Most of us have heard the old adage that when it comes to Real Estate its all about “Location, Location, Location.” And, while this is true, when it comes to real estate investing, its also all about “The Numbers, The Numbers, The Numbers.”
The whole point of real estate investing is to make money. Whether it is a lump sum from fixing and flipping them or obtaining a cash flow from renting them, you are in the real estate business to make money. You aren’t doing it as one of those cruddy weekend jobs in hopes of making money. You are doing it to quit your job as a substance abuse counselor for measley wages and make some serious bank. That was my adventure with it anyways.
Especially for a newbie, it is critical to know very specifically how much a property will cost, how much it will cost to renovate and how much you can reasonably expect generate as a rental or to clear at a sale.
There are a lot of miscellaneous expenses that are connected to the purchase of a property that an inexperienced investor can forget. In addition to the purchase price, you may need to pay taxes forward at closing, title company and or attorney’s fees and bank closing costs. You may be required to obtain a current survey, and show proof of insurance which may include flood if you are in a designated flood area.
After the purchase has closed, you will have the cost of clean-out and renovation. There may be costs associated with pulling permits and carrying costs for the property while it is vacant.
If you expect that the renovation will take 3 months, you may have to come up with two or three mortgage payments and utility payments for this vacant property. These costs need to be factored into your total cost for a property. It is only after you have added up all of these costs that you can obtain a true picture of whether a particular real estate deal will generate a profit. Don’t forget who you are catering to, though. The community itself will tell you what’s what. Are there a lot of shops marketing to the female fitness groups like Piloxing and Yogilates? Are there lots of businesses and office spaces? Or is it a low income area? This will help you know what you can pay and sell for if you analyze the surrounding area.
The best way to insure that you do not forget anything is to create a very detailed checklist and use it for every property you look at. If you are new to the real estate investment niche, join a real estate investment group or go to your local library and start reading everything you can find. Many real estate investing books will have spreadsheets and checklists designed to help you evaluate properties strictly by the numbers.
If you are lucky enough to have a real estate investment club in your area, join it. Attend the meeting, network with the other members and ask questions. Real estate investing can be an opportunity for the average person to generate a full-time income and to create real wealth. Like everything else however, it requires you to learn the business. Learning how to work the numbers will give you a great start and show you how to make money fast. If you have an annuity, don’t go cash out annuity just yet. You have one last shot at making some big time money by striking gold before you start losing your mind and doing tons of drugs (there are two resources to help you if that happens!), and real estate is your answer.
And that’s what this site is all about. I am going to share with you more thoughts on real estate and how to be successful with it. Please check back as often as you can to learn more, because I will be posting constantly.