Real Estate Foundations: What You Need to Know

Introduction

Real estate foundations is the building block to becoming a real estate investor. For the majority of people, there is a belief of 8 financial assumptions. These 8 financial assumptions are often road blocks preventing someone from becoming a real estate investor.

8 Financial Assumptions

1. A Good Job
2. Save Your Way to Wealth
3. Debt is BAD
4. Security is Good
5. Failure is Bad
6. Wealth is Measured in Material Things
7. Acquiring Wealth is Win or Lose
8. It Takes Money to Make Money

Why Real Estate

The answer to this question is the acronym I.D.E.A.L.

IDEAL means the following:

• Income
• Deductions
• Equity
• Appreciation
• Leverage

Real Estate Foundations Realty Check

1. You can make big money fast.
   1. This is true but its not automatic.
2. You can get started with limited resources.
   1. But you need some resources.
3. You can invest with bad credit.
   1. But you need the knowledge to do it.
4. Expect to ‘Learn on the Job’
   1. That is the reason you build a real estate team
5. If you work your real estate business like a business, you will be paid like a business
6. Real estate is a contact sport not a contract sport
   1. It is all about building relationships

Working Your Real Estate Business

Your number one role as a real estate investor is to be a PROBLEM SOLVER. The more problems that you solve, the more money you will make. When it comes to being a problem solver, you will learn that people do not always want money. You must be solution oriented!

New Philosophy for Real Estate Investing

• Ready
• Fire
• Aim

All too often, it is believed that you need to have everything perfect. All of you ducks must be lined in a row. When it comes to real estate, nothing will ever be perfect. There is an old saying that goes, “ignorance on fire, is better than knowledge on ice.”

Knowledge is essential, but having knowledge and waiting for everything to be perfect is a recipe for failure.

Setting Your Goals

What is your WHY? Without knowing what it is that motivates you, you will never be on a clear path to achieving your goals. Before starting any journey, one needs to have a crystal clear definitive outcome in mind. Therefore, it is important to figure out your why, because without it you will be stuck in neutral. Take the time to figure it out. Meditation is a wonderful exercise to help you achieve clarity and purpose.

What is holding you back? For most people, the fear of failure keeps them from achieving there dreams. For others, it is what other people may say or think about them. When you have achieved clarity, purpose, and your WHY is crystal clear you can let go of your fears and forget what other people have to say or thing. Then you are the master of your own ship.

7 Steps to Goal Setting

• Clearly identify your goals
• Set a date to achieve each goal by
• Write down the tools, education, skills, etc you will need
• List the groups or organizations that will help you reach your goals
• List the obstacles that you need to overcome
• Create an action plan (by month, week, and day)
• What’s in it for you?

Key Terms & Your Business

In real estate investing, the number one term is ROI. ROI stands for Return on Investment. When analyzing a deal, you will want to ask yourself, what is your ROI on the deal.

Learn to talk like an investor. Make these words your new vocabulary. (Note: do not use these words with home owners, save them for individuals that work in the industry.)

Some Key Terms and Definitions

• Cash Flow – the money that a property brings in after all expenses and mortgage or debt service
• Depreciation – an accounting term which shows the decline in monetary value of a specific asset and is used as an expense to reduce a taxable expense
• Equity – a homeowner’s financial interest in a property
• Appreciation – the increase in the value of a property due to changes in market conditions

Terms and Definitions Continued

• Leverage – using other people’s money, experience and knowledge to increase your gain
• ARV – the after repair value of a property once it is fixed up
• LTV – the percentage of debt to current value of a property
• NOI – the money that a commercial property brings in after all expenses before debt services

Know Your Local Market

It is important for you as the investor to know your local market. The criteria for knowing your local market would consist of the following:

1. Property types
2. Average days on market
3. Listing vs. Selling Price
4. Incentives
5. Selling patterns
6. Who are the players
7. Exit strategies commonly used
8. Best short term
9. Best long term
10. Most appealing

As a side note, always go into any transaction with three exit strategies in mind.

Best Opportunities

• Auction
• Bank REO’s
• Government
• Pre-foreclosure
• Short Sales
• Foreclosures
• Estate sales
• Probate sales
• FSBO
• Tired landlords
• Other investors
• OREO’s
• Builders/Developers
• Property managers
• Realtors

Build Your Team

• Bird Dogs
• Lenders
• Appraisers
• Realtors
• Title Company
• Attorney
• Property Managers
• Accountant
• Inspectors
• Contractors
• Buyers
• Renters
• Mentors/Coaches

Real Estate Foundations Conclusion

In today’s article, we covered just the tip of the iceberg when it comes to real estate foundations. If you would like to learn more about this topic in greater detail, we recommend becoming a part of our nationwide team of real estate investors. You can find out more about this opportunity at TimeFreedomREI.com.

For other real estate investing topics, go to https://timefreedomblog.com/category/realestate/