Tuesday, January 31, 2012
Basics of real estate investment
Start small and stick to the basics, says Ammon Brimhall. Small real estate investors are "not the average everyday investor." They don't have lots of money so are looking for deals to make money today.
They're looking for motivated sellers. This translates itself into a good price or good terms.
To be successful as a small investor you need to look at where you are. How much time do you have to commit? What are your goals and how mauch experience do you have? Do you have the emotional make up to be an investor? And how much money do you bring to the table?
Identify the time you have for your investment business and budget your time appropriately. (To be considered a legitimate business the IRS requires 750 hours a year - 15 hours a week - be spent in the activities of the enterprise.) Keep track of your time, who you call, your mileage and business expenditures. Much of your time can be spent looking for properties and following up. One investor looks at 20 properties a week to find one golden possibilitity. Your job is to create opportunities by calling people.
If you're a good listener and are not afraid to ask, you can learn alot, says Brimhall. "Get them to talk and soak it up!" You can spend a lot of time calling professionals in the real estate and housing field and get a lot of information. Most people are willing to help and share information. Let people in your community know you are investing in real estate. Build a team of contacts which includes realtors, bankers, mortgage brokers, hard and private money lenders, title companies, building inspectors, accountants and lawyers, property managers, tradesmen, and other investors. If you need to know about foundations or termites or mold, call an expert tradesmen. Whenever you have a question, call someone.
Establish realistic goals based on your experience. If you're just beginning, you probably won't go into a big commercial venture. Because you have strong values, you will stay clear of shady deals and avoid hurting other people. Learn to treat people with respect.
Control of emotions is important. You need to learn to be calm working under stress. Believe in yourself. Confidence will help you deal with stress.
Money is the last on the list because it is least important. When you find a good deal, the money will find you, says Brimhall.
One problem of new investors is that they are afraid to make offers. Brimhall seldom does complete due diligence before making an offer on an investment. He looks at the numbers to determine its worth and cash flow. He might visit the property. But then he makes an offer. He makes the offer subject to a personal inspection. If a deal is not right, don't be afraid to walk away from it, he says.