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Getting Started Investing in Real Estate: Slow and Steady Wins the Race

by Sharon Vornholt on November 19, 2012 · 10 comments

  
slow and steady

I started investing in real estate back in 1998, and I still get excited about this business. Having this much enthusiasm is good, but it can also be bad at times.

Enthusiasm is a powerful force that fuels you when you are bone tired from working your 9 to 5 job, but you still need to do some marketing or other tasks for your real estate business in the evening. It can also keep you from throwing in the towel especially when you are just getting started. You can probably remember times when you were discouraged and you felt like you were never going to get your business off the ground.

Be aware that this same enthusiasm can also give you a false sense of security and lead you down a dangerous path. For example, you might have just finished listening to one of those “gurus” that has convinced you that any beginner investor can jump right in and invest in multiple states; all you have to do is invest this big chunk of cash and the magic will begin. They want you to believe this even if you haven’t done a single wholesale deal and you’re not even sure what a buyer’s list is.

Don’t be fooled by those folks that make it sound so easy. Building a business takes work.

Buying Your First Property; The Basics

Before you even think of buying your first property, be sure to invest in yourself. Get some education; attend at least a couple of seminars. Find a mentor. I can’t stress this enough. You want to set up a safety net for those instances where you inevitably need one.

Once you have found a property and are ready to dive in, ask yourself these 3 questions:

  1. Have you done your due diligence? Do you know what repairs are needed and how much they will cost? You need to be very clear on this no matter what your exit strategy is.
  2. Have you been realistic about the comps for the property? One of the common mistakes new investors make is to overestimate the ARV. Be sure you are looking at what folks are actually paying for properties in your area.
  3. Once you think you have done your due diligence and believe you have everything in order, find an experienced real estate investor and run your “good deal” by them. Find out if they think it’s a good deal before proceeding. This is the time you want to find out you need to adjust your offer, not after presenting it to the seller.

Building Your Team

Even when you are just starting out, you will need a team. Your team will be there to help you get things done, but they can also keep you from making some big mistakes. There are also some tools that you will to need to have access to.

  • You are going to need a way to pull comps if you are not a Realtor. If you don’t know someone that can do this for you, ask around at your local REIA. A lot of investors are also licensed real estate agents and they may be willing to pull those comps for you. You could offer to do something for them in exchange.
  • Get a subscription to your local PVA (Property Valuation Administration). In my area this runs about $25 per month. Even though these values won’t be as accurate as comps, there are many other reasons why this subscribing to service is a good idea. You can pull up a picture of the property along with all of the basic information while you have a motivated seller on the phone. It’s also a great place to get a snapshot of the neighborhood.
  • Find a good closing company and build a long term relationship with them. These folks will be invaluable to you over time. In my area, we use closing attorneys. I can always get a bit of legal advice with just one call if I have a problem to solve.
  • Start the process of building a solid buyer’s list if you are a wholesaler. A lot of my best cash buyers came from my REIA group. You will find out pretty quickly who the heavy hitters are. Knowing where these folks like to buy is invaluable as you grow your wholesaling business.
  • Build a network of like-minded folks that you can share ideas with and learn from.

Success almost always follows a whole lot of hard work.
“There is no magic button. That magic button is YOU”.

Photo: Matt MacGillivray

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{ 10 comments… read them below or add one }

Brandon McBride November 19, 2012 at 1:53 pm

My roommate and I are about to graduate college up in Utah. Brigham Young University has a housing policy that states that students must be live in BYU-approved housing within a two-mile radius of campus. Exceptions are rare at best. This has created a bubble in which rental costs are inflated. We were thinking of purchasing one of the houses in the area and fixing it up (because of the bubble, most of these places are a bit run down). What kind of education/seminars do you recommend we acquire/attend in order to be able to confidently pursue this course of action? I don’t want to invest into it, only to be surprised by some issue that I didn’t expect.

Reply

Sharon Vornholt November 19, 2012 at 2:34 pm

Brandon – Student housing is a popular niche for some folks.

