What Would You do if You Were Starting to Invest in Real Estate Today?
The most common question I get from new investors is:
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What would you do if you were starting today?
The very first thing I would do is get down on my knees and thank my lucky stars to be beginning my investment career at absolutely the best time of our lifetime!!! Remember fortunes are made by investing at depressed levels and at the bottom or near bottom of cycles.
Research Phase: Analyze Your Market & Learn What DEALS Really Are
The next thing I would do is get off my butt and start doing my basic homework. I would go out and see no less than 50 and probably 100 properties in my investment area of choice. I am not kidding!!! I would immediately build a spreadsheet with data on no less than 100 properties. Things like Prices, Expected Rents, Repair Budgets, etc. This would give me the basis or foundation to understand what is a good deal, what is a bad deal and what is a great deal!!!!
Establish Your Deal Selection Criteria
After I have built my basic understanding of the market I would decide on what criteria I want to use to decide on what is and isn’t a good deal. I recommend every investor pick one metric that is easily transferable between property types. For me that metric is “Yield” or my expect return on all cash outlaid to secure and rehab a property. Today I personally look for expected yields in excess of 20% in my market.
Start to Make Offers
After understanding my market and deciding on my criteria for identifying a great deal I would start making offers on properties that met my criteria. I would hold fast to my criteria and not let bidding wars drive up prices. In fact you should only expect to get 1 out of every 10 properties you make an offer on. If your success rate is higher than that I believe you are offering too much on your properties.
By following this strategy I am convinced I could secure 4 investment properties with Government-backed loans inside of 90 days and secure 10 properties inside my first year. Every property I bought would have a 30 year fixed interest rate and I would be a very happy man!!!!
Alternative: Find Passive Real Estate Investment Opportunities
Now if my market didn’t offer these types of returns or I didn’t have the time to devote to learning a new market I would still find away to participate. I would find an investor with a proven track record, a simple to understand process and become a passive investor. This would insure a decent return with a lot less headaches, reduced risks and still give me the upside I want.
In the end if I was starting today I would not let this investment cycle pass me by. I would become a very active investor in my market and if my market didn’t offer returns I would find a way to be a passive investor in another market that offered great returns.
Photo: Katelyn Kenderdine