Vance: This is the Real Estate Guide to Success
video series. This is Vance Poindexter and I’m here again with Ronnie Adams.
Ronnie: One more time. Vance: This week we’re going to be talking
about the best type of property for beginning investors. Tell us what you think about that,
Ronnie. Ronnie: The best kind of property for the
beginning investor would be a property that doesn’t need a whole lot of work. For a more
seasoned investor like myself, I might be looking for the great deal. So that particular
property is going to need a lot of work. Vance: And the price will be lower on that.
Ronnie: Exactly, so I’m going to get that property at rock bottom price because it needs
a lot of work. Now, for the beginning investor, he’s looking or she’s looking for a property
that needs minimum work, I’m going to pay extra for that property but by fix-up costs
or my rehab costs are going to be minimal. I’m looking for paint, carpet, cosmetic things.
I might have to change some stoves. I don’t want to be ripping out kitchens. I might have
to change toilets, I might have to fix some minor plumbing, stuff like that. I might have
to do some stuff outside with the landscaping, I don’t want to be changing windows. I’m not
looking to change roofs — no heavy duty stuff. I want stuff that’s going to be minimum, minimal
cost so I get it done, get a mortgage on it and get a renter in there.
So that’s what, for the beginning person, don’t bite off more than you can chew for
the first time. Vance: You also wouldn’t have as many contacts,
you wouldn’t know how to get a general contractor or someone who can repair…
Ronnie: These fix-ups that this person is looking at, you could do yourself. I can paint,
it might take me longer, but I can paint. I may be able to do some minor, minor plumbing
things — I’m talking fix faucets or things like that. Even if I try it, then if it doesn’t
work, then call somebody in. So that’s not a big deal. I don’t need a permit for that.
I don’t really want to get into stuff that I need permits for. Cosmetic things you don’t
need permits for. So that’s really what you’re looking at.
Now on that type of property it’s going to increase the person’s confidence so that he
or she can move on to the next level. They may do that type of property once or twice
and then move on to the bigger prize. They’re going to get cheaper, higher profit margin
but at least I don’t do that off the back and then I’m like, “Oh my goodness.”
Vance: And you get scared. Ronnie: And you get scared and next thing
I know I’m like, “I don’t want to do this no more.” I’m already into a property though.
Vance: So they’re getting their feet wet and they’ll have a little experience under their
belt before they go to a more… Ronnie: Exactly, let them get their feet wet,
gain some confidence and little stuff they can try and then you move on to a bigger house
that needs some more work. You could try that and then say, “Okay, well this is my level.
I already tried changing a faucet — I flooded out the kitchen. I’m not going to do that
anymore.” So that’s really what that person would need
to look at. Vance: So minimum work if possible. Where
do they find these kinds of properties? Are we talking about foreclosures in particular?
Ronnie: Yeah, pretty much foreclosures. I always say shy away from the person who owns
the house and they’re living in it, an owner-occupant because they’re going to want to keep that
price high. They have a personal interest in that house. So you’re looking at foreclosed
properties, there are foreclosed properties out there that need minimum work but they’re
going to be costly. So don’t worry about the cost as long as — again
I can purchase the property. I can fix it up. I can get a mortgage that gives me my
money back or that covers that cost. And I can rent it for couple hundred dollars on
top of what my payment is. It’s a good property. Again I could do two, three, four of them
and then move on to the bigger and better things as they say.
Vance: And the source of foreclosures, where do they go to find a foreclosed property?
Ronnie: You’re going to go to your realtor. You’re going to tell your realtor, “Okay,
I’m looking for some bank foreclosures in this particular area.” I’m going to look at
what the comps are, what the comparable prices are in the area for that particular home so
that I’m going to already know what that house is going to be valued at once I get it finished.
I would know if I need to get out and sell it, if I could or not.
So these are some of the places you’d want to go, just the realtor. You don’t really
want to go to like the Sheriff’s sales. If you go to a Sheriff’s sale, that property
once it’s sold at the Sheriff’s sale, you have to do all the footwork. So that property
could have leans on it, that property probably has tax [05:11] on it that you would have
to pay after you purchased the property. And once you purchase the property it could be
for… Quick little story. I purchased a property
at a Sheriff’s sale – I did it one time, I learned my lesson. I purchased the property
for $18,000.,Tthe property was worth about 60 or 70 during that time so I was like, “Oh,
this is great!” I never even got inside that house because
I’m looking through the window. You know at the Sheriff’ sale they have the lock and key
so it was as is. So I never got into the property, I said, “At 18,000, how much work can it be?
I can really rip everything out and it would be good.”
So I go down to the Sheriff’s sale and I’m looking at the property. I’m ready to bid.
I go to bid and no one bids against me. So I’m a little nervous now but of course I’m
thinking in my head, “I did it!” So I go down to the city to put the taxes
in my name and the lady says, “Oh, there’s $20,000 of taxes that are owed on this property.”
I said, “Wait a minute, the Sheriff’s Department didn’t tell me that. They said that it was
good.” So I called back to the Sheriff’s Department
and go, “Look, I bought this property, you said that…” and they say, “That’s not our
problem. It was your responsibility.” I said, “Oh, okay.” So no wonder nobody bid against
me! Anyway I ended up paying 20,000 more than
what I expected but it was still a good deal. I was able to fix the property up, which was
lucky, get a mortgage to get all my money back. And I still rented it for the profit
margin I wanted. And I still have the house. So that was ten years later, it’s made up
for. But, a beginning investor, don’t do that.
So those are some of the things that, you want to stay with a realtor. And again, they
can help you out a little bit being a beginning person, but keep the fix up to the minimum.
Vance: Alright, I just want to follow up on that. You mentioned that you want the fix
up to be at the minimum. What if I don’t have enough money to afford that higher priced
property that you’re suggesting? Ronnie: Well, yeah remember this The beginning
person most like doesn’t have a $100,000, $50,000 sitting around, so they’re going to
need a mortgage. If you qualify for, let’s just say a $30,000 mortgage you probably qualify
for a $50,000 mortgage. So you can find a property that’s going to
be in your price range for what you can afford. Just don’t find the one that is the great
deal, and the realtor’s pushing you. It’s great until it’s not great no more. So that
person still should be able to find something in their price range.
Vance: Once again, if you enjoyed the videos please comment or rate on YouTube and we’ll
be back next time.