Want to invest in real estate but don’t know where to begin? This video breaks down the ultimate beginner’s guide to real estate investing and shows you how to start right away. Hope this helps break down the different steps!
✅ Check out our out-of-state real estate investing course Remote Rental Riches – https://courses.digitalnomadquest.com/p/remote-rental-riches which teaches you step-by-step how to acquire your first rental property!
Also here is the link to the researching markets video as mentioned in the video: https://youtu.be/8Jpwav3rOkU
Ultimate Beginner’s Guide to Real Estate Investing (Start Now!)
Transcription
Below is a transcription of the podcast. This transcription was taken from Otter.ai so it might not be completely accurate:
Sharon Tseung 0:00
Hey guys, it’s Sharon from digital nomad quest. And today I’m gonna give you guys the ultimate guide on how to start investing in real estate. Now, if you guys are new to the channel, welcome, I’m all about teaching you how to build passive income become financially free and design your best lives. So if you guys are interested in that, make sure to subscribe and hit the bell button to be notified of my latest videos. So I’ve broken down the real estate process from analyzing deals, to researching markets to how to find your property managers out of state. But I want to give this macro view of basically how to get started with investing in real estate. And I’m going to start from beginning from the preparation process about studying and then kind of analyzing your market and then putting in your offer closing on it. And all the little details behind each of these parts of the process. I feel like this is going to help you guys because a lot of people have been asking for that macro view of the entire process. And knowing all these steps is going to help you understand what action steps to take for your first rental property. So we’re only talking about buy and hold investing here, no flips or anything like that. So first off, you’re gonna want to save money, most people aren’t going to buy their homes all cash outright, they’re probably going to put a down payment on a loan. And then there’s also closing costs. And there’s also cash reserves that you need to save up in case anything goes wrong. Now for the downpayment, it’s usually 20% of the purchase price. But for multifamily units, it’s usually going to be 25%. It also depends what kind of loan you get. So this is basically the scenario of a conventional loan. However, if you got like an FHA loan, that’s going to be 3.5% down payment, so it really depends which loan you’re able to get. Now let’s just take that conventional loan scenario, usually, it’s gonna be 20%, right for the down payment. And then for closing costs, you should estimate maybe 2% of the purchase price. And then you’re also going to estimate about six months of expenses is what I personally think is good to have in your bank account in case anything goes wrong. So when I say six months of expenses, I’m talking about principal, interest, taxes and insurance, you want to make sure you have enough cash reserves in case anything goes wrong, there might be repairs, there might be vacancy, you want to make sure you have enough of that in case for example, if the property was unoccupied for those six months, I’ve even had people ask me if they can purchase a property if they have 150 k in debt and stuff like that. And first of all, you’ll need to have a bunch of these funds saved up in order to buy the property but also you need to make sure your debt to income ratio is okay. So what I mean by that is whatever debt you have divided by your income you have monthly should be no more than 43%. In most cases that 43% is on the high end that is like the maximum a borrower can have in order to get a loan. The reason for that 43% debt to income ratio is that lenders want to feel safe lending to you, they don’t want to worry about your ability to pay back the loan, they want to make sure you have enough income coming in that you will be able to take on this loan. So I would recommend that you kind of pay off debt, especially those with high interest, and then make sure you’re saving up enough money what I just mentioned before about the downpayment, the closing costs and six months of reserves, so take care of the debt first, then think about investing next you want to have proof of income. So you need to make sure that you’ve been working for two years and have proof of two years of job income to get the loan three you’re gonna need to build your credit score. So if you are buying with a loan, you’ll need at least 624 credit score, you can usually get the best rates at around 740 plus for your credit score. In order to build your credit score you need to have a long credit history, you should have different types of credit and you should also never miss a payment missing payments will significantly reduce your credit score. So set up something where you’re auto paying your credit card so that you never miss a payment. bad credit scores really penalize you. First of all, you might not be able to get the loan if you have a low credit score but also if you have a mediocre credit score, banks are going to give you higher interest you want to make sure your interest rate is as low as possible so you can make smaller monthly payments for your mortgage. Number four you should read books and you should listen to podcasts and