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So You Want To Become A Real Estate Investor

By Joanne Louise Stevens

Real Estate Agent with Keller Williams Realty Los Angeles-Brentwood

August 03, 2011 11:06 AM

I'm sure many of you have seen those late night info-commercials advertising how you can make a lot of money investing in real estate. The spokesperson tells you that it's easy, but they don't tell you how it's done. You better believe that they want you to buy their book, program or system. They entice you by having testimonials from people who have "struck it rich" and are now living the easy life because of the big monthly residual checks that they now receive. It's almost always a rags to riches story and that anybody can become their own boss, just by investing in real estate.

As an investor, you can earn great residual income from owning real estate, but it's not easy as 1-2-3. If you are interested in becoming an investor, may I suggest that you learn about the topic before you buy your first property? If you want to learn more about real estate, contact a real estate professional in the area where you want to buy. They will have valuable information specific about the area. If you are interested in one-four units, interview a realtor who specializes in residential properties. For anything over 4 units, contact a commercial brokerage company. The type of product that a realtor is allowed to broker may vary in your state. Inquire about services within their company. One question you may ask is do they offer financing? Speak to the loan officer about getting pre approved. What loans do they have available for investors? Remember you will not get the same interest rate as a buyer who will occupy the property. To become familiar with the contracts used in the transaction, ask for sample blank copies. If you have any questions about the contract, you can ask the realtor or your attorney before making an offer to purchase.

Lastly contact the business department at your local college or university. Some offer courses in a variety of topics such as bookkeeping and property management. Consult your accountant and attorney for financial and legal matters. Whether you are buying real estate as an owner or investor, be wise and get the proper guidance before you commit to buy.

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Sandi Davidson

Florida's Realty LLC - Lehigh Acres, FL

Very good advice Joanne. The days of the get rich quick/flip for mega profit days are gone (for now), but there is still legitimate money for investors to make in the market. I work with many investors who purchase, light rehab and rent the properties. My personal goal is to have 10-20 properties myself when I retire in about 20 years. I target homes that draw a rental income of $800/mo or more, and plan to use that income as my retirment income.

One of the factors that can determine the level of success is the ability to pay in cash.

If I kept my money in a safe investment like moneymarket or CD...what's the return? Less than 1% according to Bankrate. In my IRA, the rate of return is better, though never guaranteed, even so...what would I have when I retire in 20 years? X dollars...and when X dollars is gone it's gone.

With Real Estate you have 1. The rent accrued prior to retirment, 2. The property and the value of the property (currently undervalued), and 3. the perpetual income stream.

Aug 03, 2011 11:12 AM

Jerry Newman

Brown Realty, 210-789-4216, - San Antonio, TX

Texas REALTOR, San Antonio Military Relocation

Great Advise, Joanne. It's not as easy as they make it seem on TV. I know since I bought some of those programs back in the early 1990s when I first retired from the military. There are lots of good books on the market too about buying real estate and investing in real estate too. Do your research and get your financing in order before you go shopping. That just makes good sense.

Aug 03, 2011 11:14 AM

Joanne Louise Stevens

Keller Williams Realty Los Angeles-Brentwood - Los Angeles, CA

Realtor - Serving Brentwood and Surrounding Cities

@Sandi: That's a fantastic goal! You are a very wise investor. I've met a few investors in our valley who bought homes and rehabbed them. They either flipped or rented the properties. They were building their nest eggs for retirement.

I also want to own multiple properties for retirement purposes. I enjoyed reading your response. Thank you!

Aug 03, 2011 11:24 AM

Joanne Louise Stevens

Keller Williams Realty Los Angeles-Brentwood - Los Angeles, CA

Realtor - Serving Brentwood and Surrounding Cities

@Jerry: Thank you for posting. Yes. So many people leap before investigating and evaluating their goals. I must admit that I bought one of those programs in the 1990s also. The books were interesting but not complete. You can not venture into the real estate investment business without getting the proper education and information.

Aug 03, 2011 11:29 AM

Joni Bailey

101 Main St. Realty - Huntsville, TX

Your Huntsville / Lake Livingston Area REALTOR®

This is SO TRUE! If it were easy as pie, wouldn't EVERY one be doing it?! Gread advice!

Aug 03, 2011 11:36 AM

John McCormack, CRS

Albuquerque Homes Realty - Albuquerque, NM

Honesty, Integrity, Results, Experienced. HIRE Me!

Good blog Joanne. No investing is not easy and yes if it were everyone including myself would be doing it. In fact I did it once. Dealing with renters was not for me! Some investors seem to have a hard time dealing with the fact the days of buying, renting and flipping are over. At least for now those glory days are behind us.

Aug 03, 2011 12:52 PM

Joanne Louise Stevens

Keller Williams Realty Los Angeles-Brentwood - Los Angeles, CA

Realtor - Serving Brentwood and Surrounding Cities

@John: Thank you for responding to my blog. I've own a few properties. I had a good property manager. That is so important. Both properties were located in different states. Playing the role as a property manager was not for me. I have friends who own multiple properties in various states. It's tedious work. It's a lot of paperwork to maintain.

investors who are making money flipping are the ones who buy properties on the court house steps. These are seasoned investors. THEY KNOW THE MARKET! They are at the court house sales every week! They are not involved emotionally when submitting a bid. It's not a business for amateurs. You need to learn the ropes first. Usually they have a team working for them. They have a realtor, construction crew, attorneys, accountants, assistants etc, who participate in the process of flipping. I'm investors has lost money.

If the investor decides to manage his own property, he must know the laws and about tenant and landlord relationships. It's a lot to know.

Aug 03, 2011 05:24 PM

Sandi Davidson

Florida's Realty LLC - Lehigh Acres, FL

Joanne, I have to agree with you. I have zero interest in managing my rental properties. The fee I pay is worth having the investment be "hands free". Most clients who are investing in long term, income producing rental properties want a passive investment. Unless that is their primary business they do not have the time or the interest, not to mention the know-how to effectively manage their properties. Better leave that up to the professionals who want to do that for a living, and know how to do it effectively. Calculate the expense into your annual expenses when calculating your ROI...simple as that. Again I must emphasize, though it is not essential, cash investing is the way to go.

Aug 04, 2011 09:54 AM

Joanne Louise Stevens

Keller Williams Realty Los Angeles-Brentwood - Los Angeles, CA

Realtor - Serving Brentwood and Surrounding Cities

@Sandi: Thank you for your post. In order to learn more about real estate investing, I enrolled, completed and earned a Certificate in Real estate with a Specialization in Investments at the University of Los Angeles Extension. I completed 9 courses: Principles in Real Estate, Practices in Real Estate, Business Ethics, Appraisal, Real Estate Investment Analysis, (which was mostly math, Legal Aspects of Real Estate, Advance Legal Aspects of Real Estate, Property Management, Real Estate Economics, Real Estate Calculations using the HP12C Calculator and a few others. All were taught by people who work in the industry. In the Real Estate Investment Analysis, we had a practical. We had to select an commercial property and do a full property analysis. I teamed up with someone who worked for a major commercial brokerage firm. That project took lots of work. Finding comparables for a commercial property can be challenging. There are so many factors to consider. Is it a rent control area? You have to ask many questions. You have to know who to ask. I enjoyed my classes. I learned a lot from the experts. Many students in the class owned commercial and industrial properties. To anyone who wants to invest in real estate, get educated. Thank you for posting.

Aug 04, 2011 11:52 AM