During the last nine years that I’ve been in the real estate industry I’ve witnessed some crazy market swings. I entered the market as an industry professional as the market was peaking in 2007 and have worked through the lows that followed. During each of the phases of the market during my tenure there has always been one constant: opportunities to invest in Real Estate.
Jumping into the “real estate investment” game as the average sales price was crashing during 2007-2009 probably seems like a crazy time to invest in real estate. However, I did. My very first flip was purchased in April 2008 at an auction and we saw over $40,000 in profit in just four months. It’s important to note we explored all possible avenues to find our opportunity including, but not limited to, foreclosures, short sales and auctions. While our profit is respectable, you can’t expect the hyped up profit margins as seen on television shows that make investing look so very easy. Since then, I’ve profited anywhere from literally $7 (no missing zeros) to $65,000 on flip investments.
Want to know how to get started? I’ll keep it simple with three steps.
Step #1: Do your Homework.
Start reading what the experts have to say, I recommend any of the following:
- Rich Dad, Poor Dad or The Cash Flow Quadrant by Robert Kyosaki
- Millionaire Real Estate Investor by Dave Jenks
- Flip by Rick Villani
Step #2: Figure out Financing
How exactly are you going to fund this exciting venture? Honestly, you’ll need to start with $200,000. I know, you’re thinking, “Wait a second, if I could just find $200k, I wouldn’t need to invest in real estate,” or “Getting my hands on $200k isn’t that easy.” I know this, but there are ways for just about anyone with good credit, stable employment history and a manageable amount of debt to get their hands on $200,000.
The most expensive way is a traditional personal loan for a “second home.” This option will require 20% down and have quite a few fees on the front end. This is a better choice for buy and hold, rental type investments.
Another option is a “line of credit.” Usually you’ll get a line of credit based on other assets you own, like your home or other investment properties or a business. This is the cheapest option, but does put some liability on whatever asset you are choosing as collateral.
The last option is to go to a “hard money lender” (HML). There are many options with hard money and different ways you can structure a hard money loan. Be sure to understand the details of the loan. The positive aspect about hard money is that once you’ve gotten the lender to commit…it’s essentially cash in your hand. The HMLs are very smart though; they want lots of details for the project and you need to show you’ve done your homework and are educated on the process or they’ll walk away. Usually HMLs charge between 10-15% interest plus up front fees. Don’t forget to do your homework on your HML. Get references from the HML for other investors who’ve used their services.
So, you’re in the fortunate situation that you’ve now got access to $200,000…NOW WHAT?
Step #3: Call me.
We’ve just launched our new Investor Division and likely already have an opportunity waiting for you. We scour the auctions and foreclosures so you don’t have to. You’ll need to let us know where you’d like to invest (ie the cities or towns you’d like to focus on), your overall budget and your optimal type of home to work on. Townhomes are a great way to get your feet wet while minimizing the amount of surprise costs. They are smaller and share structure with neighboring homes so you are less likely to get in over your head.
After we’ve found the right opportunity, we’ll have all the tools for success to help you meet your goals. We’ve got a stager at the ready to help with material selection and post renovation staging. We’ve got trustworthy contractors to do your renovation and you’ve got Atlas to get you top dollar on the post renovation sale.
Investing is definitely not for the faint of heart and not everyone can do it. It’s not nearly as glamorous or profitable as HGTV makes it out to be, but it can be a very rewarding second stream of income that can easily become your primary stream of income with the right plan and team.
If you’d like to schedule a time to talk to our team about making your investing dreams a reality, contact us today.