7 Simple Steps To Real Estate Investing

Whether you are BRAND NEW to real estate investing or an expert in the game, it’s critical that you understand these 7 Simple Steps to real estate investing.

First things first…

* Real Estate is NOT a get rich quick scheme. However, if you learn the foundations and put them into practice, you will make more than enough money to realize any and all of your dreams and goals.

* The real estate bubble is not going to burst! The real estate market will, however, shift and the real estate market will change - just as it always has! What’s “hot” now may turn ice cold in the next 3 years (or perhaps even 3 months). But, there are ways to “bubble proof” your real estate investments. It’s actually quite simple.

Did you know that in the United States, in 1975, the median home price was $33,300? In 2005, the median home price was $195,000. Historically, the average home doubled every 7 years. If you do the math, it should be well over $200,000.

OK… Now, having said that… The real estate market WILL change and what is “working” today in real estate may not in the future… The rental market was strong a decade ago, but has been soft in recent years. We are getting ready for a turn once again.

Real Estate IS a cycle… and cycles have some degree of predictability. With predictability, you can grow your real estate business into a cash-producing, profit-pulling machine that runs itself WITH the changing real estate market trends. It is still possible to make money in real estate. In fact, now is just as good a time as any to get started in real estate investing.

But, you’ve got to make wise investments. Sure, you may make some SERIOUS cash in pre-construction, but what happens if (no, not if - when) the market shifts and there are suddenly 35 identical properties on the market for sale in the same building? How long can you afford to carry a negative cash flow on the property?

Or how about taking over property ’subject to’? Sure, it’s a great strategy and lenders may be inclined to turn the other way and not exercise the “due on sale” clause as long as the interest rates are at rock bottom prices (You know, those sellers that you’re usually taking property subject to from usually don’t have the lowest interest rates, right?) If the interest rates spike to 10-11%, don’t you think lenders might be MUCH MORE inclined to exercise their option to make you pay off the 6.5% note?

What this means is simply that you must be experienced in the basics - the tried and true techniques, strategies and systems that have worked in the past, are STILL working and will work in the future. You’ve got to have all the tools in your bag so that you can go with the flow and not be affected when real estate markets begin to shift (which they are already in the process of doing, in case you’ve missed that memo!

Step #1 - Set your plan: Figure out what your long term real estate goals are (aka retirement and wealth building) and figure out what your short term needs are with regard to making money in real estate. Then, set up the proper entities and put the plan in place.

Step #2 - Determine what your target market will be: You cannot be all things to all real estate markets. If foreclosures appeal to you, start investing in the foreclosure market. If you want to be a landlord, look to out of state owners to focus your real estate marketing efforts.

Step #3 - Be consistent and persistent: Real Estate is not a get rich quick scheme. Real Estate is get wealthy over time and put some quick cash in your pocket today. You’ve got to follow your plan and stick with it to see real results in real estate. You’ve also got to continue to increase your education and your experience.

Step 4 - Don’t fall into the “Analysis Paralysis”: Learn to analyze properties quickly. Don’t get caught up overthinking. It’s quite simple actually: What’s the property worth? What does the property need for repairs? And how much can you get the property for? It all comes down to numbers!

Step 5 - Become a master of finance!: Real estate is the business of marketing and finance. You must learn about mortgages and interest rates and loan programs that are out there. You must know how to use finance to negotiate your deals and to sell your properties.

Step #6 - Become a skilled problem solver: The reason you will get real estate deals that others don’t, is because you are able to solve people’s problems. Anything goes on the real estate playing field. You’ve got to be ready!

Step #7 - You must continue your education: It is important that you are always investing in your education and learning new tactics, strategies and tips that will help you make more in real estate.

If you enjoyed this article, make sure to look up the other articles discussing The 7 Simple Steps To Making Money on Real Estate. The next article discusses Step #1 - set your plan in further detail!

