Here’s a chance to sum numerous threads up with one post! I want everyone that’s in the game to explain the basics of real estate investing for beginners in the simplest form possible. You can use a sample deal, essay, picture, graph, whatever…Just remember one of the greatest quotes of all time…
“Keep it simple…stupid!”
Let’s take this opportunity to address all 785,059 posts that have the title…“What’s your advice for someone new to REI?”
Lay the foundations veterans…and to all the rookies…LISTEN UP NO COURSE WHERE ONE OPINION RULES CAN GIVE YOU THIS ACCURATE OF A PICTURE ON REI, THERE ARE AMAZING PEOPLE ON THIS BOARD AND THIS INFORMATION ISN’T COSTING A THING! SO, LAY IT ON US…
I’ll go with Game Theory. Both the investory and the buyer are doing something in the best interest of each other. THe investor finds an ugly duckling makes it a swan and sells it to something who has the American dream of buying a swan type home.
Real Estate Investing (REI) in the simplest explanation is: The use of real property/real estate to increase your personal networth and wealth.
The simplest definition of real estate investing methods will vary depending on your preferred method of investing.
Believe it or not, but REI is a simple business. Look above. Buy, fix, sell … buy, fix, rent … borrow funds, loan funds, collect difference. There are a ton of them depending on what you want to do.
However, REI is NOT an easy business. It takes serious dedication and planning to succeed. It takes someone who is a good manager and a good “people” person (customer service). You have to wear several hats, and be good at them all. Know about RE laws, lending options, local laws, taxes, etc, etc, etc. That’s exactly why everyone can’t do it and many that try fail. Because of the nature of the business, even the best investor can take a huge plunge fast because of one little hiccup or mistake or poor planning.
This type of thread comes up every once in a while. “Tell us everything that you know about REI in a paragraph or less.” While the insight may be good in that paragraph, you’ll never learn everything you need in one paragraph (or thread) and you’ll never be able to answer ALL of the questions that have been posted on this site over the years in that paragraph.
Do it on every deal, all the time, no matter what. Don’t buy a property unless there is no doubt in your mind you will make money. With an adequate amount of preparation and research, accounting for all expenses and outlay, don’t stretch the reality of a property’s potential because your tired of looking for a true winner.
However, REI is NOT an easy business.
I disagree with that. Sure it's not easy, but its the easiest business I can think of. There is a wealth of info about REI available in a neatly packaged medias available for little to no money. There is no industry with more junk focused on educating you how to succeed. If you fail in REI, you would fail 100 times harder in any other business. Just my .02 pesos.
My three “Golden Rules” for REI success: Control, Sell, Buy.
Step 1 - Gain control by getting a signed purchase agreement or option. You can also get a lease option agreement or go as far as getting the deed. There are several different strategies to choose from. Pick one or two to focus on but know a few more to have in your toolbox.
Step 2 - Find your end buyer. This is also referred to as knowing your exit strategy. You need to know this BEFORE you buy a property. If you cannot locate a buyer for the deal you have under contract, get out of the deal here before you get stuck with a property.
Step 3 - Once you have your exit strategy in place, THEN buy the property (close) if necessary, or simply assign the contract and skip step 3 altogether.
Control is key. Marketing is key. Talking to sellers is key. If you aren’t making offers, you are not a real estate investor.
Like all forms of sales, it is a numbers game:
30 seller calls (talk with 30 sellers)
10 appointments (meet with 10 sellers and make offers that work for you)
2 deals (10 signed purchase agreements)
This is a sample starting ratio and you should improve over time to get 4 out of 10 or more. Have fun and enjoy the business.
If you were working full time, I would say a week, part time, a month. You need to determine your own formula and it will depend on a lot of factors. If you are looking for 70% or ARV minus repairs minus $10k wholesale profit, then you will have to see more sellers and make more offers to get deals. If you are using your credit and paying cash at 85% or ARV for long term holds, then you will have better success ratios. It’s all relative but I wanted to show that it is about the numbers. Not all of your offers will be accepted so learn your ratio and work it.
In my example of 30/10/2, if each deal was worth $25k, then I would end up with $50k off two deals. Divide that by 10 offers made and I see that every time I make an offer on a property it is worth about $5,000, on average. Determine how much you want to earn in a year and work backwards to figure out how many offers per week, on average, you need to make to hit your mark.