Real Estate Investing for Beginners: A 10 Step Plan
Here is a ten step plan anyone can use to invest in real estate.
1. Find your market
(geographical area, location, close to your current address is preferred)
Finding your market means finding your target area, the geographical location, of where you want to purchase real estate. Ideally, it’s best if you purchase property within a 10-20km radius of your home. The closer you are to your investment property, whether it’s a house, mobile home, or vacant land, the better.
Choosing your market will be determined by the amount you can make, known as the Return On Investment (ROI), minus your expenses, when you sell or rent the property. And your ROI will be effected by a number of factors-current market values of the existing properties in this area, upcoming developments planned for the area, proximity to landmarks or bodies of water, crime rates for the area, employment opportunities for the area, and a lot more.
Visit the area at night. During the day, an area with a few abandoned houses or commercial buildings may appear like an opportunity. At night, however, these buildings may be a haven for criminal activity or a camp for homeless people. Talk to the people that live in the area to get a feel for what’s going on there.
2. Determine or choose your investment property type
What kind of real estate property would you like to invest in? Buying a house? Buying a mobile home? Buying land? Buying commercial property?
How would you like to buy the investment property? Buy it outright, or put the down payment on it in order to secure the mortgage? Securing the mortgage of an investment property allows you to save money while, also, getting control of the property.
Okay, you’re probably wondering “but I don’t have the money to buy the property, what about the money?” We’ll get to that.
3. Find five properties
Find five properties (houses, mobile homes, land, commercial properties) investment properties to purchase, rent for profit, or flip for profit.
Research. Study the area where you plan to purchase a property. How? Follow these steps.
1. Search online for “___________ ________ tax assessor” and “_______ _____ tax clerk” and “______ ______ property appraiser”. Fill in the blank with the county in which the property is located. Fill in the second blank with the state.
For example, if you’re searching for an investment property in Gilchrist County, Florida, search for “Gilchrist County, Florida tax assessor” or “Gilchrist County, Florida tax clerk” or “Gilchrist County, Florida property appraiser”.
Research the area. Find out what properties are selling for, how long they’ve been on the market, annual taxes, appraised values, etc.
Study the area. Determine the comparable market values of real estate. Become an expert and this will enable you to forecast, or predict, trends so you’ll understand where to buy and when to buy and where to sell and when to sell.
4. Develop your strategy. Lay out a plan.
* Buy and rent for profit?
* Buy, fix up, resell for profit – buy and flip? You make money when you buy! You can find a buyer before hand by using the internet classified ads and social and classified ads in local newspapers. Find out who’s willing to buy and what they are willing to pay before even making an offer on the property you want to buy.
* How are you going to find the money? We’re getting to that. Once you have an action plan or a plan-of-action, then finding the money becomes easier.
5. Establish a back-up plan.
Just what it says. Set up a plan in the event that everything goes wrong, in case of a situation in which everything goes south. Establish a contingency plan. You’ve made it this far, now make a backup plan. You can do it.
This-making a backup plan-will lessen any worries you have, enabling you to move forward, to take action, to make things happen. Action eliminates fear
6. Determine your exit strategy.
In order to know where you are going, first decide where you want to end up. What’s your end goal? How do you plan to exit this RE deal with a handsome profit, and with all parties (buyers, sellers, investors) satisfied and happy?
7. Present your plan to investor or investors.
Read over your notes and reduce everything to a simple plan of action. Then, write down this plan of action and reduce it to numbered steps… 1, 2, 3 and so on. Set the dates of when you’re going to do what. Make copies of this, both PDF copies and hard copies.
Get everything in writing, signed, in the presence of a notary public.
8. Execute your plan.
Take action. Action eliminates fear.
Start putting your plan into action by taking action.
9. Get people competing to buy your property.
When selling or renting the investment property, gather a crowd by scheduling a specific time. If you want to rent or sell a property, set up a specific time frame in which to show the property, preferably on the weekend. Schedule an open house on Sunday, 2pm – 4pm, gather a big crowd. Get a mortgage broker at the place to, in order to set up mortgages for people who want the place.
10. Put your exit strategy into motion.
Collect rents. Sell the property. Keep records of everything (video, audio, paperwork, keep backup paperwork).