Q: Hi Spence and Marty: My hit is that the real estate market is either at or near the bottom and I would like to try my hand at this kind of investing. But how do I proceed – I have been strictly a stocks and bonds kind of guy until now. A bit of a roadmap would be appreciated.
Richie
A: Real estate is always a good investment, but especially now. Like most real estate professionals, we too believe that the market has finally leveled off, and so yes, your instincts are correct, this is a buyer’s market.
We have a tried and true investing system and we will be happy to share it with you.
But that requires a systematic approach to real estate investing, and that is what we think you should use. We have a tried and true investing system and we will be happy to share it with you.
Our approach to real estate investing has five phases. They are:
- Learn about real estate as an investment vehicle
- Research the market in your local area
- Plan how to invest your money
- Invest your funds according to your plan
- Manage your investment to meet your plan’s goals
Let’s drill down and look at each one in a little more detail:
1. Learn: Think of the learning phase of the system as if you have enrolled yourself in a never-ending, money-making, real estate investing, continuing education class.
You will need to turn yourself into an avid reader of real estate books. Dog-ear pages, write down ideas in the margins, and highlight any and all concepts that jump out at you.
Keep going. Subscribe to investing magazines, visit websites, listen to podcasts, and read real estate blogs. You will need to do this kind of study from now until the end of time. The idea will be to become thoroughly and totally immersed in real estate investing success.
By turning yourself into an expert you will shave years off your investing learning curve. The end result will be more money in your pocket – way more.
2. Research: In this phase you need to educate yourself about the actual market in your given area. Markets can and do change drastically, often within just a few miles, so it is critical to truly understand your own market and how it performs before you start buying.
Begin by kicking some tires with a fellow investor or a good real estate professional.
Find out what small rental properties go for. Research the sold properties for the previous six months and get an idea on what properties actually sold for, rather than just what the sellers are asking for the ones that are on the market now.
You also need to become intimately familiar with your local rental rates. Call on vacancy signs and see what vacant units are renting for. This way when it comes time to buy you will really know how to spot a diamond in the rough.
3. Plan: Planning is the most important step in the process.
It is not enough to say, “I want to get rich” or “I want to find some ‘good deals.’” Instead, your plan needs to be personal, written down, and most of all, specific.
Any real estate investment broker worth his salt should be willing to help you with long-term planning, so seek one out to help you make a detailed plan before you move on to the next step.
4. Invest: If you have educated yourself, done your research, and created a plan, it will finally be time to pull the trigger.
Be prudent, though. There is no need to try and hit a home run on your first purchase. Lots of beginning investors make the mistake of trying to buy fixer-uppers or foreclosures right out of the gate. Certainly money can be made with those types of properties but it usually takes more experience.
Instead, especially on this first go-round, we say start smart and make only sound and prudent real estate purchases. Get tricky only after you make your first million.
5. Manage: Once you buy a building you still have to manage it. Thankfully, with real estate, you can do as much or as little of the management as you like, but in a perfect world we believe you should probably manage your first few properties yourself.
This hands-on experience will be invaluable later on, when you finally do turn your buildings over to professional property management.
The best news of all: When it comes to attaining success investing in real estate you do not need to reinvent the wheel. Instead, simply learn the system we have laid out above and then implement it for yourself. The wheel will then roll for you too.
Happy investing!
Have a question about real estate investing for Spence and Marty? Email them at spenceandmarty@buckinghaminvestments.com.
