If you’re a beginner and you want to know how to invest in Real Estate, I’m going to tell you exactly where to start and exactly what you need to do.
The ultimate beginner’s guide to investing in real estate does begin with you answering one of these questions.
- Do you want to make money today or:
- Do you want to make money today and tomorrow?
In the game of real estate, there’s a couple of different ways to play. And right now, there’s a huge divide. I could tell you about many strategies but really what I want to do today is I just share 2 in particular. Because you’re going to gravitate to one or the other.
And then I’m going to see if I can change your mind on something. Because I think I already know where you’re going to land.
In the question of making money now versus tomorrow what is more important?
Investing In Real Estate by Flipping Houses
When people get in the game of real estate, what entraps them is the idea of doing a flip. About buying a property right now for less, selling it for more and making tons of quick money.
And what’s fun about that is that they could have this deal done in 30, 60 or 90 days. And they’re going to make a lot of money.
That is the now money. That’s what gets people totally jazzed and excited.
We have for our example a house. Apparently this house is a good deal. Good deal means it’s going to make a lot of money. for us.
If we tried to flip this house today, because it has $50,000 of equity. And we are getting it under market. If we flip it, we’ve got to remove the selling and repair costs. Finally, by the time we do that at the end of the day, we might be be surprised to realize that $50,000 can turn into $10,000 really fast. Hence, thread lightly.
But if I’m being honest, I have to share with you a second Investing In Real Estate strategy:
Investing In Real Estate by Buying Rental Properties
Flips will always be compared to rentals. Now, a rental is not about now money.
A rental property is about cash flow and it’s about tomorrow.
Later on I’m going to discuss something similar. It is a combination that gives you the best of both worlds.
Flippers think: “Give me the money now.” while renters say, “I want to be a landlord. I want to own that property. Every month I want it to give me a little bit of money for the rest of my life.”
As an investor, you must decide: Do I want the now money? Do I want a little bit along the way? And eventually some tomorrow money?.
In my opinion flipping is short-sighted. As an investor to make 20 or 30 thousand dollars over the next 3 months sounds great. Everyone should quit their day jobs and do that.
However, you must know that you will work your guts out. Flipping means you find the house, go to Home Depot, and do all the work. Additionally, there’s a risk of actually losing money at the end of the day. Actually, it is a dangerous proposition. Especially when you’re inexperienced. Therefore, to you do this, you better have a mentor. Someone that can review the numbers because most real estate investors come in the game optimists and then leave as pessimists.
Flipping homes is an intensive type of activity. It requires working very hard and doing it on a tight schedule.
Having a house is passive. And passive means that the house keeps making money even though you as an investor may not be working for it.
Therefore, the question is: Do you want to make $120,000 a year flipping, using all of your time and energy or do you want to make $10,000 a month residually without having to spend any time.
It’s kind of a dumb question. I think we’d all agree. You would actually want the residual income. Right? Same amount of money but you do not have to work for it.
The Hybrid method to Investing.
So, what’s the priority? What’s most important? Well, you don’t have to make that choice. I’m going to share with you something that if you’re not familiar with, you need to know about. And this is a hybrid of both of these two.
It is a version of what you may have to consider: Investing for the long term.
Begin with a small investment property and expand over time the number of investment properties you own. Or develop your first multi family, and after recovering your investment flip it for bigger one.
I you want to invest in real estate in the most intelligent way, consider this:
How much is your time worth?
Number one, you’re looking for a strategy that will take you the least time. A flip is not the least time. A flip is a job. And if you don’t do the job, you don’t get paid. It’s just like your other job. It’s just in real as opposed to a desk job.
Is it going to be hard to do?
Number 2, you need to evaluate efforts. Is it going to be hard or is it going to be easy? Because if it’s going to be hard, then you may want to consider if it is really worth doing. Most of us are actually under the impression that for us to feel good about making money. We’ve got to actually work.
I’m talking about find something with the least time, the least effort.
How about the risk involved?
And then number 3, guess what? I’m talking about something that has the least risk. Because not all real estate is created equal. Some of it is riskier than others.
Is it profitable?, how much value are you creating?
Number 4, yes. It’s got to produce the most profit. But if I might, I want to actually share with you two more criteria that I believe is responsible for countless millions of dollars. Does it provide a service to the community? And it’s kind of a strange question but money follows value. So, some real estate creates little value, some real estate creates massive value.
Is it flexible in all market conditions
Lastly, this is really big. Does it work in up and down markets? Because guess what my friends? Market speed up, they slow down, they shift, they change. And if you’re not fully prepared for what can happen in a market, you can get caught in the middle. And it’s not fun, the pain can last for years.
To learn more about Investing In Real Estate read our next blog post.
