Why real estate: getting clear on your Intention:
While many people have their favorite way of storing money for a variety of reasons, the return is so low in many places (stocks, banks, etc) that many people and institutions are turning to real estate. It is not difficult to create a steady income stream with a predictable return on investment, and many people are using self-directed IRAs to invest their retirement funds. Now we are seeing $ pouring into the country and real estate market from a variety of sources, including international buyers. With the government and some banks drying up surplus inventory & requiring some bulk property buyers (who buy many properties at the same time) to rent rather than turn houses back onto the mls (multiple listing service) for resale, there is less surplus inventory on the market for sale. Even very experienced investing Pros are often finding that bargains are getting harder to find. Many people are thinking this is the year to buy for the buy & hold folks and, when possible, homeowners.
Step 1: Recognizing your goals & needs Consider options and choose: Do you want to be an active or passive investor? Do you want your money to grow w/ little supervision from you at an agreed upon rate, or do you want to be actively involved in managing your investment, potentially maximizing your potential profit? For example, passive investors may prefer to buy notes (that is, to agree to create a loan contract with the loan being secured by real estate that is worth more than the note/ loan, with an agreed upon rate and term for the note). Be wise whom you make this type of agreement with!
An active investor, on the other hand, is involved with the management of the investment, such as managing the rental & repairs for a property or hiring others to do the same. This choice can change over time, and may differ according to the specifics or timing of a particular investment, and will vary quite a bit according to the amount of time an investor has to devote to their investments. I have never seen better returns on investments, better bargain prices for rent ready properties with outstanding cash flow and choice of active or passive investments, handled w/ integrity and clarity, than what is currently offered by Summit Assets Group. One note here: when buying a rental property, there is typically a tradeoff in that buying in a higher priced neighborhood will typically have less cash flow than buying in a less pricey neighborhood. This, again, is personal choice. I have seen phenomenal cash flows in neighborhoods that I would never be in, and normal cash flows in many areas that are perfectly good for a variety of reasons, but not particularly exceptional. The buyer for Summit Assets Group, whom I am investing with, is the director, Lori Greymont, who has sold more than 1350 properties since 2009; she knows which neighborhoods to buy in and which to stay out of.
Step 2: Staying Safe: Risk Management. Own your power: remember, nobody cares as much about your money as you do. Do NOT just trust someone else whom you think knows more than you do and buy a property because you think they will take care of you. They may be 100% ethical, but is a particular investment the right move for you? Take the time to learn about what you want to do, the market you want to be in, the strategy that seems best for you. Learn from others, don’t impulse buy, and don’t let either naysayers or marketers discourage you or separate you from your money without providing good information & value. Remember that lovable old Uncle Harry or Aunt Mildred really may not know very much about the opportunity that you are looking at, and when you listen to someone consider how knowledgeable they are about the subject.
Step 3: Consider the Return on Investment (ROI) This is a standard for comparing different opportunities. You will hear people ask again and again, when considering investment opportunities: what is the ROI? Verify & understand the numbers. The cap rate or capitalization rate is explained here: http://en.wikipedia.org/wiki/Capitalization_rate. For a very quick rule of thumb comparing single family homes (not condos, which have the homeowners organization association or HOA fees), I often use the rent ratio, explained in this post: Investing in vs out of state; The 1% rule.
Step 4: How to check people out: First of all, who recommends the person / organization you are considering doing business with? Do they have a reputation for providing good customer service? Do they offer resources to verify what they are telling you? Learn about the area you are considering buying in. Where do people work? What is the vacancy rate, days to rent, trends in values, etc.? You can use some of the links posted under “Handy websites” to do market research and learn about different areas. Buy from people who are interested in helping you to make well-informed choices.
Step 5: Become Educated: Get involved in a learning community where you can ask questions and have the support of others who have more experience than you do / are learning along with you. Do not be afraid to move forward once you have done your research. Not to decide is to decide, and to do nothing involves risk as well in our current inflationary economy. Research & learn, then take careful, planned action according to your needs & goals, after getting the advice of others who are successful in doing what you want to do.
Summit Assets Group is also creating a vital online learning community through their group coaching program at a reasonable price for people who want to learn together. I am in their coaching program and find it superior to other similar programs I have been involved with. There is time for your questions to be answered. The information is very good. Downloading the ebook link posted under Thoughts as: Free ebook on Creative Investing Strategies w/ great ROI will take you to the site, or just call Dan Noble in step 8 below.
Also, ask: “Do I expect success in Life?” People who have a lot of things going wrong should probably not get into real estate. This is a business for people who seriously intend to create success in an area that is presenting an opportunity right now that happens once in the history of the planet.
Step 6: Build your network: Look around for classes and real estate investing clubs to join; meetups can be useful too. Be wary of free or very cheap presentations that are really thinly disguised pitch-a-thons & high priced training seminars. Reputable skilled investors often have very good trainings available for a reasonable cost. These can often be found through reputable real estate investing associations. It does take time & money to create events, so don’t expect to get a lot for free unless someone will be marketing to you.
Step 7: Look at samples of the strategy you are considering; discuss them with someone who is familiar with those strategies. Will you be using a self-directed IRA? Who is good with that? Will you be holding property and renting it? Who believes in and is holding property for long term? Do you want some fast cash through a flip, which may have more risk? Again, who has done that and will be good to advise you and share what they learned? As you listen to a variety of people discuss what they do, you will gain a sense of choices of activities that may be of interest for you. You may want to stick with one plan, or you may want to change and adapt what you do as you learn and gain experience. Learn what people whom you respect are doing that works for them.
Step 8: Set long & short term goals for yourself. Create your plan and a timeline for moving forward. Consider when you want to have a desired result and then plan backward to set short term goals along your path to your long term result. For a free review of how to meet your investing goals and a projected 10 year plan to show how several options would play out for you over time & suit your investment needs, I suggest contacting Dan Noble @ firstname.lastname@example.org; his telephone # is 408 268-9777 and if not available when you call, he is very good about getting back to folks promptly. (Note: Assets is plural.) Dan is very knowledgeable with years of experience in real estate and investing and can compare different strategies to see what would meet your goals. You do not need to live locally to take advantage of this offer.
Step 9: Take action. Move forward with your plan.
Step 10: Review what you have done; what is the next best step? What worked well? What would you do differently next time?
Real estate investing can be great fun. It is also serious business. Even pros can make mistakes. As the old saying goes, “An ounce of prevention is worth a pound of cure.” There are many interesting people and the community and economy are alive changing all the time, an evolving culture wherein new opportunities for investing present themselves which were not available in the past. However, be smart and careful with your choices. Do not impulse. People are often willing to share. It is very good to join a reputable investing association, not one which just pushes inventory but one wherein people come together to learn and share. For those in the San Francisco south bay area, I host a meetup group which will be a place to meet other investors & learn together. It is called Real Estate Investing in 2012 and easy to find online. http://www.meetup.com/Real-Estate-Investing-in-2012.