The million dollar question is, “How to you get started?”
There is a lot that goes into that, but let’s start with the basics.
You need to know your market. You need to know what is available. You need to know if the current market conditions dictate a seller’s or a buyer’s market. You need to know your target price point. You need to know how much capital you have to invest on hand, as well as your net worth. And while there are several other things you need to know, this is a good jumping off point.
As I said before, the investment model I use wouldn’t’ work in every market, due to low inventory and overinflated market prices. Don’t get a me wrong, a deal can be found anywhere. But if you are just starting out and have no experience, it can be very difficult.
What constitutes a good deal?
Would you even know one if it hit you in the face?
I remember a story that a contractor told me. There were two gung-ho investors who had just gone to a flipping seminar, given by one of those TV investors made infamous on “Flip This House”. These two geniuses had purchased a run down, ransacked house that actually had a huge hole in the side of it – where a tree had fallen through the roof. The contractor asked them what they wanted to do with it. They told him that they wanted to rehab the house and sell it of course….only problem was, it was going to be around $9,000 to fix up the joint (or so they thought), but they were confident that by investing their life savings into this particular shithole, they could live their real estate investing dreams. The contractor could only shake his head.
Rookies.
He told them, “This house needs to be torn down. $9,000 isn’t even going to scratch the surface on the cost of repairing this place.”
Needless to say, their grand plan didn't work out exactly the way they had hoped.
Cheap buys don't always mean good deals.
Before investing in a property, I look at major items like foundation issues, plumbing and electric. I have my GC give me a ballpark on what it will cost to fix these items, and can make an informed decision from there.
When you are first getting started, there are a lot of questions you will have. In my case, I took to answering the questions like a bull in a china shop. I tried to leave no stone unturned. I could very quickly look at a list price and some pictures and eliminate a property based on that information alone.
I looked at hundreds of homes online and knew the areas already, so I would spend hours upon hours scouring listings – something that infuriated Ms. Lowball because I was cutting into our wine/quality time. I remember her saying that she felt like she was in a relationship with MLS, because my head was always in her account.
While I realize that not everyone is as anal as I am, or have the time to search for properties like I do, which is why I would advocate joining a reputable investment group like LifeStyles Unlimited. This is a fantastic resource for newbies, as mentors guide you through the real estate investing process. For me, Lifestyles was a godsend. It came at exactly the right time. So I am eternally grateful to Ms. Lowball for introducing me to David Fisher and company, because I consider David a mentor. Without him helping me to get me to think differently about my assets, I would not be in the position I am now. Thanks to David and to Lifestyles, I can take control of my life, make my own way and have financial freedom.
I still have a way to go, but so far, I am enjoying the ride!
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