Are you a new investor? Many aspiring real estate investors have come to me for guidance to help them with the following real estate investing questions.
Q. I'm really excited about real estate and want to become a mogul. How do I get started?
A. Assuming you are starting at zero, I would build my strength and knowledge about real estate. More specifically:
- Read books to increase your knowledge.
- Save money for a down payment, or find other sources of money such as investors or assets you own from which you might borrow.
- Build your resource network by connecting with lenders, real estate agents, and other real estate owners.
- Decide on your strategy. Do you want to buy houses, small apartment buildings, larger buildings, retail and office buildings, or industrial property?
- Investigate potential geographic areas where you want to invest, so you can target certain neighborhoods or cities.
- Familiarize yourself with real estate prices. If you want to buy a brick three-bedroom, two-bathroom house in Area A, then start keeping an eye on what is for sale. Go to open houses of homes for sale.
As you are growing, you may not yet be totally self-confident about what you are doing. There will come a time, however, when you begin looking for a specific property that meets your parameters. At this point you’ve started.
Q. Speaking of acquisition strategies, I don’t know what to do. What is a strategy, and how do I develop one?
A. Here are two examples:
1) I will buy one single-family house a year for the next twelve years.
2) I will purchase ten apartment units each year for the next ten years, so that I have one hundred units by the age of forty-five.
You, the investor, have to decide what your comfort zone is. If it’s your first investment, you might want something small, like a single-family house or small apartment building. I wrestled for about a year with what direction to go in and finally chose apartments. Most investors I know started with smaller apartment buildings, and then bought larger ones.
Some branched out into office buildings, retail centers, and industrial property. The key is that these investors decided what they wanted to do and just kept on making acquisitions. I don’t know of any investors, myself included, who had a rigid, formal written-in-stone plan.