Real Estate Marketing & Beyond
Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to [email protected].
Question from Linda of Cincinnati, OH: Hello Brian, I bought a condo as my own home a little over 3 years ago. I’m 28 years old and it was my first experience investing in real estate. Although, I had a lot to learn at the time, I found the experience exciting. Since then, I’ve read many articles (including your columns) about real estate investing when they pop up on my radar. I would have liked to have gotten into investing a couple of years ago when the market was hot. But reality is that it took me those years to settle into a budget as a homeowner and save another nest egg after spending my savings to buy my condo. Today, I have about $10,000 that I would like to use to begin investing in real estate. I’ve come to believe this is a reliable path to building wealth. What do you suggest for someone just getting started? By the way, I’m single if that makes any difference.
Answer: Hi Linda, thanks for writing and including your background information. First of all, don’t let the fact that you missed out on the hot market over the past few years be a deterrent to investing today or a year from today. As long as you’re horizon is long term, investing in a softer market often works to your advantage. We all know that buying low and selling high is the name of the game.
As a new investor, you probably don’t want to rush into anything too quickly. I suggest that you continue reading current quality books and articles on the subject (not get rich quick schemes). I also suggest that you begin looking around for a trusted mentor. If you’re going to invest local, you’re best off with a local mentor. This takes time on both your part and your mentor’s part. Assuming you work a 9 to 5 job, the good thing about real estate is much of the effort often takes place on weekends when you should have time. In the beginning, this might be referred to as “carrying his/her briefcase.” But soon you’ll be asking relevant questions.
One of the first questions that you want to ask is what strategy your mentor always uses or is using at this time? As you probably already know, there are three basic strategies: buy & hold (rental properties), buy & sell (flipping), and wholesaling. Of course, each of these has finer points that could involve specializing in damaged foundations, self-financing, small apartment buildings, single family houses, or one of many other possibilities. Even if your mentor’s strategy isn’t the one you think you want to get into, you can learn plenty. First of all, why is this experienced investor using a particular strategy in a specific market at this time? Also, you’ll learn basic skills like finding leads and soft skills like negotiating. You can always seek out another mentor if you’re convinced his/hers isn’t the strategy you want to use.
Avoidable mistakes are the biggest peril that beginning investors prevent. Everyone makes mistakes but major mistakes can ruin an investment career for beginners. Linda, it’s wise to learn from those that came before you. You should specifically ask a mentor what mistakes he/she made or avoided in the early months and years. The most common big mistakes are not having a sound exit or profit strategy, buying an unprofitable property, hiring the wrong contractor, and underestimating rehab costs.
Next, you’ll almost certainly be looking at distressed properties. As a beginner, you should use the services of a qualified house inspector. But that costs money. You don’t want to hire an inspector when there are obvious signs that repairs will cost more than the profit potential. When you don’t know what to look for, every distressed property can look like a winner. From mentors, real estate agents, and by following around hired inspectors, learn what to look for that clearly makes an investment unprofitable. The most common high cost repairs are roof, electrical, plumbing, and HVAC.
Always carry paper and pen (or an electronic devise) to capture everything you learn. Many tangent things will pop up every day when you’re working with your mentor. You’ll learn what new technology offers the most bang for the buck and you might learn something like the wholesale market is much more robust than you ever realized. In the end, you’ll know when you feel comfortable making your first investment. You may decide to work with a few different mentors before making that decision. Be sure to return the favor when you become one of the more experienced investors. Believe it or not, mentors also learn a lot from the questions that mentees ask.
Please comment with their thoughts and experiences about getting started as a real estate investor. Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to [email protected].
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 12 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.
