Author: Gray Rollins
Over the last couple of decades we have seen an increasing number of television gods who claim to have built their kingdom through real estate investing. While I cannot refute or support any one guru’s claim, the fact remains that while real estate can be quite a lucrative investment, it still remains a risky venture, especially to the untrained. What they aren’t telling you is the numerous mistakes that they made along the way and how much those mistakes may have cost them in the long run. They aren’t informing you that the laws regarding real estate loans and the rights and responsibilities of landlords are not only constantly changing but are often quite different from one state to another. They aren’t telling you these details because they probably aren’t aware of them.
Most of the guru’s live in one place while the rest of live in the real world. We don’t have the million-dollar mansion and the attorney on speed dial. We have normal lives with the normal worries. We have kids that need braces and cars that need maintenance and we are worried about college funds and whether or not our 401 (k) is going to provide anything near the lifestyle we are hoping to maintain upon retirement. The answer to that by the way is probably not. So we watch these commercials and infomercials and the dream begins to form. It begins as a what if, speaking subtly to our subconscious as we sleep. Then, the voice becomes louder and occupies our waking thoughts until we voice that what if and make our list of pros and cons and decide that we could possibly swing it and convince ourselves that the potential payoff far outweighs the risk.
So where do we go from here? Good question. How does one actually go about buying an investment property? The first step is finding one. You need to have several criteria in place depending on what your goals for the property are. I’ll use flipping as an example because that is the area I’m most experienced with. A good property for a flip is in need of repairs, priced low, and in an area that is poised for growth (whether it be a school system that has just received accolades or new retail developments moving in, anything that signals things are going to be better in this area in the next couple of years). Your goal is to buy low and sell high. If you are the least bit handy, I would suggest finding homes that you feel confident in your ability to repair yourself as labor is generally the most expensive part of a home improvement or renovation project.
Now that you’ve found your property, you are going to probably want to haggle a bit, as I said the goal is to buy low and sell high. Don’t get so caught up in the spirit of haggling though that the deal falls through over something really insignificant. Keep your goals in mind. Make sure your offer is contingent upon financing and the final inspection. Have an inspection done, a thorough one. The cost for an inspection is generally less than $500 and is money well spent. You do not want to find a major problem when you think you are nearly finished with the renovations.
Once you have financing you are on your way. Enjoy the property you and your status as a real estate investor. Remember that there will more than likely be mistakes along the way, and some of them costly. How else can we become experts? Enjoy the learning process and hopefully you will find a very lucrative retirement plan/college fund/dental plan for your family.