Before you can start making offers on property or even calling on properties for sale you need to learn how to analyze. This should be the first step in learning how to invest. Until you know how to determine what you can pay for a property there is no reason to even look for or call about a property.
However once you know how much you should pay for a particular property then you can call and make offers all day long. Remember that when investing you are only concerned with what the property will be worth after it is repaired if it happens to need repairs. If it doesn't need any repairs then the as is value is fine.
When you are analyzing a property, I want you to keep in mind that you do not invest your money in Real Estate. Sure you may write a check initially or you may put a down payment down for a loan; but you are eventually either going to sell that property, re-finance it or get your cash back. So remember, you are not going to invest your own cash long term in real estate.
You invest your knowledge in real estate and real estate will pay you back with cash. Which is basically called infinite yield investing. Meaning you are getting your yield on the property, you have created an asset, you have equity, you have cash flow and you have zero money in that deal after you have fixed it up and re-financed it. That is called infinite yield investing, so don't invest your money in real estate, invest in your education and then you can invest your knowledge back into real estate and the real estate will pay you back.
Remember that equity doesn't mean anything until you can convert it to either cash or cash flow. Remember to keep this knowledge in the back of your mind every single time you move to invest in a property. I have talked to many investors who have lots of equity in property but they are not getting any cash flow from that equity so it is what we call dead equity.
If you are not getting a return that you are happy with on your equity then you should sell the property and put the cash from the equity into another investment that will pay you a monthly income. |
