Real Estate Investing breaks down into three main categories. These are the three main hurdles to overcome and I’ll touch on them more further on down, but everything you do will end up falling into one of these three categories so knowing what they are in advance will help you start thinking about what areas you know about and where you need to learn more.
The three main areas of real estate investing
- Financing your real estate transactions
- Buying and Selling Properties
- Property Management
Get an education
This is the most important place to start. You’re going to have a lot to learn with all the ins and outs of investing in real estate. You can spend a $100 in books and educating yourself and it will be one of the absolute best investments you can make. There is a steep learning curve and your money is at stake. That small investment will pay off in the several thousands down the road so get started reading real estate investing books now.
I’d stay away from the get rich quick schemes as much as possible. Solid reading that covers the main principles and information you need might now sound as exciting, but if you want to succeed then you’ll need to build a solid foundation first. Here’s a few examples to help you get started.
These links all go to Amazon so you can check them out for yourself.
- The Millionaire Real Estate Investor by Gary Keller
- Real Estate Investing for Dummies
- Commercial Real Estate for Beginners
- What every Real Estate Investor Needs to Know about Cash Flow
- Building Wealth One House at a Time
- First Time Landlord: Your Guide to Renting out a Single Family Home
- The ABC’s of Real Estate Investing
- Financing Real Estate Investments for Dummies
You’ll Notice that there are a lot of books on this list. That’s because an education is the absolute best thing that you can get started with. These are the books that I’d recommend to start with. There are lots out there and you’ll eventually decide what areas you want to go in, but until then you will need a very solid general understanding of all the principles involved in your investments. Don’t stop with just the books I mentioned, go get more and read more.
Get your financing in place
Financing is going to be the starting point for any of your investments. You can’t acquire a property if you can’t buy it. The earlier you can get started on getting financing in place, the better off you’ll be. I always recommend starting with what you know best and are comfortable with. You’ll also save a lot of time by narrowing down your list to what you can actually do versus looking at million dollar properties if you only qualify for 100,000.
One of the first steps of turning your dreams into reality is by making the first few steps. Once you see a result, you’ll start to realize that you can make that dream into a beautiful reality. Yes it will take hard work and time, but the benefits are huge. Go talk to banks, loan officers, mortgage companies, and find out your options and actually apply to get pre-qualified for a loan. You have to start and this process can take a few weeks to a few months so get started as early as possible. You don’t want to lose a deal because you were lazy and don’t have your financing in place.
You will be spending a lot of time interacting with people to manage all the moving parts of any investment. Start talking to people and making friends. You don’t know what you don’t know and these are the people that might help you make a fortune or keep you from it. Don’t let fear take hold here. Many people are scare that their golden opportunity will be stolen. Don’t even let it cross your mind. There are always golden opportunities popping up and you want to be ready for the one that’s right for you.
You can also network online at Richer Times. You’ll find lots of good information here and you can make friends, business partners, check out deals, and more. The more time and effort you put into your education and networking, the better payoff you’ll get in the long run.
Look at potential investment properties
Time to start looking for deals. You can start online with your computer and start looking there, but you’ll have to go spend some gas and look at properties in person. Looking around can take a long time and there are several different ways to speed things up.
You want to look at lots of properties and deals. You need to figure out what you like and dislike and what type of investment you’re interested in. You can do this all by yourself or use a realtor. Using a realtor helped me do things much faster and more efficient. He was also an investor so he helped me skip all sorts of problems and pitfalls.
Start gathering a team
Your team can be either formal or informal. You might be the only person on your team or there might be several. The best way to think about your investing team is to find who will bring the most positive results out. If you feel you can do all of it yourself the best with the amount of time you have, then use yourself. If you feel that you can multiply your results or let others do the things you don’t want to do, then look for people to help out.
