Real Estate Investing Basics
Find a rundown house. Buy it for next to nothing, mix in a little elbow grease, and spend the rest of your life at the beach. Real estate investing is that easy right? WRONG! Yes, you can make a nice profit by doing this, but there are a LOT of other factors that tie in to your total profit. I'm not going to cover every single factor here today, but I am going to talk about some basics you need to know if you are thinking about getting into real estate investing.
Buy Low, Sell High?
Of course, this is the key, but the main thing you want to look at is buying low, and selling quick and high! Unless you have the capital to cash flow your business, every extra month you spend either fixing it up, or your house spends sitting on the market eats monstrous holes in your profit! For example: I buy a house for $50,000. I put $10,000 into it and put in on the market for $70,000. My mortgage on the property is $500 a month. Let's say from the day you sign the papers, to the time you sign the selling papers, 6 months has gone by (pretty quick in today's economy). That is $3000 in payments that is taken off total profit! Sounds pretty basic, but it something that newbies often overlook.
Know These Two Things Before Getting Into Real Estate Investing -
Every single house you buy will come with its own set of unique circumstances. You must have a strong stomach to succeed in this business. Unforeseen problems will almost ALWAYS rear their head.
I will give you some examples from the last two houses I flipped.
Upon the original inspection, everything was up to code, but thanks to a change of the code while the remodeling was underway, I had to rewire the entire house! Goodbye $5,000.
About two months after purchasing a house and fixing it up, (it was still on the market) the State decided to put my house in a flood zone! The only body of water was a little creek that ran through a golf course half a mile away! What can you do! The flood insurance costs $800 a year! Try selling that to a prospective buyer.
Real Estate Flipping is NOT a Steady Stream Of Income -
Good opportunities do not come up every day, and when they do, you have to beat every other real estate investor to the punch. Yes, sometimes you can make money quick, but just expect it to be intermittently.
Getting Financing For a Real Estate Flip -
2013 is a totally different monster when it comes to getting financing for your real estate investing endeavors. The market is down, nobody has a job, but mainly, interest rates are so low, banks can make more money investing in guaranteed government bonds making 4% to 6%, than lending money to you (who isn't guaranteed) and making 3-3.5%.
The days of the good ol' boys are gone. No longer can your old high school acquaintance who is now a loan officer at the bank, who knows and trusts you, write up the papers right there on the spot and hand you a check. Heck, they can't (or won't) even vouch for you against the bank president or the board.
When seeking financing today, everything has to line up perfectly for the bank, even if you know and can show the bank that making a profit is inevitable. It takes time to build up trust with a bank and the bankers, and even after numerous loans and numerous successful projects, I even get rejected from time to time.
Getting Started Today -
I want to start investing in real estate, but I don't have any money! Today, that is simply not an option. Most banks require at least 20% down. To make it work, you are going to have to start small…real small. You may not even make very much money on the project, but you have to prove you can do it. If you truly believe in yourself, and the project your looking at, put up whatever you own as collateral, and offer it to the bank. It could be your car, boat, or even your own house! (I've done that) This shows the bank you are serious, and shows you have a vested interest, and will make your case more appealing.
Are You An Entreprenuer, Or Want To Be?
Take your business building skills to the online world! Visit my site http://workwithcaseyhicks.com and I'll show you how I've taken what I've learned as an offline entreprenuer, and made thousands online.