STEPS TO GETTING STARTED IN REAL ESTATE INVESTMENT #realestateinvestment

#ZINOREALTORS' STEPS TO GETTING STARTED (OR RESTARTED) IN REAL ESTATE INVESTMENT

By Enochzino Enterprise

To start with, it is important to note that dealing with practical life situations and challenges, more education is not always the answer. Education on it is own without a step by step practical of what you have learnt, it may not work for you. This means that when learning a thing, it is very important to put the new knowledge into practical use.

This other course also applies to real estate. Learning all the methods, strategies, processes and ways to invest right in real estate and you just fold your arm and do nothing with these ideas, information, methods and processes, it will all useless to you. Too much knowledge at times without actually putting that knowledge into use by following the step by step instructions may sometimes lead to frustration

In order to avoid these frustrations and wasted years learning from your own mistakes, I have taken the pain to write up these few steps on how to get started in real estate and how to invest in the right property

Below are the 9 steps that show you how to get started with real estate investing. For the best effect, I recommend you go through them from start to finish. But if you are reviewing, you can skip the ones that are not necessary to your current level

1. Identify Your Financial Stage

2. Choose a Specific Real Estate Investing Strategy

3. Pick a Target Market

4. Decide Your Investment Property Criteria

5. Build Your Team

6. Line Up Financing

7. Raise Cash For Down Payments & Reserves

8. Create a Plan to Find Deals

9. Schedule Your Time & Prioritize Next Actions

These points below are mostly summary. And are therefore straight to the point. However if you need more information and/or clarification, you can contact us via our email or phone numbers.

So, follow along, take notes, and put yourself into each of the steps so that you can get started (or restarted) soon with real estate investing.

Step 1 Identify Your Financial Stage

Real estate investing is simply a vehicle to improve your finances. So, before we get into the details of real estate, let’s think about your overall financial picture.

Most new investors eventually want to reach financial independence. You can think of this like the peak of the mountain where your living expenses are all covered by income from investments.

The fundamentals of climbing this mountain are the same whether you invest in real estate or anything else. To reach the peak of the mountain faster, you simply have to increase your savings rate. You can then invest those savings into your chosen assets, like real estate.

I’ll suggest a couple of specific real estate strategies that help with your saving rate in the next section. But for now, you need to identify where you are on the financial mountain. Are you at the very bottom (like I was as a beginner)? Half-way up? Or near the top?

This article explains these wealth stages in more detail.

You want to know your current stage because depending on where you are, certain real estate strategies will make more sense than others. I’ll explain some of those strategies in the next step.

So, after thinking for a moment, decide which stage fits you best. Don’t worry, it doesn’t have to be perfect. Then let’s move to the next step

Step 2 Choose a Specific Real Estate Investing Strategy

At this stage, you could create a 30-page business plan that even an MBA would be proud of. But remember, the goal is just to get started. So, let’s begin with something quicker. You can create a big, detailed plan later if you want.

For now, just choose ONE real estate strategy that will help you move from your current financial stage to the next stage (remember Step #1) (You can read our article on 5 ways to invest in real estate for a guide).

Starting with one specific strategy doesn’t mean you won’t have detours or even a complete change of direction later. Life happens, and you have to be flexible. But starting with just one will help you focus. And this will give you the confidence to get started.

Here is a menu of suggested real estate strategies that you can choose from depending upon your wealth stage:

Strategies for Wealth Stages 1 & 2 – Survival & Stability

Strategy Goal:

Earn extra income, learn, and avoid losses

Keep your day job & work to get a raise (not real estate, but probably the first strategy to explore)

Instead of simply renting or stretching to buy a home, master lease a residence and rent out bedrooms or units to reduce your payment

Bird dog for other real estate investors to “sniff out” good deals for them & learn the investment acquisition business in the process.

