The other day I was in someone else's car, listening to XM Radio, when a real estate ad comes on. The pitch was to get you to invest in real estate with just your good credit, and they'll do everything else - it sounded like the Jenae program!
The hucksters are coming out of the woodwork now, tempting you to make huge profits flipping houses. Don't believe it - their plan is to get rich quick selling you books and tapes!
We saw yesterday some investors jumping in around Oceanside where there was some promise of a positve cash flow. Is that all you need to invest in real estate, and can you get rich quick?
No way - and here's advice on how to go about investing in real estate today:
1. Get a good contractor who can give you accurate quotes easily and quickly
2. Decide how to manage the property - do it yourself, or a mgmt. company
3. Look at 100 houses
4. Make at least 20 offers
5. Look to pay 2001 prices, or less
These five simple points are just for starters, and cover the first three before tackling number four. Doing these will help you lay the foundation for smart decision-making.
I mentioned the sale that closed last week for $75,000. If you are looking to get started on building a portfolio, it's a great way to go - buy the cheapies. The buyer, who is an occasional commenter here, had amassed a group of a dozen lower-end rental homes over the last ten years, and sold every one of them in 2005 and 2006.
Now he's back in the hunt, but no reason to jump at just any old property. The one that closed had listed in February for $199,000, but you're not going to get a one-bedroom condo to cash flow at that price. The buyer has seen at least 100 properties this year, and we have literally made at least 20 offers - most of which don't get a response. You have to be patient, and stick to the game plan!
In the last run-up, there was a client named Steve that had bought four 2 br/2 ba condos in the early-to-mid 1990s that had been foreclosed on by Great Western. The bank didn't want to have anything to do with them, and Steve picked them up for $40,000 to $50,000. When we met around 1995, we agreed that selling those condos and exchanging into houses would make for a nice upgrade. In 2003 after doing 15 deals together, he retired with seven figures in the bank - and it all started with those four condos.
If you're thinking about investing, start with property that is manageable and cheap - ones that if they sat vacant for months, you'd still be able to handle it without stress. Be in it for the long-haul - you could see others nearby selling for less in the coming years. Use that as one of your tests - would it bother you to see others around it selling for less? If not, it must be a decent buy.
Steve's #1 mantra? Buy the best, and forget the rest.
