Hi,
Most new investors are able to grasp the techniques but they do not have enough qualified sellers to apply their techniques to. As with any business, you will need to have strong communication skills, good technique know how and creative marketing knowledge. It will take time to learn these but the good news is that you only have to learn them once to become wealthy.
I would personally add that an investor must have a good understanding of how to read and understand financial statements. This will require grasping terms like capitalization rate, rate of return and cash on cash. Knowing how to look at a profit and loss statement to tell if property is a viable investment outweighs creative marketing in my book any day.
Hi, I also wanted to be a real estate investor, will somebody please tell me what are the basics to become a good one? I hope you guys could help me. Thank you and good day 
In response to your question about how to become a real estate investor, I believe the answer lies in what you personally want out of investment? I know “money” is probably the first thing that came into your mind, but investing takes planning and careful money management.
Before investing, you need to have enough cash flow or savings to reduce investment risk. You need to decide if you want to flip properties or hold them for the income stream.
For me, the basics of becoming a ‘good real estate investor’ starts with the ability to recognize market values.
Everything falls from that.
If we suck at estimating value, everything else will suck.
When we’ve familiarized ourselves with the market to the point of recognizing value, we’ll be able to present, justify, and negotiate offers from a position of strength and confidence.
There is nothing more empowering than knowing market values like the back of our hands.
Familiarizing ourselves with our farm can be fun. We get to look at lots of properties for sale, note sale prices, and compare comps, and in no time, we’ll “deeply” recognize deals that few others will, and then it’s downhill from there.
Hope that helps.
I agree here. I believe a successful investor must also be able to accurately analyze the finances of a property. There must be an understanding of how cash flow works; how to analyze if a property is profitable; the ability to determine costs of repairs and resale value. Without this skill set, investing will be a shot in the dark.
I would absorb as much as you can in these forums before taking any action.
I recently read The Inside Trade Secrets of an Ethical Opportunity Investor and was soooo excited and motivated!! Simply put, the book layed out a plan to buy undervalued goods or real estate and sell it for a 30% profit, compounding your money until you reach a set goal. I was fired up and ready to get started, researched goods and real estate as he suggested only to end up frustrated and at a stand still. My problem is that I’m not sure how to value property or spot a good deal. My goal is to become financially independent and quit my job. Where does one start when wanting to become a real estate investor? There are so many books and seminars (expensive!!) on so many topics I don’t know really where to start. Did any of you have a mentor for your first couple of buys/sells?? Were they successful? What is your advice for finding a good deal for first time investors? Any advice would be greatly appreciated.
My wife and I didn’t have a mentor or coach to get into REI. Just had a good job, desire to succeed, and some common sense. You first need to figure out what type of investing you want to do so you can focus on that. You can’t say you’re going to learn wholesaling and then get sidetracked trying to start doing rentals. I don’t think seminars are necessary to succeed. You need to educate yourself but not by seminars.You do have to know what makes a good deal. Otherwise you’re gambling and hoping. Your education should be the procedures to do the type of investing you want as well as finding a good deal. Most people don’t want to do the work to learn and earn. They think there’s some magical real estate machine that’s going to spit out $100 dollar bills with no effort on their part. You can post specifics about possible deals on here and people will give you feedback. First determine your goals and what avenue of REI you’re going to use to get there. Saying you want to quit your job is not enough. Quantify it. Say “I need 7k of income per month to replace my income and have sufficient excess income over my monthly obligations. That means on average I have to wholesale X houses each month or have X rentals producing on average X cash flow each month.”
justin, that is great advice.
I had the advantage of being around investors since I was eight years old.
However, I took enough seminars, and bought real estate related books, tapes, and videos, to choke a horse.
So, by the time I was ready to invest, I had a fairly good idea of the risks and work involved.
Each of those resources represented a shortcut in their own way. I wouldn’t have given any of them back.
That said, the best education I ever had was actually going out and banging my head on the door of opportunity. It’s amazing how fast we learn when we’re in the process of doing ‘it.’
One thing I tell anyone now is, to keep their day job, until they figure their heads from a hole in the ground.
It’s just stupid to launch without reserves, backup, or resources to tide oneself over during the learning process. I mean, even McDonalds spends some time training their employees to do brain-dead easy work.
So, you can imagine how important I think education is, when it comes to making the ‘real money.’
Not only did I have a model to follow, and some education, but I also harbored a complete unwillingness to quit …even if it meant scrounging for rent, gas, and food…
On the other hand, it’s the dabblers that aren’t quite willing to pay for any education. They’re not quite willing to pay the price to win.
They’re not quite willing to take steps into the unknown. They’re not quite willing to lose anything.
So, they stop sending mail. They set themselves up for failure with false expectations. They quit pounding bandit signs. They quit calling sellers off Craigslist.
