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How to Get Started in Real Estate Investing

By - 2007

This is a quick guide to how to get started in real estate investing. It is a simple plan that anyone can follow. Simple, of course, does not mean easy, and there may be some things here you don't want to do. Motivating yourself to do them, however, may be the key to your success.

Six Steps to get Started in Real Estate Investing

1. Start Setting Aside Money

While it is true that you can buy real estate with no money down, it is usually not the best way to go. You will usually have more success when you have some of your own money to put into the deal. In any case, you need to have some money available for closing costs and unexpected expenses. Perhaps ironically, the latter should be the most expected part of real estate investing.

Do you think you can't save any money? Really? Get generic medicines, buy food on sale, use online software for free taxes rather than paying a preparer -- the list goes on. To be blunt, if you really can't find a way, you probably don't have the creativity and commitment to get into real estate. Others live on less than you. Live like they do and bank the difference for a while. Credit card debt? If you're paying $200 per month on credit cards, sell some things to pay them off and start putting that $200 into a savings account. Even if you do zero-down deals, you are going to want a couple thousand dollars for other expenses.

2. Get Educated

You can start your education with websites and books from the library if you are on a tight budget. Most large bookstores carry two dozen or more books on real estate investing. You can also join a local real estate investors club if there is one near you. This usually doesn't cost too much, and the contacts you make can mean tens of thousands of dollars in future profits.

3. Set Up a Team

You will need the help of other people to invest. Building your team can start with finding a good real estate agent who can show you the listings in the MLS (Multiple Listing Service). Eventually you will need an accountant as well.

What other team members you need will depend on the types of real estate you decide to invest in. You may need a good property management company for rentals, or a trustworthy general contractor for flipping fixer-uppers. Other possibilities? An appraiser, a lawyer, a mortgage broker, and possibly, a coach.

4. Make a Plan

You have to decide what kind of investing is appropriate for you and for the area you will be investing in. You are far more likely to succeed if you specialize in one area at first. Trying to get started with mobile home rentals, condo conversions and land development all at the same time is not a good idea. It also may may be a bad idea to build apartments in an area with low rental rates. So you want an investment strategy that fits your style and will work where you are.

Once you know what kind of real estate investing you want to do, you should set some goals. Write down the end result you want from your first deal, as in, "A house flipped for net profit of $25,000 in six months or less." Then you can break that down into steps, perhaps starting with "Talk to a mortgage broker," followed by, "Look at every house for sale in these three areas," followed by "Make an offer on ten of them."

5. Make Offers

You don't make money just looking at real estate so don't wait too long to make an offer, thinking you have to find a "good deal" first. A good deal is created by making an offer that makes it a good deal for you. If you are serious about making money investing in real estate, you may have to annoy a few people with low offers. Don't worry, they'll get over it, and some of them may say yes.

6. Make the Deals Work

If you have done your homework, you should close most of the deals in which you have an accepted offer. Then you have to follow through with your plan for the property and make it work. This means you have to actually find a way to have cash flow on those income properties, or find a way to stay close to your budget on that fixer-upper.

You also need an exit strategy in place, even for long-term investments. For example, suppose that single family home is eating up $200 per month instead of providing cash flow? Did you buy it cheap enough to sell and get your money out? Or could you lease-option it, to get $200 more in rent from a potential buyer?

There is always more to learn, and perhaps each of us need slightly different lessons. With that in mind, why not create your own plan on how to get started in real estate investing? Hopefully this article will get you pointed in the right direction.


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