The name of the game in today’s market is FIND THE DEAL and the rest will then fall into place, The problem today is there is more money out there looking to invest than there are good deals to buy. Back in 2009-2013, the opposite was true: there were a lot of deals to be had, but not very much money or appetite to take the risk with that money to buy these properties. Remember, we were coming out of the greatest real estate recession on record. Today, if you can find the deal, there will be banks and/or private money (friends, acquaintances) you can partner with. Even if you do not have experience, trust me, if the deal is good enough you can get it financed.
So, if finding the deal is the key to getting started, then how do you find the deal? It starts with education. You need to learn what makes a good deal which means you need to educate yourself on how to analyze a piece of real estate when it comes across your desk.
More specifically, you need to learn the following:
- Your market and what houses are selling for. Drive around and also study the realtor sites to get a feel for what a typical house sells for in different parts of town. If you notice that houses are typically selling for $600,000- $700,000 in a certain area, then when an outdated house hits the market for $425,000 you can realize it’s probably a good deal because of your market knowledge. Or at least realize that it’s discounted enough to be worth a closer look. Obviously, prices can vary from town to town, school district to district, neighborhood to neighborhood, etc. so it can take months or even years to build up this inventory knowledge.
Construction knowledge. You need to learn how much construction projects cost so you can figure out how much money a house will need invested to bring it up the level you need to be able to sell it high enough to make money on the re-sale.
Financing- you need to decide how to buy the property and how much this is going to cost to carry the home over the course of the renovation
Commissions and Closing Costs. Don’t forget to factor this in!
So if educating yourself is the key to finding a good deal, and finding a good deal is the key to getting started in investing in real estate, then how do you educate yourself?