7 Simple Steps To Real Estate Investing

Whether you are BRAND NEW to real estate investing or an expert in the game, it's critical that you understand these 7 Simple Steps to real estate investing.

First things first...

o Real Estate is NOT a get rich quick scheme. However, if you learn the foundations and put them into practice, you will make more than enough money to realize any and all of your dreams and goals.

o The real estate bubble is not going to burst! The real estate market will, however, shift and the real estate market will change - just as it always has! What's "hot" now may turn ice cold in the next 3 years (or perhaps even 3 months). But, there are ways to "bubble proof" your real estate investments. It's actually quite simple.

Did you know that in the United States, in 1975, the median home price was $33,300? In 2005, the median home price was $195,000. Historically, the average home doubled every 7 years. If you do the math, it should be well over $200,000.

OK... Now, having said that... The real estate market WILL change and what is "working" today in real estate may not in the future... The rental market was strong a decade ago, but has been soft in recent years. We are getting ready for a turn once again.

Real Estate IS a cycle... and cycles have some degree of predictability. With predictability, you can grow your real estate business into a cash-producing, profit-pulling machine that runs itself WITH the changing real estate market trends. It is still possible to make money in real estate. In fact, now is just as good a time as any to get started in real estate investing.

But, you've got to make wise investments. Sure, you may make some SERIOUS cash in pre-construction, but what happens if (no, not if - when) the market shifts and there are suddenly 35 identical properties on the market for sale in the same building? How long can you afford to carry a negative cash flow on the property?

Or how about taking over property 'subject to'? Sure, it's a great strategy and lenders may be inclined to turn the other way and not exercise the "due on sale" clause as long as the interest rates are at rock bottom prices (You know, those sellers that you're usually taking property subject to from usually don't have the lowest interest rates, right?) If the interest rates spike to 10-11%, don't you think lenders might be MUCH MORE inclined to exercise their option to make you pay off the 6.5% note?

What this means is simply that you must be experienced in the basics - the tried and true techniques, strategies and systems that have worked in the past, are STILL working and will work in the future. You've got to have all the tools in your bag so that you can go with the flow and not be affected when real estate markets begin to shift (which they are already in the process of doing, in case you've missed that memo! ;-)

Step #1 - Set your plan: Figure out what your long term real estate goals are (aka retirement and wealth building) and figure out what your short term needs are with regard to making money in real estate. Then, set up the proper entities and put the plan in place.

Step #2 - Determine what your target market will be: You cannot be all things to all real estate markets. If foreclosures appeal to you, start investing in the foreclosure market. If you want to be a landlord, look to out of state owners to focus your real estate marketing efforts.

Step #3 - Be consistent and persistent: Real Estate is not a get rich quick scheme. Real Estate is get wealthy over time and put some quick cash in your pocket today. You've got to follow your plan and stick with it to see real results in real estate. You've also got to continue to increase your education and your experience.

Step 4 - Don't fall into the "Analysis Paralysis": Learn to analyze properties quickly. Don't get caught up overthinking. It's quite simple actually: What's the property worth? What does the property need for repairs? And how much can you get the property for? It all comes down to numbers!

Step 5 - Become a master of finance!: Real estate is the business of marketing and finance. You must learn about mortgages and interest rates and loan programs that are out there. You must know how to use finance to negotiate your deals and to sell your properties.

Step #6 - Become a skilled problem solver: The reason you will get real estate deals that others don't, is because you are able to solve people's problems. Anything goes on the real estate playing field. You've got to be ready!

Step #7 - You must continue your education: It is important that you are always investing in your education and learning new tactics, strategies and tips that will help you make more in real estate.

If you enjoyed this article, make sure to look up the other articles discussing The 7 Simple Steps To Making Money on Real Estate. The next article discusses Step #1 - set your plan in further detail!

Resolving the Real Estate Investing Fear Factor

If you're a new real estate investor who has thought about real estate investing but have been due to a nagging feeling that you are certain the market will collapse once you step in and you will lose all your money; guess what, you're not alone.

