Young realty inc.
How To Buy Your First Investment Property
Sunday, October 22, 2023
How to buy your first investment property
Have you ever wanted to get started in real estate, you just don't know where to start? Let me walk you through acquiring your first investment, my first investment was the most important as it helped me overcome the obstacles that my mind was telling me I could not do!
I wanted to get started in real estate so bad, but there was one major problem, I was flat broke...and I thought you needed money to get started in real estate. I couldn't have been more wrong. 18 years later, over $2 billion in transactional volume for me and my clients, and I can tell you without a shadow of a doubt, the first property is the most important one. Not for the fact that it will be your best property, because it won't be, but for the fact that it will allow you to see what's possible. How you can overcome internal dialogue that may be slowing you down, or worse, preventing you altogether from pursuing the very thing that will lead you to riches beyond your wildest dreams. I can only say this, as that is exactly what I did.
How I Got Started
This past year might have made you think that you'll never get into real estate investing...demand and pricing are still high and no one knows where interest rates are about to go but what I'm going to show you is why investing in real estate in any market can bring you and your family long and sustainable wealth and my personal journey is a testimonial to everyone I speak to.
I started investing with my first property way back in 2005. I bought a small condo with a small deposit ($5,000), and after a year I sold that property for a six figure profit allowing me to buy 3 more properties, and then a year later, did the same thing. I rode a really good wave for almost 3 years and then the market collapsed in 2008 with the financial meltdown. I had some hardships, but managed to keep all my properties because I had tenants paying for them. Despite the world financial markets crashing, real estate was still the best thing that I ever did, as my investments kept me safe from harm. My stocks investments went to zero and my just about every other investment I had outside of real estate was obliterated. When everyone said it was too hard to do, or I should wait for the market to recover, or it's too risky, or too expensive, I just stuck to my plan and I pushed through the difficulties and what was waiting on the other side was pure bliss.
I'm here to tell you it is NOT the market conditions, it's how you adapt and how you implement your strategy in today's market that will make the difference in your life.
The Benefits Of Real Estate
Owning a rental property, especially in a market like today (high prices and high interest rates) you have to ask yourself, is it still worth owning real estate? There are 4 main reasons why rental properties are amazing and can get you to Financial Freedom a lot quicker than most investments.
- Cash Flow: Done properly, the investment should provide you with enough monthly cashflow to pay for all of your expenses and give you a relatively healthy monthly return on your investment.
- Appreciation: Real Estate goes up and down all the way up. Overtime almost all real estate will go up in value as the cost to build/replace the current home will also go up and due to inflation, the value of the asset will go up overtime natually without any need for improvement.
- Principal Recapture: Not everyone wants to use debt, but debt used properly is your friend in real estate and the tenants you have will pay down the debt over time, and the longer you hold the property, the more debt will be paid off.
- Tax Benefits(Depreciation): There is an old saying, you are in the real estate business, not the tax paying business. Real estate brings with it the highest tax benefits that you cannot find with any other investment vehicle. If you want to earn more, and pay less taxes, you need to be in real estate.
How You Can Get Started
The hardest part about real estate investing is just getting started. The second hardest part is getting out of your own way and letting real estate do it's magic. Real estate is not about timing the market, rather it's about TIME IN the market. The sooner you start, the sooner you will reap the benefits. Here is a simple 8 step process of how you can get your first investment property:
- Choose a market: the first step will be determining the market you want to invest in. Based on what your goal is will determine what city you invest in. If you are trying to get high cash flow not every city will give you that. You want fast growth(appreciation) you will have to look at fast growing cities. Higher price points generally mean higher returns, but will also cost more out of your pocket. So based on what you want to do, you will have to choose a city you want to get started in. HINT: Most investors start where they live.
- Get Pre-Approved: You have to be able to get financing in order to grow in real estate. Debt is a huge part of real estate as you try to grow and scale your portfolio, but don't get too hung up on this step. Just go to your bank and do a soft inquiry as to what they would give you, if you happened to buy to something. This doesn't take long, but will give you a good understanding of what your starting budget can be. There are over 45 different no money down techniques, so if the banks don't work out, have no fear, no money down investing is by far the fastest way to finance, but I would rather you start with a traditional bank first.
