Real Estate Investing 101: What You Should Know Before You Get Started

real estate investing 101Want to know how to get started with real estate investing? You may be like many people who have been tossing around the idea of becoming a real estate investor for many years, perhaps reading books, attending webinars, seminars and other events.

But you still may not have a good birds eye view of the entire process of real estate investing.

That’s why I’ve written this article. I wanted to give you a good idea of what’s involved in the process of real estate investing the right way.

Step #1: Get Connected to A Mentor or Peer Group

There’s not necessarily a degree program one can take in order to become a real estate investor.

So if you want to learn how to start investing in real estate successfully, you’re likely going to learn from others who are doing it.

That means you will need a mentor, coach and/or a community of peers you can ask all of your questions of and learn from.

If you want to be successful in any endeavor is best to join a group of peers who are achieving what you want. The same is true for successful real estate investing.

Joining a local real estate investment association, mastermind group, etc. will slowly build the competence and confidence you need to succeed.

Step #2: Build Your Team of Experts

If you want to be successful at building your real estate investment portfolio, you must surround yourself with experts who can help you.

The investor who tries to be a one-man band is the investor who loses or builds slowly with lots of headaches.

You can accelerate the growth of your real estate investment empire and minimize the headaches and mistakes made by taking the time to build a rock-solid team.

  • Realtor – you need a realtor who specializes in real estate investment properties in the Westminster, Maryland area. This person should have a working knowledge of where the best deals are for your investment properties. It’s even better if they are an investor of real estate themselves. That way you can feel more confident that you’re working with someone who understands which are looking for in an investment property.

 

  • Property Manager – one of the best opportunities in real estate investing is rental units. However, landlording and is not easy. To be successful at it requires skill, knowledge and experience. Which is why you should consider adding a property management company to your team of experts.

 

  • Handyman – One the best opportunities in real estate investing is rehabbing. As a real estate investor, you will need a good handyman, painter, plumber, roofing company, home inspector, and other home service providers in your Rolodex.

Step #3: Build Your Ideal Investment Property Avatar

Finding a great property to invest in is like finding a needle in a haystack. But if you take the time to build your investment property avatar then you’ll have such tight parameters that you narrow your search and make your work easier.

This makes it much easier to find great deals easily.

  1. Consider your resources – this means considering your financial, time, experience, skill, knowledge and other resources that will be needed to operate your investment business.
  2. Choose which type of properties you want – do you want single-family homes, mobile homes, multi-family homes, condos, townhomes, small or large apartment houses, foreclosures, historic homes, commercial real estate or other types of properties?
  3. Choose the type of area, neighborhood you wish to invest in – do you want to be in a lower income, middle class, affluent, or exclusive? For most investors, focusing on the middle to upper middle-class income level is the best bet.
  4. Property Condition and Value – Choosing the best deal comes down to the types of numbers you want to be in. And also comes down to how much you’re willing to fix the property and what condition you’re willing to buy a property in.
  5. Neighborhood Comps – an investment property is only good as it compares to the other homes in the neighborhood and community.

Step #4: Find the Best Deal

There are lots of ways you can go about finding endless deals. Here’s a list of strategies you can use to finding the best deals that fit your criteria:

  • Call Landlords, Sellers
  • Surf the internet
  • MLS
  • Drive the neighborhood
  • Bandit Signs

Here’s a list of advanced strategies you can use to find deals:

  • Facebook Ads
  • Google Adwords
  • Youtube Ads
  • Direct Mail Letters/Postcards

Step #5: Choose Your Investment Strategy

There are multiple real estate investment strategies and exit strategies to choose from. What’s nice about real estate investing is that there is something for all levels of knowledge and financial resources available.

  • Wholesaling – if you are a beginner in real estate investing a good place to start is qholeselling. Wholesaling properties requires the least amount of time, money, and expertise invested. But it still teaches you the essential skill of finding great deals.

 

  • Rehab & Flip – this strategy of real estate investing is generally a lot more profitable but also requires more time, money and experience to be successful.

 

  • Rentals – renting properties means that you assume the role of being a landlord. This role requires less time, but the same amount of money and experience as rehabbing to be successful. It’s my favorite strategy is investing in real estate because my goal is to build up enough positive cash flow to be able to replace my income and build net worth. So this is the best option for building wealth.

Step #6: Finance the Deal

This is the make or break step of the real estate investment process.

Getting the right financing for your real estate investment deal is all important because with the wrong finance terms you can end up in the red.

It also determines how many deals you can get and how fast you can grow your portfolio.

  1. Bank Loan – while the first option most people think of when financing their property is standard Bank loan, the reality is that you’re less likely to get a bank loan. This is particularly true for the first-time real estate investors.
  2. Seller/Owner Financing – seller financing is an ideal way to purchase an investment property. Instead of dealing with a bank or other lender, you deal directly with the owner. This usually involves entering into an agreement with a promissory note providing an interest rate, loan repayment calendar and terms of defaulting on your payment.
  3. Private lenders/Investors – The job here is to pull together a network of investors who would finance the entire investment property. This is a pretty difficult way to find real estate investment deals for most investors. It requires a rock-solid reputation and a broad network of high net worth investors to pull it off.
  4. Hard Money – this is a common way to finance real estate investment properties because the loan is based on the asset not your personal borrowing power. So it is considered asset-based lending.

If you decide to rent out your properties, which is my recommended method of investment because of all of the financial benefits, you will then go into managing tenants.

As you can see, the steps involved in the real estate investment process are very manageable. However, step number one, building a team of experts and a group of successful peers have to put down on a lot of common pitfalls and costly mistakes.

Which type of property do you wish to start investing in?