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Investing in Real Estate 101
Riches can be made in any kind of
real estate market. A professional real estate investor
makes money when prices are high and when prices are
low.
No matter what is happening in the market
they buy low and sell high. They never buy high and
expect to make money waiting for prices to rise.
Newbies buy high expecting prices to
rise, and when the prices drop they are left owing $175,000
on a house that is now worth $100,000. So as a real
estate investor always buy low.
Everywhere there are properties selling
for below market value. There are many homes in average
neighborhoods that need a few thousand dollars worth
of cosmetics.
For example, take a house selling for
$100,000. Since you have done your homework you know
it could easily sell for $145,000 or more if it looked
better. Buy the house, spend $2,000-$7,000 fixing it
up, and sell it for a sizable profit.
Never spend a pile of money to completely
renovate a house. Just do cosmetic changes such as painting
the inside and outside, putting in new carpet, fixing
broken doors and repairing leaky faucets. Only do the
basics to make the house presentable.
Real estate investors recommend you
start out buying three-bedroom, two-bathroom homes.
These are the most in demand and so are the easiest
to re-sell.
Buy in neighborhoods that are nice.
You do not want to buy in neighborhoods that are too
nice or too rough. Focus on your average family-friendly
neighborhood.
Also, buy homes that are listed at 60-75%
or less of their value. Never buy a home that is listed
at $100,000 with a value of $100,000. Buy the one listed
at $75,000 that is valued at $100,000.
The easiest way to find these homes
is to work with a real estate agent. Find one who will
be glad to find you homes that meet your criteria.
Why work with a real estate agent? Agents
have 85-90% of the properties for sale. They know the
area. Tell them you are an investor right up front and
what you are looking for. The great agents will be happy
to send you all the homes you can handle, and you will
be happy to pay them their commission.
Besides having a great agent you also
need to have a niche market. Are you going to focus
on foreclosures? Are you going to go after fixer-uppers?
Are you going to buy and then quickly re-sell? Or are
you going to buy and rent it out for a while?
If you are going to rent out your properties
be sure you do the math. Will you be able to rent out
the house for more than the monthly expenses? Be sure
to include a property manager with those expenses. And
remember that the house might sit vacant a month or
two. Allow enough money to account for no income for
part of the year.
So never buy a home that is going to
cost you $1,000 a month in finance charges and other
expenses if you can only rent it out for $800. That
is a fast way to end bankrupt.
But before you do all this, before you
get a real estate agent and go out making offers, there
is one very important thing you must do first. You must
write down your goals.
Is your goal to be worth $1 million
within five years? That is very possible. But do not
expect to reach 1/5 of that goal in the first year.
Start with a plan to make so many offers
a week and stick with it, increasing it as you go. Since
most beginners make one purchase for every 50 offers,
have a plan to make one purchase a month. That would
require you make 50 offers every month. Set the goal
and little by little you will achieve it.
So you have your goals, you have a great
real estate agent, you know your niche, and now it's
time to make some offers. As stated, most beginners
make one purchase with every 50 offers.
If you make $25,000 on that one purchase,
then in effect you are making $500 each time you make
an offer. So never think that you are wasting your time
making those other 49 offers.
Just as important as having written
goals, a great agent and a niche, you need to have the
right frame of mind to deal with success. So many who
want to invest in real estate actually cause themselves
to fail. They self-sabotage their success.
Believe you can succeed. Learn how to
handle money wisely. Educate yourself by reading and
attending seminars. Surround yourself with people who
have the same goals as you and who are achieving their
goals.
There are many real estate experts out
there, so find a good one, attend the seminars on learning
how to think about money and be financially responsible,
and begin your journey to buy and sell properties.
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