The Next Level Institute is dedicated to helping real estate investors - whether a brand new or a seasoned investor - become more successful with less effort. Get your free 4-part mini-course on finding deals AND learn the 7 keys to sucking in the deals faster than a “Hoover” vacuum! Get your free e-book at: http://www.7steprealestate.com

About the Author

The Next Level Institute is dedicated to helping real estate investors - whether a brand new or a seasoned investor - become more successful with less effort. Get your free 4-part mini-course on finding deals AND learn the 7 keys to sucking in the deals faster than a “Hoover” vacuum! Get your free e-book at: http://www.7steprealestate.com

Real Estate Investing Myths - Busted

Myth 1: It is too late to invest. I?m too old to wait for an income.

Fact: It is never too late. The focus should be on positive cash flow and not on the mortgage pay off date. It is easy to own several rental properties that will pay you enough to not only pay the mortgage, but also give you a nice income.

Myth 2: I can?t afford to buy property now. I?ll wait until my house is paid for, then I?ll look into it.

Fact: Your house has equity in it already. You can use that equity as a down payment on an investment property and realize a positive cash flow from the rent.

Myth 3: The Real Estate bubble will burst and I?ll be left holding an empty balloon.

Fact: It is possible that interest rates will rise causing fair market values to lower, but that isn?t likely. The economy has been very stable. Rent rates have been predictably low in most markets. As markets correct themselves there will be some areas that rent inflation will occur and can only mean more money in your pocket. The key is finding the right location for investing.

Myth 4: Interest rates must rise and keep rising.

Fact: The Federal Reserve Board has been doing an excellent job in keeping inflation at so low an incline it is almost flat. Hurricanes Katrina and Rita, and the recent spike in oil prices have caused a slight increase in rates, but the tide turned in the oil prices and inflation seems to be checked. Without going into complicated economics, the Federal Reserve has been keeping inflation clipped by tiny hikes in interest rates. The job market and labor force has maintained balance, therefore the slight increases are actually good for the economy and for investment security. Consumers are utilizing equity loans for their spending and huge spikes in interest rates would basically collapse the growing economy.

Myth 5: I don?t have any extra cash so a $0 down payment loan is the best route to start my real estate investment career.

Fact: If you don?t use any of your own money, your mortgage will be higher. $0 down means 100% of the loan equals 100% of the value. That kind of ratio means a negative cash flow. While negative cash flow is not a huge problem for someone who has available cash, negative cash flow for someone who lives from paycheck to paycheck is financial suicide.

Myth 6: A fixer-upper is a cheap way to riches.
Fact: A fixer-upper can put money in your pocket but there are so many pitfalls that you need to be very careful. Buying well below market value for a house that needs a new roof will only be profitable if you just put the new roof on. Thinking that you need to not only fix the roof but put in another $20,000 of refurbishing to make it perfect is not good strategy. The more money you pour into a fixer-upper, the less profit you?ll realize when you sell it. Buying a fixer-upper, making it perfect all for under market value, then renting it is a better way to make money on that type of project.

Real Estate Investing Myths - Busted

Myth 1: It is too late to invest. I?m too old to wait for an income.

Fact: It is never too late. The focus should be on positive cash flow and not on the mortgage pay off date. It is easy to own several rental properties that will pay you enough to not only pay the mortgage, but also give you a nice income.

Myth 2: I can?t afford to buy property now. I?ll wait until my house is paid for, then I?ll look into it.

Fact: Your house has equity in it already. You can use that equity as a down payment on an investment property and realize a positive cash flow from the rent.

Myth 3: The Real Estate bubble will burst and I?ll be left holding an empty balloon.

Fact: It is possible that interest rates will rise causing fair market values to lower, but that isn?t likely. The economy has been very stable. Rent rates have been predictably low in most markets. As markets correct themselves there will be some areas that rent inflation will occur and can only mean more money in your pocket. The key is finding the right location for investing.

