As a private money lender, we meet and deal with many real estate investors.
After seeing many successes, and a few unsuccessful ventures, I wanted to put together a list of tips that I see the successful investors using so that you can incorporate these into your strategy.
#1. Build Solid Relationships!
If you really want to get into real estate investing and do it right, you need to focus on building relationships with people.
Because that’s what real estate is, it’s a relationship-based business.
If you focus on a certain local area, it tends to be a “small world” and most of the players know each other.
Think about this: when you invest in real estate successfully, you generate revenue not only for yourself but potentially many other people as well.
It is so important to build a network of realtors, contractors, bird dogs (people who help you find deals) attorneys, property managers, and accountants who can all help your business run smoothly.
Once “your team” knows what you like, your goals and trusts you, you will be amazed at home many deals come your way, not only properties for sale, but contractor deals on materials, discounts on other services, potential tenants, etc.
#2. Know Your Location, Location, Location.
Make sure you are familiar with any area you plan to buy property in.
Do thorough research.
Is the area appreciating?
On a decline?
This can also tell you about potential tenants should you be doing a buy and hold strategy.
Nothing can be more of a nightmare than a property that attracts the wrong type of tenant.
#3. Know Your Numbers!
Make sure you know your numbers.
We have seen a few “rules of thumb” when it comes to determining if the deal will break even or even cash flow after you get a tenant into it, but nothing really set in stone.
And we have heard it all.
The “1% Rule” for example, is built on the idea that you can hopefully get 1% of the cost of the home as a monthly rental payment. $200,000 purchase = $2,000 month rent.
I think in cities like LA or Boston the “1% Rule” might work better than homes in the Phoenix metro area.
In our opinion, it is better to create a quick spreadsheet and run those numbers.
Here is an excel spread sheet from the bigger pockets team to help you get started.
#4. Know the Utilities (If You are Doing Multi-Family)
If you are buying a duplex, triplex or small apartment building, are the water and electric separate for each unit or lumped together?
This is important because if they are lumped together, you might get stuck paying for utilities for the entire property out of your pocket.
Trying to “guess-timate” what each tenant uses might cause problems.
#5. Research the Condition of the Home.
This is crucial.
We once saw an investor who purchased a property with a dry pool only to find out the concrete pool leaked. This cost him over $6000 to repair and was not in his budget.
Make sure you hire a pro to inspect the property so you have an accurate list of what repairs are needed to sell or rent out the property.
Well there you have it, the best tips we know to get you started as a real estate investor.
Building a team is at the top of our list and in my opinion the most important.
When you find that awesome deal and you have availability to funds for the purchase, a contractor ready to do repairs, and a property manager ready to place a tenant into the home, and you know your numbers, you should see good success in your business.
#6 Advanced Strategy: AirBNB
I was doing a little reading the other day and came across an investor asking about AirBNB (Short Term Renters Crowdsourcing Website)
Here is an idea to research: What if you hired a person, who was say going to school/college, as the “house manager.”
In return for lower rent and maybe a little salary, you could set up a AirBNB gig, charge per night fees and run a little hotel type service.
This would only work in certain areas but it is a strategy to keep in mind should the need arise.
Now go out there and take action!