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:
- 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.
- 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.
- 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.
“There is no magic button. That magic button is YOU”.
Photo: Matt MacGillivray