Getting Started In Real Estate Investing

getting started in real estate investing

I’m willing to bet that you’ve heard that investing in real estate is one of the best things you can do. But have you stopped to learn about how it really works? Most people just assume it’s flipping houses, but there’s actually a lot more to it than that. Never mind remodeling a house, what about finding the sellers, buyers, and getting all the contracts in place in case things don’t work out?

So, here’s the quick summary of how you can get started in real estate.

Learn about the different types of investors

Ok, here’s the breakdown:

There are three major types of investors (and there are more sub-sections).

Wholesalers are essentially the middle guys that can find a seller who needs to get rid of their home fast, and they find a buyer to pair up with the property. What generally happens is the wholesaler gets an assignment fee, let’s say $3,000, that they put on top of the sales price of the property. The buyer, a flipper or buy-and-hold investor, will purchase with the sales price + assignment fee. The wholesaler makes 3k, doesn’t need to put any cash down, and has helped a seller get out of a bad financial situation while helping an investor find a property to work with. These guys are usually called home buyers.

Flippers are the most common investors that people think about. These guys buy properties low, spend anywhere from $20,000 to $100,000 on repairs and remodeling, and turns the property around on the market to make anywhere from $20,000 to $200,000 from the sale. While these guys stand to make the lion’s share of the profit, they also take on the majority of the risk.

Lenders are investors who simply provide the funding to handle a property flip. Flippers may use their own money or a lender’s money. Lenders can be private money or hard money. Hard money acts more like a bank in the sense that they have an organization that handles a process for vetting the borrowers. They also generally have higher requirements and larger interest rates. Private money lenders are a bit more lenient on all accounts. A private money loan might be something like $200,000 at 10% interest rate with 3.5-4.5 points (points are essentially a percentage of the sales price due at closing to the lender).

Alright, we’ve got that out of the way! Let’s talk about how to find deals.

Marketing is the key to success for real estate

Regardless of what your role, marketing is the absolute most important aspect of finding houses that need to be rehab’d.

For wholesalers / flippers, the most common methods are:

  • Bandit signs (illegal almost everywhere)
  • Bird-dogs (people who find houses for you for a fee
  • Cold calling
  • Cold emailing
  • Cold mailing
  • Facebook
  • SEO
  • Facebook Ads
  • PPC Ads
  • Driving 4 Dollars (driving around looking for vacant houses)
  • Foreclosure lists
  • Probate lists

 

Almost all of these methods require some form of up-front investment. The cheapest methods are foreclosure and probate lists, which you can purchase from your county, usually around $20-$40. The challenge with lists like these is that everyone else has access to them as well, so it all comes down to who can get in touch with the homeowners first and who can convince them the most.

Driving for dollars is the cheapest method but not always very effective, simply because you’re looking around for houses that have signs indicating a homeowner may be willing to let go of the property. If you see a property that looks like it’s vacant, unkept, boarded up, super ugly and messed up or can’t afford their repairs, you have a potential prospect and have to start digging to find the homeowner’s contact information.

Each of these methods can be further Googled and you can find a ton of resources on how to get started with them and advice to maximizing the efficiency with each method.

This is the most important part of real estate investing right here!

This is where you should pay most attention:

The absolute most important part of real estate investing…..

is networking.

Yep, that’s right. Networking.

Here’s why:

When you network with other real estate investors, you build relationships where you know who your buyers are, your lenders, your property suppliers, and other wholesalers.

It doesn’t matter if these people do the same thing you do. That’s because joint-ventures in real estate are super common. You may be wholesaling and have a property, yet you’re having a hard time finding a buyer. Then you meet with another wholesaler who has exactly the buyer you’re looking for, and now you JV the property, split the profits, and everyone makes money and walks away happy.

Networking in real estate also lets you find people that would be willing to help and teach you. The real estate community is more about helping each other finding financial independence. If everyone helps each other, everyone wins.

How do you network?

Look for local meetup groups, REIA groups (real estate investor association), and monthly or weekly gatherings. Any major city will have a bunch of these events happening all the time. This is where you need to be if you’re getting started in real estate investing. Even if you’re brand new, they always have some presentations on teaching newbies and people are always willing to share their experience.

Here’s a video from Flip Man about building a list of cash buyers for wholesalers:

 

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