even take courses if possible. So some books I recommend obviously Rich Dad Poor Dad by Robert Kiyosaki, the ABCs of real estate investing was a good one. Also long distance real estate investing if that’s one of the things that you are interested in, make sure to get that one by David Greene. I would also keep watching my YouTube videos to get more information as well as actually my boyfriend’s YouTube channel, his Asana, everything real estate investing, it’ll help a lot with your real estate education. The more you learn, the more you understand everything be able to analyze deals faster, and it’ll just help you a lot in the journey. Number five, you should network either in person or virtually during these times, you’re probably going to do virtually right you can go to meetup.com you can search for real estate investing meetups in your area, or virtually again, and you most likely will find a bunch of these different meetups, the good thing about meeting a bunch of people in order to invest in real estate is actually that you will find contacts for agents contacts for contractors, you’ll be able to meet other people who are investing in your target market. And maybe you can ask more about those locations. Or you can even discover some new markets that you know you never thought about based on just different chats with people. For example, I had called a realtor A while back and I am actually now purchasing a property from that realtor. And that wouldn’t have happened if I didn’t make that connection before. So I honestly suggest meeting as many people as possible because you’ll never know what kind of deals you’re gonna get sent by the different people you might be able to find that contractor for example also that may be a perfect Fit for what you need. And just increasing the amount of people in your circle will allow you to access more deals for sure. Number six, now you want to get a pre approval letter from a lender, you know, what I realized before is that you need that pre approval letter to show that you are a serious buyer and your agent can present that and it will show that you can get a loan. So in order to do that, you should basically call a bunch of different lenders see what their rates are, and then essentially just get a pre approval letter, because later on, you can still work with a different lender, you can still get a different rate that pre approval letters just to show that you’re serious so that you can start making those offers. And if you didn’t know already, basically a pre approval letter is a first look evaluation of a potential borrower by a lender, you can basically use this to show that you are able to get a loan from this lender. But again, you’re not locking in interest rates or anything like that when you get this pre approval letter. So you can always shop around for another lender in the future. When you’re actually closing number seven, you’re going to need to do your research. And what I mean by that is you’re going to need to do your market research as well as your analysis for good deals. So first off, you’re going to need to study different markets, you can check out Sydney hyphen, data.com. To get a lot of statistics that you’ll need to pull in order to see if the target market is good actually have a video on this. If you want to check that out. It’s basically all about researching markets, you can figure out the different steps and different things you need to look for, in order to find a good location for you to invest in. After you’ve narrowed down your target market, you need to understand how to analyze deals, that basically means that you need to make sure that whatever property you purchase will actually cash flow for you after expenses, you want to make sure you’re not getting an alligator property, that essentially means that you’re actually paying extra after you’re paying off the mortgage, and you’re getting the rents are still coming in negative with the cash flow, you want to make sure you’re not doing that. Because negative cash flow can be really dangerous for you. I also have a video on this as well go ahead and check it out. Basically, it’s all about how to analyze deals, you can grab my free spreadsheet so that you can understand how to put in the numbers and essentially see if it’s going to cash flow or not. This research portion is very crucial for the entire process of this you got to make sure you do a lot of analysis and research in order to get a good cash flowing property. Number eight, you’re going to find the deal. So agents are probably going to be sending you different deals or you’re going to look on the MLS or Zillow and Redfin and stuff like that, you’re going to see if you can find that one property that you think is going to be a really good deal. Sometimes it’s good to get like a fixer upper, maybe nothing too crazy. But getting something that has some damages or is in need of some cosmetic repairs that you can do for maybe $10,000 or something like that, which will increase the value of that property, you want to look for something like that in like a really good location, it’s usually a good idea to get ugly home in a good location if you can afford all the repairs. But if you’re just starting out, maybe it’s easier to not get a fixer upper, you might get a turnkey property or just something that will essentially cash flow right away without you having to do too much of repairs. Number nine, you