Monday, January 5, 2009

Real Estate Course: Day One of 30 Day Action Plan

Day One
1. Money for business
Time or money
2. What properties to look for
3 bedroom/2 bath
At or below median price
3. Buying & Selling Model
Buying to flip
Buying to hold
4. Get to know your market (on going)
5. Tell everyone what you do

Today is decision day. You have some thing you need to decide upon before you go forward. First you need to decide how you will run your business: Time or Money. You can find a lot of information about real estate through time-consuming research. You either do the work yourself (saving money) or hire someone else to do it (Saving time). The chose depends on how fast you want to get going. If you have no money constraint (you still have a job and you are doing this business part-time) then doing your own research is an excellent way to start. You will learn how the all parts of the business work. This will help you when you go to hire someone to do the job. You will know how it is done and how long it should take. But this business still needs money to start. While you can buy property with no money down you will need money for marketing (we will talk about this in the days to come) and other research resources you may want that will make this business easier. So you need to either take money out of savings or borrow it. The more you have the faster you will be able to spin this business up. Be warned on borrowing from the kings of borrowing. That is how we started our business: if you take this route you better have a strong constitution. Because the credit runs out quickly and you will need to show results quickly so you can pay it off.

Let’s talk about the target market you are going after. We want to make it easy to buy and sell properties quickly. You do not want to be in the business of buying properties you have difficulty selling quickly. So you want houses that are bread and butter. The median priced home has three bedrooms and two baths. Why, because everyone wants one. They are not hard to sell if they are priced at the median (that means there is an equal amount of homes priced above and below that price). By far the majority of homes sold will be in the range of the median price of homes (+/- 10%).

What business model will you be following? Will you buy and hold property. Purchasing properties that you can rent out or will you purchase property to fix up and resell. The answer to that question will determine your buying strategy. Obviously you will need to have a positive cash flow if you but and hold, but you will need to buy low enough with will buyers to buy and flip property. You need to research your market condition to tell which will work for you. The current financial climate (January 2009) in California dictates for us to have a buy and hold model. We can resell property but we must provide owner financing. Once you decide on the business model you need to research where motivate sellers are. We want sellers that are motivated by circumstance: Death, Divorce and Distress. These three problems will provide the majority of your motivated seller calls, more on this later.

Now get to know your market. Talk to Realtors and go to open houses in neighborhoods you like. Read the newspaper to know what is going on in your town. How long does it take to sell a house and at what price. What is the median price of homes in your target neighborhood? This is the research that you must know before you start making offers.

Lastly, tell everyone you know that you are looking for property to buy. Even offer a finders fee for any lead. This may motivate some people to tell you when a property is for sale. Maybe even before it goes on the market or is listed.

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