So, you started the year off gung-ho, determined to really make it happen in real estate investing in 2008. We salute you for that. Knowing what you want to do is important in making things happen. Even more important is having a plan to make things happen. Finally, you also need determination to keep things going.
2008 will be over soon. Now is a good time to take stock of where you are. We know that the year just started, but it is also almost ¼ of the way gone. We want this to be your best year yet in real estate investing, and to do that you have to keep your momentum.
What is momentum and why is it important?
Webster’s defines momentum as “strength or force gained by motion or through the development of events.” So, what does this mean to you? It simply means that, as you continue to do things to further your real estate investing career, these things will build upon each other, and keep you moving forward.
For instance, say that you attended our recent seminar on The Ultimate TurnKey Real Estate Investing System™. Or perhaps you went to another seminar or boot camp offered in your area. You could have purchased a book on real estate investing, or a home study product. The key is that you sought out information. You did this because you are either interested in investing in real estate, or you want to intensify your efforts and increase your results from 2008. That is a great start. In fact, we can consider it your first step. You have gone out of your comfort zone, and left the comfort of your house to come out and hear what we and/or other industry experts have to say. You might have ignore the negative comments from some “dreamsnatchers” and sat down with your new material. So, what is next?
What is the next step?
If you have been to one of our seminars, you know that we always recommend that you “Take Action Now.” And when we say “now,” we mean “now.” Why? Because, as we like to say, “You can’t slow the mo.” In other words, you have gotten the ball rolling, don’t let it stop. Each action that you take will build upon the previous ones. This will get you going and ensure that you keep going.
Now, your next step will depend on where you are in the process. For the sake of this article, we will assume that you are in the “information gathering” stage.
Like we said before, this could mean that you have gotten information on real estate investing from a seminar, boot camp, book, home study course or some other source. You have taken in everything, and now you are ready to get started.
We suggest that you develop a plan. It does not have to be anything elaborate. You don’t need to purchase a special software package or anything like that. Just get some pen and paper, or sit down in front of your computer and make your plan. Start off with your goals. What do you want to accomplish by investing in real estate? Are you looking for some quick cash? Do you want to increase your net worth? Are you looking for additional monthly income? Do you want to leave your current job? Do you want to take a vacation? Your goal could be any of these things, a combination of them, or something else entirely. The key is to figure it out, and get it down on paper.
Now that you know what you want to accomplish, it will be easier to determine what you need to do to do that. For example, if you are looking for quick cash, you might want to wholesale a property. Or, you might want to purchase a property, rehab it and do a cash-out refinance, and put those proceeds in the bank. Or, you might want to put part of the proceeds in the bank, and take your family on a vacation, or put a down payment on a car. The choices are endless, and they are up to you.
Regardless of your goal, it pretty much stands to figure that you will need to pick out a house to get started. We recommend that you attend your local real estate investors association, and make some contacts there. There will probably be several investors there with properties to sell. Get all of the flyers that you can, and take them home with you. Look for houses that match your interest. Be sure to note the areas where the houses are located.
Most investment properties will be in the same general area, because the areas are good for real estate investing. Take a look at the prices. Are some houses priced a lot higher, or a lot lower than others? If so, it would be a good idea to see why. Also take a look at the comps (Comparable Sales) and the ARV (After Repaired Value) of the houses. If you see any wide ranges within the same area, it is a good idea to see why. It could be because one house has an additional bedroom or bathroom, or one house is brick and the other is frame. These are all factors that determine the value of the house, the comps and the ARV. Lastly, take a look at the repairs that are required. How much are they? Are you comfortable with that amount? How were the numbers derived? These are all important questions to ask.
We would recommend that you get a good idea of all of these variables. The investor who is offering the property for sale should be able to provide you with this information. Decide where you want to invest, what you want to do with the property (do you want to rehab and hold or rehab and sell?), what price range you are comfortable with, and how many repairs you would like to complete. We always suggest that our investors invest in Single Family Homes (SFH) with at least three bedrooms, in a hot area, with a small to medium rehab (no more than $15,000.00 – $18,000.00).
We suggest that you speak with, and purchase from a wholesaler. We don’t say this because we are wholesalers ourselves, but because wholesalers specialize in locating investment properties. A reputable wholesaler will offer you good, solid investment properties in good, solid areas of town. They will know what types of houses are good, and what areas of town will be profitable for you. And, if they are anything like us, they will value their customer relations and want to see you succeed. This means that they will help you get into a good property.
I found a house, now what?
After you have located the property and feel comfortable that it will help you achieve your goals, it is time to start the purchase process. You can expect to put down an earnest money deposit of anywhere from $1,000.00 – $2,500.00, depending on where you live and the investor from whom you are purchasing the property. Some investors will require more earnest money than this, others will require less. It is important to remember that, the amount of earnest money that you deposit will go towards your closing costs.
You will need to find a financing source to pay for the purchase of your property. You will also need to make sure that you have an appraisal from an appraiser that is approved by your lender. You will also need to verify the repair numbers that you have been given. If the repair numbers were provided by a licensed contractor, that is fine, especially if you plan to use that contractor. If not, you need to have an estimate completed, by a contractor that you plan to use. If you are lucky enough to be investing in an area where your seller provides all of these things for you the process will be a whole lot simpler. We call this a TurnKey System™.
From Closing Onward
After you have successfully closed on the purchase of your property, you will need to complete the renovation. This should take anywhere from 2 – 4 weeks, depending on the size of the job, and the competency of the contractor. At this point, you will be ready to complete you cash out refinance and put a tenant in the property, or list it for sale. Again, this is strictly up
After you have done all of this, there is only one thing left to do. Buy another property! Use what you learned from this experience to make your next one even better. Remember, the more properties that you purchase, the bigger a change you will make in your life. One property is great, but it will not cause lasting change. But imagine if you purchased four properties in a year (once every three months) with a gross profit of $40,000 on each one! What kind of a difference would that make in your life? What could you do then? How well would you sleep at night? With a great property management company to handle the daily details, you could see lots of positive change in your life.
So, good luck! We sincerely wish you success as you embark upon this journey, or move yourself farther along. There are so many great things in store for you, and we are excited for you. Remember, it takes more than one property to change your life, but the more you go through the process the easier it will be, and the more momentum you will have. And don’t forget, “You can’t slow the mo!”