5 Steps for Beginners to Ensure Real Estate Investing Success

When starting out as a real estate investor, you need to create a basic plan and processes for your business. Unfortunately, many new real estate investors do not see or treat their investing career as a business; rather they treat it as a hobby. Such a disruptive attitude will cause you to miss out on many potentially profitable deals! Therefore, creating an action plan is imperative. Your plan for a successful career as an investor must have specific details, and the following are the 5 steps to a successful real estate investment: find, analyze, acquire, track and promote properties.

Search – Locating attractive investment properties is the first step in growing your business. There are several ways to find properties. The two most successful for me have been 1) connecting with real estate professionals or hunting dogs and 2) farming an area. Building a network of property finder is essential for motivated sellers to be able to find you. It’s also important to have a real estate agent with access to comps on your computer. Additionally, they can also tell you when properties have been on the market for a long time. This can be a great opportunity for you to find and connect with a motivated seller. But the most effective way is to get out, drive or ‘explore’ the area and become familiar with the properties, neighborhoods and prices in your area. If a house comes on the market, you need to know immediately, you need to know the price and whether or not it is within the usual price range. These price anomalies can be your ticket to finding a good deal. While it is time consuming, the knowledge you gain from farming an area is priceless.

Analyze – Analyze the deal and explore various investment strategies. Successful investors don’t just have a plan A; have BZ plans! Education is key; The more exit strategies you know, the more good deals you can create! Many beginning investors may want to start with just 1 strategy, such as wholesale. However, while you focus only on wholesale opportunities, you may be missing out on short sale opportunities or opportunities to purchase ‘subject to’ properties. Therefore, education and multiple exit strategies are imperative! When analyzing, be careful not to fall in love with the value of the asset (as values ​​can fluctuate frequently and without warning). Generally speaking, you should never purchase a property with more than 70% loan-to-value. Also, look at the cash flow. If the cash is flowing from the property, you can make money even if you can’t sell as fast as you want.

Acquire- Once you make the decision to acquire the property, you must formalize the offer. At a minimum, submit a basic LOI letter of intent.) The LOI is a non-binding agreement that sets forth the minimum basic elements of an offer, such as location, price, terms, inspection period, and closing date. Don’t suffer from ‘analysis paralysis’. Get the property under contract and then inspect! Have your real estate investment attorney draft contracts that give you as many exits as possible. While beginners study and try to get as much information about the property as possible before submitting the contract, experienced investors have the property under contract and then begin the due diligence process.

Tracking – Once purchased, the next step is to track income, expenses, and your TIME. Today, it’s an essentially absolute rule that you must have some kind of software package installed. I was looking at a 14 plex in Phoenix, AZ where the landlord only had a receipt book to prove rental records. Worse yet, he had no documented P&L or Income Statement. He showed me numbers on notebook paper and asked if we wanted to continue! Suppose that everything you do in property management will have to be proven to a banker. Get software and get organized. Proving your income will be the difference between being able to sell a property or keep it forever. Additionally, most of these software packages can create phenomenal reports for you that, when analyzed correctly, will help you with the information you need to use the proper exit strategy. Finally, even if you have positive cash flow, does the property prevent you from doing other deals? Your time is valuable. Many motivated sellers (like the gentleman who lived in his 14 plex) are motivated because managing the property is a full time load and they burn out. Don’t let this happen to you.

Promote- Set up a way for your network to learn about properties for rent or sale. A professional flyer is an effective communication tool. So are websites and other tools on the Internet! But probably the most powerful is word of mouth. Attend networking events and meet other people. Once a relationship is formed and trust is established, your ability to find and move deals will increase exponentially!

So how do you find people to help you in these areas? Let’s face it, networking with other investors and professionals is what makes some real estate investors successful and makes others fail. But with an effective network and communication and management system, you’ll be well on your way to building a real business.

The key to a successful network is being able to briefly tell others what you have to offer and how your services can help others. There are 4 steps to a successful network:

1 – Give a short elevator pitch to summarize what you’re all about, who you’re looking for, and why you’re a great solution. Keep this tone between 30 seconds and 2 minutes.

2 – Exchange phone numbers or business cards

3 – Suggest a meeting, lunch or golf outing (somewhere where you have time to go over the details of your business)

4 – Seek mutual benefits

Remember, your goal for networking at most events is simple: get a date. This concept sounds simple, but most people turn appointments into a sales presentation. Avoid doing this! Make your impression; gather information, make an appointment and leave. It’s that simple, and nothing else is ineffective. Finally, keep your networking time per person to a minimum. Your goal is to connect with as many people as you can at these events.

In conclusion, you must have a plan, processes and procedures to find properties, software and criteria on how to analyze properties, documents created and systems that allow you to quickly acquire properties, software and resources to accurately track property performance, and ways to promote your business. Without buyers, sellers or tenants and other specialized professionals on your team, your business will struggle and fail. So get out there, network and start your business!