Let’s get right to it: are you sure you’re ready to invest in real estate? This question is vague and the question and its answers are subjective, but what I mean is: do you have the strong foundation (excuse the pun) that is necessary? While there will be different answers to this (and don’t feel you’re answering ‘wrong’ – there is no ‘wrong’ – there is only honest assessment), it is important to begin with an evaluation of where you are now.
Which parts of your foundation are strong? Are you financially stable? Do you have good credit or decent credit or abysmal credit? Do you have a great plan (or at least an outline)? Have you begun to educate yourself? Have you (and this will depend greatly on where you are on the ‘investing continuum’) created a team around yourself?
The answers to these questions are all keys (OK, Robert, enough puns already!) to your success. For example, if you have credit cards at 28% interest, you might address those before you start investing – you’re probably not going to make 28% per year on your first transaction as you begin to invest in real estate, so you’re better served paying down your debt. (This will have the added benefit of improving your credit and giving you a stronger profile. This will help you down the road.)
Do you have reserves in the bank for repairs or to pay the mortgage if your unit is vacant? Do you have money for a down payment and closing costs? There are as many ways to finance real estate, traditionally or creatively, as there are houses on the market. But understand that it’s not as easy as some Get Rich Quick programs would have you believe. If you’re using traditional lenders, they’re going to want some ‘skin in the game’ for investment properties. We’ll talk more about this in later articles.
Educate yourself. Real estate is a very wide world and there are a lot of moving parts. What is it about real estate that appeals to you? Are you thinking of buying a fixer to work on yourself or are you looking for a turnkey property, i.e. you buy it, sometimes already rented, and just maintain it (or hire a property management company to do so)? Do you want to own rentals and be a landlord, or does that sound awful to you? Do you want to own a building from which to run a business or to rent space to other businesses? Or both? There are so, so many ways to invest in real estate – the challenge is finding what appeals to you!
Do you have an idea of your strategy and your goals? Why are you doing this? To create a legacy, to create passive income for retirement, to raise money to pursue another interest? Do you want to be actively involved? Or not so much? What does your world look like in 5, 10, 40 years? These answers will evolve but it’s good to start out with a general idea of where you’re heading. It’s alright if it’s still a little vague – there is a lot to learn and there are a lot of blank spaces to fill in.
Where To Start
Google will always find something – just start poking around. What intrigues you? You will find all sorts of great stuff. (I do all the time… I have two free 8-hour classes lined up, one this Saturday, one next. And, of course, Google’s subsidiary, YouTube, is always good for learning.)
Read. Go to Amazon and search books on real estate investing. Go to the local library.
BiggerPockets.com – a great and bottomless source for all levels of investor. And a good place to make connections.
Check out REIA (Real Estate Investor Association), a great place to meet other like-minded folks. https://nationalreia.org/
Build a team. Other investors, contractors, title and escrow officers, your bank’s loan officer, anyone who you think you might be able to help you learn and succeed and who can guide you through muddy waters. At the risk of sounding self-serving, my first find would probably be a real estate agent (I know one, by the way). Agents will know the local market and probably have a number of contacts in the industry whom you can ‘borrow’ for your own team. Find a good agent who’s on the same page as you. Lastly – you may not want to hear this – but you’ll also want to look into attorneys and CPA’s – setting up your business structure correctly can have huge ramifications.
Many of the above resources are free – it just takes action: make a call and have a conversation. If you’re nervous about making a call, don’t be! A call from a ‘newbie’ can be exciting – it provides me with a chance to teach and mentor and help someone, and ultimately it is a potential business opportunity for both of us. Many out there are of the same mindset. If you happen upon someone who doesn’t seem interested or with whom you don’t ‘jive’, move on! Not many will say, “No” – it’s an absolute compliment!
Now that you’re READY, stay tuned for AIM! & FIRE! in upcoming issues.
Robert Thompson, Lic’d Principal Broker in OR, Lic’d Managing Broker in WA, eXp Realty LLC
503-729-9477 [email protected]