Real Estate Investing - the Real Keys to Real Success

The real estate market can be fun, exciting, fast paced, scary, overwhelming, profitable, time consuming, and crazy. That’s quite a range of emotions for one subject! Even when things are done right, there can be moments of extreme anxiety, but you can make it through! I am not trying to scare anyone away, just prepare you. Real estate and property flipping is the most exciting business I have been involved in, and reading this article will help you get started in the right direction, and to avoid some common mistakes.

Let’s get right into it, and start with the basics. The first step is to determine what part of the business appeals to you, and also what part of the business you can get into at this moment based on your circumstances. Let’s start by reviewing a couple of options for those of you that have very little money to start with, or even no money. Later, we will discuss options for those of you with money to invest.

There are a few ways to get your foot in the door in the real estate business without actually having your own investment funds. The quickest and easiest way into the business is to become a “birddog” for investors. This simply means you find the deals, they buy them. You can earn a fee from bringing them what they are looking for. I recommend looking in the phone book, on the internet, and watching for signs that belong to an investor. Call these people and tell them what you are looking to do. Ask them exactly what they are looking for, and ask if they will work with you if you bring them a great deal. Nine times out of ten, they will say yes, and give you a good idea of what their investment formula is. Pay close attention, even if they don’t buy a property you bring them, you have just gained valuable knowledge about what local investors are looking for! Be sure to get something in writing regarding your payment, before you give them all the details of the deal!

Another way to start with little or no money is wholesaling. I don’t recommend this if you are a complete novice. Most wholesalers have this strategy: Tie up the property with a contract, find a buyer that will pay more than your contract, and you make the difference when it closes. Be sure your contract has an out in case your buyer does not close. If you have no money, you don’t want to have the seller try to force you to close on the property.

The third no money technique, and the way I broke into the business, is to create a partnership with someone that has money, but not the time to search for a property and put the deal together. Again, this is not for a complete beginner, you need to know the basics to ensure you actually profit from the deal! Form a “LLC” with the partner, and use that to hold the property you have chosen to purchase. Be sure to treat it as a business. Everything to do with the business is to be kept separate from your personal funds. If you are getting paid for anything, write an invoice, and “submit” it to the business. Keep good records, you will need these for tax time!

OK, I realize there are still people out there that have money, and many investment books leave you out! Let’s look at a few options for you to get started.

First, you need to build a solid team. There are a lot of people that will work for you, for FREE! Truthfully, it’s not actually for free, but a lot of this business is based on commissions, so it is not costing you anything to have people working for you. In fact they are getting paid when they bring you a deal that will make you money. So you need to build a solid team. I recommend having a real estate agent on your team. They have access to bank owned foreclosure listings, and are your best bet to gain access to these properties. Foreclosures and REO’s are at an all time high right now, so it would be foolish to miss this opportunity.

Second, find a good “birddog”. Read above for details on that term. Find a young aggressive person that is really looking to make it in the investing business. Please be sure if they bring you a great deal that you actually close on it! Most people starting in the bird-dogging business don’t have money. Help them out, and they will be loyal to you. This is how you get the best of the best. They have the time, you have the money. It is a win - win relationship.

The next person to add is a banker. You may have money, but the more of your own money you can keep, the better. I suggest getting in with a local bank or credit union early on. As you move on to more deals, they will be comfortable continuing to lend to you. Be sure to speak with residential and commercial lenders to find who may be the best fit for your personal investing strategy.

This article barely touches the surface of getting started in the real estate and foreclosure investing business. Proceed with caution, double check all your numbers, and be extra conservative. Pass up a deal if it is not what you expected. Don’t get emotionally involved, remember that every property is just numbers in your spreadsheet! With that said, get excited, and go flip some houses. -Justin Razmus