- Learn To Analyze a Deal: This is called underwriting. You will have to do some basic math prior to getting into real estate. Don't let that scare you, it's not complicated, if it was, I wouldn't be doing it myself. You simply just want to know what the monthly income(rent) will be, what the expenses (taxes, maintenance, etc.) are and if the rent will cover the expenses. Ideally you make a positive cashflow, but at the very least it should be cashflow neutral. Having negative cashflow is an advanced strategy that I don't want you looking at for your first investment.
- Look For Properties: This is where the fun starts to happen. Find a local realtor (an investing specialist is preferred) or simply start your search online like over 90% of all buyers do and look for investment properties that are either undervalued, or look like a great deal. No matter what is happening in the market, I have always been able to find underpriced properties. If you are looking for a quick start lesson, check out this FREE course I created here.
- Run Your Numbers: Once you have found the property you are interested in. And you know what mortgage you are approved for, have your Realtor help you run the numbers on the property to make sure you have enough money to close. You will need money for the deposit ($5,000-$25,000), the down payment (5-10%), closing costs(typically 3%) and you will want to know what mortgage rate the bank will give you and using that number what the monthly expenses will be. If the rent covers all of the expenses, it's time for the the signing.
- Make An Offer: Here is the best part of real estate, it doesn't cost you money to make an offer on a property. If you are not embarrassed by how low your offer is, your offer isn't low enough. Start low, the worst the seller can say is no. I have purchased properties for 50% of the value simply because I asked. I certainly could have paid more, but the seller was willing to sell the property for a low price.
- Close It: Assuming your offer gets accepted, and the conditions have been met, your lawyer or title company will step in and walk you over the finish line. There will be a lot of paperwork to sign. Don't let that scare you, it's not like buying a stock or a bitcoin, this is a real investment, with a lot of legal work to do, so make sure you have a good real estate lawyer who will walk you through every step. Then go out and celebrate the win, you have just entered the real estate game and your life will never be the same again.
- Maximize the Management: The real estate moguls of the world, myself included, will tell you that the real money in real estate comes after you own the property. Maximizing returns, increasing rent roll, increasing value through capital expenditure, and decreasing costs will make from some impressive returns on your investments. A good property management company will help you with all of these items, especially if you have picked a city that you don't live in.
In Conclusion
Real Estate has created more millionaires than any other asset class, it's not even close. When I was first starting my investing journey, I looked at any and all investment ideas. But I needed a guarantee, because I was sick and tired of being broke. Real Estate was my guarantee, and it was really the only investment that I could control the outcome. Real estate was my vehicle to riches and it can be yours too, you just need to get started. I know it may seem risky now, but whats the risks of not investing? What are the risks of working pay check to pay check? What are the risks of not doing anything?
It's Time To Elevate Your Life
~Stephen Young
The Investor coach podcast
What We Are About...
Success leaves clues, if someone is truly consistent at anything, over a long period of time, they are not lucky. They are doing something different than you. It's not that they are gifted, but they are doing something, a set of practices that separates them from everyone else. If you can figure out what they are doing differently than you, and you do the same thing, you will get the same results. But you have to model someone who is doing consistently what you want. Follow me and our guests to millions.
Episode 23 - #1 Question I wish I had known before I started...
Have you ever wondered how much more successful you could have become if you knew what you know now? Listen To More
Episode 29 - Titans of Industry
Find out from two highly successful Realtors how they scaled their businesses in the face of massive adversity. Listen To More
The Investor coach podcast
What We Are About...
Success leaves clues, if someone is truly consistent at anything, over a long period of time, they are not lucky. They are doing something different than you. It's not that they are gifted, but they are doing something, a set of practices that separates them from everyone else. If you can figure out what they are doing differently than you, and you do the same thing, you will get the same results. But you have to model someone who is doing consistently what you want. Follow me and our guests to millions.
Episode 23 - #1 Question I wish I had known before I started...
Have you ever wondered how much more successful you could have become if you knew what you know now? Listen To More
Episode 29 - Titans of Industry
Find out from two highly successful Realtors how they scaled their businesses in the face of massive adversity. Listen To More
Hi, I Am Stephen Young
CEO Of The Best Blog Ever
I have always loved real estate, and our blog gives you more information about real estate if you are looking for a deep dive. Here we interview other real estate investors, and we show you their journey from start to finish. Be sure to sign up for our weekly newsletter to keep up to date with all of the new blogs, interviews, and investment opportunities.