should start making offers. And when you’re doing this, you should have patience, some markets are just really competitive that it will take a while for you to get a home. Finally, it really depends on your market. So some of the markets I’ve invested in, it’s actually pretty easy to win the offer. But you know, for example, where I live like in the Bay Area in order to win an offer, it takes a lot of time it takes a lot of offers, you might get exhausted and you might give up. But just don’t give up Have patience, it is really a good idea to find a good deal. Don’t just settle for something that might be okay, because you’ll regret it maybe it won’t cash flow as well as you expected. You want to make sure you are finding something that really fits your Buying Criteria Don’t settle for less. Now in order to make your offer you’re going to need to make sure you have an agent you’re working with usually this agent is going to be able to send you deals which will help a lot in your process. When you are looking for one that works. You also might want to start vetting out property management companies and things like that. And these people will help you understand the location even better, as well as just give you the right connections and give you the right deals are number 10. Once your offer gets accepted, you will be in escrow now during this escrow period, there’s a lot of things you’ll need to do. So you might want to get an inspector in order to get a home inspection report. You might not need this if the seller already has an inspection report that you can just look at, but usually you’re gonna need to find one in order to get that home inspection to be safe. In order to make sure there’s no crazy defects or anything like that. You also want to get homeowners insurance and you might want to find your property management company at this time in order to essentially have one prepared when you sign and they can start taking over and helping you this depends on if you are managing the property yourself or you’re gonna have a third party do it for you. And lastly, you’re gonna want to provide those documents for the lender they might be asking for your tax returns your W two essentially your proof of income and assets to make sure that you have enough money and you have the ability to pay back the loan. And then after that you basically are done when everything closes and then you can start getting the tenants and you can start cash flowing. So I hope this all made sense. This is essentially the entire Ultimate Guide to how to start real estate investing. This whole thing takes you from start to finish from the beginnings of really learning everything networking studying, to essentially closing on your first deal so I really hope this helped comment below if any of these things surprise you or just let me know if you liked the video by smashing the like button subscribe, hit the bell button to be notified on my latest videos and I’ll see you guys in the next one.Transcribed by https://otter.ai
Hey guys, it’s Sharon from digital nomad quest. And today I’m gonna give you guys the ultimate guide on how to start investing in real estate. Now, if you guys are new to the channel, welcome, I’m all about teaching you how to build passive income become financially free and design your best lives. So if you guys are interested in that, make sure to subscribe and hit the bell button to be notified of my latest videos. So I’ve broken down the real estate process from analyzing deals, to researching markets to how to find your property managers out of state. But I want to give this macro view of basically how to get started with investing in real estate. And I’m going to start from beginning from the preparation process about studying and then kind of analyzing your market and then putting in your offer closing on it. And all the little details behind each of these parts of the process. I feel like this is going to help you guys because a lot of people have been asking for that macro view of the entire process. And knowing all these steps is going to help you understand what action steps to take for your first rental property. So we’re only talking about buy and hold investing here, no flips or anything like that. So first off, you’re gonna want to save money, most people aren’t going to buy their homes all cash outright, they’re probably going to put a down payment on a loan. And then there’s also closing costs. And there’s also cash reserves that you need to save up in case anything goes wrong. Now for the downpayment, it’s usually 20% of the purchase price. But for multifamily units, it’s usually going to be 25%. It also depends what kind of loan you get. So this is basically the scenario of a conventional loan. However, if you got like an FHA loan, that’s going to be 3.5% down payment, so it really depends which loan you’re able to get. Now let’s just take that conventional loan scenario, usually, it’s gonna be 20%, right for the down payment. And then for closing costs, you should estimate maybe 2% of the purchase price. And then you’re also going to estimate about six months of expenses is what I personally think is good to have in your bank account in case anything goes wrong. So when I say six months of expenses, I’m talking about principal, interest, taxes and insurance, you want to make sure you have enough cash reserves in case anything goes wrong, there might be repairs, there might be