As a wholesaler, we get a lot of calls from newbie investors who just are not real sure where to get started. As we want to help the new investors become successful investors who will be working with us for years to come I wanted to include some basic instruction on how to get started.
Many people call and are very concerned with getting the first deal, or even more concerned with getting their company set up first. And I have to say that some of these things are like stall tactics that I used way back in college. The week end before finals, my roommate and I found all kinds of things we just had to do before we could start cramming for the test: clean our study space, go buy goodies to eat while we study, call our parents, etc. One time I even decided I must bake a pie before I could study for finals. Never mind that I had never made a pie before that date and to my knowledge have not made one since. I was stalling.
So in an effort to stop some stalling I want to take a look at some things you need to do to get started.
First we need to decide what is successful and that may depend on where you are currently financially. But for most investors you will want to focus on two things: short term income and long term cash flow and appreciation.
If you look at a successful investor they have accumulated cash flowing rental properties over the years that brings them in monthly income and appreciate over time and at the same time they do one or two deals (or more) a year to bring in chunks of cash.
So let’s look at the short term chunks of cash. Thats what we specialize in here at kcInvest.com. We work very hard every week to find really good deals that we can buy at a price that will allow us to sell them to the end buyer (either a home owner or another investor) and make a chunk of cash profit.
This is really great for a new investor to do to pay down debt or build up a cash reserve to buy other properties. But it’s not a passive income stream that will keep going if we decided to retire and go play golf. We have to keep working at the business to keep the money coming in or we need to hire people to run our business for us to keep the money coming in.
So on the flip side, everyone here at kcInvest also buys to hold a few properties each year to add to our portfolio of rental properties. To put this into an example:
If an investor makes it his or her goal to acquire a 2 rental properties each year for 5 years that cash flow $200 or more a month. In 10 years we should have 20 properties with $4,000 a month coming in or $48,000 a year. Not a bad income. And when you add in depreciation that looks even better on a tax return.
So Second Step is to work out your goals. If you have the nest egg already built up and don’t have a lot of time to devote to being a real estate investor. Just focusing on the acquistion of 2 (or more) quality properties that cash flow each year will build up a great passive income stream. Property managers can manage the properties for you.
And the big plus – the tenants are paying down your mortgage so that at the end of 20 to 30 years you have a free and clear house. Then you can refinance and pull out cash to renovate and resell and put some funds in your pocket and keep renting for cash flow. Renovate and resell for a profit or even sell it as is for cash then.
Now if you don’t have the nest egg built up and you have more time on your hands, you may want to focus more on the big chunks of cash either through wholesaling like we do or through buying, rehabbing and reselling which we also do from time to time.
Once you have your goals in mind it’s time to learn what you need to know to reach those goals. Join the local REIA group for the education piece. This is bar none the best place to learn next to getting out and actually taking action. You can meet people in the business, hear from gurus as well as local movers and shakers. And when it comes time to invest a bit of money into your education, buying from the REIA’s vetted speakers with the REIA’s backing in case things go wrong is by far the best way to learn.
As you are learning you also want to go look at properties and meet as many different people as you can to build up your network.
And then last, at some point, you need to start making offers and doing deals or building your portfolio or both – OR NONE. Let’s stop right here and let you know that real estate investing is not for everyone and you may find that you just are not comfortable with the risk. For you it’s just not right. That’s ok. Or you may find that buying houses or flipping or holding rentals is not for you but you still want to be in real estate. You may find the money side is better for you and you could invest in notes or be a private lender.