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Where Do I Start?

September 12th, 2008 · 10 Comments

© Aloysius Patrimonio|Dreamstime.com

© Aloysius Patrimonio|Dreamstime.com

This is a common question. Real estate is such a big field and there is so much to know. It can be confusing. Below is a guide to help. It’s not designed to answer all your questions but it should help you decide what you need to learn and in what order.

Decide what you want to do.

This means learning the strategies and techniques, and finding the ones that fit your personality and your resources. “Your resources” is key. Two key resources are time and money. Some methods need more time than money, some need more money than time. Make sure you are pursuing a strategy that can work for you.

Learn the skills, and techniques you will need.

If you want to be a rehabber and you don’t know how to estimate repairs, you are asking for trouble. Likewise if you want to be a landlord you better have a clue how to screen tenants and know the local landlord tenant laws. If you don’t have any money, you need to know the no money down techniques and understand creative financing.

Learn how to evaluate deals.

You need to know how to run the numbers. If you don’t know what makes a good deal, how can you make an offer? If you could consistently buy at 85% of fair market value, is that a good deal? Probably not in most cases. You should know the formulas that investors use to decide if a transaction is worth doing.

Learn the market.

Simply knowing the formulas is not enough. Valuing property is as much art as it is science. Do you know your neighborhoods? Are values going up or down? Are other investors buying there?

You have to know your neighborhood inside and out.  What are the expectations of buyers and tenants. Will buyers expect granite counter tops, hardwood floors and ceramic tile in this neighborhood? Or maybe you can get away with vinyl floors and Formica counter tops. That’s a difference that could make or break a rehab.

The same goes with tenants, how nice does the place have to be to be rented? Overspending is obviously bad but underspending may keep your place vacant for months and ultimately cost more.

There is something called the “100 House Rule.” Until you have gone in and checked out 100 houses you really don’t know the neighborhood well enough to answer the questions above. You should be checking out listings, open houses, for sale by owner, auctions, and deals from wholesalers.  This will give you an idea of both the retail and wholesale markets.

Line up the financing necessary for your strategy.

This business takes money. It doesn’t have to be your money but you better have a clue where the money is coming from.  Some investors with great credit come into this business assuming they could get financing. But they don’t understand that different types of deals need different types of financing.  They go to the wrong lenders and get turned down.

Commercial properties, rehab deals, buy and hold, and whether in your name or held by an LLC would all require different types of loans and perhaps from totally different lenders. You need to build relationships with lenders and learn what they will and just as importantly what they will not finance.

Caution: Most mortgage brokers primarily lend to homeowners. They will say they can finance anything when there is no way they can lend on your deal.

Learn these things to become ready.

Earl Nightingale said “Luck is when preparedness meets opportunity” Will you be prepared?

If you look at what I have said above it is basically; know what you want to do, know how to do it, know where the money is coming from, and most importantly know how to evaluate the deal. Until you know those four things you are not ready to invest. Your number one goal should be to learn those things. If you try to buy before you get to that point, you are not investing, you are guessing.

Happy investing,

Ned

Tags: Beginner · real estate

10 responses so far ↓

  • 1 Shawn // Mar 17, 2012 at 9:07 pm

    Hi, Ned Im am a newbie to tax lien investing and am wondering if its worth it to invest in one or two liens if they are 1k -2k? Simply getting 18% on these transactions after all the due dillegence that has to be put in, then what? Plus if its only once per year it would require me to invest in other states. I have about 1k-2k to invest in should I wait to aquire more funds before I get started? I see all these “Invest with little money, then make big profit slogans” seems like bs. Basically how would I make 1k into a few k’s?
    Thanks reading.:)

  • 2 Ned // Mar 19, 2012 at 6:15 pm

    Shawn,

    You wrote: “Invest with little money, then make big profit slogans” seems like bs.

    For the most part it is BS . . . but not totally. To be successful in real estate investing you have to have resources. Money, knowledge, and time are three key resources. You generally need at least two of the three.

    You can start with a modest amount of money in the tax lien game. I did. Just make sure your expectations are realistic. If you have $1-2K to invest I would start now, but be smart about it. You learn by doing. If you start now you will have much more knowledge and experience when you have a bigger pile to play with. – Ned

  • 3 Shawn // Mar 19, 2012 at 6:51 pm

    Thanks for the quick response Ned, I appreciate it greatly!! I was thinking of investing in the tax lien sale this upcoming May in the city, and Im also looking into becoming a bird dog. From what Ive read and seen online its a great way for newbies to learn the ropes while making money. Thanks again your website is a great source for hometown knowledge. 🙂

  • 4 Ned // Mar 19, 2012 at 8:35 pm

    Shawn, I am usually months behind on my replies – you just got lucky 🙂 Bird dogging is a great way to get started and I am always looking for great deals. I also might need some interns for this seasons tax sale. If you are interested reply via the info I put in the email with the tax lien list.

  • 5 Lynn // Jan 29, 2013 at 5:20 pm

    Ned,

    What do your interns for tax sales do, and how do you pay them?

    Thanks!

  • 6 Ned // Jan 30, 2013 at 12:09 am

    Lynn, I have used interns to help me inspect properties before the auction. I don’t pay them. In return for their help I teach them anything they want to know about tax liens or real estate investing. Are you local to Baltimore or are you in FL.

  • 7 Lynn // Jan 30, 2013 at 10:28 am

    Ned, I am in FL.

  • 8 Robert // Apr 24, 2013 at 10:46 pm

    Greetings Ned –

    I am very interested in becoming your intern. Do you have any room for me?

    I have one rental condo in DC and am eager to earn about the business. Please let me know.

    Robert Przydzial
    202-439-9319

  • 9 Doni // Aug 16, 2013 at 9:42 am

    Hi Ned: I to am interested in becoming your intern. I live in Northwest GA a bedroom community of Atlanta. How do I go about this? Doni

  • 10 Ned // Aug 24, 2013 at 10:06 pm

    I have worked with interns at tax sale time in the past. Right now I am not working with any interns but I may have some administrative work I could use help with.

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