to benifit from it?

    Such loans are a tool. One tool in your tool box to continue the analogy. Like any construction project if you use the wrong tool or you do not understand its limitation you can do damage.

    An option loan (one of the ‘exotic mortgages’) will work as you describe if you expecting appreciation. The problem that you have to manage is what will you do if there is little to no appreciation (or even a price fall). If you pay the minimum the loan is growing so you need more money to pay off the loan than when you started. If you pay all the interest the loan balance would not grow.

    If there is no appreciation (or the value falls) will you have the cash to make up the difference? If you can answer that question and then follow through option ARM loans might be a useful tool.

  7. jon Says:

    Thanks for the very informative post, wish I had found you 3yrs ago when I had a little money and was looking for such guidance

  8. Beach_babe9711 Says:

    books I read that helped.

    the complete guide to flipping properties by steve berges

    fix and flip it, how to make money rehabbing real estate for profit by katie and gene hamilton

    flipping properties by william bronick and robert dahlstorm

    rich woman, because i hate being told what to do, by kim kiyosaki

    rich dad poor dad, by robert kiyosaki

    charelton sheets no money down,

    john beck’s tax liens

    i got their entire newest programs for only 30$ instead of having to pay 100’s for it. john beck has all the tax lien states, and return, and deed sales. and carelton sheets has a lot of information and the forms and contracts you have to use in real estate. and i like steve berges book because he explains you have to have a pre, post, and exit strategy before you buy.
    and carelton sheets 5 steps to buying.
    1 identify and set goals
    2 get to know your market
    3 find motivated sellers
    4 perfrom a physical and financial evaluation
    5 make the offer

  9. Beach_babe9711 Says:

    I only had credit for 3 years since im young, but i have good credit, 734 im gon get my credit to 800. i don’t have any debt, i pay my balances each month. so i can qualify for the most since lender do debt to income. and in two years i’ll have 100,000, since i have to work full time for 2 years to qualify. and my savings is making 5% interest. and I get college for free, and thats one reason i want to get a real estate license, just so i get more experience and know about it better. when i get a loan i want to get 100% so i can keep my savings. and i’m not going to pay taxes in my payments or insurance, so my payments are lower. I’ll pay them once each year. and because its a buyers market, i would have the seller pay most of the closing cost. 3-6%. but 3% would cover everything. and i would get credit for repairs.
    when i start i’m going to only do distressed, pre foreclosers and bank reo’s. I want to buy the worst house in the best neighborhood and add value to it, then sell it. or buy a preforecloser for instant equity then sell it. and my goal would be to do 1-2 a year.
    my neigborhood was built in the 1950’s. so theres still a lot of houses that need updating. there have older people, and half younger people. close to good schools. i want to buy a small 2 bed 1 bath house, then add a room and a batroom. most of them are on large lots. and the median price house is 550,000 to 650,000. and 500,000 to 530,000 are move in as-is. and there are some house that are selling for 450,000 right next to alo of houses that are worth 570,000 and higher. so its a good place to invest. and its a real stable neighborhood, the apprechation right now is 10%, and for the past years its been at 9-11%.
    and after that i wont want to do any CD’s. you can only make 5-6% thats why i like tax liens. with tax liens i can make 16%, 18% and higher.
    and i like realtytrac.com it has a lot of information on preforeclosers and bank reos and they update it everyday. rightnow there are 30 preforeclosers in my neighborhood.
    and i would always get pre qualified and pre approved first, before i buy. the know the market and rent rates, and know if its a sellers or buyers market.and get a contract with the houses for sale so i choose to buy it or not in 17 days. and i would get a permit before closing so the day after closing construction workers can start.

  10. Beach_babe9711 Says:

    did you market a lot? or did you find them on your own. preforeclosers bank reo’s are easier to find, but for distressed properties, i was going to send flyers out to all the real estate businesses with my information, and leaving ads in the classifieds “we will buy your house” for example, to get more calls, and sending flyers out like direct mail, to distressed/preforeclosers to homewoners for what ever their reasons are…divorce, change of job…. for example

    “we will buy your house” divorce, change of job, behind in payments

    i’m pre qualified and pre approved and can close fast

    you don’t have to upgrade your house to sell it or pay
    for a realtor and wait for months.

    you don’t have to pay any closing

    everything will stay private

    800-xxx xxxx

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