They won’t quite treat what they’re doing as anything more than a hobby.
Of course, too, they’re the same ones asking about the refund policies on the real estate courses. Pffft.
Bottom line there’s no free lunch. It can take a lot of money, or it can take a lot of time to become successful, and it makes no difference how much of each we possess at the outset, if we don’t also have an unwavering commitment to our success.
Thanks for the advice. I am no stranger to hard work or study. I have done it all my life. I have succeeded in every goal I have set. My goal is to have $5,000-$10,000 cash flow a month. What area of real estate I am going to pursue to accomplish this is still undetermined. This is the area that has me stalled. Not sure how to determine this other than just pick one, learn it well and take the plunge?
Is there any area that newbys should stay away from? Can anyone recommend books or seminars to learn more about real estate investing? I live in a small city. Is there one area that is better for smaller towns?
Can anyone describe the steps they went through when they were first getting started?
Thanks so much.
Deliberately map out your strengths and weaknesses, including a personal financial statement, and a personal profit and loss statement.
Maintain a detailed financial statement, listing everything you own at replacement value. Carry it with you, and be prepared to show it to sellers whenever you ask them to carry any kind of financing.
Create a portfolio with some information about yourself, including referral letters, and letters of reference from people that you’ve done business with, and eventually photos of houses you’re invested in.
Be ready to show your establishment in the community; church involvement; chairman of the local Log Cabin Republicans…etc.
Keep all the contracts/forms/deeds/carbon in the trunk of your car and be prepared for a deal.
Carry a yellow note pad, a calculator and a pen with you so you can negotiate on the spot.
Know your rents and know the market values, and start making offers on houses for sale.
Frankly, I put notes on the doors of listed houses, telling the seller that I would be interested in buying their house after the listing has expired. I’ve lost count of the number of sellers that called me immediately, wanting an offer.
I’ve also lost count of the number of agents who called me and informed me that I should do things to myself that I thought were otherwise, physically impossible.
Your income goal is too vague. Tighten that up. Five to ten thousand, is like saying I want to be ‘rich’. Good luck with that one.
Be way more precise and accountable.
Regardless of the size of your farm area, once people find out you’re a reliable buyer, your referrals alone may keep you busy.
I know investors that have moved to where more fish are biting, in order to build a critical mass of investments. This included moving to where there was more appreciation.
Don’t complicate the business by trying to pursue every sort of kind of deal structure. I think you’ve already mentioned this, so you’ve got that covered.
Monthly income from real estate effectively comes from two sources: rental income, or from merchandising (brokering/flipping/wholesaling).
One of the most active flippers here in So. Cal does both. He wholesales about eight properties for every one he keeps. Most of his purchases are seller financed investments where the rents are greater than 1% of market value of what he buys. This is easier to find in management intensive areas, and/or less populated areas. Another thing is that he’s constantly trolling for down payment lender/partners. He offers something like 10-12% fixed on a 2nd TD.
You’ll find a LOT of sellers willing to finance their houses if you can give them 10% in cash. Many sellers either don’t have much equity, or just don’t need a lot of cash in order to do business. If you can drum up a reliable/consistent source of down payment money, you can grow your portfolio VERY fast.
This is exactly what our family did in the late sixties and early seventies. We came up with 10% down payments and took over loans Sub2 like ‘crazy.’
BTW, 10% is NOT a creative, no-down formula… Just saying, but that was our sophistication level at the time. Where did we get 10%? We borrowed from the credit union(s) (for a while), bought and sold crap at swap meets, bought and sold school buses, traded houses, and created lots of 2nd TD’s, among other things not so creative.
My uncle went for broke doing this, and assembled a 200+ portfolio of houses in just ten year’s time. So could you. The important thing to note was that his farm was appreciating faster than average.
One shortcut: Focus your effort in areas where the most houses are selling. Otherwise, its like shooting ‘at’ a barrel of fish, instead of shooting ‘into’ a barrel of fish… if that makes sense.
I could say more, of course, but that’ll get you thinking about which direction to go.
I too want to be a rei, but have some other issues. I have a pretty good idea of values in my local area,Palm Coast, fl., and being in the contruction business, i have a pretty good idea of construction costs. i dont know where to find deals to flip. i have been to forclosure auctions, but they are being auctioned too high to make any money. i have been looking on mls, craigslist, backpage, etc.
does anyone want to team up or maybe have some suggestions, thanks, tony
I am probably going to take a lot of heat for this comment but I feel it needs to be brought up. For all you newbie investors, wholesaling and bird dogging has been all the rage. But in my opinion, the days of “easy” money and quick big number profits are dwindling. I would not recommend getting into wholesaling or bird dogging for the following reasons:
#1 - The market is recovering and it is recovering fast. Finding below market listings are getting few and far between due to buyer demand. Even foreclosure and auction properties are being listed/auctioned within 10% of market value leaving a very little, if any, profit margin.
