As an investor, especially in this market, people are always asking to be shown the ropes or for some advice. That is the fundamental purpose of TheFlipBoard.com. As most of you know, most amatuer advice is useless and wastes everybody’s time. Below is some real advice from individuals who have done it and are doing it. Ok, it’s from me and a good friend of mine who believes in Carlton Sheets’ system. But everything else is solely just my opinion.
I stick mostly with single-family homes but most of the techniques below will apply to multi-units as well.
Real Estate is a relatively simple business (I did not say “easy”) that many complicate and take themselves out of the game before they even get started. There are only 3 basic things you need to know about any property when getting started in real estate investing.
1. What can I get the property for?
2. What are the repairs needed if any?
3. What is it worth?
People let fear and indecision stop them from taking action, so lets take a quick look at these 3 as some may want to see more than the broad strokes.
“3. What is it worth?” - This one is pretty easy if you do a little work. Assuming you don’t know your areas (as you should and has been suggested many times before) the first thing you do is call two or three realtors in the area of the property you are looking at buying and tell them you are looking at buying or selling a home in that area. Find out days on the market, their opinion of market value, etc. You are asking 2 or 3 in case one doesn’t know what they are talking about. If they all say something similar or close to the same thing, then you have a pretty good idea of property value in a particular area. Next, drive around and see what houses are listed for and go to some open houses. Get a feel for the neighborhood. Look online if possible and see what the property has sold for in the past. Between these methods, you can arrive at a pretty good representative of value.
“2. What are the repairs?” – Hire a licensed contractor or handyman to walk through and have them tell you what they are thinking and why. If you are really new, have a couple of contractors go through. Always get 2 to 3 estimates before making any decisions! You will learn a ton. PAY them for their time. The $50-60 dollars for an hour of their time is worth ten times that in knowledge. A good one will come if you PAY them and tell them why you need them. Of course then that $60 is now a business write-off too.
“1. What can I get the property for?” – This is where you actually talk to sellers or realtors. This is where you make your money and is the most important point and probably the hardest to someone new. Remember, you make your money when you buy, not when you sell. Learn how to negotiate as that has the biggest impact on your success. The rest is just a little research. You don’t have to know everything to talk to sellers. Just talk to a lot of them and in time it will be second nature. Don’t fear rejection. They are not rejecting you personally, only your offer. Think of it this way. Say it takes you 100 sellers to get one deal (pretty commonplace or better than this due to this market). You make $10,000 from that deal. And yes, that is a bad deal most wouldn’t touch unless it was a wholesale deal. This means for every seller you talk to, whether they sell or not, you make $100. Now how many people do you want to talk to for $100 each in future income today? I tell them if you won’t talk to 100 or 200 sellers, knowing you are being paid for it, then this is not the business for you. Multi-units bought from a realtor you will probably run the 50% rule or your screening criteria before wasting too much time. This is more toward FSBO buying, dealing directly with a seller. A much more advanced concept for those with some experience.
Folks, just get out there and talk to a lot of people if you want to be successful.
Always make sure you have an outstanding real estate attorney working for you. Not just an attorney, but one who also is a RE investor. Those are the best to work with because they know what you should be looking for when investing. Nothing happens without a rock solid CONTRACT. Wasting time looking at a property, talking to everyone about the deal, without getting a written contract, leaves you beaten by some other investor who can produce a contract quickly. A good attorney can do this for you. Trust me, you will be glad you took the time to interview lawyers to find a good one or two in your city. (Always look to hire the BEST.) Simple one-page contracts with a seller locks them in until a more formal document is signed at Closing.
Keep it simple. Keep your credit rating IMMACULATE. Or at least in the upper 700′s. Keep working on your credit until your score is at least 720. You will be glad you did when you can get funding and your competitors cannot.
Make offers with conservative numbers and you will be ok. Get out there and most importantly, HAVE FUN. If you do not like what you are doing, it will show and people will not wish to work with you. Nobody like “stick-in-the-mud” personalities. Smile, ask questions and people will be drawn to you. And sooner or later, you will close on a profitable real estate deal.
-Richard – www.theflipboard.com
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