A tax accountant is a good example of an informal team member. If you use an accountant who knows about real estate investing, he’ll be able to help you save thousands of dollars compared to their nominal fees. If you use an accountant who doesn’t know about real estate investing, depreciation, write offs and more, then you’ll be losing out on thousands of dollars. The same idea goes with property management, rehabbing, maintenance, financing, and all the other pieces of taking care of your investment.
Choose a property type
I bet you’ve already got a great idea of what it is that you’re looking for. You might now exactly what you think you want to do at this point. That’s the idea. You’ve gone through and started learning about properties and all the different kinds that exist. If it’s your very first one, you might have gone with a single family residence or duplex. These two are the most common first rental properties that I hear about. If you’ve chosen something else, that’s okay too.
Within single family homes, there is a huge difference in types, locations, and quality. You’ll now be better able to narrow it down to the type of single family home you are interested in. You might know the school district you want to be in or the size you feel works best. There are lots of different parts and only through spending time looking and having your financing in place will you be best able to decide which property type will suit your needs best.
An example list of property types
- Single family residence
- Duplex / Triplex / Quadplex
- Industrial Space
- Office Building
- Retail Space
Decide on your skills
Most people aren’t the best at everything they do. It’s called dealing with reality. A smart investor will take stock of their abilities and decide which ones need to be handled by other people. The earlier you can decide on this, the better.
For example: Repairs needed on a property are rather extensive. If you don’t have a lot of experience and are not good at doing all the repairs plus the amount of time it will take, then you might save a lot of money by hiring a professional to do it for you. On the other side, if you’re really good at repairs, then this might be the part you do yourself. You’ll have to honestly look at your skills see what works best for each situation.
You’ll never make a purchase if you don’t make offers. The entire process of buying a property is a series of negotiating steps and it all begins with the first offer or letter of intent. During each step of the process you’ll be able to make changes and adjustments that help both parties come to an agreement.
You’ll also be dealing with contracts and it helps to spend time reading all the fine print. You shouldn’t be afraid of contracts, but you do need to make sure that you understand what you’re doing and how it will make things workout. If you want to use an attorney, that’s fine. You can also use the prepared contracts a realtor has which is a nice perk of using a realtor.
Negotiate on the deal
The art of negotiating is most closely aligned with the art of listening. You want to make sure that you meet your goals with the deal and listening to what the other side needs is also helpful. A single family home can be a very easy process compared to some much bigger deals, but the process is still generally the same.
You can negotiate on any part of a deal and this is where a lot of real estate investors will talk about making deals work. By spending time looking at lots of other deals, talking to people, and the selling party you’ll be better able to find out a solution that gets you both what you want.
Close on a deal
Conogratulations on getting a property! Now the hard work begins. Many people think of getting the deal as the end point of the investment. The next part of managing your investment is where you have to get the “investment” part out of it. You’ve now got to do the work to get a return on your property.
Manage the investment property
Taking care of your investment is extremely important. This is the part where you add value of some kind and then get a return on the property. This is a huge field and can involve everything from rehabbing to renting.
Fixing a property can involve a multitude of things. This is something that you should have found out about and planned on before you ever closed the deal. Sometimes there are unexpected problems that you’ll find so you do need to be diligent in looking for problems and have plans in place to fix whatever you find.
Renting or making an income from the property is also really important. Part of managing your investment is getting a renter and continued maintenance. It’s an important topic that you plan on.
This is a very small section in this article, but it is a huge part of any investment property so be sure to plan ahead and make as many plans in advance as possible.
You might not have all your properties forever so you need to have an exit plan in place. Selling your property is the easiest exit plan, but you can also find other solutions such as trading and sale leasback options to help you finish your investment.
This is the best and quickest run through of the steps that you will take on how to start investing in real estate. It’s not something that happens overnight and it can be thought of like a marathon more than a sprint. You can run your marathon at a sprint pace if you want to. Those are the people who tend to find all the best deals and take them.
You can do it! You can get great results and there are hundreds, no thousands of people, who have had successful experiences and have had richer lives through investing in real estate.
Best Wishes and we’re here to help.