Become a buyer’s agent, help buyers find houses to purchase, & learn the retail housing market in the process

Become a leasing agent, match tenants to properties for landlords or property managers, & learn the landlord business in the process

Manage/supervise remodeling projects for other investors & learn the remodeling business in the process

Strategies for Wealth Stage 3 – Saver

Strategy Goal:

Dramatically increase your savings rate by reducing expenses and/or increasing income

a. Any of the options in stage #1

b. Hack your housing in order to reduce or eliminate your housing payment

c. Do a Live-In Flip (aka flip your residence) in order to build big, tax-free savings

d. Do a Live-In-Then-Rent by living in an affordable house for 1-2 years and then keeping it as a rental

e. Start wholesaling real estate for quicker, smaller chunks of cash (usually requires investments of time and money in marketing and strong sales skills)

f. Start a non-real estate side-hustle that matches your skills and passions with a need in the marketplace

Strategies for Wealth Stage 4 – Growth

Strategy Goal:

Grow your smaller net worth into a much bigger net worth

a. Fix-and-Flip houses to generate big chunks of cash. Remember to save & reinvest your profits!

b. Build & grow an income property portfolio using one of these plans:

i. The All-Cash Plan – no debt, pay 100% cash for each property

ii. The Debt Snowball Plan – borrow on a small number of properties, then accelerate debt pay down one property at a time

iii. The Buy 3-Sell 2-Keep 1 Plan – buy 3 rentals, hold, then sell 2 and pay off debt on the third

iv. The Trade-Up Plan – use tax-free exchanges to build a portfolio with strong equity and income

v. Self-Directed Retirement Account Plan – use a self-directed IRA or 401k to invest tax-free in private loans rentals, or flips

Strategies for Wealth Stage 5 – Income

Strategy Goal:

Turn existing equity into investments that produce maximum income with minimal hassle and risk

With existing real estate portfolio:

a. Pay off debt to decrease overall debt levels (0% to 33% loan-to-value), reduce risk, and increase income

b. Sell low-quality properties and replace them with better ones.

c. Refinance any remaining debts that are not optimal with fixed, low-interest, long-term debts

d. With no existing portfolio or with an insufficient number of properties:

i. Buy more passive assets like higher-quality residential rentals, net-lease commercial rentals, and/or shares in limited partnerships. Keep overall debt levels low (0 to 33% loan-to-value)

ii. Make loans to other investors with funds inside and/or outside of self-directed retirement accounts

iii. Diversify into other asset classes.

Choose a Strategy

If you find yourself attracted to one of the strategies above but you’re intimidated by how to execute it, that’s ok. You still have time to learn. Just make a note of it for now. This kind of focused decision-making process helps you identify knowledge gaps that you need to fill as you go.

For now, just choose one strategy that sounds most interesting and applicable to your situation. Then let’s move to the next step.

Step 3 – Pick a Target Market

With prices so high in many locations, people ask me often whether they should invest close to home or choose a new market. It’s a good question because the market you choose could make a big difference in your final results.

I prefer to invest close to home If possible. Being local gives you the advantage of intimate knowledge of the market. And while managing real estate from a distance can be done, it’s still more efficient and effective to be local.

So, I would start evaluating markets close to home. If prices seem too high in your local neighborhoods, explore a few ideas locally first before looking at other locations. Second, look for smaller niches within your overall market. Within high-priced markets, niches like condos, mobile homes, tax liens, and note investing can sometimes still be profitable.

But whether you stay close to home or invest somewhere else, you should always do a market analysis first. Watch out for our next post, comprehensive guide on How to Pick the Ideal Location For Investment Properties. Use that as your guide if you’re brand new to market analysis.

Here is a brief summary of the ideas we will present in that guide:

#Evaluate big picture location criteria

#Jobs and economics

#Population growth

#Rent/price ratio

#Evaluate small scale location criteria

#Convenience

#Romance

#Walkability

#Safety and Crime Rates

#School Districts

#Public Transportation

#Neighborhood Covenants and HOAs

#Local Laws, Finances, Taxes, & Infrastructure

#Barriers to Supply

By combining all of these criteria, you can then choose a target investment market. Choosing your target market will probably begin with a metropolitan statistical area (MSA), which is a larger region.

If you need to take more time to evaluate and choose your market, that’s fine. But don’t get stuck too long. I recommend making a choice as soon as possible and then keep moving forward to Step 4. Much of entrepreneurship is trial and error. You’ll never be perfect. You can test your hypothesis and return to this step if it does not work.

Step 4 – Decide Your Investment Property Criteria

Your investment property criteria tell you and others what it means to have a good investment. I actually recommend creating a written investment profile that you can share with potential partners, investors, and sources of leads like real estate agents.

Your written investment profile should include descriptions of two major categories:

a. Target property

b. Target terms (aka the numbers)

Your target property will become clearer when you choose a niche within your overall market. A niche means you focus on one smaller segment of the entire market. We've discussed that a bit in Step 3,

When you have chosen a niche (or niches), your basic target property description may look something like this:

a. Single family houses with 3 bedrooms and 2 baths. Ideal properties also include a garage or other storage and a useable yard.

