WHERE TO START Probably the most commonly asked question among new investors is Where do I start? We have heard of lease/options, flipping, rentals, multi-family, retailing, etc. With the large number of courses and strategies available, the new investor may feel overwhelmed and confused. This month I will attempt to give you some specific first steps. 1. In my opinion, business planning is the first and most critical step. You really need to think this whole thing through. In the July issue I gave you some web sites for detailed information on business planning. There are numerous books on business planning available at both the library and local book stores. While there are lots of details to consider in your plan, the number one question you must ask yourself is How much time will I really be able to devote to this business? The more time you can spend learning and doing this business, the better you can expect your results to be. If you are already working a full time job, be prepared to work as many hours extra each week as possible. If you cannot dedicate enough hours to produce results, dont start. 2. Check on your financing possibilities. I know all about the no money down strategies, and I know that it is possible to buy a property with no money down and no credit, but I also know that very few of the deals you ever do will be done this way. In our current market, you should not assume that you will make this a full time business with no money and no credit. There is no question that having access to financing and having good credit will get you farther faster. It does not have to be YOUR money, and it does not have to be YOUR credit, but if you have it, it will be easier to get started. Talk to some lenders, be it hard money lenders, typical mortgage lenders, your local bank, or get referrals to lenders from other investors. 3. Focus on the strategies you understand thoroughly. If you dont understand any of the typical creative strategies, dont do a deal until you have studied at least one and understand it well. Whether it is lease/options, flipping, etc., it is difficult and confusing to learn all of them at once. Pick one to focus on. The area in which you live or plan to work your real estate business may have some effect on which strategy you choose. If you will be working a newer area, lease/options may be the best choice. If you will be working an area of older homes, flipping or rehabbing may be the best choice. When you do your business planning, you will have to identify the best opportunities for your business territory. 4. After you have completed the above steps, you are ready to start looking for your first deal. Finding motivated sellers is the name of the game. Whether you will be placing classified ads, putting up signs, flyers, etc., locating those sellers who, for whatever reason are motivated enough to make you a good deal can be a challenge. This is the step that will take most of your time on a day to day basis. 5. Once you have found your motivated seller, it is time to evaluate the numbers to see if there really is a possibility for a profitable deal. If you are not comfortable with this process, be sure to seek help from another investor, your accountant, your real estate attorney, or someone who is qualified to help you. You also need to have a good idea of what your exit strategy will be. You will want to make your offer based on what you intend to do with the property after you get it. Remember you make your money when you buy. If you dont buy it right, you will not be able to sell it for the profit you were hoping for. The laws of physics dictate that an object at rest requires more effort and energy to move than an object that is already moving. At first it will be hard, and it will take time. But eventually, with diligence and perseverance, you will get your business moving in a profitable direction. |
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