Why is it so hard to start investing in real estate?
Maybe it is the flood of information coming from so-called guru’s who make it sound so much harder then it really is. They tell you to jump into buying short sales, foreclosures, lease options, forward flips, back flips and so on. Real estate investing can be simple. Before starting you need to determine if you are able to invest for long-term wealth and cash flow or do you need to create income streams right away.
If you need to generate cash right away you can start with flipping houses. Learn to put connect to motivated sellers, put houses under contract and assign your position to a cash buyer. If you are ready for an adventure and want to fix and flip, then begin understanding all the steps involved so that you can do it now.
Connect yourself with a highly motivated seller who must sell asap at a big discount, learn to control the house without owning it, market and sell your equitable interest to another investor and collect your wholesale or assignment fee. Doesn’t that sound so simple? It is basically 4 steps and a risk-free way to begin investing in real estate when you need to create a pay-day asap. It is a nice way to build a real estate income stream without needing cash or credit.
2. Fix and Flip
You have seen this one repeated on TV. Find a totally distressed house in need of a lot of work, fix it up and sell it for a nice payday. They make it look like so much fun as they work through all the job-site drama! The truth about flipping houses is that it can be a roller coaster ride full of peaks and valleys because there are so many moving parts. You need to find the right house, for the right price, build a reliable contracting team, market to sell to a new buyer, hope they can get their financing, work through their home inspection and then collect your large pay-day. Your payday will not occur if you are way over budget on your renovation or you can not sell the house for as much as you had hoped.
My point is that the entire process much be managed carefully in order to reduce risk in this type of short-term speculator transaction. It takes a lot of experience and discipline to create a large payday in a short amount of time fixing and flipping houses.
If you can invest for the long-term then you can buy and hold real estate assets and build a portfolio of rentals. The good news is that we have a fantastic market to buy and hold real estate assets. Rental demand is the highest it has been in several years and although prices are inching upward, there are still great deals for diligent investors who know how to buy houses at discounts. The key is to focus your investment criteria, buy real estate without banks and attract great tenants.
See how easy it was to create your personal investing road map?
1. Need Income? Start with flipping houses. Learn to wholesale and/or fix and flip strategies.
2. Need residual income streams and build wealth? Learn to buy and hold real estate assets.
The key to both begins with identifying your starting point and creating a path that leads to your success. Both road maps start with the verb “Learn.” It is the one activity you need to take for both paths. Personally I am a lifetime learner. When I was in college, I learned a lot about Electrical Engineering and how to be a great employee. When I left corporate America I had to “Learn” real estate investing and I continue to invest in my personal learning all the time.
There are lots of myths involved with investing in real estate and both can make you stray from your chosen path so I want to bust these 3 myths right now.
1. All houses are bought with brokers and banks. Let me assure you that this is just not true. Many of the very best deals available in your local market will never make it to the MLS. You can learn to connect with motivated sellers who must sell asap and must sell their homes as-is. These are typically homes that will not appeal to first time home buyers and will not qualify for typical bank financing. The circumstanes and conditions are what opens the doors for savy real estate investors to buy the houses at big discounts. Often times, the situations will also open the door for seller financing so you would not need to go get a new bank mortgage to buy their home.
2. All tenants are trouble. When I was employed in corporate America and had hundreds of employees I discovered that if I was diligent in my search, did background checks and verified the information on resumes I could be successful finding the right employees most of the time. The same is true with being a landlord. If you learn to carefully review rental applications, check references and previous landlords, verify employment and carefully screen tenants you can be right most of the time. It is not rocket science but does require processes and discipline to not just rent to the first person who has their deposit and want to move in asap.
3. All contractors are thief’s. The truth is that there are some great, reputable contractors who would love to help you rehab some houses. They need to be qualified before they work on your houses. Make sure they are licensed and insured, have great referrals and be sure to document everything with a solid contract, W9 for tax reporting and get copies of their license and insurance documents. Doing that front end due diligence on your contractor will allow you to feel much more comfortable.
What about you? Are you ready to invest for the long-term and build a portfolio of rentals? Do you need cash right away and need to flip some houses to pay down debt, quit your job or finally get ahead?
Take the time to honestly discover where you are at right now and where you need to go. Once you know your starting point you can build your personal plan to succeed massively by investing in real estate.