The 10 Most Popular Questions All New Investors Ask
We’ve all watched our fair share of home makeover shows on HGTV and thought, “Wow, that looks like soooo fun, I wish that was MY job!” Well the truth is, it can be. Depending on whether you want to rehab houses, be a private money lender, have a rental portfolio, or all of the above, you can dive into the real estate investment industry in whichever way would suit you and your lifestyle best. What stops the majority of people is the lack of education and knowledge, not knowing what questions to ask, who to talk to or where to start. What’s been a great educational resource for our business and thousands of others like ours across the nation, has been through Fortune Builders Mastery. Than Merrill and his partners from the hit TV show “Flip This House” created this real estate investing platform that educates and teaches its students on how to become an entrepreneur investor. Take a look at this article below written by Than Merrill himself on some of the most popular questions new investors ask.
1. How Do I Finance My First Real Estate Deal?
- There are a number of options when it comes to financing your first real estate deal. You can always choose a conventional course of action by acquiring a loan from a traditional lender, i.e. big banking institutions. However, you can always opt for a private or hard money lender. Private lenders are less strict in regards to their loan requirements and therefore typically charge higher interest rates.
- Wholesaling is another viable option for investors who are just getting started because it requires no down payment or any of the investor’s personal capital. More often than not, new investors save up the profits they earn from wholesaling to use as a down payment on a rehab or buy and hold property.
2. Is It Necessary To Get A Real Estate License As An Investor?
- There are both pros and cons when it comes to the question of whether or not investors should acquire a real estate license. Investing in real estate as a licensed agent gives you unlimted access to properties listed on the MLS. With a license, you also have the potential to take home a larger profit because you don’t have to give away a percentage of your earnings to the agent you would’ve been working with. Obtaining a license also opens the door to a whole new networking channel, which is one of the best ways to find deals. Also keep in mind that not having a license allows you to work with a variety of agents whom might all specialize in different niches, giving you the opportunity to diversify your types of deals. On the flip side, becoming a licensed real estate agent doesn’t come free; you must invest a great deal of time, energy and even money to practice regularly. Ultimately, it depends on the specific individual and his or her goals when it comes to answering this real estate FAQ.
3. What Does ARV Mean?
- A property’s ARV refers to its After Repair Value. Learning how to accurately calculate a property’s ARV is a skill that even the best investors still strive to perfect. In order to determine whether or not a specific property is a good deal, investors must first, keep in mind the price of the property; second, be able to inspect the property and estimate the cost of repairs; and ultimately, analyze the numbers to verify whether or not the ARV will be greater than the initial cost of the property plus the repairs. If your calculated ARV is not at least 10 percent higher than the property plus repairs, it is likely that your profits will be minimal.
4. What Is The Best Exit Strategy For Me?
- The first step an individual must take after making the decision to leave his or her nine to five job in order to become a real estate entrepreneur, is what exit strategy to focus on. There are three basic exit strategies investors can choose to concentrate on, which include: wholesaling, rehabbing, and renting. Each has its owns benefits and disadvantages and is ultimately contingent upon an individual’s goals and preferences. For those looking to make cash fast, wholesaling is the ideal exit strategy as investors have the ability to close their deal in as little as two days. One of the most popular exit strategies, rehabbing, is perfect for those with an eye for design and the propensity for getting their hands dirty. If building long term wealth is your utmost objective, consider adding rental properties to your portfolio.
5. What Are The Best Marketing Campaigns For New Investors?
- There are so many marketing strategies for real estate investors today, it is almost impossible to count. Direct mail campaigns are great for new investors because it gives them the ability to pick and choose their message, target audience, and campaign scale. Implementing a direct mail campaign is guaranteed to bring in results because a tangible piece of mail allows prospective clients to make a physical connection with your brand. Tracking the results of your direct mail campaign can also help you determine which market, or niche, you want to focus on. For example, if you send your piece of mail to a probate list, a recently foreclosed list, and a tax delinquent list and you receive the greatest number of calls from those on the tax delinquent list, you will know how to run your campaign successfully again in the future.
6. Are There Any Tax Benefits That Come With Investing In Real Estate?
- The tax benefits that come with investing in real estate are endless. Becoming a rental property owner however, is arguably the easiest way to receive these benefits; but certainly not the only way. When you rent a property, you can deduct a number of expenses including, but not limited to, depreciation, repairs, interest and taxes that relate to the common property.
7. How Should I Structure My Real Estate Investing Company?
- The most common way to structure a real estate business is by forming an LLC (limited liability company). However, individuals can also opt for an S Corp or Sole Proprietorship. LLC’s are most universal in the real estate investing industry because it is a separate and distinct legal entity. Meaning that an LLC can obtain a tax identification number, open a bank account and do business, all under its own name. The primary advantage of an LLC is that its owners, known as members, have ‘limited liability,’ which signifies that , under most circumstances, they are not personally liable for the debts and liabilities of the LLC.
8. How Do I Find Leads For My First Deal?
- In today’s day and age, social media is one of the most effective – and cheapest – way for new investors to find leads. Creating accounts across all social media sites allows you to advertise your brand, services, and unique qualities that make consumers choose you over your competition. Content marketing is another way to establish yourself as a thought-leader within the industry. Creating original content proves that you are an expert in your niche and will help separate you from other investors. Although blogging can be time consuming, it is worth the effort because it has the ability to attract free leads. Because there are so many options when it comes to real estate marketing strategies, it ultimately depends on how much money and time you are willing to spend.
9. What Do I Need To Know As A First-Time Homebuyer?
- Buying your first home can be scary and overwhelming, but once completed, invaluable. The first step in becoming a first-time homebuyer is to get your finances in order. It is important to check your credit score in order to determine the overall state of your resources. The next step is to get pre approved for a loan. To do this, your lender will assess your debt to income ratio – among other things – in order to determine how much you will be allowed to borrow. It is important to keep in mind that there is a big difference between getting pre qualified and getting pre approved. Almost anyone will pre qualify for some type of loan, but getting pre approved gives you a more accurate picture of how much money you will be given. The rest of the steps are detailed in our First-Time homebuyer checklist.
10. How Do I Pick The Perfect Name For My Real Estate Business?
- Once you’ve established your business and area of expertise, you must choose a name that accurately depicts the unique characteristics of your business. Before settling on a name, do some research on other companies you admire. Learn how and why they chose their business name and see if you can draw from inspiration. It is important to pick a name that you can easily market. Something that is easy and clever enough to remember, but not so eclectic that consumers are confused about the industry you are in. Just be sure to choose your words wisely and remember that your name becomes your brand and will stay with you forever.
Real estate investing has the ability to turn employees into entrepreneurs, but not without dedication, hard work, and perseverance. Study these questions and you’ll be well on your way to success. For full article by Than Merrill, see https://www.fortunebuilders.com/real-estate-faqs-the-10-most-popular-questions-all-new-investors-ask/
We hope this gives you a sense of direction and opens up the opportunity for more questions and insight to come! If you have any questions, please reach out to us!
-Our Team at Next Step Homes, Inc