FOR HANDS-ON, PERFECTION IS NOT THE GOAL
Many people like the idea of investing in real estate but can’t seem to decide how or where to start. They attend seminars featuring a variety of investment options offered by many different lecturers. Quite often they leave not knowing exactly whose advice to follow.
My feeling is this: part-time investors or those just starting out need training and experience in about equal proportions. Stated another way, they don’t need a lot more education than they can use or apply. They need enough education and know-how to begin; and then on a continuing basis as they gain experience from doing it.
There is no quicker way to become an experienced real estate investor than to jump right in and buy real estate. Unfortunately, the kind of experience many get using this method is not the experience they need. Frequently beginners buy properties based mostly on looks. Invariably they pay too much. Paying too much coupled with having little or no experience can turn the American dream into a nightmare.
“Invariably they pay too much.”
Real estate investing requires many skills other than simply buying properties. Classrooms and books are important and necessary in order to learn technical information. However, there is absolutely no faster or better method to learn the practical side than doing it yourself. It’s called on the job training. This learning experience is best accomplished with properties that require some personal attention.
Rundown houses that need work are ideal candidates because they’re inexpensive and because perfection is not important. Most any work you do is likely to improve the property even if it lacks professional quality, and we all get better with experience. But we can only get experience by doing.
Fix-up jobs require a multitude of skills. The investor must purchase a property cheap enough to earn a profit. Fix-up investors will be involved with employees and contractors. They must develop a specific fix-up plan to fit within a pre-determined budget. Finally, they must choose and manage tenants for rentals or negotiate a buyer into a profitable sale.
Fix and Sell or Fix and Rent
Both strategies are “best,” depending on the individual. If you need the money from your first fix-up in order to continue investing, selling may be your only option.
Finding good properties is the most difficult task. Personally, when I find one that I can fix-up and increase rents to prod uce steady monthly income, it hurts me to sell it. Positive monthly income can quickly add to your wealth. I’m a firm believer in keeping the goose that lays golden eggs.
” … more houses are becoming fixers than are being fixed. “
The key is to start fixing and try both strategies yourself. Many investors start with filers, then over time gradually switch to other investment specialties. That’s a perfectly reasonable strategy. Others like myself develop a special knack for fix-up and land lording and tend to stay with it.
When you buy right, fixers are cheap. You should expect to pay 20-50 percent below regular market prices. The largest discounts will be earned when you buy the ugliest properties. Ugly rundown properties combined with people problems, such as divorcing owners and non-paying tenants who kick in walls, often provide even larger discounts.
By the time you’ve completed a fix-up project or two, You’ll have enough experience to deal with almost any real estate transaction. And, your confidence level will increase at least 100 fold.