The second category on your investment profile is the ideal terms (aka the numbers).

Your criteria may change over time. But choose some basic investment property criteria that you can live with for now. Then move forward to the next step. If you find later that you need to adjust your criteria, you can always come back.

Step 5 – Build Your Team

Real estate is a team sport, and you are the leader of your team. You don’t necessarily need employees, but you will need independent contractors and advisors who can help you in their areas of expertise. If the idea of running this team turns you off, then perhaps a different type of investing suits you better.

Below is a list of some of the important team members you will need. I picked up the categories for these team members in the awesome book

1. “Inner Circle” – your personal, closest team members

Spouse

Business partner

Mentors/personal advisers

2. “Support Circle” – your fiduciary or critical relationships who help you with important, ongoing tasks

Property manager (if applicable)

A legal advisers specializing in real estate and/or business

Certified Public Accountant (CPA)

Lender(s)

Mortgage lender – for long-term financing

Hard money lender – for short-term financing

Private money lender– for flexible, short or long-term financing

3. “Service Circle” – functional relationships for tasks you’ll need for your investments

Closing agent/title Company

Home inspector

Electrician

Plumber

HVAC technician

Handyman

Painter

Yard service

Pest & Moisture control

General contractor (for bigger remodels and pulling permits)

You will have the best chance of finding your key team members by networking with other like-minded real estate investors. I do this locally at my Real Estate Investor Association (REIA) or at other business groups like the Chamber of Commerce. You can also find other real estate investment like-minded people online.

Now, let’s move on to Step 6

Step 6 – Line Up Financing

Unlike other forms of investing, it’s fairly normal to use financing to help you with a real estate purchase. And there are many options to choose from.

Below are a few financing sources you could choose from.

FHA (Federal Housing Authority) mortgage–this agency issues to applicants from the National Housing Fund Loan. The applicant maybe given up to a maximum of 30years to pay back the loan. This however, depends on a couple of criteria such as the age of the applicant etc. You can follow this link www.fhamortgage.gov.ng to learn more about Federal Housing Authority.

Hard Money Loans – These lenders are most interested in the collateral (i.e. a hard asset) instead of the detailed lending regulations of other sources. The loan costs are much higher, so these are often used for short-term remodeling projects.

Private Lenders – The type of private lender varies widely, from self-directed lenders to wealthy individuals. The flexibility and the long-term relationship you get from these lenders make them extremely valuable. I also include money partners in this category.

Seller Financing – This is one of the favorite types of financing. A seller with equity can allow you to pay the purchase price over time with installments or by using more creative contracts like leases and options. It’s not as easy to find seller financing as walking into a bank, but the flexibility of terms make seller financing worth the effort.

The type of financing you choose will depend upon your financial situations (Step 1), your strategy (Step 2), and your personal preference. You will want to rely heavily on your mentors and your lending team members (Step 5) to help you line up the best fit for you.

Once you have a solid plan for financing, you can proceed to Step 7 to raise cash for your down payment & reserves.

Step 7 – Raise Cash for Your Down Payment & Reserves

Real estate investing is a business that allows you to use other people’s money to help you move forward. But you shouldn’t count on building your entire business with no money down. Even if you use the highest leverage scenarios, you will still want to save cash for reserves.

So, how much cash will you need? And how do you raise it?

The amount of cash needed will depend upon your strategy (Step 2), the prices in your target market (Step 3), and your property criteria (Step 4). You can also ask your lending team member (Step 5) how much down payment you will need for certain loan programs (Step 6).

For example, let’s say your financial priority is increasing your savings rate (wealth stage 3). You decide to use the house hacking strategy to purchase a duplex for N60,000,000.00, your mortgage plan may require you to make initial deposit of 5% - 20% down payment. So, you will need N 3,000,000.oo (5%) to N12,000,000.00 (20%) of N60,000,000.00 for your down payment and perhaps additional charges for your closing costs. Bedsides all these, you may also need more cash for property improvements and reserves for a rainy day. So, let’s say all together you will need an average of N20,000,000.00 for your total down payment.

So how do you find that money? Here are a few ideas:

Save – I know this is obvious. But sometimes you just need to make investing important, work for extra income, cut other expenses out of your life, and be patient until you have saved the money. No short cut here, but it works.

