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The Top 10 Steps to Successful Real Estate Investing
In this article I list the top ten recommended courses of study that all real estate investors should understand thoroughly. They are listed below in the order that they should be learned:1. Goal Setting:
You have to know where you are going before you begin. If you don’t know where you are going, you won’t get there. This important step is missed by most people who are starting out, then ten or twenty years later after making money and losing money, they see the importance of detailed goal setting. That is when they become rich. If you start off setting worthwhile goals, you will get there quicker, with less complications.
2. Finding the Deal:
Most people have so much difficulty finding the deals. When they finally think that they get one, they move full force ahead – usually into a nightmare! It is very easy to find properties to buy, it is a little difficult and time consuming to find a “Real Deal”. The road is scattered with the remains of those who thought they had a deal. You must learn the difference and in all the available properties, find the real deal.
3. Researching the Deal:
Part of the process that goes hand in hand with finding the deal is researching your prospective deal. The more you know about the property; the sellers; the neighborhood; and the local, State, and Federal laws that affect the property, the better your chances of success. Many of my students find this step to be the most fun, once they know how to research the right way. Skip this step and you may not have a real deal. Do this haphazardly and you will not make as much per deal as you could, or even worse you will probably lose money.
4. Financing the Deal:
Properly financing your transaction is one of the most crucial parts of real estate investing. It is also the part in which most people fail miserably. Understanding and using proper financing techniquest can make a bad deal good, a good deal great, and a great deal AAA rated Excellent! The second reason most deals fail is because of the wrong financing from the beginning!
5. Lease Options & “Subject To” Financing:
These two ‘Creative’ financing techniques are listed separately from the financing because of their importance. These two methods of financing are more than simply a “nice to know” factor of real estate investing, but is actually a “NEED TO KNOW” factor. Lease options are the number one item that should be in your knowledge based ‘investor tool box’. They work when nothing else will work. They create more multiple methods of cash flow than any other method.
Understanding and becoming competent with the “Subject To” creative financing method is where most successful real estate investors started, and continue with success. This powerful financing method is fairly simple, lowers the costs associated with purchasing property, and ownership can be transferred within days (if not hours), without the problems associated with traditional financing.
6. Foreclosures:
Understanding the foreclosure process, then using real estate acquisition strategies, especially creative strategies is one of the top methods of building real estate riches. Using a basic understanding of the process, how the homeowner is affected, and strategizing a win-win situation, can build your real estate empire quickly. Many consumer protection laws must also be understood, as this is topic contains the largest activity of consumer fraud. Understanding and doing things properly when acquiring foreclosure properties can and probably will be where you will make your most money. Done improperly, sloppily, or simply not understanding foreclosures will leave you bankrupt and possibly in jail.
7. Negotiation:
Everybody talks about negotiation but most people don’t have a clue on proper negotiation strategies. Believe it or not real estate is a ruthless, cutthroat business. If you are not aware of the many types of approaches to use when negotiating, I will guarantee that they will be used against you. Simply knowing the many different strategies is very useful. Implementing one or even several of the strategies will increase your profits immensely. Understanding and using several negotiation tactics will skyrocket your profits and success throughout your life, including personal relationships!
8. Home Inspecting and Repair Cost Estimating:
The reason most deals fail is because the investor has missed items during his property inspection, or underestimated the cost of the repairs and renovations. It is crucial, before you finalize a transaction, that all possible problems are identified, priced with high estimates, and included in the property profit plan. If everything else, from finding the right deal, investigating, negotiation, and financing are all done correctly, but repair cost surprises pop up, you lose!
9. Property Management and Landlording:
Many people who are getting into real estate investing simply have decided that they are not going to be landlords. They plan on only flipping property, financing property, or partnering with others in one capacity or another. All sounds fine until, for whatever circumstances, they are forced to become landlords. The flip doesn’t take place, they have to foreclose on something they financed, the partner becomes disinterested or even dies. That is when, if they are not familiar with landlording, their entire real estate empire crashes.
On the other hand, those who intend to be landlords; who purposely acquire properties and rent them to tenants, will fare much better for many reasons. First off they can fearlessly acquire more properties taking over tenant troubled properties at major discounts and straightening them out. The tax advantages of rental properties can virtually allow one to be income tax free! Retirement becomes secured by having multiple properties when mortgages are paid down and rents are increased.
Whether you intend to hold properties for rental or not, it makes no sense to enter into the real estate business without understanding how to control your tenants, increase your cash flows, and increase your property values.
10. Asset Protection/Entity Ownership:
Widely overlooked are the details such as understanding and using the proper legal entity such as trusts or corporations in which to hold property. Many people start small and before they know it own a bunch of property, usually in their own name. Then, without warning, in the blink of the eye, they lose everything they own, usually through a single lawsuit. If they had properly set up a simple structure of ownership known as asset protection using various entity ownerships including estate planning, they would be growing wealthier and wealthier without worry.
