Why it might takes months to get started. Revised - Posted by Ronald * Starr(in No CA)

Posted by Michael A. Bardelli on March 30, 2003 at 14:39:57:

Excellent post. I always re-read your posts for the wealth of information they contain. This one is so accurate and good for new investors. Thanks for the information, its always useful.

Michael A. Bardelli

Why it might takes months to get started. Revised - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on March 30, 2003 at 14:24:53:


By Ronald Starr

Some people seem to think that reading two real estate investing books, attending one exciting seminar on real estate, and reading 700 posts on CREONLINE.COM is all they need before starting to buy properties. And, perhaps for a very few people that may work. But, I think that most people should expect to spend several months studying real estate investing and their local marketplace before they start making offers on properties. In ?My Advice for the Beginner Real Estate Investor: How to Become Successful? I suggest to expect to spend at least 6 months learning the ropes, and perhaps longer.

People seem to disbelieve me. ?Oh Ron, why should it take so long?? Well, okay, here is my answer to that question.
Here is a list of questions which you might want to be able to answer and some things that I feel it is good for you to know, as a budding real estate entrepreneur before you start buying or making offers on properties. You don?t have to know everything on this list. Depending upon one?s investment approach or locale where one invests, this list may be incomplete. It may also have items you don?t really need to know much about to get started. Different investment approaches require different knowledge. But as you read it over, ask yourself ?Gee, do I really want to start buying without knowing that??

I have grouped them into categories for convenience. Some items could easily be put under two or three different headings.

Figuring out a personal strategy for investing
Learning about the mathematical basics of real estate investing: the numbers to consider, such as gross rent multiplier, cash on cash, return on investment, return on equity, net operating income, cap rates and perhaps more such as mortgage constant and debt coverage ratio
Should you consider getting a real estate license or a broker?s license?
Should you consider working as a real estate licensee for commissions?
What are some other investments than residential property and what are their characteristics?
With so many different ways to invest in real estate how can I figure out what way to start off for myself?
How does one actually make money with real estate?
If I want to become a full-time investor should I do something different from those who will do it full time while keeping their ?day jobs??
Should I expect to invest differently at the beginning and years later?
Knowing where to get or knowing how to find out lien information against a person and the person?s property
Knowing how to find out how the owner of a property is and how to contact that person
What are property taxes in different nearby jurisdictions?
What transfer taxes are charged in nearby jurisdictions?
What a foreclosure is and something of the basic process in your state
How the assessor?s office determines assessed value and whether that has some consistent relationship to actual market values and if so what
Where to find the documents you will be using to carry out your purchase/acquisition program?leases, options, sales contracts, rental contracts, and more
How real estate agents and brokers get compensated for their time and effort
What ethical principals real estate licensees are supposed to adhere to
Where to go to complain about poor treatment by real estate licensees and what sort of complaints might be considered serious
Finding out the rental property rental rates for different types of properties in different nearby locations
Learning how to quickly get or pull comparable property sales for a particular property being offered by sale
Learning the prices of houses and small rental properties in the different neighborhoods of your area
Knowing how to calculate an offering price for a rundown property
Knowing what types of properties are selling fast and which ones slowly in the area
How to advertise for motivated sellers of properties
Learning how to tell if a property owner is eager to sell or is very determined to get what s/he wants or full market value or more
Are there any ways to systematically look for bargain buys?
Does one do escrows the same in every state? What are the differences between the East and the West?
What is the purpose of an escrow?
Are there times one might not use an escrow? When?
Knowing what to expect in the way of closing costs when buying properties or selling them
How to calculate estimated expenses for a rental property
How to advertise for renters of properties
What are your rights if you own a property and are leasing it out?
What are the pros and costs of leasing out a property vs. doing a month-to-month rental?
What is the section 8 housing assistance program and when might it make sense to use it?
How do you screen rental applicants?
When is it time to get rid of a not too good, not too bad renter?
Are there any legal restrictions on who I can refuse to rent to?
Knowing what is required to make a contract legally enforceable in court
Knowing what is required on a deed to make it legally recorder able
Understanding the importance of the order of priority of different loans and liens
The landlord-tenant laws for your state and local area
What are easements and what do they mean to the property buyer/owner?
What are some of the ways to take title to a property and what are the ramifications of using different entities to do so?
Should you have different entities doing your property management than hold title to?own–your properties?
What sorts of things can you do to reduce the risk of being sued?
What can you do to reduce the chance of losing should you be sued?
Knowing about ?standard loans? such as those from conventional lenders
Knowing how to calculate loan payments for an amortized loan or at least where to go to get that information
Different ways to structure purchases to reduce the amount of cash to acquire the properties
How much it may cost for conventional loan fees
How long it might take to get a loan approved from a conventional lender and go through the escrow process
How does one find money sources other than institutional lenders?
What financing options make the most sense for long-term holding properties, for quick-turn over properties?
How do my credit scores affect the types of loans I can get for real estate investing?
How to advertise for buyers of properties
What do prospective house buyers look for when they are looking for their new home?
What investors are looking for when they look at an investment property to buy
The income tax aspects of rental property ownership?both federal and state, possibly even local
What are 1031 exchanges, what they do, when to use them, how to set them up, how they work
If there are any ways to reduce taxes when rapidly buying and selling properties for a profit
What kinds of insurance to get and what they might cost
How much it may cost for various real estate services:
appraiser?s fees
title work
escrow fees
pest control??termite??inspections
private building inspectors fees
cost for a certificate of occupancy in the local building department
How to negotiate with a property owner
How to negotiate in general?with suppliers, workers, authorities, neighbors, etc
What are your rights if you are leasing a property
What are paper, notes, mortgages, contracts for deed, and how does one figure the rate of return on them?
What is the effect of selling a note to somebody else ?with recourse? or ?without recourse??
What about paying down loans early, is that a good idea or why not?what are the considerations?
How does one find investors to whom to resell good deal properties?
Gee, is there anything else I should know about real estate investing?