Sell – Can you sell your car and buy a less expensive one? Do you have expensive toys that you can sell until later in life when you are financially better off? What about selling a big home with a lot of equity if you are willing to downsize? Do you have collections of junk in your house that needs to go away? Selling is one of the safest and most logical ways to raise funds.

Borrow – This one you need to be careful with. It is most often more comfortable borrowing safely against long-term assets like rental properties. But personal loans, credit cards, or lines of credit used for down payments can be dangerous if things go badly. The problem is the discipline of cash flow. If you borrow N20,000,000.00 to invest, will the investment produce enough to pay the interest? If not, you will need to come out of pocket. Just make sure you can handle that extra loan payment in a worst case scenario.

Partner – Partnering is like sharing a delicious cake. What if someone offered me a rich, chocolate cake (my favorite!) for 50% off? But what if I didn’t have the money to buy it? Wouldn’t it make sense to find a friend who DOES have that money and split the cake with them? Now we both win. That is partnering in a nutshell. This works very well. Just make sure to communicate clearly up front (in writing), and only work with people you like and trust.

Now that you have your cash and financing lined up, let’s move to the next step where we find good deals!

Step 8 – Create a Plan to Find Deals

Good deals don’t just land in your lap. Finding good deals is more like a treasure hunt. You have to turn over dozens and dozens of stones before you find a hidden gem.

Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.

We should always have our washtubs ready for periods when “it rains gold.” But what about the rest of the time? During normal economic times, you have to work hard and create a plan to bring good deals to you. And you have to stay disciplined with your investment criteria (Step 4) so that you don’t succumb to the fever of a hot market.

My recommended plan to find real estate deals includes two sub-steps:

A budget for marketing

Marketing campaigns to bring prospective deals to you

Marketing Budget

If you have a N 0.00 budget for marketing, you will have to get creative and plan to spend more personal time instead. It is more challenging this way, but it is not impossible. With approximately N 50,000.00 per month, you probably have enough to create workable marketing campaigns. And for N 100,000 per month or more, you can really set yourself apart within your market.

Marketing Campaigns

There are many possible marketing campaigns to choose from. And because marketing is an inexact science, the campaigns that are effective change like the wind. So, I recommend carefully testing different campaigns, and then stick with what works.

Multiple Listing Service (MLS): Find a buyer’s agent who will send you leads based upon your criteria (see Step 4). Using the MLS (multiple listing services), these agents can set up automatic emails that will reach your inbox any time a new or reduced property hits the market. Warning – move fast on these deals (like this minute, not hours or days)! Everyone else is doing this campaign, too. (Zinorealtors offers MLS www.enochzino.wixsite.com/mysite )

Referral & Networking Campaign – Tell everyone you know to send you leads on prospective properties. Talk to friends and family, but also reach out to professional contacts like your CPA, attorney, financial advisers, real estate agents, property managers, etc. Attend networking meetings at landlord associations, REIAs (Real Estate Investment Associations), and other real estate and business-related meet ups. Get business cards and print flyers with your investment criteria so that people remember you.

Drive (or Walk) For Dollars – Regularly walk or drive your target neighborhoods. Look for FSBO (For Sale by Owner) signs, For Rent signs, vacant or run down properties listed with agents, and vacant properties with no signs. Call numbers on signs to talk to owners or agents when possible. For vacant properties, talk to the neighbors when possible to try to get in touch with the owner. Also, write down the vacant house address, and later look up the owner contact information. You can also contact Zinoreltors at email: enochrealtors@gmail.com or www.enochzino.wixsite.com/mysite

Cold Calls – For those who can handle 50 rejections for every 1 promising phone call, this could be an effective method. You can search the online classifieds or local paper to find for sale by owner and for rent by owner listings. Then just call listings one by one and ask questions. Few people will do this, so you may find some gems that others pass up.

Classified Ads – You can advertise your service (buying real estate) through free or low costs classified ads online or in local print publications. Not every avenue will work, but if they are low cost or free, try as many as possible and get your information out there.

Intermediate & High Cost:

Direct Mail – You can send letters or postcards to various lists of property owners. Finding these lists is sometimes as easy as paying a list company or local service. Other times it is a wild goose chase. Don’t be discouraged if it is hard. That is actually a good thing because fewer investors will choose to follow up and you will.

You can also seek the services of independent real estate consultants.

Website & Social Media– A website & social media channels (Facebook, Twitter, Linked-In, etc.) are like an online business card that tells about your real estate investing business. Be sure to tell people who you are, what you are looking for (investment criteria from Step 4), and how you can help. Most importantly make it easy for people to contact you.

