Real estate investing is always good and sometimes it’s red hot. It’s startling to learn that of all those thousands of eager folks who attend real estate seminars only about 5% buy even one investment house. Why? The real estate gurus sell the “sizzle” and make profiting from making real estate sound easy. The truth is that it can be simple, but not easy.
Here’s a quick plan that will enable anyone to begin building financial independence.
There are four steps to investing in single family homes:
1. Buy homes below full market value. Yes, people do sell homes for less than the home’s full value. The key is to understand that most home owners will only consider a purchase offer that is all cash and within 5% to 10% of their asking price.
A successful investor learns to find financially distressed home owners who have no choice but to sell for less than market value. They have lost their job or been suddenly transferred; they are divorcing; they been living beyond their income; the family has been overwhelmed with medical bills and, not uncommonly these days, their money has gone to support a drug habit.
Those are examples of motivated sellers. They have to sell and they will accept something other than a conventional, all cash offer.
2. How do you find motivated sellers? You work at it! Like any business it is important to develop a marketing plan.
You are selling your skill as a home buyer to people who must sell. Your are there when they need you and you have the skill to help them solve at least part of their problem, make this work to your advantage and be smart about it.
3. After you’ve found a motivated seller you must understand how to frame offers that provide benefits for both you and the home owner. A good real estate investor quickly learns that this is not a business of stealing property, but of solving problems in a way that benefits the seller.
The home owner is in a tight spot of some kind and you can save them from public embarrassment and, in most cases, give them at least a little cash to get a new start.
No investor can afford to leave cash in every deal. You must use creative techniques like, leases, option and taking over mortgage payments. Little or no cash is needed for those deals. You can find plenty of reasonable priced educational material on those subjects wherever you look.
4. You make your profit when you buy! Never purchase until you’ve carefully determined exactly how you will get to your profit. If you hold it as a long term investment will the monthly rental income more than cover the monthly mortgage payment? Will you sell the deal to another investor for fast cash? Will you do some fix-up and sell the property for full value? Will you quickly trade it for a more desirable property? Have a plan before you buy.
There you have four steps that even a part-time investor can execute in three to four hours per week. What’s the missing ingredient? Your determination and perseverance. If you will unfailingly follow the plan for a few months you will be well on your way to financial independence.