FAQPosted by: theinvestortoday
Real Estate Investing Frequently Asked Questions
So, you’re serious about becoming a real estate investor or you wouldn’t be reading this, right? One of the challenges you’re going to face is in obtaining quality relevant information.
Disclaimer: I set up this site because I wanted you to learn real life expectations for what you can make in the real world and what it will take in terms of effort. Now lots of people do make millions in real estate but getting there depends a lot on what you’re willing to put in.
When you are considering real estate investment advice, be careful of the source you gather your information from. There is more than one person who will give you answers to your real estate investing FAQ but not all of them are of equal value.
Ask yourself honestly if that person is actually using their own investment advice to earn a profitable living through real estate. If the answer is “no,” then you better take that advice with a grain of salt. Quality investment advice should only come from a qualified investor.
Whose advice should I be leery of?
Be careful as you’ll notice many friends, family, agents, brokers and even lawyers can give you a whole lot of misinformation. In all honesty, if they knew all the answers to what worked and didn’t work in real estate investing, they’d already be using that advice to become wealthy. Your mom’s life advice can be brilliant but her real estate advice may not be so valuable. Do you think Donald Trump would give you the same advice on real estate? Which of those two would you rather hear tell you about investing? For me, I love my mother but her real estate investment advice is pretty lousy.
Since chances are those people have probably not successfully mastered real estate investing, you’ll probably want to look for other sources for your advice.
The Real FAQ as Told by a Real Investor
Q: Does real estate investing really make people rich?
A: There are some people who get incredibly wealthy through stocks and some other people who do not. For the people who don’t succeed, is it that stocks don’t work or that the people using them don’t all possess the right knowledge and skills?
It’s funny because every man is a “self made man,” it’s just only the rich who admit to it. The wealthy are what they are because they have applied knowledge that works. Studies repeatedly conclude that over 90% of wealthy individuals have become wealthy through real estate. Does it really work? It works better than any other system of business to produce wealth with the right knowledge and skills.
Q: Which techniques work and which ones don’t?
A: Unfortunately, there is no “one size fits all” answer to that question. In the USA, short sales and lease options are great techniques to get started towards producing strong profits. In other parts of the world with more stringent banking laws, you may need more extensive knowledge on how to start private capital funds and similar ventures to get around having to have out of pocket cash.
Q: How much money do I need to start?
A: Donald Trump once said that using your own money in a deal is just “lazy.” If you understand how to correctly negotiate discounts, you can always find capital partners, banks, private lenders and others sources to fund your deals. No matter who you are, eventually your money runs out and so you have to learn how to raise capital in order to build and sustain wealth. No one ever got rich using only their own money.
The single biggest misconception is that having “debt” is a bad thing. Nobody ever achieved wealth without it. It’s true that high interest credit cards and consumer debts are bad. However, all businesses use loans and private capital debts that generate more incoming profits than the debt requires them to pay out. That is the only path to wealth. There is no limit to the number of profit producing debts that you can afford.
Q: What is the best place to start?
A: There are tons of free resources online that will teach you the basics you will need to proceed forwards with real estate investing. I would strongly urge that you simultaneously learn some marketing skills as you will find that most investors come up short not because they have a shortage of techniques that work but simply due to their inability to understand marketing. Marketing is 90% of any business. You cannot achieve long lasting financial success in any business without strong marketing.
Q: What is the best area to buy in?
A: There is another huge misconception that you need to buy real estate in the right area. Learn to invest your money in great deals, not great areas. If you’re looking to buy a second property and you want to hold it for a long period of time, then I’d strongly urge you to check out the fundamentals of cash flow course. However, if you learn to buy property with significant discounts built right into the purchase, you will be immune to almost any local market conditions. To successfully make money in real estate you need to learn to buy significant equity at the moment of purchase and then sell that equity. The “best area” to accomplish that is anywhere you can find such a deal. That’s why all great investors know that making money in real estate happens when you buy, not when you sell.
Q: What are the best types of properties to buy?
A: The best types of properties to buy are much like what are the best areas to buy. The best types of properties to buy are ones that give you significant equity right at closing. That means that you are buying it for cheaper than the rest of the local market would value that piece of property for. The best types of properties to buy are the ones that offer the largest discounts with a fixable solution to why they were sold to you for that cheap. That can be any type of property.
