Real Estate Investing FAQ (Frequently Asked Questions)
How do I get started investing in real estate?
Education comes first. Developing a good knowledge base is important so that you can determine the best investing strategy for your specific situation. There are a few real estate investing books that I recommend on the recommended reading page. Check out #49 for a list of real estate investing websites.
But, do not make the mistake of thinking you have to know it all before you take any action. True learning takes place when you take what you study and put it into practice.
Finding a real estate investing mentor is a way to fast track your way to success. Learning from an expert’s experience and mistakes can save you a ton of time and money.
What typically holds back beginning real estate investors when getting started?
I’m going to cover the top 2 things that come to mind.
1. Negative Thinking
This covers negative self talk, self limiting beliefs, and accepting negative feedback from others as if it were true. This is the most destructive type of thinking that exists. No matter what vocation you’re interested in, if you want to be successful, this must be addressed. Being optimistic and positive is a standard trait among the top performers in every industry. As a Man Thinketh, by James Allen, is an excellent book on the subject. Also, check out 4 Fundamental Assumptions from Your Real Estate Investment Advisors.
Bottom line, if you want results, you’ve got to get off your butt and take action. Reading a hundred books on real estate investing and taking some seminars isn’t going to do anything for you unless you put it into practice. I’ve seen too many professional seminar attendees that continue to spend thousands of dollars every few months but still haven’t bought their first deal. That’s ridiculous! Start making phone calls, start your marketing campaign, and go out and make some offers!
What’s the best way to finance a deal?
Deals can be structured in many different ways as a creative real estate investor so having multiple options provides you the best way to finance them.
Start by looking at your own resources (cash, equity, credit, etc.). Determine what assets you may have personally to use in your real estate investments. If you have some cash or good credit, that can definitely aide you in getting started but is not a necessity . . . I started without cash or credit.
The first and easiest lender to get on board on your team will be a hard money lender. They lend based on a property . . . not a person. Bring them a good deal and the financing is waiting. You can most likely find one at a real estate investment club near you.
Partnerships can be a great way to get deals done. There is a limitless number of ways that partnerships can be set up so be as creative as you want. Our first partnership deal was a 75%/25% deal split. The partner provided the financing and got 25% of the net profit once the property was sold. Check out Profiting from Partnerships for more on that.
Recruiting money from private investors can be one of the most profitable and flexible ways to finance your deals. A private investor can be anyone that wants to make a good return on investment from real estate. We did a free no pitch 100% content webinar on recruiting private money about a month ago. If you missed it, click here recruiting private money webinar replay.
Click here for more on real estate investment financing strategies.
How is the current market affecting real estate investors?
It has affected my business mainly by making it more difficult to monetize properties through sales and refinances. When selling a property, there is a great deal of competition. In my area, there has been a 250% increase of the number of houses on the market compared to 3 years ago. The mortgage industry is still changing so much, who knows what’s in store for us there.
But, with that said, it’s a great time to buy! Anyone that has a lot of cash and/or has the ability to buy and hold properties is in a great position right now! There hasn’t been a better time to buy in many years.
In my opinion, the most important thing you can do right now is to plan for multiple exit strategies. This will insure that you do not put yourself in a tough spot with a house in today’s market.
How do I protect myself when putting a property under contract?
One way is to limit the amount of earnest money that you put down on the contract. We, as investors, rarely put down any more than $500 as an earnest money deposit. We typically put down $100 for earnest money. This money is held by the closing attorney or title company of our choice.
Another way is to have a clause in your contract that states something like, “This offer is subject to partner’s approval.” It can be as simple as that. Doesn’t matter if you technically have a partner or not. This will allow you to pull out of the deal if you find out that it’s not what you thought it was.
After you’ve put a property under contract, you want to make sure to file the right paperwork against the property to protect the deal. The last thing you ever want is to get an awesome property under contract and lose the deal because you failed to act intelligently about it.
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