1. Know Real Estate Is Your Plan.
Know what investment vehicle you are going to concentrate on. And once you know what it is, know absolutely everything there is to know about it. If you are awake you should be studying, investigating and learning all there is to learn. If real estate is what you choose, then you should learn all about the type of real estate you are going to invest in, the location, financing, deals, the power players, the economy of the area, and on and on.
2. Shop The Deals.
Again, you need to do your homework. Identify which deals are currently on the market. What deals are under contract. How long and how many deals are open at any given time? Where are the deals? Are they where you want to invest? Studying these deals gains you market knowledge and lets you spot insider area trends.
3. Find Deals That Are For Sale.
If you’re driving around and you see an attractive property call the property to see who owns it. Find out how long it’s been under the same ownership. Find out what else they own. Pull tax records and other public information. Usually, property that’s been owned for a certain period of time is most likely going to be up for sale or be on sale. Don’t limit your search to what is simply on the market. Expand and tailor your search to what you love and what you’d want to own. Property under contract can still be purchased if the price is right. You just have to know what you want.
4. Contact.
Make contact with the broker, seller or whomever you need to. You need access to the deals and market and more than likely you need an insider and someone in the business. Brokers are hard to track down and in my book, I tell you more about how to work with them. Making contact is an important step in getting knowledgeable about investing and it’s worth studying and learning how and who to talk to.
5. Learn/Make a Pitch.
Put together your sales pitch. Decide how you are going to convince the person to sell to you over someone else who has more history and experience. Write down what you love about the property. Create your script and story about what you want to do, how you see it fitting into your portfolio that you want to build, what about the location is perfect, and what price are you willing to pay for it.
6. Underwrite Your Deal.
Do your due diligence. Determine financing, money and exactly how much cash flow the property will produce. Plan your exit strategy – who will buy this when you are ready to sell? Plan out your operating expenses, your EGI (Effective Gross Income), your NOI (Net Operating Income) and CAP rate. Don’t be afraid of the big deals.
7. LOI (Letter Of Intent)
You don’t need a lawyer for this letter, it can be very simple form letter you get off the internet. Think of it as your offer letter. The main message: I’m going to buy your property from you for this much money.
8. Financing and/or Investors.
You should always use some form of leverage (debt) on your deals. It makes the most sense. Make sure to arrange your financing and know the terms of what you intend to do. If you don’t have the patience, aptitude or time to get your capital together, you’ll need to look for investors. Either way, you are going to have to sell yourself.
9. Legal.
At some point, you will need to involve a lawyer for the transaction. Again, this can be as simple or complex as you make it. On a deal, your bank or financing institution will tell you what your legal documents and setup needs to look like. Don’t think you need an LLC or corporation right off the bat without doing some homework and research to exactly what you need and what your exposure is.
10. CLOSE.
This is actually doing the deal! Sign the papers and take ownership. It will be the best and scariest day of your life!
