The best real estate investors start with a plan. Figuring out what you need and how to get it can be confusing and frustrating as you are just starting out. While there are several different paths you can take there are a few basic items all new investors need. These items are the backbone of your business and will go a long way in deciding exactly how and where you invest. Instead of being pulled all over the place you should start by making a checklist and addressing these items one at a time. If you are wondering which direction you should take your business here is a new investor checklist to help guide you.
- Goals. What do you want out of investing in real estate? Sounds like a straightforward enough question yet most new investors fail to answer this before they get started. Like every other item on your checklist there is truly no right or wrong answer. If you want to focus on rehabs, wholesale deals or buy and hold rental properties they are all on the table. If you want to hold onto your full time job and invest a few days a week that is certainly an option as well. If you want to dive right in and make real estate your primary source of income you can do that too. Whatever road you want to take in real estate is possible with the right work ethic and mentality. The key is to have some idea of your end goals before you get too far. These goals will help push you towards the market, property type, financing and team that you end up pursuing. Without a firm goal in place you will float around day to day without any real purpose.
- Finances. After you have an idea of what you want out of the business you can start putting the other pieces in place. The next piece of the puzzle is financing. You can have high aspirations for the business but if your financing doesn’t align you won’t get very far. One of the biggest changes in the real estate business over the last decade is with how properties are financed. In the past if you wanted to buy you needed your own private capital or were at the mercy of lender programs. Today there are several more financing options than ever before. While lender programs are still around there are also many hard money and private financing options available. As you are just starting out you should explore all of these options even if you don’t think you need them. The reality is that you never know when you will have a need for a hard money loan. Bank loans are great but may not be the best way to acquire a property. The more financing options you have the easier it is to make an offer and ultimately close a deal.
- Team. Regardless of how long you have been in the business for it is important that you have a good team in place. This is especially important as you are just starting out. Start by finding a real estate agent that is a good fit for what you want to do. The best fit may not always mean the most successful agent in the area. You want someone who knows the investing side of the business and is willing to walk you through your first couple of deals. A good fit with a real estate agent can open doors to many additional deals. You also need to reach out to find a real estate attorney, mortgage broker, contractor, handy-person and eventually an accountant. At this stage it is tempting to use the first person you talk to. Fight this urge and find the best fit. You will lean on your team more than you think over the first handful of deals. If you cannot work together you will eventually drop the ball on something that will cost you time, money or a deal.
- Market. Your goals and financing options should lead you to a few different markets to invest in. At this stage you should limit yourself to just one, maybe two, markets until you become more comfortable with the business. By narrowing your focus you have a much better chance at pursuing only quality deals. Once you venture outside of your comfort zone you bring risk into play. All it takes is one bad deal to throw your business for a loop. Whichever markets you choose you should know everything about them. The more knowledge you have on an area the more comfortable you are and the easier it is to make quick decisions when a property comes your way.
- Implementation. Once you cross off the first four items on your checklist the last one may be the most important. The last phase of getting start is the implementation phase. You need to come up with a plan of how you are going to realize your goals. Deals will not just fall on your lap. There should be a plan for generating leads and finding deals. This doesn’t need to be elaborate or even expensive but it must be consistent. Whatever you do you need to be able to repeat it every week. Without action your business will never get off the ground. Take some time to come up with a few different strategies for how you are going to implement your business and start closing deals.
Knocking these five items off your checklist will give you a great head start for your business. You can fill in the holes as you go but start by answering these five items.
