MUST-DO’s for New Real Estate Investors
How to Start Investing in Real Estate
The real estate investment meetings we have attended lately have covered various topics including: How To Buy at a Sheriff Sale, Ethics in Lending, and How to Wholesale. At every meeting we hear the same questions:
- How do I start investing in real estate?
- Should I attend REI meetups?
- Do I try and get pre-approved with a lender?
- Is it worth it to pay thousands of dollars for a program of classes from a celebrity?
The truth is, there are many ways to get started in real estate investing, but in our experience with intelligent investors, there are certain MUST DOs when you want to start investing in real estate.
Read Every Chance You Get
As Gordon Gekko once said, “[t]he most valuable commodity I know of is information.” There are so many vehicles to obtain information of a particular topic of interest. So much information is readily available that it makes paying for classes and programs pointless, at least in the very beginning. Blogs are a great way to get information on the field. Most lenders have one and cover a variety of topics they felt were relevant to write about at the time. Some are good, some not so much, but here is a list of the top real estate investing blogs (not to brag, but we’re on it). Enjoy!
It is vital that you grasp, at the very least, an overview of the field from reading. Get to know the language so that you can speak it with others at real estate meetings. Understand the importance of aligning yourself with good realtors, lawyers, title companies, lenders, etc. Building this infrastructure will be essential in comprehending what speakers are talking about at lectures where a specific topic is discussed.
Attend Investor Group Meetings
Everyone uses these meetings for different purposes. Experienced investors could be using them to learn more about a particular subject, establish new relationships, or find the missing piece to their team. A broker may be learning as well, or soliciting new business. I recently attended an event and learned that drones are now being used to search vacant properties and get a better estimate of rehab costs. There are always new tips to learn.
As a new real estate investor, you will be there to gather as much information as possible and establish relationships. It might be worth making a spreadsheet of contacts that you meet and like at these events. You’ll quickly find out that issues often arise on the job. Having a contact to help you find a solution to that issue in a timely fashion will significantly impact your bottom line at the end of a project.
Create a Business Plan
This could be done in the very beginning in order to formulate a plan and revisited once you’ve acquired more knowledge, contacts, etc. In our opinion, this is one of the most important steps to take when starting out. Because we think it is that important, we’ve created a free house flipping business plan template for you to download. As you work through this business plan, you will identify your existing strengths and weaknesses. What can you bring to the table? What areas pertaining to real estate investing will you need help with? Also, you’ll identify your team, where that team will look to invest, and characteristics about the neighborhood/city you are looking to invest in. You’ll price out recently sold properties in that neighborhood, identify the ratio of homeowners and renters, and much more.
Align yourself with the RIGHT team
Assembling a competent team is not easy. Unless you are extremely lucky, you will go through many realtors, lenders, partners, attorneys, plumbers, electricians, etc. before you find the right person to work with for each of those positions. Some of our clients have worked with 10+ lenders before finding us. Most of our clients have used multiple title companies in hopes to finally find the right one. We’ve mentioned in other articles that people that were the best of friends growing up turned out to be suboptimal partners together. Identifying strengths and weakness via the business template helps immensely because you’ll then know what is needed from your team and who to partner with.
Learn About Lending Programs
Each lenders has its own way of lending. Make it a point to find out what a lender needs to see in order to qualify you and how do they lend. What percentage of purchase? Rehab? Is it asset based? Credit driven? How many points do they charge? At what interest rate? Do they put an emphasis on customer service? Based on what you have identified via your business plan, you should be able pick a lender that is best for you. Make sure to write down all of these details so that you can easily compare lenders at the end of your research.
Seek Out a Mentor
Some people can read articles in order to better comprehend the ins and outs of the industry, others need a hands on approach. As someone who is starting out, really in any field, it is wise to ask to be mentored by someone who knows the business. It may surprise you how willing people are to share the knowledge they’ve acquired over the years. They will cite specific examples of what not to do, share contacts, teach you how to negotiate, and much more that you simply can’t get from an article, no matter how well-written. Here are some tips on how to find a real estate investing mentor.
Why Not Set Yourself Up for Real Estate Investing Success?
We will never tell you that there is only one way to go about getting your foot in the real estate investing door. We will, however, tell you that the above steps are some of the most common starting points for new investors and have proven to be vital to their success. If you’re serious about making real estate investing your career, all of the above are MUST DOs when starting out.
For a more in-depth look at how to start investing in real estate, check out our free, comprehensive guide: Flipping Houses 101.