My first education in real estate came from Carleton Sheets
The best first step you can take in real estate is to really find out what is out there. It is impossible to spot a good deal if you have never walked through a property or looked through the real estate classified ads. Get through as many houses and condos and duplexes as you can, and one day you will stumble on a deal that is just too good to pass up. If you've gotten a good enough grasp of the market, you'll recognize it when it does.
It usually takes me between two and four weeks to find a great deal. If you have a little more money, foreclosures and distressed properties are a great way to make money in real estate. I was a college student without much (any) money, so I had to start with little money down and low risk opportunities (yes, they really do exist). At first I worked with a real estate agent, looking at properties listed on the MLS. Although that is a great way to find out what houses can sell for, it isn't the best way to find a deal. After I realized that, I struck out on my own.
I looked through the paper and drove by houses until finally I found a house on a third of an acre in Provo for seventy-six thousand dollars. Even more important than the price was the fact that I was able to talk the owner into carrying the financing for two years. Almost as important was the location (near BYU in a nice neighborhood). For a picture and more information, see my earlier blog "Recap of 2001--2004." I used student loans as a deposit on the lease option and the payments were low. My family and I moved into the house, which though small was perfect for us. We made some minor improvements (during which I found out that finish work really isn't my thing) and then put it up for sale almost immediately.
At first, we listed it with a real estate agent. The first six months with the agent, we only had two people walk through. At the end of our contract we promptly switched signs in the yard from the agent's to a "For Sale By Owner" and had a signed offer within a few weeks. We ended up selling the house and getting a check for twenty-six thousand dollars. Not bad for my first real estate deal!
I wouldn't have known it was a great deal when I saw it if I hadn't been through a lot of houses in the two months before I made an offer. The other great information that I gleaned from the Carelton Sheets course was the questions to ask potential sellers. Price isn't the only factor in finding a great deal. Price is important, but if a seller isn't willing to carry financing or consider a lease option, it might not be possible to buy the house anyway. Carelton Sheets has evaluation forms which I used to learn more about what to specifically look at in properties. The experience of using those forms and looking through several different properties gave me more confidence and maturity to take from when I met with the seller. It was enough to give her enough confidence in me to carry the note. It is definitely the most important first step of entering the real estate world.
Although I don't use everything from Carleton Sheets' program, I would highly recommend the course if you are really interested in getting into real estate investing, part time or full time. There's no easy way, you have to be willing to put the time in to learn the information enclosed and put it to use. But if you do, it can give you a great starting point.
2 comments:
Ryan,
Do you consider a first home a good deal when it is at the market price and the terms are flexible, or would you hold out for a house that is below market and has the desired terms?
It really depends on the terms. If they are really good then that can be enough to make up the difference. For example, if they will let you lease option their house for $600/month and $300 of the $600 goes to principle every month, that might be good enough to make up the difference in price depending on how long you plan on being there. With FSBOs you can usually get a good deal on price as well. Most people sell their house FSBO in order to save themselves the 6 percent listing fee. If you can negotiate for part or all of the listing fee that is usually a very good start to building some profit into the transaction. Additionally, FSBO have a greater chance of not knowing exactly what the market value of their home is. They might be asking too much (and by acting confidently and explaining comps you might be able to show them that) or too low (good for you!). If you are planning on being in the house for two or more years, you can then usually count on inflation to help you make even more (3--6 percent of $150K isn't bad). In my case, as soon as I buy a house I put it back up for sale at a premium and sell the house at the top end of the market. It might take longer to sell that way, but usually it's quicker than I expected (and than my wife would want!). I hope this helps.
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