Buy your first investment property
“Begin with the end in mind”
I first heard the phrase “Start with the end in mind” in a book by Steven Covey called “The 7 Habits of Highly Effective People.” This expression makes a lot of sense because the fact is that you cannot get where you are going unless you know where you want to go.
Most new investors understand that real estate is an investment vehicle that makes sense. We all know that many fortunes have been built on real estate. But when you’re just starting out, all the available information can be very confusing. I often get emails asking “what strategies should I use?” or “Where should I look for deals?”
One of the reasons these problems are so difficult to understand and solve when you are new to the investing game is that the answer to the question can be different for each individual.
Seminars tend to package the information into a “one size fits all” crash course. But this inevitably leaves unanswered questions for each individual user. Simply put, each person has their own individual situation regarding credit, income, employment, assets, etc. All of these factors can affect your investment options and objectives.
Adding to this confusion is the sheer number of strategies. Do I have to own a rental property? Should I fix and resell? What about the options? Now, what about buying tax taxes? There are so many options, how is one going to know what to do when just starting out?
I can remember flooding around me. I spent thousands of dollars on different courses, trying to put all the pieces together and gain enough understanding to know what to do first.
It seemed like no one wanted to tell me anything useful unless I paid them first. I soon discovered that no matter how much money I spent, there were many unanswered questions. I felt frozen with fear, because I just didn’t understand what to do first. As a result, it took several years before I felt comfortable enough to get directly involved in buying a property.
Today, having seen and participated in many transactions, I know that the first step is to decide what you want real estate investment to do for you. In short, where do you want to go?
Like any journey, you start by deciding where you want to go. Once the destination has been chosen, the best way to get there is determined.
Many of the most successful and wealthy investors I know have built their fortunes on rental property. Some of them own 40 or more rental houses. Some of them own commercial properties such as gas stations, storage facilities, or office buildings. Each had the same destination, the cash flow from rental income, but two drastically different ways of getting there.
Frankly, most truly successful investors are very patient men and women who build their portfolios slowly over several years. They are cautious and cautious, buying only when they know the deal is good.
Today, many people are drawn to investing because they’ve heard the stories about how you can buy a home with no money down and get enough cash at closing to pay off all your debts. This is possible, but creating a debt to pay another has its risks.
Let’s say your ultimate goal is to achieve a passive income of $5,000 per month from rental property. Now, think of that target as a city on a road map.
Most cities have several different paths you can take to get downtown. The same goes for your investment. Different people will arrive at the same destination, each using a slightly different route to get there.
Once you decide where you want to go, your route to your destination will be determined by your financing options.
If you have excellent credit, income for which you receive a W-2 statement, and plenty of cash for a down payment, your financing options will let you go pretty much any route you want. The fact is, good credit and cash will get you where you want to go much faster. But it is not the only way.
If you have credit problems, are self-employed, or don’t have cash for a down payment, your final destination may be the same, but you’ll need a different route to get there.
Your financing options determine the route you have to take to get to your destination. In essence, the answer to getting started is to find out what type of financing you can get, and then find deals that work with your available financing options.
If you can’t get any type of financing, you can still buy offers where the seller will agree to finance the offer, or some scenario where financing is provided without you having to qualify.
If you have decent credit but are strapped for cash, there are investor loans with low down payments that can make it easier for you to get started with little cash.
If you have good credit and cash, hop on the freeway. Shop around for any good deals, as you can get a loan at great rates, plus take advantage of any good seller financing deals that come your way. You have the largest number of options to reach your destination.
No matter where you start from, you can still end up at the same destination and achieve the same goal.
Step one: decide where you want to go. Then shop around for a good lender to find out what avenues you can take. Even if you have to start on the “no cash, no credit” back roads, remember that sooner or later, if you keep driving, you’ll find an on-ramp to the freeway.