Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

Getting Started: Answering The Most Important Questions

Getting started in the real estate investing business can be a very confusing time. If you talk to ten people, they will tell you ten different ways you should go about your business. While there are many different ways to go once you get started, there are only a handful of things you need to focus on from the beginning. How you answer five basic questions will largely define how, where and when you conduct your real estate business. Once you know the answers to these questions, you will have a pretty good idea of what to do next. Here are the five most important questions you should ask yourself:

1. Do I have access to cash?

How you finance your properties impacts everything else you do. Having access to cash or capital of your own completely changes how you make offers and the type of deals you can pursue. Most foreclosures, bank-owned properties and short sales give preference to cash offers. Not only will you get more offers accepted, but you can also close in a much quicker time frame. Conversely, if you only have funds for the down payment and need lender financing, your offers will be completely different. Your offer with lender financing will not be viewed as strongly as a cash offer, however. This will lead to you to look for local hard money or private money partners. You don’t need your own cash to start investing, but you do need to know what you are working with.

2. How is my credit?

If you don’t have your own funds to contribute to the deal, you will need to rely on credit for financing. Without a serviceable credit score, many of the roads you thought you had available will be closed. Credit scores for investment loan products need to be higher than those for traditional mortgages. The minimum starting point is typically somewhere around the 700 mark, with some programs as high as 720. Even if you don’t need credit for financing, you never know when you will have a need down the road. You may need to use credit to finish a rehab project or to take care of an unexpected situation. Without knowledge of your credit score, you won’t have a clue how to fix it. In many cases, you can fix a low score if you are aware of it. Even if you don’t plan on using credit, you need to know where you stand.

3. What are my investing goals?

What do you want out of the real estate business? Are you looking to close one or two deals a year, or are you looking to make this a full time career? Within these deals; are you looking for a quick return or do you want to add to your portfolio? There is no right or wrong answers to these questions. Every investor has individual goals and aspirations. Knowing these will help guide you as to the type of deals to entertain. Currently, the most popular form of investing is with rehabbing and flipping. While this gives you the chance to make a quick return on your investment, it requires time and commitment you may not be able to give. There are times when your goals may not be in line with reality. Before you get started, you should write down a list of all of your short and long-term aspirations.

4. What is my time frame?

Are you looking to see a return on your investment within 60 days? Do you want to close your first deal as soon as possible? Even though you may want things to happen quickly, it may not always be the case. Knowing the time frame for each, type of deal can give you an idea of what area of the business may be best for you. Knowing that wholesale deals have a shorter time frame than rehabs, they may be a better option for you. If you truly don’t care about when you see a return, you will have the full gamut of options available.

5. How much time am I willing to commit?

One of the biggest changes to the real estate business in recent years is the available technology. Technology has made it possible to conduct business in virtually every line of work. Instead of needing a dedicated office, all you need is a fancy phone and access to the internet. Even though the business can be easier, it still requires a large time commitment. How much time you are able to provide will go a long way in shaping your business. If you work in a profession that allows you a few hours a day, you may take a different path than if you only had nights and weekends available. Regardless of how or where you invest, there is a certain amount of time every investor needs. Before your first deal, you need to know where you stand.

One of the best things about investing in real estate is that you can shape where your business goes. You control where, when and how you invest. A large part of your business will be determined by how you answer these five questions. It won’t define everything about where you are going, but it will give you a good start.