vacancy, you want to make sure you have enough of that in case for example, if the property was unoccupied for those six months, I’ve even had people ask me if they can purchase a property if they have 150 k in debt and stuff like that. And first of all, you’ll need to have a bunch of these funds saved up in order to buy the property but also you need to make sure your debt to income ratio is okay. So what I mean by that is whatever debt you have divided by your income you have monthly should be no more than 43%. In most cases that 43% is on the high end that is like the maximum a borrower can have in order to get a loan. The reason for that 43% debt to income ratio is that lenders want to feel safe lending to you, they don’t want to worry about your ability to pay back the loan, they want to make sure you have enough income coming in that you will be able to take on this loan. So I would recommend that you kind of pay off debt, especially those with high interest, and then make sure you’re saving up enough money what I just mentioned before about the downpayment, the closing costs and six months of reserves, so take care of the debt first, then think about investing next you want to have proof of income. So you need to make sure that you’ve been working for two years and have proof of two years of job income to get the loan three you’re gonna need to build your credit score. So if you are buying with a loan, you’ll need at least 624 credit score, you can usually get the best rates at around 740 plus for your credit score. In order to build your credit score you need to have a long credit history, you should have different types of credit and you should also never miss a payment missing payments will significantly reduce your credit score. So set up something where you’re auto paying your credit card so that you never miss a payment. bad credit scores really penalize you. First of all, you might not be able to get the loan if you have a low credit score but also if you have a mediocre credit score, banks are going to give you higher interest you want to make sure your interest rate is as low as possible so you can make smaller monthly payments for your mortgage. Number four you should read books and you should listen to podcasts and even take courses if possible. So some books I recommend obviously Rich Dad Poor Dad by Robert Kiyosaki, the ABCs of real estate investing was a good one. Also long distance real estate investing if that’s one of the things that you are interested in, make sure to get that one by David Greene. I would also keep watching my YouTube videos to get more information as well as actually my boyfriend’s YouTube channel, his Asana, everything real estate investing, it’ll help a lot with your real estate education. The more you learn, the more you understand everything be able to analyze deals faster, and it’ll just help you a lot in the journey. Number five, you should network either in person or virtually during these times, you’re probably going to do virtually right you can go to meetup.com you can search for real estate investing meetups in your area, or virtually again, and you most likely will find a bunch of these different meetups, the good thing about meeting a bunch of people in order to invest in real estate is actually that you will find contacts for agents contacts for contractors, you’ll be able to meet other people who are investing in your target market. And maybe you can ask more about those locations. Or you can even discover some new markets that you know you never thought about based on just different chats with people. For example, I had called a realtor A while back and I am actually now purchasing a property from that realtor. And that wouldn’t have happened if I didn’t make that connection before. So I honestly suggest meeting as many people as possible because you’ll never know what kind of deals you’re gonna get sent by the different people you might be able to find that contractor for example also that may be a perfect Fit for what you need. And just increasing the amount of people in your circle will allow you to access more deals for sure. Number six, now you want to get a pre approval letter from a lender, you know, what I realized before is that you need that pre approval letter to show that you are a serious buyer and your agent can present that and it will show that you can get a loan. So in order to do that, you should basically call a bunch of different lenders see what their rates are, and then essentially just get a pre approval letter, because later on, you can still work with a different lender, you can still get a different rate that pre approval letters just to show that you’re serious so that you can start making those offers. And if you didn’t know already, basically a pre approval letter is a first look evaluation of a potential borrower by a lender, you can basically use this to show that you are able to get a loan from this lender. But again, you’re not locking in interest rates or anything like that when you get this pre approval letter. So you can always shop around for another lender in the future. When you’re actually closing number seven, you’re going to need to do your research. And what I mean by that is you’re going to need to do your market research as well as your analysis for good deals. So first off, you’re going to need to study different markets, you can check out Sydney hyphen, data.com. To get a lot of