As you know, I love real estate. Never in a million years thought I would be doing this type of investing, but if you read my earlier post, why I love real estate, you know I am crazy about it. We have been so lucky to have friends who have gone before us with real estate ventures and they have given us some amazing advice. I feel it is our job to do the same for those who may have an interest in real estate, but need a little advice.
So here are the top 3 pieces of advice I would give:
- Know the location in which you want to invest. Location is everything in real estate. Know where the good school systems are. Is it a convenient location-close to stores, malls, restaurants? What are other houses renting for in the area and what are you expecting to make? If you are flipping the property, how much have other homes in the area sold for?
- Come up with a plan. Know what strategy you want to use going in. Are you interested in buy and hold rental properties or do you want to try a flip first? Do you want to try the wholesale market? What is your timeline for starting your real estate business and how do you plan to finance your first deal and subsequent deals? It will make it a little easier if you know what type of investing you want to do going in. Greg and I knew if we started investing in real estate, we would want to keep our purchases for the monthly cash flow (rentals).
- Don’t get in over your head. Our first duplex we bought was a foreclosed duplex because the owner got in over his head with his properties. I do not want that to be us. Figure out how many deals you can do realistically each year. That number is different for everybody and that is totally ok. Do not feel like you have to keep up with those who have been doing it for a while. Know your comfort level.
Consider talking to other investors before you start making the move into real estate to see if it is something you want to begin. The benefit with talking to those who have done this for a while, you get to hear the good and the bad. It isn’t all sunshine and roses all the time and it is honestly good to hear these types of bad experiences because it becomes a learning experience for you. Really listen to those who have done this for awhile. I can tell you from experience that it has helped us mold how we manage our business. Listening to advice of others is invaluable.
Always consider whether or not you will be willing to do some of the repairs needed on the property. If you don’t have time, that is ok if you are willing to hire out the jobs that need done. We like to create a budget for what needs done and do our best to stick to it. We do our best but sometimes things come up when you actually get in to the property so it is nice to have a little padding to the budget in case it is necessary.
I have mentioned this before, but Greg and I are not the handiest people. Not even close to the description of handy, but we have met some great people who are very handy and we use them consistently on the properties.
We have created a list of people, “our team” of people who we go to with certain problems and it is extremely helpful. We have a contractor, HVAC person, personal banker, plumber, accountant and realtor just to name a few. These are the key people that we use over and over again because we trust them and we trust their work.
When starting out, you may not have the key people in place and that is ok. You will find those people through trial and error and when you find the people you work with the best, keep them around and be loyal to them. These key people are invaluable not only because you trust them to do great work, but because they may start referring deals to you! Win, win for everybody involved, you see what I am saying!
Gosh, I feel like is way more than 3 pieces of advice! I probably should have named it 5-10 pieces of advice for the newbie, but I just can’t stop writing!
Listen, I know real estate isn’t for everyone. We have run into tons of people who think we are crazy for doing what we do and I get it. It does take time and energy to manage our current investments and to keep looking for others, but this is something we see ourselves doing for years to come. We plan on growing and expanding because ultimately real estate will give us the freedom we desire.
Real estate is not a “one size fits all” kind of deal. You may start with one type of investing and find out it is not for you and start something completely different. That can happen.
If you need some help creating a business plan, I just came across this website that may be helpful. This guy has been doing real estate for quite some time and actually does some coaching. Check out Mike Ferry’s website here. There are also tons of free downloads.
So at the end of the day, don’t be afraid to invest in real estate if it is something you have always thought about doing. Yes it can be scary. Yes you will have to use some critical thinking skills, but if you have the means to do it, make a calculated decision on how you will go about your first purchase and take the plunge. Just know that it will require some work along the way, but if you are willing to put in the time, you will reap the benefits.
What other questions do you have regarding real estate?
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