How to Invest In A House Without Sending You To The Poor House: Real Estate Investment Tips for Beginners

Introduction:

How many times have you heard the same old mantra from your typical real estate investors like "Invest with no money down!", "Fix & Flip in less than 30 days!" and my favorite "I will teach you how to be rich quick with real estate!" Sometimes it can be too many to count even if it's on both hands! I've been in real estate for a while and I can assure you while it's a simple concept, if you're not careful in the beginner stage you can lose a lot more than you gain. But have no fear, Funny Financials is here to give you great humorous tips on how to invest in real estate without your losing your money or your mind. (It can get crazy sometimes) Let's get it started!

Section 1: The Basics: Real 101 Without the Pop Quiz

What's defines a real estate investment you ask? According to James Chen from Investopedia.com, Investment real estate is real estate that generates income or is otherwise intended for investment purposes rather than as a primary residence. It is common for investors to own multiple pieces of real estate, one of which serves as a primary residence while the others are used to generate rental income and profits through price appreciation. Even though there are many types of real estate investments in the market, primarily, most properties can be broken down into two classifications.

• Residential: Investment real estate can include residential land and properties. Residential investments typically involve homes, townhouses, and condominiums. Residential properties can be multi-family or single-family units.

• Commercial: An investment in commercial real estate might involve the ownership of retail stores, office buildings, or storage facilities and warehouses. Investment in commercial real estate is typically more involved and costly than residential investments. Commercial property leases can be longer than a residential rental agreement. Both the costs and profitability are usually measured on a per-square-foot basis.

With this solid foundation on what types of real estate you can invest in, will help you navigate the industry a lot easier instead of just investing in anything weird and calling it a real estate, like port-a-pottys. (I know that may seem surreal, but you'll be surprised what people have invested in and thought it was real estate)

Section 2: Finding the Right Property – Avoiding the Haunted Houses

Searching for a property is like having women try on the glass slipper before you find your Cinderella. Surely it can be a bit daunting and uncomfortable but here are a few steps that will help you when it comes to finding that perfect property for you.

1. Know your budget- Before you start looking for that rental, have a one-on-one conversation with your bank account (Figurately speaking of course. Please for the love of God do NOT actually talk to your bank account like a crazy person). Make sure that you and your bank account are ready for that commitment and if not what needs to be done to help that bank account grow and see your vision of being an investor come to life.

   
   

2. Location, Location, Location: It's all about what you prefer when it comes to this. If you like peace and quiet, make sure to avoid the noisy places where it's like spring break parties every weekend and if you love to be social make sure you avoid the places where your neighbors are cactuses and tumbleweed.

3. Assess the Property’s Personality: Every house has its quirks. Some have interesting character, while others might just be plain weird (Like a toilet seat in the kitchen and a disco ball in the bedroom.) Decide if you're interested in a house with a bit of personality or you prefer something "normal"

4. Hire a Good Inspector: Think of a home inspector as your property’s therapist. They’ll uncover issues you might miss, like cracks in the foundation that could turn your dream home into a literal “crack house.”

These steps will for certain help you find that amazing house that just right for and that's within your budget. Now let's breakdance on this amazing breakthrough of knowledge!

Section 3- Financing Your Investment – Without Selling Your Arm, Leg and Perhaps a Kidney

Now we really get to the meat and potatoes of it all! Getting your deal financed is crucial for this investment to be successful. This is also where you have the most risk, so we got to be cautious. So, here's some things that can be done that will help you get your deal financed the right way.

Financing in real estate is broken down in these categories:

• Traditional Loan- These are your loans from the bank. Think of getting loans from a bank like getting candy from the store, but instead of paying for that candy in cash on the spot you place in your request (apply for a loan) and the candy store owner (The grantor) give you (The grantee) the candy and voila! You now have you candy! (Twix is the best candy in the world by the way)

• Creative Financing- Creative financing is a term used in real estate to describe non-traditional methods of buying or financing property. The goal of creative financing is to use as little of the buyer's own money as possible, also known as leveraging. Think of it as you are cooking a group of family and friends but you’re out of ingredients and you’ve invited a bunch of picky eaters. Instead of running to the store to buy all the traditional ingredients (like cash or a traditional loan), you get inventive. You raid the pantry for some expired cans of beans (equity from your house), negotiate with the neighbor for a secret family recipe (creative financing deals) and trade your special dessert for some borrowed spices (investors or partners). You end up doing very well with what you have and there are no complaints from the people. (Just don't tell anyone you used crumbled Cheetos as a topping)

Section 4- Let's Manage that Property – Less Drama, More Dollars

Got the loan? Now it's time to be a landlord on what you own! You have the opportunity to be in charge and manage your property the way you like. Now before you start writing out the ten commandments on how to be a good tenant, here are three tips that could assist you in finding a good tenant without the drama:

1. Interview Like a Job- Treat that interview as if this is a job that the tenant is applying for (technically it is, being a landlord is like a job so is a tenant, because both have responsibilities to make sure the agreement is performed correctly!)

2. Will you sweat the pet? -  If you allow pets, make sure potential tenants are on friendly terms with their furry friends. Additionally make sure that the pet is friendly in general and well mannered. The last thing we need a dog to do destroy our house so bad it is looking like a storm hit it or the pet cat has started a gang to terrorize other cats across the street!

3. “The References Riddle”: Make sure to check the references of the landlords who had your prospective as a former tenant. “Ask their previous landlord if they’re a ‘tenant gem’ or if they were ‘more of a tornado in a teacup.’”

With these tips you'll be able to spot your diamond tenant and avoid the cubic zirconium weirdos!

6. Section 5: Avoiding Common Mistakes – How to Be the King/Queen of your Castle and Not a Clown in a Circus

I know the learning curve maybe be steep for some, but the last thing you need to be is the laughingstock of investment groups and clubs. To help you out, here are some common mistakes that you need to avoid when investing:

1. The 'Midas Touch on Everything' syndrome- No need to place solar panel on a roof if the roof look as if it's about to cave in. Try your best not to overinvest in the property and just take care of the necessities like the roof, HVAC unit or even the foundation before you even think about glamming the house out.

2. “The ‘DIY Disaster’ Approach”: Tackling major repairs yourself with no experience is like trying to eat cereal with a fork to save milk. Sometimes it’s better to call in the professionals unless you’re okay with your property looking like something out of a scary movie!

3. "The ‘Don't want to Deal With it Today' Technique": Putting off property maintenance and repairs is like leaving your car’s check engine light on and then being surprised when it breaks down. Fix issues promptly to avoid a bigger mess later.

4. “The ‘Cash Flow Roulette’: Forgetting to budget for unexpected expenses is like playing Russian Roulette with your cash flow. Always have a financial anchor for those surprise repairs, vacant months, or random property crises.

Navigating real estate can definitely be a wild ride, but with a little humor and careful planning, you’ll avoid the classic blunders and make your investment a bit more fun an enjoyable!

7. Wrapping It Up

And there you have it, future real estate moguls—your crash course in investing in real estate, served with a side of humor! As you set out on this ultimate adventure, remember that investing in property is a bit like joining a reality TV show where the stakes are high, the drama is real, and there’s no “best-dressed” category—unless you count how well you handle those unexpected repairs.

Good Luck!