Fear grips every new investor; and no one successfully investing in real estate today would state otherwise. It's common for potential real estate investors to miss out on incredible opportunities for no other reason but an overwhelming sense of fear.

Okay, so let's address some of the most common fears and see whether we can help you to become less anxious, and maybe take the plunge into real estate investing after all.

Negative Cash Flow

Hey, the idea behind investing in real estate is to make enough money to cover operating expenses and loan payment with some left over to deposit in the bank. Having to feed a property won't cut it; no investor wants to feed a rental property.

Believe it or not, this fear one might be the easiest to manage because it's straightforward: simply run the numbers before you buy. Obtain the property's last twelve months income and operating expenses, calculate a mortgage payment, and plug the results into a spreadsheet or real estate investment software program to determine cash flow. If the cash flow is negative, so be it, otherwise dispel the concern and move ahead.

Just be sure to use realistic rents, a vacancy rate (even if the owner claims full occupancy), operating expenses (don't forget replacement reserves), and a loan payment to compute your annual cash flow.

Also, never walk away merely because the property indicates a negative cash flow. Dig a little deeper and look for ways to manage the cash flow. Many rental income properties simply go negative because of poor property management; you might have a probability of raising rents and cutting operating expenses. Who knows, you may even discover a real opportunity overlooked by the current owner.

This Isn't the Right Time

Yes, for any number of national or international events, potential investors often feel it would be advantageous to wait for better times before making an investment in real estate.

But real estate investment has little to do with the economic climate at the time you buy. Foremost, consider the long haul. Economic depressions come and go, but how will the investment property impact your future rate of return? That's what counts.

If it helps, bear in mind that unlike the fluctuating stock market real estate has a profound record for steadily appreciating. Perhaps not overnight, and not without an occasional bump, but historically, real estate value does go up over time.

Losing Your Money

Of course, you wouldn't want to tap into your savings to make maybe the largest financial investment of your life only to wind up losing it all.

The key, however, is to study and research. Learn about the property you want to invest in, and the area where you plan to invest. Look for sources of information like seminars, college courses, real estate software, and real estate investing books. Get an expert appraisal of the property from an investment real estate professional or property appraiser. There's always some risk when real estate investing, but developing a plan with knowledge will negate most of your uncertainties.

Tenant and Management Hassles

Okay, it's true. No one wants the headache of having to repair a refrigerator or to fuss with an unruly tenant; and its understandable why that concern does prevent many people from becoming real estate investors. But life is always a series of trade offs, and trading off an occasional migraine for potential future wealth is generally worth it.

However, it's also true that in time you will learn to deal with and manage most issues in your sleep. If not, you can always hire the services of a reliable property management company to deal with it for you. For about ten percent of the rental income, a property manager will do all the dirty work; the advantage being that it will relieve you of the time and stress of having to deal with tenants and repairs and in turn puts matters like late rents into the hands of experts.

Lack of Real Estate Experience

Just because you have not yet purchased an investment property should not keep you from real estate investing. In this case, locate a real estate agent who specializes in investment property to assist you.

When it actually comes time to buy a rental income property, you'll be surprised to discover that it's not as insidious as it looks, and tapping into the mind of an expert will increase your comfort level significantly. But the keyword here is investment property specialist. A real estate agent who just sells houses won't benefit you; you want a real estate professional with true real estate investment experience.

It's Time to Get Started

Granted, the hardest part about jumping into real estate investing is getting started. We're great at making excuses, and there are always numerous reasons to put off starting something new.

Yes, we want to be cautious. It's better to put the breaks on and approach real estate with adequate knowledge. So if you're struggling, here's my suggestion: learn, research, and plan. Educate yourself about real estate investing, learn about real estate in general and more specifically about your specific real estate market, and develop a road map about the financial security you hope to achieve.

Afterward, pick out that first rental property, make a purchase, and then take over as manager. If you've stuck to your investment plan goals, calculated the numbers, did your due diligence correctly, and work diligently to increase income and control expenses, in time you'll be able to move on to bigger and better properties.