A few years back, my wife had to have back operation to correct a problem with the disks in her spine. We contacted several doctors and finally found the one to perform this delicate and complicated surgery.
The doctor we chose was a senior spinal orthopedic surgeon who specialized in ruptured disks.
This doctor had positioned himself in a very specific niche and was clearly the expert. His office was located an hour and a half from our home and he was only available to meet with us on Monday, Wednesday, and Thursday from 9:30 am to 2pm.
Since we knew we could accept nothing but the best, we decided he was the one to perform the surgery. We did not compare his prices to other surgeons and we took off of work and traveled an hour to get to his office. Why?
We had a problem and only wanted an expert to solve it.
There are many things to learn from this example that apply to my business.
- We are both selling a service not a product.
- The industry is very competitive and consumers have many providers (doctors, real estate agents, real estate gurus and real estate investors) to choose from.
- As a client/patient the promise of good service can only be able to be proven after the fact or close.
Just like this doctor you can also set yourself up as the expert in a niche. Here are some areas you might choose to specialize in:
- Rentals
- Fix and Flip
- Rehab
- Land Development
- Paper Notes
- Lease-Options
- Foreclosures
- REITS
- Tax Liens
- Finding Private Money To Borrow
- Business Buying
My own niche is working with investors who have a day-job. Since my clients, like myself, are very busy, I try to find the best resources, systems, time-saving tools and expert information. Like this piece from M. Anthony Carr, author of “Real Estate Investing Made Easy.”
Four Steps To Setting Up A Real Estate Investment Business
Most investor wannabes I talk with want so badly to “flip properties” that they forget on the outset that they are talking about launching a business — a real estate investing business. They simply think and say: “I want to begin buying and selling real estate.”
Sounds pretty simple, doesn’t it?
Find a run down home, maybe a foreclosure; go through it repairing and painting walls, replace flooring, install new appliances; put it on the market and make $50,000 each time. Yeah, right.
Before you launch into the real estate investment world, first consider how the transaction went with your primary residence. The agent probably took care of many of the minute details, such as lining up contractors for inspection items, helping you with financing and insurance, and even getting the inspector. If you’re going to start investing on a regular basis, then you’ll want to develop relationships with these professionals yourself and follow these steps to begin your real estate business:
Locate Financing
All investing hinges on this first action. If you don’t have financing, most likely you won’t be investing. You’ll want to find a program that will allow you to put as little of your own money into the property as possible. In today’s competitive mortgage environment, there are still investor programs that allow zero down on the investor’s part.
Since you may have remodeling or rehab costs, don’t forget to look for programs that include money for those activities. If you can get it, try structuring seller financing as this can be the easiest way to get into a property.
The owner holds onto the note until you’ve completed your rehabilitation of the house. You can try to get the owner to take just interest-only payments until you sell, then pay them the balance once the property is sold. There are plenty of other ways to finance an investment property, so talk with several mortgage providers to find out your options or better yet, learn how to find private money to borrow.
Set up a Limited Liability Corporation
This protects you from any accidents that may happen during the refurbishing process. If someone gets hurt on your property, they could sue you — the LLC purports to protect your personal property.
Find an Investing Real Estate Agent or Birddog
They should know the marketplace you’re interested in to find the properties.
Line up your Contractors.
Unless you’re going to do it yourself,
then you have to ask the following questions:
- Do I have the expertise to handle tasks that require trade status,
- such as plumbing, electrical, HVAC?
- Can I lay carpet?
- Can I hang/repair drywall?
- Can I fix dry rot and carry out other carpentry work?
- Can I replace sub-flooring and deck work?
- Can I repair the roof?
- If you’re repairing electrical and plumbing you may need to get
- proper permits and inspections.
- Find a title company to check out titles of properties.
- Find a settlement or escrow company for closings.
- If you’re holding onto the property short term, you’ll need a short-term insurance policy to cover the property until you sell it again.
And then here’s the kicker — except for the LLC setup, you have to do each of these steps every time you want to buy another property, fix it up and sell it.
As you can see, this is another job when you’re considering the refurbishing of property and selling. I haven’t even gotten into the tax ramifications of short-term investing (you will more than likely owe capital gains taxes of 5-15 percent on all of your profit).
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You CAN make a lot of money, and you’re going to work hard and think very hard to do it. The good part about it is that the returns are usually higher than what you’ll find in any other business. Yet in access investing is a simple business… Buy Low..Create & Enhance Equity… Sell High.
Before you get started, write down your financial goals together with your partner — usually your spouse. Find a real estate agent, investment mentor, or local active real estate investing association member who can walk you through real estate investing as it pertains to your area and then talk with your accountant about tax liabilities
and benefits — then, make your decision.
Do or Don’t, There Is No Try,
Kendall Matthews, vp of Do