A Great Way To Start Investing In Real Estate

It's normal to be afraid of investing, and even more normal to be afraid of investing in real estate. It's a big step, and you don't have full control over what happens to your property. What if there's a crime wave, or if all the other houses in the neighborhood start losing value when their owners default on mortgages? What if there's a natural disaster and your investment isn't covered by insurance? What if it just doesn't increase in value over time, or if you get really bad tenants?

These are sensible fears, and the fact that you have them indicates more that you will be a sensible investor. Some fear is healthy. It keeps you from doing stupid things, and making stupid mistakes. Too much fear can paralyze, however.

Step One: Overcoming Fear of Real Estate Investing

Overcoming your fear and converting it into caution is the first step to successful real estate investing. Start by finding a mentor, someone who's been there, done that. Your mentor can keep you from making truly foolish mistakes, and help you meet people who will start to form the core of your network, a critical part of good real estate investing. But continue by practicing. You don't have to buy real properties to practice, only select properties that you'd consider investing in. Track their highs and lows, the steps experienced brokers take to prepare them for market, and watch for the pitfalls that can cause you to lose money.

You'll quickly find that, with a little common sense and a lot of work, real estate investing isn't as scary as it first seemed. Once you've overcome your fear, you're ready for the second step: really getting started with your first property.

Step Two: Getting Started With Real Estate Investing

During your practice sessions, you should have noticed something. While at first you didn't see a lot of good properties, over time you learned to spot more and more properties, often before they went on the market. This gives you your first advantage, and the critical skills for your first real estate investing job: bird dogging, or real estate jobbing.

This job, also known as property scouting, involves providing an established realtor or real estate investor with great quality leads that they can convert into clients and then sales. You can use your property-spotting skills to locate great investments with owners willing to sell. Motivated owners, those who must sell right away, are even better.

Pass these leads on to the realtor you work with. When he or she closes on the sale, you'll get a nice referral fee. But you'll get more than cash from this relationship. You'll be gaining valuable real estate investing experience, and the knowledge from an industry professional whether certain properties are truly good investments or not. In addition, you'll be getting hands-on experience in the real estate field, and preparing your nest egg for your own dive into the world of real estate.

Step Three: Being Successful

There are thousands of real estate investors. Right now, a lot of them are losing their shirts. You don't have to be one of them if you learn the right lessons about success.

Start with two things: first, use your common sense, and second, be creative in selling, prepping, and buying techniques. These two things should develop naturally as you locate, buy, and sell more properties.

But you must know many other things about real estate investing: you need to be able to spot and estimate costs of needed repairs in any property you're examining, within about 20% of actual cost. This takes practice.

You need to understand real estate profit margin/cash flow concepts like comping and holding costs. You need to understand when to "flip" a property and when to hold on to it and sell it at a better market price.

Most importantly, you must be able to do the math on any given property in a smart, common sense manner. Only when you can estimate profit and loss on any property with decent accuracy will you be able to start turning a profit in real estate investing.

You can learn much of this skill by working as a birddog (property scout) for experienced real estate investors. Often times, the investor will provide training to help you spot quality deals. Once you become more experienced, you will be ready to take the next step and start real estate investing on your own. So keep an eye out for that cherry deal, the one that involves an undervalued property that you know will sell for a great profit. And never, ever give up.