(Updated 2016) 9 tips to help new investors get started in real estate.
Time is money; so is effort. How much is effort worth? Can you put too much effort into one project and not feel amply rewarded for your contribution? Be a leader, not a worker; the benefits are immeasurable.
As a worker the responsibility is on you. It’s your skill, workmanship, reputation and in the end your warranties on any work done to any aspect of a particular property. Will there be a learning curve? If so, how long will it take you to learn the skills it takes to properly buy, fix, rehab, market and exit a real estate transaction? Remember, time spent and effort spent is money spent.
As a leader you are still ultimately responsible. However, your decision making skills are the things you and your reputation will be rated. You will no longer have the lag time it takes to learn a skill or trade. You can rely on others expertise to push your business forward at a more rapid rate. This luxury doesn't come free but what is the time value of money? What is the money value of effort? How many deals can you do your first year being the one that drives every nail?
Make up your mind to be a leader as early as possible. The ability to be a good leader is what allows GREAT investors to maximize their full potential. The ability to let go of the reins and rely on someone else to work on your behalf is what will grow your business at an exponential rate. If you are in the position financially to start investing, then more chances than not, you are a better than average decision maker to begin with.
Where to start:
1. 1. Find a local professional in your area. , www.meetup.com , reputable financial institutions that specialize in hard money and other types of investment real estate and Google are all great place to start.
2. 2. Network with people that are currently doing what you would like to do. As my grandpa would always say, “Tell me who your friends are and I’ll tell you who you are.” Find free meetups to go to and network. Be wary of seminars and (expensive) classes and software. I personally have been to the seminars and paid thousands of dollars to further my education. There are things that I have learned from them. However, some of the soundest advice you can find are the principles you can read out of books such as “Rich Dad, Poor Dad” “The Millionaire Next Door” and “The Richest Man in Babylon”. Once you've made the connections, local professionals and your new contacts will be able to answer just about any simple question you have.
3. 3. Once you have narrowed down the type of investor that you want to be; (i.e. wholesaler, landlord, flipper, owner finance, or silent/passive) network with like minded individuals and keep moving forward. It’s at this stage that some investors get stagnant and stop wanting more. They get complacent with the meetups as their new after work social group and quit striving for personal growth. NEVER FORGET...the goal is to get out of the meetups. Only returning to tell your “from my humble beginning” stories.
4. 4. Learn how to evaluate deals. If you can, gain access to the MLS in your area. There is a great website that allows individuals to pull comps on deals in Texas with real time MLS data. www.newwesterncomps.com it’s 100% free to try. All you have to do is sign up with the Coupon Code: MobilComps11 and Rep Code: 1004. There are also classes and meetups that you can take for under $50 that break down what to look for when evaluating deals.
5. 5. A successful investor will always have time to show someone how good they are at their job. While networking, find investors that will let you walk through their current projects so you can grow accustomed to seeing dilapidated houses. Ask about pricing. Take trips to Home Depot, scratch and dent appliance stores, flooring and material outlets etc… You will be surprised in the difference an investor can get a house rehabbed for to what a homeowner can.
6. 6. Connect with local wholesalers and small banks in your area. Small banks are going to service their own loans and might be a great place to look for the occasional home run foreclosure. Wholesalers in the area are going to have many more deals than a local bank will but they will also have a large buyers list. As a newer investor to their list, you will have to be able to make a quick but informed decision.
7. 7. Evaluate every deal. Even if it’s not in an area that you are interested in. Ask questions on how values were determined. You will gain confidence in your decisions so when the time comes to make a decision on a house that is in an area of interest to you, you are able to be informed and act decisively.
8. 8. Never swing a hammer. Especially if your background is in construction. If you have the hands and experience in construction, then use that experience to judge quality and set expectations for your contractors. Always get your general contractor to sign a contract that has a completion date and a per diem for every day that he goes over schedule. By this time, you have networked with enough investors to know what to expect from the contractor you chose. Your time can be spent more wisely as a leader looking for the next deal.
9. 9. When looking to sell or lease your property out, finding an agent to help you is easy. Finding the right agent is a little more complex but not hard to do at all. Most listing agents spend their time farming a certain small area. Drive the neighborhood and check sold comps in the area to see whose name appears on most of the listings. You will see one name that appears more often than any other and that should be the agent to list your house. For each subdivision in an area it could be different. Unless you can negotiate a reduced commission and price your house aggressively with the difference, there isn't a strong reason that you have to use the same agent every time.
This process should only take a few weeks or months to execute and a deadline that feels comfortable should be set for completion. Your team will determine your success so choose wisely.