How Do I Get Started?

How Do I Get Started?

I will presume that your goal is to acquire a monthly cash flow by investing in income producing real estate. I recommend that you start with a two-tenant property. This page is about how you find that first property. By setting your sites on a two unit property you will prepare yourself mentally to turn down any single family properties, unless they are a really great deal. All of the methods presented here are being used by investors’ everyday to locate properties to buy. As you search for that first property, one thing will lead to another until you find a profitable deal. You cannot find that lucky, good deal unless you are out there looking every week and are prepared to act when it comes along.

Each of the real estate investors that I have met over the years nave started out with small investments and built up their property portfolios as their experience and net worth grew. As you accumulate more properties, and the cash flow from them, your options as to the size of deals you can do and the methods of financing them increases.

I started my real estate investing with an owner financed $28,000 house with a garage apartment. My last deal - an office building required a $700,000 loan. My next project (a mini-storage) will involve a loan of about $2,100,000 and a total deal value of about $2,800,000. My point is that it gets easier to do larger deals as your financial statement and experience improves.

Best ways to find bargains?

This Article is duplicated in "Buying A Rent House"

You should consider having business cards printed that say, "I buy houses". Pass them out everywhere you go. Every now and then a deal will come your way. It really does work. Read the classified ads every day, looking for bargains. Put signs out that say you buy houses. The main point is that you are always looking and you let everyone know you are looking. You will find the deals.

Call the banks and savings and loan associations in your area; request a list of foreclosures that are for sale.

Check with your county court house for information on tax sales; be sure you understand the auction rules.

Check the Internet for U.S. Marshall Sales of seized properties

Drive the residential streets looking for the house on the block in the poorest condition. Look up the owner in the courthouse records, or on line (county records), and send them a letter asking if the home is for sale.

You can get a list of government property sales at http://www.pueblo.gsa.gov
Federal information center: Go to Federal Programs - U.S. Real Estate - Property Sales List.

This web site lists government real estate properties that are sold by auction or sealed bid, and explains how to get more information. The web site also has contact list of other government seized property auction dealers.

I met a husband and wife team a few years back that found homes for sale at bargain prices by looking at homes for rent every Thursday when the paper came out. They were looking for landlords who were disgruntled and fed up with the problems of being a landlord. They would then offer to buy the house at a good price (good for them). They had to look at hundreds of homes to find a deal, but it worked, as they had seven when I met them. They knew the market, they offered a cash deal, they closed on the deal within days. After closing they took a mortgage out to replenish their funds. The plan was to offer $15,000 less than they thought the home was worth - (condition being a consideration), and close the deal only if they could buy at $10,000 under market. They worked the blue collar neighborhoods.

NAREI: Go to the national Association of Real estate investors’ web site to see if they have a local chapter in your area. www.narei.com....Join the local group and let the other members know you are a buyer. There will be people there who scout deals and turn the deals over to investors for a fee. Expect to pay from $500 to $1500 to the scout who brings you a deal. There will also be people who buy fixer-uppers and sell them to investors.

Business Cards.

Print up 500 business cards that say "I BUY HOUSES" with your name, phone numbers, and your e-mail address. Pass the cards out to everyone you meet, and tell everyone that you are looking for houses to buy. Pass the cards out long enough, and a good deal will come your way. You can also have signs printed and put them on roadsides that say I buy houses and a phone number (check the local laws in your area on roadside signs).

Learn The Market.

Start Looking at Houses. Check the newspaper classifieds in your city for houses for sale. This is your new hobby at breakfast, at lunch, on break; you are reading the classified ads or reading a book about real estate. In order to know the values of homes and the current rental rates in different areas of town, you must look at lots of houses. After looking at a hundred houses you will know a bargain when you see it.

Look for words in the ads that might indicate a bargain such as, for sale by owner, handy man special, rent to own, low down payment, etc. Call on all the ads at first. Do not become selective for the first two or three weeks. You are trying to learn all that you can about the market and how the different people handle the calls. If you start getting selective, you will miss a lot of opportunities and it will take longer to get comfortable with the process.

When you call, say “I am calling about the house you have advertised, what you can tell me about it?” If they try to pre-qualify you, tell them you are looking for a home for your son or another relative and also for a rental property or two, preferably a duplex. That will get the person running the ad to provide you information without them having to nail you down on the details. Spend all your free time out looking at homes for sale or for rent.

House For Rent Ads.

Check out the classified ads on houses for rent, and go see the properties. This will give you a feel for the rental rates in different parts of town. You will need rental rate information to evaluate the cash flow of any potential purchase. As you look at rentals, you will meet all different types of landlords and learn the different ways that they operate. When you meet one that complains about being a landlord, you just may have found a bargain. This is how I found my first owner financed house.

Houses In Need Of Repair.

When you are out looking at homes for sale and homes for rent, notice any houses that are in need of repair or maintenance. Write down the property's address, and search your city's tax records (most large cities have this information on-line) for the owner's address, and send the owner a letter inquiring if the house is for sale. There are a lot of absentee landlords that might sell if someone just asks. You might get a hundred no's, but one yes can make you thousands of dollars.

Working With Real Estate Agents

Real estate agents are working for the seller. It is there function to get the highest price for the property owners. Whenever possible, when buying* I prefer to deal directly with the sellers. I have found that the down payment required on properties when a real estate agent is involved is larger, even if the owner is financing the deal. This is due to the sellers closing cost running 8% to 10% of the house’s sales price (with the agents commission included).

Real Estate agents for the most part are hard working people, and if you are lucky enough to find a good one to work with that brings you the kind of properties you are looking for, they can be a big help. One would think that the real estate agents would realize that real estate investors could help them increase their sales and commissions. You would think they would want a list of investors to work with who buy houses on a regular basis. I personally have not found that to be the case. My point is, for you not to rely on real estate agents. Proceed as if you must find every deal yourself. Then, when you find a good agent interested in helping you build a profitable inventory of rental properties, you will be ready to take advantage of that opportunity.