Buying and selling properties for a profit or being a landlord collecting rents from properties all over town is a fantasy held by many – even when they are successful in other careers. The idea of generating income from real estate is very appealing and when done correctly, real estate investing is one of the safest and best long-term wealth-building tools when you can maximize return while minimizing the risks. Below are my recommended first steps on getting started on your real estate investing career:
1.Build a great team. Getting started means finding an accountant and an estate litigation lawyer. Committed, reliable and well-informed, you will need them to guide you through the most current laws, regulations, and tax requirements. This will include helping you plot strategy for bookkeeping, taxes, insurance, and legal holding status and input on your overall business plan which should have realistic goals identified for years 1, 3, 5 and 10.
- Find the right bank or mortgage broker. Just as important as the price of your real estate deal will be the terms of the deal. And, while I always say the key to a great real estate deal is financing, financing, financing – that may require some creativity by your lender. Think outside of the box when it comes to financing and consider all options and carefully review them with your team. Some motivated sellers will hold paper – that is when the seller will take a first lean position on the property – and this could be to your advantage. Remember, on all deals, the terms are as important as price.
- Find a good realtor to help you locate the best properties. Make sure you choose a realtor who has lots of experience in selling a large number of investment properties. They should be familiar with concepts and phrases such as return on investment (ROI), net operating income (NOI) and debt service. Most importantly, they should be responsive and flexible when it comes to showing you properties. Whatever window you have during the day – they should accommodate your schedule and not vice-versa.
- 4. Do your homework and look for towns with jobs. Even with an expert team – you should be studying market trends in the industry. Whether you are investing in suburbia or downtown — take the time to learn everything you can about the location. Most importantly, make sure any investment you make has rising employment. The lifeline of your real estate business will always be tenants that are gainfully employed and can pay you rent. All employment trends can be found online in any market you are considering investing in.
- Get the local buzz and seek a mentor. There are plenty of real estate success stories to read about and learn from. If possible, model your investment decisions after what successful real estate investors in your area have done or not done! When possible, seek out a top exec for mentoring you as this could prove to be much better than reinventing the wheel. Get to know other local investors, sign-up for real estate newsletters and mags, and join a real estate club in your area. Clubs will not only will this serve as a great industry resource but will become a great place to network with other investors, lenders, and meet repair service providers.