My wife and I have been discussing getting into real estate investing for a year or so. We’ve read some books and have been reading through the REIClub website and forums. I believe we are ready to jump in but are a bit afraid to get into the first property. Overall, I’m tyring to make sense of how start looking for a property. I believe we are looking to obtain our first rental property to get our feet wet and then move from there. I took an initial step to get pre-qualified for an property investment loan and was approved for upto 275,000. We also have excellent credit and will have about 60,000 to use toward a down payment. I’m trying to figure out how to locate a good area to invest in, and where it will not be difficult to rent the property, and utilize the down payment and what we are approved for wisely.
I’ve also been thinking of looking into foreclosures thinking I can get more for the money I have available. Is there any advice that anyone can offer out there as we get into our first property?
Can you really do it? Anwer: YES. It’s been done over and over again by people everywhere.
Are you ready to do it? Answer: NO. You simply don’t have it together enough to even be looking at properties yet. Besides the “I might do this, I might do that” you’ve got going on, you’re full of doubt and fear. You’re doubting if you can do this, and you’re doubting if REI is real. You’re afraid if you don’t do it and you’re afraid if you do.
So here’s the advice:
Make a plan. A real plan. Not “I’m going to get into REI” Lay out a plan on what you’re going to do with your first property. How you’re going to buy, where you’re going to look, what you’re going to fix, what you’re going to do when you get it (sell/hold), and finally, follow through.
Everybody gets scared in this business. If you don’t, then you’re probably a little crazy. I was afraid when I made my first offer at $50K. I was afraid when jumped up to $200K properties. Scared too at the first $500K deal and freakin’ trembling at my first $1 million. The difference between you and I? I made a plan and pulled the trigger.
Hey, my first deal, I put down $1K in earnest BEFORE ever telling me wife that I was even going to make an offer (she thought this REI stuff was bogus, too). Man, I was scared of going HOME, forget about the deal!!! Now, she gets mad if I DON’T have offers out there!
Thank you. That is wise advice. I really appreciate that. I should qualify my self and metion that I have been reading a lot of books and postings, like here. One book in particular made the most sense to me and had a lot good information. It emphasized exactly what you said, PLAN!!! We actually are taking the next two to three months to get serious about planning. Yes, I am a bit scared, but am looking forward to it.
I’m curious on how folks have gotten started with their first. Where are some of best sources to obtain listings and information about the areas being researched? I have surfed the web and have found a few, but question the validity of the informaiton. There must be a handful of resources that are common to the REI market.
Where are some of best sources to obtain listings and information about the areas being researched?
Plain and simple. Find a good RE agent, preferably a REALTOR, and explain to them exactly what you’re doing. You are planning on investing in the area and want to know as much info as possible on it. Pick the price range and/or class range that you want to focus and get as much info as possible on it. Have them pull up ALL of the solds in your market area for whatever you plan on buying. Have them pull ALL of the listings in that price range/class. Have them pull foreclosures that fit the bill for that ARV/class. Most important, offer to pay them for their time!
Also, do the homework yourself. If sale data is public knowledge in your area, then research the stuff yourself. Read the newspaper and see what FSBO’s are trying to get for properties.
Focus on one/two areas (depending on the size of your market) and get to know that specific area like the back of your hand. Within 6 months of my first deal, I could tell you within a few thousand either way, what a property should sell for just by hearing it’s location and basic layout. When you learn that, and you’ve got the data to back up the knowledge, then making the offer(s) don’t scare you as much.
I have to agree with Roger. As always, good advice.
You might also explore partnering with other investors. You put up the capital and they do the work.
Because think about it. Are you interested in real estate because of the money or because you want to spend the rest of your life as a professional dealmaker?
If all you want is the money, then partner with people that know what they’re doing and let them do the work. You’ll be happier that way.
Mentoring, working with a partner, talking with people in the forums, all good ways to get started. Its not going to happen overnight though.
You’re going to have to make the decision to jump in and get WET. RARELY will opportunity drop in your lap. You have to be in the right place at the right time. ALSO, things come from out of left field that you would not even dream of, and that’s when you have to be ready to take action.
I am in your same situation. I have the funds, basic knowledge, and the EXTREME MOTIVATION, but just like Roger stated, I am working on my PLAN. I’m learning my market. Talking to other investors about their trials. Deciding if I want to flip or hold. Researching costs of materials. Finding reliable contractor (I’m lucky in this because my brother is a contractor), a good Realtor to work with. Title company. CPA that is familiar with RE, and so on. There are more ducks to get in a row than I first thought. Of course, I’m still scared, but a good scared. Its always scary when you risk thousands of dollars, but if you get your ducks in a row you eliminate a lot of the risks involved. And you make lotsa $$$. Just my 2 cents.
Great advise here but IMHO your first “deal” should make you a homeowner. There are many programs available to first time homebuyers and mortgage rates are typically better with easier qualifications for an owner occupied property vs. investment property.
If you are hell-bent on becoming a homeowner/investor/landlord all in one fell-swoop consider a duplex. Live in half, rent the other.
My home was a fixer-upper when I bought it. I paid 109k three years ago, I’ve put in about 35k and it is currently is worth about 179 k. I live in a slow market so most of the value was added through the rehabbing not appreciation. I still have a lot of room to add value, for example I have an effeciency appartment in the back that needs gutting and an attic that would add 1000 sq ft. if fixed up. I priced a house that was about the same size as mine in this area and they where asking 200k and it still needed a lot of up dating and did not have any style, so when I sell my home I should do very well. If I wanted I could even rent out the appartment in the back. I have learned a lot about rehabbing and about home design through the process. What ever you decide to do, good luck and don’t get discouraged.
Thank you for providing all of this great input and feed back. This has all been helpful. For the record, we already own a home, our primary residence. We are looking into REI from a flip and rental stand point. My wife and I are in the process of writting out our plan and have approached a few folks we know about being mentored.
We’re looking forward to getting into the market. ;D
I have been reading a fairly good book, that might help you out a little. Its called “How to Succed and Make Money with Your First Rental House” so far good book for the first timer.