Become a Real Estate Investor in Five Easy Steps

Robert Ramirez
Broker Associate
RE/MAX Marina Realty
707. 762.5611
www.petalumahomes.com

Well it’s a new year and a perfect time to reflect on your life journey. Where you are and where you want to go. If financial freedom is your desired destination then there is no better way than investing in real estate. Are you willing to take five easy steps to become a real estate investor? If the answer is yes-let’s get started!

Step #1: Prepare your Net Worth sheet. This form is available from any lender or you can download it off my website. A net sheet is a document that lists all of your assets and all of your debts. When you subtract the debts from the assets you have your net worth or “bottom line”.

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Step #2: Prepare your Budget. This is a detailed worksheet of all your monthly income and expenses. Income includes your paycheck, interest from a CD, alimony and/or child support, dividends and other investments you may have. Expenses are your costs of living, i.e., bills, rent, food, health and child care, car loans, credit cards, insurance and even your morning café latte. Once completed, scrutinize your statements. If you consolidated your debts, brought your lunch to work and entertained at home, how much money could you save at the end of the year? If you can reduce you’re spending by $500 a month that’s a huge start! Adjust and examine your Net Sheet and Budget every month and think of ways to stay on track.

Step #3: Determine your buyer type. In my thirty years of business I have basically seen four types of investors. Buyer “A” is the true “investor”. This person is looking for an investment with present value at time of purchase. They can act quickly, are financially qualified and consider appreciation as an added bonus. Buyer “B” is the “speculator”. They are open to buy any type of property but their profit is always based on future appreciation; their primary focus in not on present value. Buyer “C” is the “pride of ownership” buyer. They generally only buy properties they would be willing to live in themselves. Overall their rate of return is low but they are in for the long haul. This person is usually a great landlord. Buyer “D” is “Looky-Lou”. This person buys nothing but knows everything (in theory). They attend “get rich quick” seminars, open houses and buy tapes, but are too afraid to jump into the market. This person is a great person to know because they hear about great deals and love to tell you about them. Take someone like this to lunch often!

Step #4: Determine your area of focus. For example if you’re a true investor- you may have to look at properties in Mendocino, Solano or Lake Counties to make the numbers work. If you’re a speculator, you might want to examine “marginal” properties, bare land and “fixers” near up and coming neighborhoods. And if you’re a pride of ownership buyer…you’ll just focus on properties you’d like to live in.

Step #5: Build your team- starting with a Real Estate broker. It is essential to select a broker that has experience buying and owning investment property. Your other team members should include a lender, contractor/handyman, home inspector(s), and title officer. Your real estate broker can either help you build a team, or will offer their team, which incidentally can be more equipped than yours. Because, when that ideal property surfaces you must be prepared and ready to act on short notice.

History has shown us that the real estate market goes up and down, which allows the “investor” to find real opportunities; opportunities in any market. Do the five steps, it’s not rocket-science, but a proven method that will get you on track to become a true real estate investor.