How much time are you going to be able to devote to this real estate endeavor?
If you currently have a full time job, I would advise you to keep it—at least until your real estate business generates enough money to replace your current income. This is especially important in today’s constricted job market.
If you have a job with a good income, you should be able to qualify for a mortgage. Your job should provide you with funds to contribute to your retirement account, and perhaps to pool with another investor with whom you might like to partner. Many self-employed full-time investors are no longer able to get a mortgage on their stated income, or because they have already reached the limit on the number of properties they own.
Many of these investors use hard money or private funds, when they would be just as willing to take on a partner who can get a mortgage at today’s low interest rates. This option would expand the possibilities for exit strategies, perhaps turning a flip into a cash-flowing long-term hold. Network with them, if you are still working and still learning about real estate investment.
Did you know that you can self-direct your Investment Retirement Account (IRA) to invest in real estate, and not just stocks and bonds? Many people are unaware that they can do this. There are many fine IRA custodians like Equity Trust and facilitators like Bellevue-based Guidant Financial that can help you set up your account to do just that.
While a full-time employee may not have much time to devote to investing, he will likely have funds to invest. And that will provide incentive to partner with a more senior investor who is looking for funds or an equity partner. If you are simply looking for a passive investment with greater returns than you might earn on the rest of your investment portfolio, then lend money to an investor you trust with a consistent track record. Or partner with an experienced investor from whom you wish to learn.
In the process of lending money, you will receive paperwork that you may find yourself using later when you are looking for private lenders yourself! Look over their prospectus on investment, and ask questions about how they intend to generate profit. You will learn much about putting together a professional presentation, about buying criteria, marketing, and about potential exit strategies. One of the biggest mistakes new investors make is quitting their job too soon.
If you are in a real estate-related industry, you may never decide to quit your job, as this may be a good source for leads, referrals, commissions, financing or other resources.
However, if you are unemployed, retired or self-employed, you have the opportunity to dive into investing full time. Real estate investing is MORE than a full-time job, despite what some national gurus might have you believe. I guarantee you will not be sitting on a sunny beach sipping margaritas while your business works without you—at least not in your early years.
Investing is a discipline that requires hard work, education, consistency, systems, and persistence. Learn all you can, and surround yourself with people who are successful, positive, and believe in you. There will be plenty of obstacles, rejection and naysayers along the way. Make strong connections among your contacts at your local real estate investment association, because they will remind you that IT CAN BE DONE, and our members are out there doing it. And you can too! If you are willing to do your homework, and take action!