Steps for the Beginning Real Estate Investor

In all my searches for information on real estate investing, I have not found many articles about what it really takes to become a “real estate investor.” There are lots of ads, and lots of people who want you to attend their classes while taking large chunks of your money, and then of course the personal mentoring, which takes even more of your money. Now that we have jumped into the field, I want to share our observations and lessons learned. It’s important to do your homework: research all the different avenues of education, decide how much money you have to invest (yes, you do need to have some cash, despite what all those “teachers” say), decide how much risk you can tolerate, because investing in real estate is not like purchasing $1000 in stock. You are purchasing a high-ticket asset, with value anywhere from tens of thousands to upwards of millions of dollars. And last but not least, you must be prepared to work hard and be persistent. It is not a part-time gig, no matter what those multi-gazillionaires claim. Following are four basic requirements that you will need in order to be successful.

You must have a desire for learning and continuing education, in whatever form it may take.

It is extremely important to take classes, attend seminars and read, read, read! Lots of people have followed teachers like Robert Kiyosaki, Donald Trump and Carleton Sheets. They all have powerful information to offer. But remember: giving us this “education” is their business. They are making money doing those seminars and boot camps, and making tons of it. You need to know that there are several different methods to make money in real estate (wholesaling, retailing, rehabbing, buying/selling contracts, renting, property management, commercial, etc.) Remember, each teacher has a different angle and each made their money in different manner. You need to decide which avenue is the most comfortable for you and go from there.

The Learning Annex provides good exposure to several different methods of making money in real estate and you can pick and choose whose methods you would like to learn more about. It is much easier to get into the business by focusing and learning one method at a time, and then move on to other avenues if you wish. You will only get overwhelmed trying to do everything at once.

It is also important to look at different types of education, including college courses and the internet. The single best tip you can follow is to join your local Real Estate Investment Club. To find your local club, go to www.creonline.com. This is a low cost way to start your education and also build contacts, which is extremely important in this business.

You need to have some cash to start.

Part of the hype from teachers of real estate investing is saying you can get into this business with “zero money down” or no money out of your pocket. The truth is, you really do need to have some cash in order to begin investing. Not only will you need some kind of down payment (anywhere from $500 to $5000), you will also need seed money for starting up your business. Remember, the days of 100 percent financing of properties is gone. You most certainly will need to come up with a down payment for your first investment property. Additionally, you’ll need money for starting your business. You might need to purchase equipment – both for your office and to do rehabbing. You will need professional consultants, an accountant and a lawyer. If you have left your J-O-B to pursue this business full time, you will need to replace your income until you get another income coming in. And don’t forget the cost of the education, classes seminars etc.

You need to have a comfortable tolerance for the “risk” you are taking on in this investment.

Buying and selling real estate is a risk – make no mistake, and it is a very LARGE risk at that. Part of the problem with the real estate market today is because [mostly novice] “real estate investors” rushed to cash in on rapidly escalating prices of real estate. Econ 101 – supply and demand. They bought recklessly, not intelligently, and now find themselves stuck with properties (whose values are resetting just as quickly) that they can’t unload. You must be aware at all times that any purchase you make, you must be prepared to hold if necessary. This is investing 101. Pay attention to the market.

You must work hard and persevere.

When it is all said and done, real estate investing is work. If you are coming from the corporate world where the work day is very structured and organized, working for yourself as an investor may come as a culture shock. Again, real estate investment teachers will tout “work for yourself” and “work your own hours.” They give the impression that you can come and go as you choose and work when you want. While this is partly true, you must also possess the self-discipline to sit down and perform the work you need to do in order to accomplish your investment goals. It is not as easy as it sounds. There is lots of research, the attention to business details such as book-keeping and stocking your office, searching for, then working the deal, completing the details of the deal (contracts, lawyers, titles, etc.) and then of course rehabbing the property, (or hiring and supervising rehabbers) if you intend to keep it.

Just as Murphy’s Law states, you will inevitably encounter road blocks along the way, some minor and some major. It is important not to give up or allow set backs to derail your progress.

The investing mantra is “Buy low. Sell high.” Current market conditions make it one of the best times ever to invest in real estate. Just remember, nothing is as free or easy as some “teachers” would like you to believe, all while they take your money to the bank. Just do your homework, choose intelligently and spend your money wisely. Learning Real Estate Investing can be overwhelming, but it is worth all your efforts.