Car Signs – This means using magnetic or vinyl lettering on your car that says “I Buy Houses” or some other message with your phone number. This approach may be beyond your comfort zone, but it is relatively inexpensiveAdvertising – Use online ads like Google Adwords, traditional advertising like newspapers, magazines, and community bulletins, and even radio advertising (talk radio is best). The cost for this type of marketing can get out of hand fast, but if you are careful about testing, it can be a great return on investment.

Decide on a Budget & Marketing Campaign(s)

There are actually many more marketing campaigns that I could share (and you’re welcome to share your own favorites in the comments below). But these are effective options that will give you some choices to start with.

So, decide a rough marketing budget and choose one or two marketing campaigns you will start with. Then move on to Step 9

Step 9 – Schedule Your Time & Prioritize Next Actions

I have given you a lot of information so far. But the point of this real estate investing article is to help you get started as quickly as possible.

So, the point of Step 9 is to help you transfer all of this information into organized, effective action right away. First, I will make recommendations for scheduling your time. Second, I will talk about prioritizing next actions.

Schedule Your Time

You know your life and your schedule better than I do. But I assume like most people you’re busy. So, here is an important question for you:

How much time can you and/or your spouse or business partner carve out each week to work on your real estate investing business?

Be realistic. But if getting started with real estate investing is important to you, also be ruthless with your priorities. This isn’t a forever project. You will spend more time for the next few months to a year, but later as you gain momentum, buy properties, and build systems it will consume much less time.

So, how much time can you carve out? Based on my prior experience helping other investors one-on-one, you need at least 10 hours per week in order to give yourself a minimal chance of success. But the more time you can commit, like 20-30 hours, the more you will increase your chances. However, if you decide to use the service of a real estate consultant, you may not necessarily need to spend so much time.

Now look at your calendar and block out specific times to work on real estate each week. For example, if you plan to do real estate before your job each day and on Saturday mornings, schedule it so that nothing else gets in the way. This is like a work or doctor appointment. It must be scheduled in order to be a priority.

Once you have the time blocked, you can focus on the actions you will take during that time.

Prioritize Next Actions

The awesome book Getting Things Done by David Allen taught me that getting projects done is not really time management. Once you have scheduled blocks of time like I suggested above, it is now about ACTION management. This means you need to spend your time only doing the actions that will move you forward towards your goals.

The important habit here should be to break big goals and projects down into small, bite-sized actions that can do and check off a list.

But for now, I suggest you do the followings:

Identify Next Projects: Write down the one or two projects that must happen NEXT to start investing in real estate. Projects are anything that requires more than one step to accomplish. You will notice that this article was organized step-by-step for a reason. If you are not sure about your next project, just go back to Step 1 and make that your project.

Identify Next Actions: Write down the next two or three actions that you must do in order to move forward on the projects you just wrote down. For example, your actions may be “read some articles on real estate strategies” and “write down the best strategy for me.” You can do those things in your next block of time dedicated to real estate investing.

Do Your Next Actions: Nice and simple, right? Just do what you wrote down during your next time block (or even better do it right now!).

Identify Next Actions (Again): This process just keeps going and going. You continue finding more next actions until a project is done. Then you move to the next project, and the next, and the next.

What happens when you finish all your projects? You accomplish your goals, of course! And what’s next? You guessed it – you move on to the next goal (s). It is a fun game to play.

Conclusion

We have made it to the end of my #9 steps for real estate investing! As I shared in the beginning, my goal was to save you frustration and time as someone getting started (or restarted) with real estate investing.

As you may know, too much information can sometimes work against you as a newbie. So, I hope the action steps in this article will give you a framework to get started quickly. And if you get started and keep moving, you can avoid getting overwhelmed and move past those other

pesky beginner challenges like analysis paralysis.

But as you know, these steps are only the beginning. Real life is fluid, and the best plans you make will be tested and challenged in the forge of reality. So, stay flexible, keep learning, and let me know if I can help by making comments below.

Were my 9 steps above helpful for you? What are your next real estate investing projects? What are your next actions? Do you have any questions or challenges?

I’d love to hear from you in the comments below.

And just in case you need further advice before you delve into real estate, or you need any of our others services, please feel free to contact us via the following links

email: enochrealtors@gmail.com

website: www.enochzino.wixsite.com/mysite

facebook: www.facebook.com/zinorealtors

WhatsApp: 07037571846