In 1991 I began my first foray into the world of foreclosures and real estate investing. The internet was all but non existent, access to resources was limited, and there just wasn’t a whole lot of information out there for the new investor. Well times have changed, now we have instant access to tons of data and information. We also have the same lat night TV gurus telling us how to get rich quick. Well it simply isn’t that easy, but the good news is, it isn’t that hard either. Be prepared to put in a lot of time and effort, hope for a little luck and you are on your way. Whether investing in real estate, stocks, bonds or any other investment you will need to have a good team to get you where you want to go. So where do you start. I have outlined the first ten steps I think you should take.
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The First Ten Steps For New Real Estate Investors
1. Have a Plan– Most investors don’t take the time to develop a solid plan for their investment strategy. Understand what type of property you want to buy, how much money you think you need to make, how long it will take to complete the project, what problems may arise, are you flipping or holding the property ? This is the cornerstone to sucussfully investing in real estate or anything for that matter.
2. Select your Target Market– If you are just starting out we recommend you buy property close to home. This will enable you to be actively involved and you will have access to people and information. There is usually plenty of good opportunities in every area.
3. Consult with Property Managers and Other Investors– I know when I started out I did all I could to avoid talking to realtors, property managers, etc. I hated them. This was probably one of the worst mistakes you can make. Seek out KNOWLEDGEABLE brokers and property managers. Property managers deal with investments all the time. This is their business and most will be willing to help in some way. I have seen several investors buy properties only to learn after the fact that many banks won’t finance a property that has been flipped. This limits the buyer pool and impacts profits.
4. Take a Course in Real Estate Investment Analysis– There are plenty of online courses you can take to understand the basics of real estate investing.
5. Build a Team– Now is a great time to start building a team. There are plenty of people looking for work and the real estate industry has seen a flood of layoffs. Call local escrow offices and ask them if they can refer you to anyone or if they are willing to help you.
Appraisers – Loan Officers -Escrow and Title – Attorney -Real Estate Brokers- and Property Managers all can be helpful resources. But remember not all are created equal. Usually those individuals that are successful are more than happy to share information with you.
6. Know where to find deals– Finding a good deal isn’t as difficult today as it will be in 2015. But you still need to do your homework. Understand what it takes to buy a property at a courthouse auction vs. buying from a bank or asset management company.
7. Research Local Market – Once you have selected your market, look for trends in pricing, sales, etc. What properties are selling, which ones aren’t. How long are they taking to sell. What price range and so forth. I think you get it.
8. Have an Exit Strategy– This was taught to me early on my a very smart and lucky businessman. I took a class in entrepreneurship and this is what stuck the most. If you are flipping a property it is pretty cut and dry. However if you are holding it for appreciation or cash flow, know when you plan to get out.
9. Have Realistic Expectations-I see many new investors think this is it, I can quit my job, I will be rich just like those guys I saw on TV. This is not the case. Real Estate Investing is no different than investing in stocks, bonds, gold, commodities etc. It takes time to build wealth. You will have some deals that do well and others that don’t. The key here is to make your winners better than your losers. I guarantee not all deals will go as planned. Costs will increase, sales prices will change, buyers will cancel. There are many things out of your control. If you have done your contingency planning correctly you will be able to weather losses without too much additional gray hair.
10. Network with other Investors– There are plenty of deals out there for everyone. Most investors need help in some way. To do this successfully takes time, money and a lot of effort. With that’s said, ask investors if you can tag along. Offer to research properties, take photos, research title problems. This will give you valuable insight.
Bonus Item– Attend a courthouse auction. They are not what you’d expect them to be. However they can be a great place to get a little insight. You probably won’t have anyone willing to tell you too much but go have a look.
Presidio offers tools and tips to help investors succeed. Send us an email and we will be happy to set you up with a real estate investment handbook.
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