Discover keen insights from distinguished real estate tycoons and traders!
Tenderfoot Education in Real Estate
Investing 101
Back in the days of the wild, Wild West, when easterners traveled across this vast
country looking for opportunity in the newly opened territories, they were often referred
to as a ‘tenderfoot’.
This wasn’t a complimentary term but it was a rather apt one. The easterners wore ‘city’
shoes that weren’t designed to withstand the rigors of the western terrain. Their hats
didn’t have wide brims to protect them from the sun and their clothing wasn’t made of
tough material like denim.
These new westerners didn’t know how to take care of themselves and because they
didn’t know where and what the dangers were they didn’t have any idea how to avoid
them. If you are just beginning to consider the idea of investing in real estate you are a
tenderfoot and you do need some instruction to avoid losing your shirt…and probably
your pants, hat and boots, as well.
First you will need to determine what your strategy will be in real estate investing. Do
you want to buy a property, fix it up and sell it quickly or do you want to buy a property,
hold it and wait for the market to increase? Do you want to deal with renters? All of these
questions are ones that you need to answer before you invest in any piece of real estate.
You will need to learn how to investigate the value of properties yourself. It isn’t fair to
use the time of a real estate agent and have them show you property after property while
you try to look for a good real estate investment.
There are several online sites that are helpful in determining the real value of real estate.
DO NOT rely on tax values. They are not reliable and they are not accurate either. You can find a real estate agent that you can work with and you can find recommendations
for such agents online.
After you have learned how to determine property values yourself and have chosen a
real estate agent that you can work with, the next thing that you need is a good broker
that you can also work with. Ask your real estate agent for the names of three mortgage
brokers.
Then you will need to find out what interest rates and closing costs each one charges.
(Check out your local bank or credit union as well). Take copies of your three credit
reports and choose a sample property for each broker to run hard numbers on.
Now you are ready to actually make your first investment. You want to choose the lowest
price house in the best possible neighborhood to put a contract on.
Let's say the cheapest two-bedroom house in the best neighborhood in Fort Wayne
costs $100,000 and the next cheapest, comparable home is listed for $140,000. If you
buy the home that is priced at $100,000, you can raise your price to $130,000 the next
day and make a dandy little profit.
Now let’s talk about closing the deal. First show the seller your pre-qualification letter
from your lender. Then get the required inspections for termites and get your appraisal.
Once you have all of your ‘ducks in a row’ so to speak, it takes about 30 days to make
the final close.
A note here about any renovations or repairs that you might want to make to the
property: Before you close, you might want to think about a Purchase and Renovate
loan. A Purchase and Renovate loan wraps the cost of construction up in the loan so
you don’t have many out-of-pocket expenses. This may require an estimate from a
general contractor and plans from an architect as well.
Okay, now let’s go back to the first thing that you needed to do and that was to
determine your strategy. Now is the time for you to execute that strategy that you have
used to invest in this real estate. If you bought it with the strategy of flipping it when the
market went up then you just simply wait.
