Real Estate Investing 101
This is a guest article by HIB who blogs at Happiness is Better about personal finance, real estate investing, early retirement, and being happy. If you enjoy this article, make sure you head over and subscribe to his blog.
Real estate investing is a relatively simple business. It requires a lot of hard work – unlike how it is portrayed on television. Just like anything else, once you have a system in place everything gets a lot easier. The same can be said for any business venture or project whether it’s a blog or a McDonald’s franchise. It’s all about having a system. What follows are some tips and strategies to help you get started. Real estate investing 101 if you will.
Set some goals
One of the first things you want to do prior to investing a lot of your time and energy is to define some goals. In real estate investing, are you in it for the quick buck or are you looking for long term income? Perhaps you enjoy fixing up homes. Maybe you just see real estate investing as a means to an end. It’s taken me a while to figure out what I wanted. I’ve learned a lot, but because I did not set up goals, I didn’t know where I was going and I was easily distracted. During this process, to my dismay, I have quit and started real estate investing three times within the past 2 years.
Avoid the late night “gurus”
So, before you start making goals, DO NOT buy anything from a late night guru. If you want an honest opinion of a particular guru, go to www.johntreed.com. If you are really intrigued by a program, go to ebay and purchase it for a fraction of the guru’s cost.
Once you have NOT purchased a late night guru’s fluff, you need to set goals.
For this article, I’m going to assume that you would like to buy and hold a house as a rental. I will also assume that you are very busy with your career and do not have the time or money to market. A sensible goal for your first year is to purchase 1 property. I’ve chosen the “buy and hold” method because frankly, as of August 2008, it’s tough to sell a house unless you are owner financing the property. People are having a difficult time getting approved for loans right now. If people can’t buy a house, many of them still want to live in a house, so they choose to rent. Rental rates are on the rise which is making this goal all the more appealing (and realistic).
Purchase using a Realtor
The most time and money “efficient” way I know to purchase property to hold as a rental is to purchase using a Realtor. So, what should you look for in a Realtor? There are typically Realtors that work with investors and Realtors that do not. Obviously, you want to find the former. Two subgroups within Realtors that work with investors are Realtors that list houses and those that represent the buyer known as a “buyer’s agent”. Realtors that list houses have the best interest of the seller at heart. Those that represent the buyer, such as an investor, are required to represent the buyer and keep the buyer’s wishes a priority. In my opinion, it’s good to work with both. Networking is king. For more information on what to look for in a Realtor, take a look at a recent post, 13 Questions For Your Next Realtor.
As a new investor, when you begin working with a realtor, please be honest about your experience. If you’ve never done a deal, tell them that. If you aren’t sure what area to invest in, seek their advice. If you are not pre-qualified by a source of financing, you need to do so before working with a realtor. Also, realtors are professionals that earn a living by HELPING you buy and sell houses. Do not waste their time. Treat them like gold and they will reward you with more deals than you can handle.
Market analysts think the sky is falling in the real estate market. When I hear people talk like that, I know NOW is the time to buy. Now is when people build long term wealth. I’m in Texas so our market did not experience the enormous spike in appreciation that other markets did, but in the Texas market, now is the time to BUY BUY BUY!
Photo by Jef Poskanzer