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Encouragement
| | Tuesday, March 09, 2004 @ 08:00 AM EST
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Contributed by: Christer Wittusen
Christer Wittusen Properties
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I just want to let everyone know a little bit about how I got started and how I finally stepped up and bought my first house.
I started reading up about real estate investing back in June of last year; my knowledge of real estate was zero before that. I relied on Internet as my research library and allot of how to articles. I kept updating my wife about the material I was reading since I in general likes to consume articles in areas that interest me; I eventually started to look at HUD sites
in my area (Miami) and I was lucky enough to get in contact with a broker that I now have formed a very good relationship with.
I found a house and I told my broker about it, they were asking 109K for it and he came back telling me that it would sell for 135K. We decided that we were interested enough to get a lock box code to the house and take a look at it; we went out and took a look at it and it was a complete war zone. The guy living in there was basically sleeping in dirt, collecting dirt, and keep different automotive parts in the house. However, the back yard was huge (12K sq ft); this was our first home that we took a look at and it was hard for us to see beyond all of the crap. We called up the investor holding the property and I started to negotiate with him; we finally ended up coming to an agreement of 89,9K for the property. At this point my wife (partner) and I decided that we were going to give it a trial; we contacted our mortgage broker (before we had access to hard equity) and financed the entire deal (100%); we only had to come up with closing money (6K).
We then started to look for some people that could help us restore the house; here is a warning for everyone. We ended up spending 4.5K on a contractor that was recommended to us but they did not do anything right and they just wanted more money. We finally told them to take a hike; we also learned that we will not pay anyone in advance for something that they have not done; additionally, we also learned to look at the dates on the homedepo receipt given to us by the contractor (he collected every possible receipt from the ground trying to get money for material). We ended up having to go to the house every day after work and work on the house for the next month; this was a good lesson because we learned allot from that. Despite this bad experience we ended up having a great time working on the house and we eventually ended up renting it out to an older couple. This couple is now asking us to tell the house to them and we have agreed to do so at a price of 165K; we put 20K into the house (that includes the 4.5K lost to contractors). We are selling this one by our self so there is no commission, we should net about 45K.
I have since September (when we bought our first house) purchased 5 more houses and I am currently working on selling them with an average net of 30K. All I can tell everyone that is out there still thinking about doing their first deal is to do your home work, network with a good broker so that you get a little bit of a security in your first couple of deals. You will eventually become efficient enough in your area that you will most likely end up doing a couple of deals without your broker or potentially a couple of deals together with your broker.
Don’t walk in blindfolded but also don’t let your self be so cautious that you end up never buying a house. Investing is a little bit of a risk taking but you can cut down on the amount of risk you are taking if you just do your due diligence first. Make sure that you feel that the numbers work and always expect repairs to cost more then you thought they would. In the beginning of your rehab career you will (just as I do) fix more then need to be fixed and that will cost you more but you will eventually start seeing what needs to be replaced and what only needs to be fixed or repainted. Instead of going in and smashing up the entire kitchen, stop and think, can I just repaint the doors or should I just replace the doors and keep the frame.
I have worked with computers for over 20 years now and I always thought that I was going to make it big in computers (I am making good money but not near the money I am making with real estate); however, I have seen that with less effort in real estate one can make a bundle of money and one can get allot of freedom with it. Both my wife and I are getting closer and closer to ending our day jobs and start doing this full time. WOW, that feels good.
Good luck to everyone and keep up the good work.
Here is what I worked out with my broker in the even that you want to use the same argument.
We have worked it out in the following way now, he gets all my houses and I only pay him a commission of 4.5%. For this he has to give me information about how fast he can sell the house (inventory level), at what price he can sell the house. This will help me understand if the deal is good or bad and I feel a little bit more secure about the deal.
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