Since my first article with Inside Collin County Business, I have received numerous inquiries into the very explosive Texas Real Estate investing market.  This has prompted me to share the top ten questions I am always asked.  Usually the questions are not asked in the order of priority that they should.  Therefore, I have taken the liberty of also explaining the order these questions should really be asked by investors.

 

TOP TEN QUESTIONS

1. Where can I find good investment property?

While this is always the first question everyone asks, it is not the first question they should be asking.  The first question should be what are the first steps I should take before beginning my real estate investment career?  I strongly believe the answer to that question is to get your spouse or significant other on board.  Do not try to do real estate investment without their approval and support.  Even though this is an investment venture, it will involve personal funds.  Both you and your spouse should be in agreement with what you want to accomplish short term and long term.  The next step is to evaluate if you have the time available to dedicate to real estate investment.  You should plan on scheduling at least 20 hours per week for the first month.  Week one: learn the language of real estate, week two: build your team (see Question #3), week 3: learn how to research properties, week 4: get involved in the offer writing process.

 

2. How much will this cost?

The money question always comes early in any conversation.  I will answer it this way, the better your credit, the lower the cost.  The better your research, the lower the cost,  the better your team, the lower the cost.  You need to know where you are on your credit and cash availability as well as what you need to do to improve both.  Credit is king and cash is queen.  I know what you’re thinking; the real estate seminars are screaming you need no money or credit.  Remember they are selling, seminars and tapes.  Our best advice is to work on your credit and cash availability prior to beginning this endeavor.

 

3. What would keep my Realtor from keeping all the good houses for him or herself?

We really do love this question; there is nothing to keep us from buying these homes.  But remember each of us research about 200 properties a week and narrow it down to about 20 for on-site visits, of which about 5 are usually home runs.  Our business is to find properties for our investors; if we kept every good property for ourselves we wouldn’t be in business very long.  What you should be asking is, “Can I do all this by myself?”  The answer to that question is, “No.” You need to build a team to include a mortgage lender, realtor, insurance, CPA, rehabber, inspector, etc.  You have 20 hours a week for the next 4 weeks to get prepared.

 

4. Why do I need a Realtor and how much are their fees?

You don’t need us, you could do it all yourself.  You can research, evaluate, negotiate,   deal with the title companies, mortgage companies and banks, buy and sell properties, all yourself.  As with any financial move, getting sufficient professional advice will help insure a stronger return and less risk.  By the way, the seller pays the realtor fees.  The number 4 question should be, “Are you and your team experienced investors yourself?” The answer to that question is, “Yes – we are experienced investors.”  This is also an important question you should ask anybody you are planning to add to your support team.  Remember, it is your money and you should not let someone learn this business on your dime.

 

5. Should I flip or hold?

This is a great question depending on what your business model is.  To explain, “flipping” would be instantly reselling the property after you have completed rehabbing it and the property is now retail ready for resale.  “Holding” is fixing up the property, renting it to a tenant, and using the cash flow from the property as your return on investment as well as seeing the appreciation year after year.  North Texas is a buyers’ market and it has been for the last two years.  What that means is, there is a tremendous amount of inventory at a great price right now. That is good news for the buyer, but bad news for the flipper.  While the flipper takes advantage of the abundant inventory and great price, he or she now has to work in that same environment as a seller and right now that mean selling in a buyers’ market.  We are not saying it cannot be done, but you have to be prepared to take into account the time and cost involved in holding the property until it sells.  If you hold and rent a property, you take advantage of several different benefits including appreciation, (yes we are in a flat market – but this can be a good thing), cash flow, depreciation, tax advantages, and the most important one, having your tenants pay for your investment.   In the buy-and-hold process, the long-term benefit is to eventually have the property paid for and this could be your retirement income.  Either option you choose will work as it has more to do with you and your investment goals.

 

6.      Is real estate better than stocks?

This question usually comes up when an individual has a defined amount of money they want to invest.  Your Realtor’s role is not to be a financial advisor but to find you the highest quality investment property based on your business strategies.  Any good financial advisor would tell you to be diversified so your portfolio can withstand the ebbs and flows of our ever changing market.  In my opinion, everyone should have at least one rental property in addition to any stocks they may have.

 

7.      What should be my first step in real estate investment?

Get your support team together; spouse, mortgage lender, rehabber, realtor, insurance agent, and CPA. Confer with your team and establish the criteria for your first purchase.

 

8. What real estate seminar should I attend?

Go to as many as you can and just don’t believe everything you hear.  Pick and choose nuggets of information from all of them.  Be smart about the money you spend and remember these people are now making money selling seminars and materials.

 

9. Is being a landlord hard?

Land lording is as hard as you make it.  What makes it hard or makes it easy is the choice of tenants.  Nobody is perfect and sometimes the criteria I use are not so much credit based as it is interview and referral based.  Chances are if they have good referrals from friends or workers they are pretty solid people.  Also chances are if they have perfect credit, they won’t be your tenant very long.  If that part of the business does not appeal to you, there are many high quality management companies that will take good care of you. 

 

10. Where should I look first?

There is always a gem of a property in any neighborhood. Until you become a seasoned investor, you should try to keep your properties as close as possible for your own convenience.

Although it’s true, “they isn’t making no more land,” real estate investing is no different than any other business and it should be treated like a business to produce the desired results.  Every good business has a plan and a team of partners or relationships with the necessary service providers.   With you as the CEO of your business, you should approach your team building with high standards.  Ask each potential member of your team the following, “Have you ever worked with investors and please give me your references.”  Call these references and use experienced professionals.  I promise you this: talk is cheap and experience brings success.