You will need to know exactly what has to be repaired. Since you have no experience, I would recommend you have a home inspection. They will be able to tell you about things that aren’t cosmetic such as the HVAC system, plumbing, panel box and other electrical and a whole host of other things you wouldn’t be qualified to inspect. There can be many things the average person would overlook.

You also should have another investor look at the house that has experience. You will need comps and the ability to know if it is really a good deal. If you have a REIA in your area, you should becom a member of that too. You will most likely find your first mentor there.

This site as well as other blogs have a ton of good information on them. There is a lot to learn, but I only wish I had started at your age.

There are also some affordable places you can get some training. Best of luck.

Sharon

Reply

Jason November 20, 2012 at 7:39 am

Sharon,

It may be a bit out of place, but reserves, reserves, reserves. I think owning 1 rental property is actually harder than owning multiple. No other properties to lesson the impact of a furnace going out or vacancy. Many many folks will have some very expensive mistakes early on. Without reserves, they may find themselves in the motivated seller category.

Another great post Sharon.

Jason

Reply

Sharon Vornholt November 20, 2012 at 7:56 am

Jason –

You are absolutely right. New investors are often unprepared for the unexpected cash outlays that will inevitably crop up. Having other properties that cash flow certainly helps ease the pain.

I had an investor friend say to me once that if you didn’t have enough properties – (25 or more), what you had was not a busines but a “painful hobby”. This fellow had about 100.

Thanks for weighing in.

Reply

Chris Clothier November 20, 2012 at 9:18 am

Sharon –

Another excellent article and very timely reminder. So many times, investors are looking for the quickest route to success and, like I did early on, can get sidetracked by trying to make it happen NOW. Great choice of article topic this week.

All the best – Chris

Reply

Sharon Vornholt November 20, 2012 at 10:02 am

Chris –

It’s tough getting started as all of us know that have been around for a while. There really is no shortcut to success. It takes hard work, picking yourself up when you want to quit, and friends and mentors to give you a “kick in the butt” every so often when you need one.

By the way, everyone should have a friend or mentor that cares enough about you and your success to give you that “kick in the butt” when you really need it. As always, I appreciate your feedback Chris.

Reply

Rod Thomas November 21, 2012 at 11:50 am

Good intro, but what about the benefit of the “OP” Formula? I teach people to use this formula to make up what they lack in experience, skill, money or time. Not every investor has to know everything, but they need to know someone who does. It’s a wider concept than building your team. So we have…
OPM – Other People’s Money
OPT – Other People’s Time
OPE – Other People’s Experience
The beginning of the journey is for an investor to work out their own strategy, which can be hands-on or hands-off. That determines the kind of investor they are. At Axis our focus is on working with clients with money but no time, so we do as much as possible for them. That’s not the only or best way, just one way that suits some people. In this event we ARE the team – everything is provided so clients can make maximum use of the OP Formula.

Reply

Sharon Vornholt November 21, 2012 at 1:54 pm

Everyone should defiinitely use the “OP” formula. I think you put that piece into play as soon as you have a mentor and beging to put a team together. You have to learn before you earn. Thanks for your comments Rod.

Reply

Val Csontos April 15, 2014 at 5:38 pm

Sharon,
I am not sure which guru you had referred to about investing all over the place. I had also started out in 1997-98. Back then I just purchased a Carrolton Sheets course on no money down real estate, followed that to the letter and five years later since 2003 I am self employed. In his course he had advocated that you should buy your properties no more than 30minutes drive from your house I think this is fantastic advise. Gurus can be very motivating and helpful to get you started just need to use common sense! Not sign up for some mentoring. I only spent $290 for my “guru” and Some of the creative ideas about purchasing OPM. I learned in that course I can still use today!

Our course today is much better and easier since you can fact check any one or any idea much faster and this place here, BP and articles like yours should help the beginners too.

Reply

Sharon Vornholt April 16, 2014 at 7:17 am

Val –

Many of the same tried and true strategies still work today. Some of them change a bit over time, but there is nothing that can replace good old fashioned common sense and hard work. Thanks for reading.

Sharon

Reply

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