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SHOW NOTES FOR EPISODE 524: ASK BILL! PRIVATE MONEY VS. BANK LOANS, REAL ESTATE COLLEGE DEGREES AND REAL ESTATE INVESTING FOR $500
In this month’s “Ask Bill!” episode, Bill answers questions on Private Money vs. Bank Loans, Real Estate College Degrees and Real Estate Investing for under $500.
Tip of the Week: Make Your First Investment a House Hack
Buy a duplex, Triplex or Fourplex!
When you’re first starting out, you’re going to want to buy a single family home or a duplex.
We suggest going with a duplex. Duplexes are generally located in affordable areas primed for growth. This makes them an excellent investment for a first-time real estate investor.
The other advantages of investing in duplexes include:
Ability to keep watch on your property 24/7
Mortgage advantages if you buy a duplex that you also live in
Duplexes give investors the ability to house-hack. House hacking means a landlord can live in one unit and rent out the other, which has many advantages.
House hacking
House hacking means that you live in one unit and rent out the unit next-door for cash flow.
With this method, you get to live in your investment property while also keeping an eye on it at all times.
You will also probably rule out most bad tenants that pay late and party into the night because they know they’ll be living next to their landlord.
Reference: https://www.lofty.ai/blog/real-estate-investing-101-for-beginners
Ask Bill! Private Money vs. Bank Loans, Real Estate College Degrees, and Real Estate Investing for $500
This is our monthly Fun Fact Friday “Ask Bill!” episode, where Bill answers specific real estate investing questions received during the month from e-mails, in-person conversations, phone calls or through online portals such as BiggerPockets.com and Quora. In this month’s “Ask Bill!” episode, Bill answers questions: Private Money vs. Bank Loans, Real Estate College Degrees and Real Estate Investing for $500
One of our goals here at the Old Dawg’s REI Network is to help educate/enlighten fellow real estate investors, to share what knowledge we have by answering your questions, and to help other investors to broaden their understanding of real estate investing so they can avoid some of the mistakes that may cost later.
Q. While it may be easier to find private lender/partner to invest on your real estate property when you start off, isn’t bank a cheaper way to obtain money after you build up equity on your own?
A. Absolutely a traditional financial institution is the best way to get cheap money. However, most borrowers don’t gravitate to private lenders as a choice between the two, but an alternative when the banks say no.
Although there are certain advantages to going with private money, such as the lack of hoops to jump through, most borrowers would certainly prefer the near free money offered by the traditional lenders in today’s low interest rate environment.
As for joint venture business partners, that is a tad different. To those that want to truly expand their portfolio, it is nearly impossible to do that with your own funds (especially as you are starting out). There is no question that having 100% of the deal, with a low interest rate will provide you with a better return on the one property, than a percentage of the deal, and a partner owning the balance. It is often said that the most expensive money to obtain is when you give up equity in the deal.
However, to many the goal is not to maximize the return on one deal, but to truly grow the portfolio. So, because of that, by choice, do some investors choose to go towards partners right away.
However, i never want to dismiss the strategy of obtaining 2–3 quality properties on your own, with traditional financing, in quality markets, attracting quality tenants and holding onto them for a long time. This simple approach allows the investor to build significant wealth with minimal effort.
Q. If I want to become a real estate investor, it it worth it to get a real estate degree
A. Now, there are lots of ways to invest in real estate. I’ll narrow it down to THREE (a) being a Realtor, (b) being an investor, (c) being a real estate attorney or, (d) being some other thing involving real estate. Therefore, determining the value of such a degree becomes difficult without trajectory information.
If you plan to become a Realtor, a state pre-licensing course and the passing of a licensing exam are typically sufficient. No degree required. People skills are, however, essential.
If you plan to own rentals, there’s a lot of great books, podcasts, YouTube videos, and more – that cost little or nothing! If you take this route, I would recommend you also find a mentor.
Rental management is a skill set that is best learned hands-on.
· Work as a property manager for the four years you would have spent taking classes and learn best practices. Learn the operational and financial side of things, then make your own investments using money you earned along the way. Remember, rentals typically require 25% down on a mortgage, so you need the cash to play in this sandbox. Also, no degree is required here but a mechanical aptitude and keen sense of people’s nature is essential.
· You could also be a Realtor, work for a developer, become a contractor,
If you plan to be a real estate attorney, an undergraduate degree in real estate may be helpful, but you must still make it through several years of law school and pass the bar in order to practice. Is this particular degree “worth it?” Maybe… you must have an undergraduate degree in something to apply to law school…
Whatever your path, I wish you the best of luck!
Q. Can I invest in real estate for $500?
A. I’ve had guests on the podcast that have done that:
Here a 9 Ways You Can Be a Real Estate Investor for $500 or Less
1. Bid4Assets.com – $1 minimum bid properties
2. Groundfloor – Invest in 50 different projects
3. Wholesaling
- http://olddawgsreinetwork.com/real-estate-day-trading-for-100/
- http://olddawgsreinetwork.com/wholesaling-re-with-zero-cash/
4. Seller Financing
- http://olddawgsreinetwork.com/seller-financing-why-be-the-bank-2/
- http://olddawgsreinetwork.com/retirement-at-33-thru-multifamily/
5. Rent-to-Own or Lease Option
- http://olddawgsreinetwork.com/lease-options-and-cracked-houses/
- http://olddawgsreinetwork.com/mobile-flipping-wholesaling-lease-options/
- http://olddawgsreinetwork.com/buying-re-without-cash-or-loans/
6. 0% Down FHA, VA Loans, Hard Money
- http://olddawgsreinetwork.com/retirement-at-33-thru-multifamily/
- http://olddawgsreinetwork.com/what-is-hard-money-when-to-use/
7. Assume a Loan
8. Government and Community Down Payment Grants
9. Take a potential partner to lunch
When I have guests on my Monday podcasts, I always ask them the question – “If they lost absolutely everything and only had $1,000 in cash. Knowing what they know today, how would they use that $1,000 to rebuild their real estate investing business. “
I can’t tell how many of my guests have said, “I don’t even need the $1,000.” Or they say, I would use the $1,000 to buy a cell phone and/or cover coffee or lunch meetings with people I know that would help me by providing funding.”
You see, the amount of money is not the real issue. It’s really what you would do with what little you have or the little you don’t have.
Be creative. Learn creative financing techniques and try them on your next deal.
OTHER REFERENCE BLOG/PODCASTS:
- Can People Really Buy Properties for No Money Down? – November 1, 2017
- 084: 10 Best Ways to Buy a Property with Little or No Money Down – March 17, 2017
- 021: Buying Properties with Little or No Money Down with Brandon Turner – August 8, 2016
- 221: Wholesaling Real Estate with Zero Cash – July 9, 2018
- 209: Buying Real Estate Without Cash or Loans – May 28, 2018
- 288: How to Find Below Market Properties in 2019 – March 1, 2019
- 210: 20 Best Ways to Find Off-Market Deals – June 1, 2018
- 200: Ask Bill! Buy Land and Retire Cheap, Real Estate Investing to Fund Minimalist Lifestyle and Travel – April 27, 2018
- 128: Where Can You Buy a House for $1,000? – August 18, 2017
DISCLAIMER: Many of the above strategies take knowledge and have a higher degree of risk. You need to do your research and/or work with someone who is experienced to reduce your risk.
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Additional Episode Sponsor: Meno Studio – menostudio777@gmail.com