Myth 4: Interest rates must rise and keep rising.

Fact: The Federal Reserve Board has been doing an excellent job in keeping inflation at so low an incline it is almost flat. Hurricanes Katrina and Rita, and the recent spike in oil prices have caused a slight increase in rates, but the tide turned in the oil prices and inflation seems to be checked. Without going into complicated economics, the Federal Reserve has been keeping inflation clipped by tiny hikes in interest rates. The job market and labor force has maintained balance, therefore the slight increases are actually good for the economy and for investment security. Consumers are utilizing equity loans for their spending and huge spikes in interest rates would basically collapse the growing economy.

Myth 5: I don?t have any extra cash so a $0 down payment loan is the best route to start my real estate investment career.

Fact: If you don?t use any of your own money, your mortgage will be higher. $0 down means 100% of the loan equals 100% of the value. That kind of ratio means a negative cash flow. While negative cash flow is not a huge problem for someone who has available cash, negative cash flow for someone who lives from paycheck to paycheck is financial suicide.

Myth 6: A fixer-upper is a cheap way to riches.
Fact: A fixer-upper can put money in your pocket but there are so many pitfalls that you need to be very careful. Buying well below market value for a house that needs a new roof will only be profitable if you just put the new roof on. Thinking that you need to not only fix the roof but put in another $20,000 of refurbishing to make it perfect is not good strategy. The more money you pour into a fixer-upper, the less profit you?ll realize when you sell it. Buying a fixer-upper, making it perfect all for under market value, then renting it is a better way to make money on that type of project.

Real Estate Investing Alternatives

You’d like to invest in Real Estate, but you aren’t sure what to invest in (condos, apartment buildings, commercial properties, land), and you’re not certain if you have enough money available to make a suitable Real Estate investment.

It seems that everyone is investing in some form of Real Estate, but you consider yourself a novice and your risk tolerance is low. You don’t want to make a costly mistake, so you decide to wait. You may have even purchased tapes and books and videos extolling the virtues of Real Estate investing, and how simple it is to become financially independent.

The old saying, “If it’s so easy, everybody would be doing it,” is just as appropriate for the Real Estate market.

Also, you may think that it’s too late — the so-called Real Estate “bubble” is about to burst.

Are there any alternatives for the neophyte, or the conservative investor who’s very concerned about his or her life savings?

There are such alternatives, a method by which you can own real estate and have it managed, with the liquidity of the stock market. It’s called a REIT, or Real Estate Investment Trust.

For about fifty years, REITS have offered investors the opportunity to own a variety of Real Estate investments — commercial and private — without the aggravation, inconvenience, and time-consuming hassles of individual ownership.

On top of this, a REIT can be purchased or sold just like as common stock. Professionals who are experienced in buying, selling, and renovating properties manage them.

Because many REITS purchase several properties, their diversification often keeps the investment risk low. Within the REIT, the management team has the capability of divesting itself of unprofitable properties, and, if the timing is appropriate, the ability to purchase additional properties.

Many REITS also offer very competitive dividends, which make them an excellent alternative to bonds and preferred stocks.

Also, the value of the properties in the REIT can appreciate, giving the investor a very important investment advantage — total return (appreciation plus dividends).

This appreciation in value is rarely seen in bonds (unless interest rates drop sharply), and, unlike bonds, REITS do not have a maturity date.

REITS are not without their risks. The Real Estate market could weaken, apartments and mall locations could remain vacant for a period of time, or the REIT may not want to risk putting additional capital in certain properties.

If you don’t have the expertise to invest in individual Real Estate ownership, or, if you’re a conservative investor who demands liquidity in your portfolio, speak to your investment advisor regarding REITS. These trusts may give you the liquidity and the diversification you need and deserve.

As a final note: If you’re searching for appropriate vehicles for your IRA, REITS may be one of your best alternatives. Remember to do your homework. There are many different types of REITS out there.

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