Getting started in the real estate business can be a very overwhelming experience. There is a lot more that goes into closing a deal than simply finding a house you like. There are a few key items that are needed to ensure success. Skipping over these items can leave you chasing your tail. The more prepared you are before you enter the business, the greater your chances for success. Instead of covering all your bases, start with just a handful of select items. Before you look for your first property, you should have five essential resources in place.
1. Financing: It takes money to buy real estate. This isn’t a shocking statement, but many investors aren’t ready to buy. The first thing you need to do if you are thinking about using lender financing is getting pre-approved. Most realtors will not take you on a listing appointment said letter. Not only should you have an idea of what you are approved for, you should know all your numbers. You need to have an idea of what the monthly payments will be for different purchase price ranges. What you think you are approved for may not be the case. Mortgage guidelines are constantly changing. A loan program that you may have been approved for may no longer be around. The very first step you should take as an investor is to see what you are approved for. You don’t necessarily need to use lender financing, but you should know where you stand.
2. Local market knowledge: It is critical to know everything about the area you are considering investing in. The better you know your area, the more efficient you will be with your offers and numbers. This takes more than looking at a few past sales. You need to know local demographics, foreclosure numbers, unemployment data, new housing starts and other trends. Each of these things will be very different from San Diego to Austin. A lot can change inside a town within a few miles. You need to know what areas are desirable and which you should pass on. Getting involved in a bad property will impact the rest of your business. It could take several months to recover. Knowing your market is like a coach knowing their team. They will know the strengths and weaknesses of each member. If you treat your market like a team, you will get the most out of it.
3. Lead generation: There are dozens of ways to generate leads for your business. The method you take is typically based on your budget. One common mistake new investors make is trying to do all of them. Instead of looking into a handful of methods, narrow your focus to a select few. Once you have a few in mind, you can chose which one or two you are willing to commit to. It is better to do a few things multiple times than to do a handful of things once. You don’t need to start off with a direct mailing campaign or other ideas that will break your budget. Whatever you do you need to dive in head first. The number of leads you generate will directly impact your business. You need to have your ideas ironed out and ready to go when you start.
4. Contractor: New investors like to wait until they have a deal to reach out to contractors. This is the worst thing you can do. Even if you have yet to submit an offer, you should reach out to a few contractors. This will not only serve as good education, it will also allow you not to skip a beat. It is very difficult to make quality offers without properly estimating repairs or upgrades you have in mind. A good contractor will help you in this step if they feel that you will have business for them down the road. By waiting until your offer is accepted, you will waste precious days talking with multiple contractors and collecting estimates. Some contractors may not work with you before you are established, but those that do you know you can depend on.
5. Private/hard money: Not every purchase you make requires lender financing. Some deals are better served for private money lenders. Even if you don’t think you will need it, you should line up hard money lenders. Hard money lenders are much more accessible today than ever before. In most markets, you can find multiple lenders with different structures and options. Bank owned deals give favor to cash offers that can close quickly. Here is a perfect situation for you to use hard money lenders. You never know when you will have a deal that hard money is best for. Before you get started, you should know how the process works. You should have multiple options that you can call if a deal unexpectedly falls into your lap. The more resources you have to close, the better chance you will be successful.
Focusing on these five areas will prepare you to make an offer. Not only will you be confident in making offers, but you will get more accepted. From there, you will have a contractor lined up and you will be on your way. There is never a perfect time to start investing. There is always something you wish you were more confident in or knew better. Having these five resources in place will give you the jump-start your business needs.