#2 - The competition is high. It seems like all new RE investors are jumping into this field because it does not require a lot of upfront cash. In many markets, it is swamped with wholesalers.
#3 - Legal loopholes and regulations are getting tighter. It is getting harder and harder to get title companies and lenders to work with new wholesalers.
I believe that the classic buy and hold strategy is where the money is right now. Buy rentals as much as possible that are below market value. Enjoy the income stream until resale value peaks and then sell and re-invest into more profitable properties.
Compounding rental property income is how most REI get rich (I’m talking long-term sustainable wealth) - not from wholesaling.
campbellsimon,
I’m on a list of more than a half-dozen wholesalers.
Assuming these guys aren’t special, or have an extra chromosome of luck, some of the things you’ve mentioned as being indications that it’s the wrong time to get into wholesaling, are the very reasons TO get into it.
Otherwise, these are perpetual barriers that every wholesaler faces.
For example, when the market was falling/flat in 2008, the criteria for buying was way stiffer. Many wholesalers bailed.
It was harder to find buyers for deals.
Well, for the smart wholesalers who knew how (and why) to shop for the buy and hold investors, there was a huge opportunity.
Now, it’s more obvious to the amateur/one-off buyers that the prices are going up, and they want in on the gravy train. So, it’s MUCH easier to merchandise deals, and the requirements are substantially softer (because of the upside).
Which brings me to agree with you about a couple of things. It’s really smart to be a buy and hold investor. However, it’s just as smart to be merchandizing buy and hold deals to these investors…
And you mentioned the auction prices being at 90%… That’s always been the case.
Auctions are notoriously risky and iffy places to find bargains.
However, like any source of deals, we keep casting our hooks, and eventually we’ll catch “something,” no matter where we’re casting. It’s just a matter of remaining consistent. Of course casting a ‘net’ is probably more profitable, than casting a line. That’s for another post.
Probably the key here is not depending on one source for deals. We don’t drop a hook in one place, and wait. Instead we plant poles all around the pond, if not different ponds, waiting for the bobbers to disappear, so we can reel in the deals.
Meantime, the ‘something-for-nothing’ investors/merchandisers are always disappointed that good deals are hard to find.
One of the main reasons the deals are hard to find, is that the merchandisers aren’t digging very keep, or continuing to dig at all. They scratch around the entrance to a mine shaft looking for gold, but fail to venture down mine shaft itself.
All the things you’ve mentioned here become excuses that keep the hobbyists, or the not-so-serious dabblers, from grabbing their flashlights, picks, and shovels, and headed into the ‘darkness of opportunity.’
But you’ve never heard it put that way before! 
The two things you need are action and followup. I could give you a step by step, hour by hour answer but unless those two things are your priority you will just join the 98% that join the Titanic.
For now own i am happy to be on real state.
Now i want to help others if somebody need my :help
I think you just have to me smart, strong and willing to learn. If you are not strong enough, your tenants will eat you alive. That’s why you have to get some guts before investing in real estate.
I’m not sure we need to be smart for this business. Otherwise, I know too many dumb butts that made themselves independently wealthy, just by mastering one niche of real estate, and rinsing and repeating.
For example, I knew a literal dummy in Olathe, KS that owned more than a dozen, tiny, free and clear, fugly, fixer-rental houses that he developed an income stream from. This short, tubby, socially-retarded little man spent a dozen years working to pay these rentals off, with both the cash flow, and his own earnings from a menial job.
All ‘smart’ investors know you let the renters pay off your houses, right? Not him. He was in a hurry to quit his job.
Well, when he was almost 40, he finally got the houses completely paid off. It was after that point he started buying vintage cars, which he liked to park on his front lawn. That’s when he showed up on everyone’s radar. Before this, nobody paid any attention this guy.
Meantime, we became amazed that the town “retard” could pull this off!
It did inspire me to be more aggressive about my own investing (in ghetto houses that were worse than his) at the time. It’s like watching someone elegantly accomplish something, and then people want say to themselves, “I could do that. It’s a piece of cake.”
Regarding managing property… The town dummy had a simple plan to follow, and followed it over and over with each tenant. I’m not sure the tenants were much brighter than he was, but that’s for another post.
The bottom line is that if we’re willing to stick with a niche, and learn it, it all becomes brain-dead simple, and any dim-wit can make it work.
At the same time, we can make this business as complicated as a six part algebra equation if we want. We can analyze a unit’s vacancy rate by rolling average, by unit size, by floor location, and calculate the ROI on on a semi-annual basis, and then move to the next unit, and calculate it all over again. Or we can just keep the units full, collect our rents, and call it a day.
I think it pays to keep things as brain-dead simple, and as routine, as possible. Sure, it’s easier for dumb butts to pull off, but we can try.
:beer