statistics that you’ll need to pull in order to see if the target market is good actually have a video on this. If you want to check that out. It’s basically all about researching markets, you can figure out the different steps and different things you need to look for, in order to find a good location for you to invest in. After you’ve narrowed down your target market, you need to understand how to analyze deals, that basically means that you need to make sure that whatever property you purchase will actually cash flow for you after expenses, you want to make sure you’re not getting an alligator property, that essentially means that you’re actually paying extra after you’re paying off the mortgage, and you’re getting the rents are still coming in negative with the cash flow, you want to make sure you’re not doing that. Because negative cash flow can be really dangerous for you. I also have a video on this as well go ahead and check it out. Basically, it’s all about how to analyze deals, you can grab my free spreadsheet so that you can understand how to put in the numbers and essentially see if it’s going to cash flow or not. This research portion is very crucial for the entire process of this you got to make sure you do a lot of analysis and research in order to get a good cash flowing property. Number eight, you’re going to find the deal. So agents are probably going to be sending you different deals or you’re going to look on the MLS or Zillow and Redfin and stuff like that, you’re going to see if you can find that one property that you think is going to be a really good deal. Sometimes it’s good to get like a fixer upper, maybe nothing too crazy. But getting something that has some damages or is in need of some cosmetic repairs that you can do for maybe $10,000 or something like that, which will increase the value of that property, you want to look for something like that in like a really good location, it’s usually a good idea to get ugly home in a good location if you can afford all the repairs. But if you’re just starting out, maybe it’s easier to not get a fixer upper, you might get a turnkey property or just something that will essentially cash flow right away without you having to do too much of repairs. Number nine, you should start making offers. And when you’re doing this, you should have patience, some markets are just really competitive that it will take a while for you to get a home. Finally, it really depends on your market. So some of the markets I’ve invested in, it’s actually pretty easy to win the offer. But you know, for example, where I live like in the Bay Area in order to win an offer, it takes a lot of time it takes a lot of offers, you might get exhausted and you might give up. But just don’t give up Have patience, it is really a good idea to find a good deal. Don’t just settle for something that might be okay, because you’ll regret it maybe it won’t cash flow as well as you expected. You want to make sure you are finding something that really fits your Buying Criteria Don’t settle for less. Now in order to make your offer you’re going to need to make sure you have an agent you’re working with usually this agent is going to be able to send you deals which will help a lot in your process. When you are looking for one that works. You also might want to start vetting out property management companies and things like that. And these people will help you understand the location even better, as well as just give you the right connections and give you the right deals are number 10. Once your offer gets accepted, you will be in escrow now during this escrow period, there’s a lot of things you’ll need to do. So you might want to get an inspector in order to get a home inspection report. You might not need this if the seller already has an inspection report that you can just look at, but usually you’re gonna need to find one in order to get that home inspection to be safe. In order to make sure there’s no crazy defects or anything like that. You also want to get homeowners insurance and you might want to find your property management company at this time in order to essentially have one prepared when you sign and they can start taking over and helping you this depends on if you are managing the property yourself or you’re gonna have a third party do it for you. And lastly, you’re gonna want to provide those documents for the lender they might be asking for your tax returns your W two essentially your proof of income and assets to make sure that you have enough money and you have the ability to pay back the loan. And then after that you basically are done when everything closes and then you can start getting the tenants and you can start cash flowing. So I hope this all made sense. This is essentially the entire Ultimate Guide to how to start real estate investing. This whole thing takes you from start to finish from the beginnings of really learning everything networking studying, to essentially closing on your first deal so I really hope this helped comment below if any of these things surprise you or just let me know if you liked the video by smashing the like button subscribe, hit the bell button to be notified on my latest videos and I’ll see you guys in the next one.Transcribed by https://otter.ai
Comments 1
Thanks for sharing this valuable information with us, it is really helpful article!. I really appreciate this post. I have been looking everywhere for this!