Q: Should I flip/rehab properties?
A: You have probably heard a lot on TV about this type of investing. There are many people who get rich knowing full well how to invest in stocks and there are many people who are content getting 4% in a savings account. Most generic ideas that are sold to the public produce “slow, steady, gradual, and safe returns.” They may produce some returns but they will not ever achieve wealth.
When you rehab or “flip” a property, you’re really just trading your time for money. Having said that, you do not have an unlimited amount of time to fix properties. While you can certainly earn a profit this way, it is extremely rare for people to become wealthy from “flipping.” I have seen investors who knew little about buying with equity put their time and sweat only to walk away breaking even with 6 months of labor and time wasted. I would suggest you learn to fix contracts and financing rather than learning how to swing a hammer. The former is much more profitable and it consumes a lot less time.
Q: Where should I get my investment advice from?
A: There are many “gurus” who offer $5000 weekend boot camps and expensive coaching. The bulk of what you will learn is motivation. While motivation is an essential part of your success, you will probably not get fair equal return on your investment. The best investment advice is always found at your local real estate investment club. There you will find real investors who are using techniques that work. If you don’t waste their time, you will usually get 10-30 minutes of their time to “pick their brain” with relevant questions about how you should focus your efforts. Just be sure to not waste their time. Having a real person that you can ask real questions to is worth its weight in gold.
Q: What is the best real estate course to review?
A: There are many quality courses out there that will help you achieve lasting success. Be wary of courses that have endless “up-sells” with boot camps, personal coaching and more detailed courses on the same material. Don’t buy hype and seminars. A true real estate course should be a complete guide from start to finish so that you can complete the type of investment you are trying to accomplish without the need for additional information. Admittedly, we are clearly biased on the subject but I would have you check out Matthew David’s Short Sale Mastery, Matthew David’s Lease-Option King and Cash Flow Fundamentals. All of them are written in collaboration with real life wealthy real estate investors using these techniques in the real world. They are all stand alone top of the line courses. Our real estate investing 101 article is a good place to start understanding the fundamentals.
Q: What skills do I need to be a real estate investor?
A: Most new investors are able to grasp the techniques but they do not have enough qualified sellers to apply their techniques to. As with any business, you will need to have strong communication skills, good technique know how and creative marketing knowledge. It will take time to learn these but the good news is that you only have to learn them once to become wealthy.
Q: How many rental properties will produce enough cash flow to live off of?
A: This is a great question because most people think that owning rental properties is a good thing. Rental properties are for suckers (okay so maybe uninformed is a better word choice). Instead learn to create real estate mortgages, write creative contracts, master creative financing or have rental properties managed in bulk. The banks gets rich from your property with very little interaction and management. You can’t become wealthy if you have to do things like fix a toilet or worry about the hot water heater every other night. Learn ways around having to dedicate your personal time and efforts towards managing properties.
For instance, if you purchase a home and your total payments are $1000/month and you rent that property for $1100/month you receive a total positive cash flow of $100/month. You are still liable and you will have to manage any ongoing issues with the home. If you sell that same home under creative financing terms and you hold paper as a 2nd lender, you can make the same $100/month acting like a bank without any of the hassles. In the second example you are sacrificing the equity you build very slowly over time but you do not have to oversee the property. You will save years of head aches and hassles by using a creative investment agreement instead of actively managing the property. However, if you buy your equity at purchase as urged on this site, that equity lost over 30 years is almost irrelevant. The years gained not physically managing the rental property will enable you to find more great deals.
Q: What if my credit sucks and I have no money?
A: Well I guess you’re screwed and S.O.L. then… just kidding. I started with no money and just about the worst of credit. There is lots you can do to improve your situation quickly. Firstly, fix your credit ASAP and start earning money without using your own cash. Join our mailing list and we’ll show you how to earn money and fix your credit for free. Despite all that you may have heard, it has never taken credit or capital to profit from real estate.
Go to my homepage and sign up for my free wholesaling course and I’ll show you just what I mean.