How to Get Started in Real Estate Investing
By Steve Gillman - 2007
This is a quick guide to how to get started in real estate
investing. It is a simple plan that anyone can follow. Simple,
of course, does not mean easy, and there may be some things here
you don't want to do. Motivating yourself to do them, however,
may be the key to your success.
Six Steps to get Started in Real Estate Investing
1. Start Setting Aside Money
While it is true that you can buy real estate with no money
down, it is usually not the best way to go. You will usually
have more success when you have some of your own money to put
into the deal. In any case, you need to have some money available
for closing costs and unexpected expenses. Perhaps ironically,
the latter should be the most expected part of real estate investing.
Do you think you can't save any money? Really? Get generic
medicines, buy food on sale, use online software for
free taxes rather than paying a preparer -- the list goes
on. To be blunt, if you really can't find a way, you probably
don't have the creativity and commitment to get into real estate.
Others live on less than you. Live like they do and bank the
difference for a while. Credit card debt? If you're paying $200
per month on credit cards, sell some things to pay them off and
start putting that $200 into a savings account. Even if you do
zero-down deals, you are going to want a couple thousand dollars
for other expenses.
2. Get Educated
You can start your education with websites and books from
the library if you are on a tight budget. Most large bookstores
carry two dozen or more books on real estate investing. You can
also join a local real estate investors club if there is one
near you. This usually doesn't cost too much, and the contacts
you make can mean tens of thousands of dollars in future profits.
3. Set Up a Team
You will need the help of other people to invest. Building
your team can start with finding a good real estate agent who
can show you the listings in the MLS (Multiple Listing Service).
Eventually you will need an accountant as well.
What other team members you need will depend on the types
of real estate you decide to invest in. You may need a good property
management company for rentals, or a trustworthy general contractor
for flipping fixer-uppers. Other possibilities? An appraiser,
a lawyer, a mortgage broker, and possibly, a coach.
4. Make a Plan
You have to decide what kind of investing is appropriate for
you and for the area you will be investing in. You are far more
likely to succeed if you specialize in one area at first. Trying
to get started with mobile home rentals, condo conversions and
land development all at the same time is not a good idea. It
also may may be a bad idea to build apartments in an area with
low rental rates. So you want an investment strategy that fits
your style and will work where you are.
Once you know what kind of real estate investing you want
to do, you should set some goals. Write down the end result you
want from your first deal, as in, "A house flipped for net
profit of $25,000 in six months or less." Then you can break
that down into steps, perhaps starting with "Talk to a mortgage
broker," followed by, "Look at every house for sale
in these three areas," followed by "Make an offer on
ten of them."
5. Make Offers
You don't make money just looking at real estate so don't
wait too long to make an offer, thinking you have to find a "good
deal" first. A good deal is created by making an offer that
makes it a good deal for you. If you are serious about making
money investing in real estate, you may have to annoy a few people
with low offers. Don't worry, they'll get over it, and some of
them may say yes.
6. Make the Deals Work
If you have done your homework, you should close most of the
deals in which you have an accepted offer. Then you have to follow
through with your plan for the property and make it work. This
means you have to actually find a way to have cash flow on those
income properties, or find a way to stay close to your budget
on that fixer-upper.
You also need an exit strategy in place, even for long-term
investments. For example, suppose that single family home is
eating up $200 per month instead of providing cash flow? Did
you buy it cheap enough to sell and get your money out? Or could
you lease-option it, to get $200 more in rent from a potential
buyer?
There is always more to learn, and perhaps each of us need
slightly different lessons. With that in mind, why not create
your own plan on how to get started in real estate investing?
Hopefully this article will get you pointed in the right direction.
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