Tony's first $6,000

[kimray]

Tony – hope you’re well.

When you 1st started in real estate investing, you said you only had $6,000. How did you use that to buy your 1st property? Excellent accomplishment! What obstacles did you overcome since homes are less expensive in Palmdale but still cost more than $6,000?

I’ve setup a self-directed IRA, have $23,000 but from my research, Palmdale homes start at 55k. Even without many offers made on this home, I still don’t have enough money.

I welcome your suggestions. Thanks, Kim

[Tony Alvarez]

Dear Kim,

Yes it's true I had $6,000 that I borrowed from my father but I combined it with loans from a hard money lender and private investors.

$6,000 is not really a lot or a little bit of money and in actuality has very little to do with why I succeeded. In all honesty it wouldn’t have mattered if I had no money at all. Not that cash doesn't help but the truth is that anyone can find the cash if they have a profitable deal. Let's not focus on my $6,000 or your $23,000. Let's put our focus where it should be, which is on finding a property that you can acquire for less than its market value. That’s gonna take you seeing as many homes as possible in your target market area and learning to quickly identify value.

When I first got started buying in the Antelope Valley, houses were selling anywhere from $30,000 to over $100,000. I focused my attention on buying low end properties in low income and blue collar neighborhoods that were in fair to poor condition and in need of many repairs and upgrades.

The obstacles are too many to mention and change with every deal. However, I focus most of my attention on finding a way around, through and under the obstacles.

My basic recipe was to purchase these homes at 50% of the after repair value, spend no more than 10-20% on acquisition cost and repairs and an additional 10-20% on selling and carrying cost and therefore my typical gross profit after all expenses ranged in between 10-20%. Sometimes we hit 30% but that was a home run!

Lastly, markets change rapidly and today, it's tough to keep up with how fast and furious changes are coming at us. This is not a market for the faint of heart or the inexperienced to just jump in to. I've seen a lot of new investors come out to the Antelope Valley over the last 36 months that have already had their head handed to them. So be careful and be cautious, pay attention to the numbers in whatever market you chose to invest in. Make sure you understand that market better than anyone else based on the time and effort that you decide to invest. See as many houses as possible before you decide to buy. The more houses you see, the higher your level of confidence with your decision making. Remember, although each area is different, overall, we are still in a declining market.

Good luck!