Essential Guidelines for Beginning Investors

Real estate investing is not a “get rich” quick proposition as many of the late night infomercials would lead you to believe. If you’re getting into real estate investing then you should be prepared to treat it as an active business. As such, several fundamental strategies will help you as an investor to ensure you have the greatest chance of success.

1) Surround Yourself with Like-Minded People

Real estate investing can yield phenomenal returns over time. But to put these returns on an even faster path, you must think and act in non-traditional ways, meaning you must practice to some extent what is often referred to as “creative real estate”. If you’re practicing creative real estate, you will be doing things in ways that differ from the approach of the masses. Stay away from the negative minded people that say it won’t work or can't be done and instead surround yourself with people that think and act as you would like to be.

2) Have the Right Team

As I teach investment classes, I always start by recommending the students, if they have not already done so, to form their advisory team. You should never wait until you have an opportunity in the pipeline to try and line up the assistance you need to close the deal. You need the following members on your team:

• Closing attorney - one knows creative real estate practices, and that has significant experience, but that doesn’t cross the line of the law in the name of creativity.

• Insurance Agent - find one that understands real estate investments and that has excellent service. If you operate in a corporate entity (recommended) then keep in mind your agent should offer commercial insurance on your type of investment.

• CPA - find one that is aggressive and owns real estate, and that has a wealth of experience in working with clients with similar needs as those that you have.

• Mortgage Broker or Lenders – work with lenders and brokers that are experienced with investors. If dealing with a broker, be sure they actually CLOSE a dozen or so loans a month with investors, not just ORIGINATE loans. Working with direct lenders is better if you have great credit as you cut out the middle man. Develop those relationships with money sources ahead of time.

• Real Estate Agent – Find one or more hungry real estate agents that are willing to help you and then train them. Work on a deal by deal basis and treat them like gold if they bring you the opportunities. I get more deals through agents than almost any other way, and it is not limited to deals on the MLS. In fact, most of the best deals agents bring are BEFORE they are listed.

• Property Manager – If you’re looking to grow, you likely need some professional management to help you manage your inventory. You might want to manage a few properties on your own, but eventually turn this over to experienced professionals and use your time to focus on building your wealth.

3) Deal Only with Motivated Sellers
Wasting time with unmotivated sellers is one of the biggest mistakes I see beginning investors making, and the one that keeps many from the success that could otherwise be theirs. Real Estate Investing is a discount-buy business. If the seller does not have a valid reason and is not motivated to sell at a discount, move on. Don’t waste time talking to sellers who are not motivated. Also, be sure to qualify deals over the phone before wasting time running comps or performing other due diligence. Time is your most valuable asset!

4) Be Patient and Persistent

In this business, or any other, you will have to deal with some rejections before you find the winners. You may look at dozens of opportunities before you find a good one. Not every deal that comes your way will work. And then sometimes, you will work on a deal that will not pan out, and you may have to follow-up a half dozen times to finally work it out. Don’t give up. You must have patience and be persistent. Don’t chase losers, but if you find a winner, pursue it as long as it takes. Also, it is important to have a tool to track your opportunities so you can keep track of leads and follow-up. We currently use Outlook as our contact manager, but there are many others out there such as Goldmine and Act! that have even greater functionality.

6) Invest in Your Education
It has often been said, and rightly so, "If you think education is expensive, try ignorance." In real estate investing, a SINGLE mistake can cost you tens of thousands of dollars. Unless you have a very thick skin, and even thicker pocket book, be sure you KNOW what you’re doing. It is far cheaper to have some education than to try operating a business from a position of ignorance. No matter how long you’ve been in business, you should continue growing your education. Set aside money each year to invest in yourself -- it is the best investment you can make and will pay HUGE dividends over time. NOTE: Don't get sucked into the super expensive boot camps until you've got your feet planted on the ground. There are many sources of low cost, quality education out there. Develop an education budget that makes sense and stick to it!

7) Have a Realistic Plan

Any successful business owner knows that without a plan your chances of success are DRASTICALLY reduced. You’d be amazed however at how many people start up an active real estate business by just jumping in and never really thinking through the tactical and strategic matters that are necessary to ensure a reasonable chance of success. You should get your big picture goals clearly defined and then define workable steps for achieving those goals. Find others that have experience you can tap into to help you develop your plan. Team up with knowledgeable experts to learn how and what they do to be successful. Seek out experienced people to partner with on opportunities. Leverage their experience to ensure your plan is solid. Never just wander around looking for deals, hoping things will work out for you. Have a plan.

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