The road to wealth begins with the first step. Whether or not you have money now, start your real estate program as though you have none – or very little. A good admonition I learned from another investor is: don’t write big checks or make promises you can’t keep or assume existing bank loans.
If it’s not your money and you didn’t promise a bank you’d be responsible for the loan, it’s pretty hard for you to lose money. You will make money helping other people solve their problems. In fact, you’re in the problem-solving business and real estate is just the tool you will use. You don’t have to make promises you can’t keep just to get someone to work with you. If you understand what I’ve just said, you should not be the least bit fearful of investing in real estate.
Basic Real Estate Investing Rule:
Live where you wish but invest where it makes sense to invest. That may- or may not be where you live. When I first started to write my book, Southern California’s Orange County was one of the “hot” markets. I saw it as the “Greater Fool” market. That is not to say Orange County is not a good place to live. It is to say it may not be the best place to invest.
People buying in Orange County did so because they thought they’d be able to sell the property for even more money to the next buyer (greater fool). Present homeowners are barely able to make their payments now. If they took-out an adjustable-rate mortgage, they’re terrified those interest rates will increase and that their mortgage payment will go higher.
And they can’t refinance because they have no equity. Until you have a firm grasp of what you’re doing in real estate, stay away from these “Bubble” markets. The one exception would be if you find someone that just wants to give you the title to a house just to get rid of it. As long as you don’t take title in your name or promise to make their mortgage payments, you can’t get hurt, but more on that later. For beginners, however, this is probably not where you should start.
Real estate prices go up and they go down. These fluctuations are based on the local economy to a great extent. The trick is to find a market where the economy has been poor but is now starting to show some life. It’s starting to recover. Perhaps new businesses are moving into the area and new jobs are being created. As the local economy recovers, the demand for the local real estate will increase and the price of that real estate will increase.
Studies show that for every one new basic job created, seven other service jobs evolve. These would include dry cleaners, bakeries, restaurants, service stations and pet stores. On the Internet today, you can find demographic statistics on almost every city in the USA (http://www.numbeo.com/common/). A careful perusal of these data will get you pointed in the right direction in the right geographic area.
The old caveat was to not venture more than a 50-mile radius from where you now live. If you can find a recovering area within that radius, by all means start there. If not, don’t let that 50-mile restriction hold you back. Move outside this artificial box. Take the time to check out promising areas regardless of where they are located. This statement ties-in with the “Location-Location-Location” admonition you’ve heard many times.
You can buy a great property in the wrong location and loose your shirt. You can also buy a poor property in an excellent location and probably make a profit. Location not only means the quality of the neighborhood, it also means the quality of the local economy. Finding this place to start is your number one priority. I’ll take you through the next steps in Pssst – Wanna Be a Real Estate Millionaire – Getting Started Part 2.Note: This is just the beginning, I wrote a book, “Pssst – Wanna Be a Real Estate Millionaire?” to familiarize investors like you with all of the techniques you can use to purchase- or make money in real estate. I plan on sharing it freely and take you step-by-step through as many transactions as possible so that you will know what to expect in each instance.