Well, as I said, some may not be necessary for everybody. But all of these seem important to me. And I am sure you will be thinking of things to add to this list that are important to you. I encourage you to do. Then study up so you know what you are doing before you start paying out your hard-earned money for investment real estate.
Good InvestingRon Starr*******

Bouncing off of Rich’s post - Posted by IB (NJ)

Posted by IB (NJ) on March 31, 2003 at 16:07:28:

Took me 7 mos. of studying my market and reading everything I could on REI. And I STILL made mistakes!

I remember my partner, after months of looking for our first deal, kept saying “By next month we GOTTA have our first deal…”. I would correct him and say ‘no, by next month we have to have the EDUCATION to get our first deal. When we get it, we’ve learned enough to at least get our first deal’.

A never ending process of learning, this business is.

Thanks Ron for a great post.

Re: Why it might takes months to get started. - Posted by RichV(FL)

Posted by RichV(FL) on March 30, 2003 at 17:37:25:


As always very informative post. Its a keeper.

And yes I will admit, for some of us it took years rather than months to get started.

I have said this so many times “its not money that makes money its education”. Many new investors just want to jump in after reading one book.

I firmly believe that education is the key to success.



as always an EXCELLENT post, Ronald - Posted by David Krulac

Posted by David Krulac on March 30, 2003 at 14:46:48:

you are absolutely correct. One of the big reasons that i post here is in the hopes that people coming after me won’t have to learn nearly everything from the school of hard knocks and takes years, and even decades to learn real estate.

I talked with a person today who told me whers they lived and what their rent was. Immediately without hesitation I told here that that was an excellent rent for the area and that I knew the owner of that specific building. The first day out of the shoot, you can’t possibly have that information at your finger tips. But if you’re seriously in the rental business, you need to know what the competion is charging and you need to know where your rents stack up against everybody else. Are your rents high, low, or just right.

You also need to know whether there is a glut on the market of 1 bedroom units and a lack of 3 bedrooms on the market.

But the bottom line is that this business is such a vast business that learning is a never ending process.

To your continued success.

David Krulac
Central Pennsylvania