4 days ago
433: Beginner’s Guide to Real Estate Investing
Learn the beginner's mistakes to avoid.
Is setting up a real estate LLC even worth it?
Learn how to build the right credit score for a mortgage loan, including why you actually don’t want a score over 800.
If a cash flowing property is so great, why would anyone sell it to you? I outline a myriad of reasons.
Should you make a lowball offer to a real estate seller? Learn negotiation techniques.
Earnest money procedures are covered.
The real estate buying process is slow. From the time that you make the offer, it can often take over 30 days to close the deal.
Once your offer is accepted, I recommend a professional third party inspection. It can cost you $300 to $500 for a single-family income property up to $1,000 for a fourplex inspection.
I cover property appraisals and how they verify the quality of the bank’s collateral.
Learn how to get a good feel for your property manager and what their duties are.
I discuss the Management Agreement between you and your manager.
Be sure to tell your insurance provider that this is a rental property, not your primary residence.
A mobile notary meets you at your home, workplace, airport, or even a restaurant in order to complete the paper-and-ink closing process. This wraps up the deal.
Get started with income property at: GREmarketplace.com.
For free coaching to help get you started, contact our free Investment Coach, Naresh, at: GREmarketplace.com/Coach
Resources mentioned:
Show Notes:
www.GetRichEducation.com/433
Get mortgage loans for investment property:
RidgeLendingGroup.com or call 855-74-RIDGE
or e-mail: info@RidgeLendingGroup.com
Analyze your RE portfolio at (use code “GRE” for 10% off):
MyPropertyStats.com
Memphis property that cash flows from Day 1:
www.MidSouthHomeBuyers.com
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Welcome to GRE! I’m your host Keith Weinhold, here to help BEGINNING Real Estate Investors Today.
The biggest beginner mistakes to avoid, when you make an offer - can you lowball a turnkey provider, and all those buyer steps like LLCs, mortgage pre-approval, inspection, appraisal, and closing. Today, on Get Rich Education.
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Welcome to GRE. From Athens, Greece to Athens, Georgia and across 188 nations worldwide. The voice of REI since 2014.
This is Get Rich Education Podcast episode 433 - and this is your Beginner’s Real Estate Investing Audio Guide. Hi, I’m your host Keith Weinhold.
We’re talking about how to get into long-term buy & hold RE investing - and that’s because it’s the most generationally-proven way to build wealth.
First, let’s talk about a couple of the biggest mistakes that real estate investors make - it’s being invested in only one geographic market. Often, that’s the market that they just happen to live in.
There is more risk with being in only one market than most realize, because you’re now tied to the fortunes or misfortunes of just one area’s economy.
Another substantial, common real estate investor mistake is that they continue to hold onto one - I’ll call it - special - property in their portfolio that they usually need to get rid of - but they have either sentimental ties to it - or they just hold onto it for convenience, and do you know what that property is?
I’m actually talking about a specific property here.
It’s the home that YOU YOU USED TO LIVE IN yourself. Well, what’s wrong with renting out the home that you used to live in yourself?
You might still have the preferable owner-occupied financing locked in on that one - and afterall, that’s a better rate than you could get on a non-owner-occupied rental.
The problem is that the property probably doesn’t perform BEST as a rental.
But you might be clearing, say $600 per month by using your former primary residence as a rental today.
Look, for you, it’s often about the cash flow - and yes, it is about the cash flow.
But there’s something even more important than cash flow - that’s because nearly any property will cash flow if the loan were paid off.
That’s why it’s really more specifically about the rent-to-price ratio of a property.
If you’re renting out the home that you used to live in, and it wasn’t strategically bought as a rental, if your rent-to-price ratio is 0.4%, meaning that for every $100K in value it has, you’re only getting $400 of monthly rent income, then you’re losing cash flow dollars every year - and every month.
Look, let’s give a real life example of the .4% RV ratio. Say that you can get $2,000 rent out of that $500K property that you used to live in.
But instead, three $150K homes bought strategically as rentals can have a combined rent income of $3,000.
So it’s either one $500K property at $2,000 of rent income.
Or three $150K properties at $3,000 of rent income.
So you’re losing $1,000 dollars of cash flow every month - by not buying and owning strategically in markets in the Midwest and South where the properties make sense as a RENTAL on the day that you buy it.
Your primary residence only made sense as a primary residence on the day that you bought it.
Now you can see that the only reason that you still own it, is because you defaulted and “fell” into it. Don’t fall into things. Often, you want to be intentional.
You are a better investor when you’re intentional rather than emotional.
It’s even better for you now. Beyond your $1,000 of additional cash flow with some repositioning, now, with three properties instead of one - now you’ve also taken care of the first real estate investor mistake that I mentioned.
WITH three rentals rather than one, now you can be diversified across multiple markets.
Two birds are killed with one stone. Now with some re-positioning, you’ve increased your cash flow by $1,000, AND you’re in multiple markets. One property isn’t divisible.
And this $1,000 of monthly cash flow example is small. Of course, the differences can be greater than this.
We’re talking about real estate investing for beginners today, so let me clearly guide you through step-by-step on just how you go about buying your first property - writing an offer, getting an independent third-party property inspection and vetting your Property Manager which is known as due diligence, then the appraisal, and onto closing and receiving cash flow from the tenant.
As you’ll see, much of today’s show pertains to any investment property at all.
But we’re talking mostly about how to buy what are known as turnkey homes, especially homes outside your home market - as most of the best deals are not found where you live.
Turnkey means three basic things. #1- You buy a property that’s either brand new construction or fully renovated. #2- A tenant is placed for you - and you get to approve them. And #3- the property is held under management for you from Day 1 - if you so choose.
Like they say, the best investors live where they want to live, invest where the numbers make sense.
Today’s content is primarily geared toward United States real estate investors - but those that live outside the United States will benefit here too. You might want to buy a property in the US.
Here’s a question that you might have - “How do I go about setting up an LLC - a Limited Liability Company - to hold my investment property in?”
I’ll tell you - I don’t think “How do I set up an LLC?” is the best question to ask.
The best question to ask is, “Should I set up an LLC?”
The three main reasons people set up an LLC are for either anonymity, tax purposes, or asset protecti…