Just like most things real estate
investing can be broken down into easy to learn steps.
Step One - Learn the basics:
Ownership of real estate is
evidenced by a valid deed. When you buy property the seller signs
a deed that transfers his ownership interest to you. Most states
use a Warranty Deed. With that deed the seller warrants that
title to the property is as he has described. You would buy title
insurance in case some defect in title was discovered after the
transfer of ownership. Recording the deed is notice to the world
that you are the new owner.
You must know how to correctly
fill out such basic documents as purchase offers, deeds, options,
leases and rental agreements. Many of those documents have been
recorded in your county and you can see many expert examples
by viewing your County Recorders files.
If you have borrowed money to
buy the property the lender will record a mortgage or trust deed
immediately after the Warranty deed has been recorded. This mortgage
is a lien on the property and gives the lender power to foreclose
if you violate terms of the loan, like stop making payments.
Step Two - Understand how to
buy real estate:
Most sellers want to sell their
property for full price and all cash. Investors generally want
to buy at a discount and delay paying for as long as possible.
To do that you must understand the many techniques an investor
can use to satisfy the needs of the seller.
You only make good deals if
the seller is urgently motivated to sell. Perhaps he has lost
a job, been transferred, has a drug problem, is facing divorce,
bought more house than he could afford... or a variety of other
reasons why he/she must get out from under those mortgage payments.
You can control real estate
with leases, options, subject to techniques and a host of other
"creative ideas". To be successful you must understand
which technique to use in which situation. You just talk to the
seller until you learn what he/she will accept.
Step Three - You must uncover
a steady stream of motivated sellers:
They are always plenty of people
who must sell their homes and sell them in a hurry. The trick
is to find them. Since most people will so "no" to
any offer but all cash, you need to be constantly on the search
those motivated home owners.
My experience is that most new
investors don't fail at investing... they fail at marketing.
Marketing is how you sell you skill as an investor and find enough
motivated sellers to keep the cash rolling in.
You can use billboards, flyers,
telephone calls, door to door canvassing, bandit signs, newspaper
ads, Web sites, direct mail... or any combination. If you don't
use good marketing every week of the year your chances of becoming
a successful investors are minimal.
Good marketing is the secret.
You can be expert at every creative buying technique in the book.
If you can't locate motivated sellers every week you just won't
be able to buy houses.
Time and again we've seen people
with just basic knowledge of one or two buying techniques become
very successful, because they are unrelenting in their search
for motivated sellers. Perseverance and stamina can work wonders.
My choice is to mail postcards,
because they are inexpensive to prepare and send. You can read
more about my postcard system at http://digbig.com/4cjxp
Step four - Always have an exit
strategy before you buy:
Before buying an investment
property you must carefully evaluate the potential for profit.
One of the keys to your evaluation will be to determine what
you will do with the property if you buy it.
Included in the many ways to
profit are:
1. Place it in your "buy
& hold" inventory if it will produce profitable rental
income.
2. Place it in your "buy & hold" inventory if it
will produce break-even cash flow and you expect it to increase
in value by 8% to 15% or more per year.
3. You can assign the purchase contract to another investor for
a one time cash payment.
4. You can buy the property and immediately sell it to a retail
buyer and cash-out.
5. You can exchange it for a more desirable property.
6. Refinance cash out and use the money for the down payment
on another property.
7. Etc...
Finally
Now you can visualize the four
basic steps in real estate investing. You'll never know all there
is to know about every step. Just get started and add to your
knowledge as you go along. Remember, all it takes to be successful
is perseverance and stamina!
Mark Walters has written
"Single Family Homes - The No Risk Investment".
About the Author
Mark Walters is a third generation investor.
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