The phone rang. A prospective client was interested in possibly pursuing real estate investments in the Houston area and just wasn't sure about how the whole process worked with bank foreclosures etc. This is going to be a good day, I thought. From the sound of his voice it seemed as if he was very anxious to get started and was soaking up every bit of knowledge I could throw at him. After explaining the process in general, I told him about our conservative approach to this speculative field and in effect, started prequalifying this gentleman to see if he had what it took to make smart real estate investments.
- So, have you saved and allocated any liquid capital (cash) to this project? You know, to be used towards the down payment required, closing costs, remodeling and holding costs?
- Well, no. I had read somewhere that you could borrow money for all of that.
My heart just sank. This was another Casey Serin waiting to happen. A twenty something kid reading real estate investment (using the term very loosely) books and infomercials preaching to the youth of this country that they can own property without any money of their own, credit or knowledge for that matter. All of a sudden I felt like if i didn't do something, or even if I didn't say it the right way, this guy would proceed in a path that would lead to financial disaster.
- Is it possible to buy property with no money down? Can you even borrow money for the repairs? The answer is: Absolutely! But the question is: Should you? Does it make financial sense to pay an incredibly high interest rate and out of this world closing costs to "roll everything in"? What if the property sits on the market for 30 days, how do you plan to make that payment? This is after all an investment and it should all be planned out before you get in. Real estate "gurus" are not in the real estate business, they are in the book business. Don't forget that. They show you 5 of their students that made money but they leave out all the ones in bankruptcy court with loads and loads of debt. Unlike what they want you to believe, real estate investments are not for everyone, but everyone can put themselves into a position where they are equipped to make an investment in a smart way. I'm sorry if I'm being too forward but I just don't want you to ruin your financial future. I really think you should dedicate some time to acquiring as much knowledge as possible about real estate investment and put yourself in a financial position to make a real estate investment the smart way.
- WOW - he said - This is very eye-opening!
I don't know if he will follow my advice but it definitely was a good day, after all.
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