SMARTERLANDLORDING

ADVICE FROM EXPERIENCE

Getting Started

How to Save Money for Future Investing

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Training yourself to build a consistent savings will eliminate so much stress and uncertainty in life. You will be adequately prepared to deal with unpredictable expenses and you will be positioned to make serious real estate investments in your future.

So, why do we make excuses?

I’ve copied down a few of the tactics and tricks that helped me develop consistent savings. Savings coupled with reducing your expenses are the keys to financial flexibility.  I’ll discuss reducing expenses next time.

1. Increase the Inconvenience
Using the same bank for your checking and savings accounts is too convenient! It makes it too easy to borrow from your savings. That’s why I tell everyone to open their savings account at a different institution than their checking account. To INCREASE the inconvenience, I opened my savings account at a credit union whose hours of operation mirrored my own office hours. What are the chances of you leaving work just to borrow a few dollars from your savings? I don’t think so. You don’t need to buy those shoes anyway.

2. Payroll Deduction
If you have the option, have your savings come directly out of your paycheck and into your savings account. If you don’t ever see it, you won’t ever miss it. This worked so well for me that I continued to increase my payroll deduction every time I got a pay increase.

3. Know Where Your Money Goes
This may sound like a no-brainer, but seriously, know where you spend your money. Make a budget of necessary spending as well as monthly luxuries. After analyzing my spending, I realized I was eating out way too much. If you earn $10 an hour, and those shoes cost $70, think about it. Are those shoes worth a full day’s work?

4. Spend it all on Pay Day
Pay all of your bills the day you get paid. If you aren’t afforded the option of payroll deduction for your savings, then pay into your savings like it’s a bill. After all of your bills are paid, portion out what is needed for groceries, gas and reasonable “rewards” for budgeting responsibly. If there is a larger than expected balance remaining, then put most of it in your savings. If you wait to pay your bills, you will nickel and dime your savings away before you ever see it.

There will be surprises; there will be set backs. Don’t get discouraged. Everyone is different, and you should develop your own savings strategies based on how well you know yourself. For instance, I never allowed myself a “reward” for responsible spending. I saved it all. If I had just experienced a sizable set back to my savings though, I would find justification for treating myself. Yes, it made an even bigger dent to my pot of savings, but it kept me on track.

Which is more important?

Why I Became A Real Estate Investor

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I have always rented: rooms, apartments, town houses, single family homes—the works.   My parents have always rented too.   They worked hard to provide for me, but I wish they had worked smarter.

Working smart is having assets that work for you.

Unless you have revenue generating assets, your income will always depend on the hours you punch on a time clock.   Building wealth and financial stability is about diversifying your revenue streams.   Diversification will provide you with an additional level of stability in the event that you’re laid off or suffer from a severe medical condition.

I’m young but I’m all about preparation.   There are many reasons why investing in real estate can be advantageous.   Here are 5 reasons why I became a real estate investor.

1. It is not rocket science.
Properties appreciate alongside inflation.   The longer you own an investment, the more it is worth.   As a notoriously indecisive person, I enjoy the options that appreciation provides.   I can sell it for a profit down the road, or I can refinance and leverage the equity to continue investing.

2. I learn valuable skills.
Unlike undergraduate school where I spent thousands of dollars to learn things like existentialism, the skills I have learned during my time in real estate are functional.   As long as people live in houses, there will always be a demand for carpenters, plumbers, painters, etc.   If all else fails, I could make a living as a handy man—not to mention the money I save by doing repairs on my own.

3. I can increase the value of my investment.
Unlike stocks or bonds, a real estate investment is something that you can directly and immediately affect.Sweat equity can go a long way, increasing the property’s value and increasing its rent revenue potential.   I enjoy the work too; so, it’s a win/win!

4. Cash flow is king.
The revenues generated from my rentals cover my mortgage—in addition to padding my pockets.   Someone else is paying for my retirement!   I’m able to save at a higher level than before too, which affords me some of life’s luxuries, as well as the ability to continue investing.

5. I can be proud.
The most rewarding part of being a real estate investor is the difference that you make in the community.   It’s incredibly satisfying to see an abandoned property return to its former glory. I want to be a catalyst for systemic change, and real estate can afford me the opportunity.   I also enjoy being a fair landlord to deserving tenants. Too many companies take advantage of tenants through crafty lease language—or by neglecting their duty to maintain the property.   I know because I have been there.

I’m proud to be an investor.

So what are your reasons?

 

Get Off the Wall

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I attended my local REIA meeting the other night and was glad to see several first time visitors there wanting to get into real estate.  As I have written before, joining a local REIA group is a great way to get into real estate and now is a good time to get into real estate.  Being an officer of MIG and one of the more experienced members, several first time visitors caught up with me during the meeting.  They always ask the same thing, “What do I need to do to get into real estate?”  Here is what I tell them.

First, I tell them they need to study all they can about real estate.  There are many different aspects to real estate and I do not know what you want to do and frankly, neither do you.  Check out every book from the library, buy a few books, listen to pod casts, peruse the internet.  You need to get familiar with the basic terms and concepts used in real estate like wholesaling, mortgage, writ of possession, trust deed, etc and you need to become familiar with the methods to invest in real estate.  There is no right way to invest but not every way is right for everyone.

Secondly, you need to get to know some people in real estate.  You need to meet people who do different things in real estate such as landlording, or rehabbing or retailing.  While all deal with real estate they are very different and utilize very different skill sets.  You need to determine which investing activity best suits your skills.  There is no better place to do this than at your local REIA group by talking with other experienced investors.

I know this can be hard.  I was a newbie once too.  I went to meetings and stood along the wall and I see many first time visitors doing the same thing.  I know what they are thinking.  They are afraid you will sound dumb.  They are afraid you will not make a good impression.

But none of that is true.  The more experienced folks remember when they were first timers and how hard it was to take those first steps.  We will not think you are dumb.  We will be impressed that you have taken that first step!  So take that first step.  Get off that wall and up out of your seat.  Ask what people do, how they got into investing and ask for a business card.

Here is another idea for you first timers, offer to take a few of the people you meet out to lunch.  You need to eat lunch.  They need to eat lunch too.  Use your lunch time to your advantage.  There is nothing like an hour over a good meal to pick someone’s brain.

So get to a local REIA meeting if you really want to get into real estate.  Get off the wall and introduce yourself, talk to folks and find out what they do.  Over time, they will help you become a successful investor and soon you will be handing out cards to the first timers.

The Time Is Now To Get Into Real Estate!

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Right now there is almost a perfect storm for real estate investors.  If you are thinking of getting into real estate investing and becoming a landlord there is no better time than now.  Real estate is currently on sale and mortgage rates are at the lowest points anyone has ever seen!  Even better, rents are on the rise because more and more people can’t purchase a home and are there fore forced to rent.

If you are thinking about becoming a real estate investor, I can’t emphasize enough how good the conditions are right now.

If you have been thinking about it and you want to jump off the fence and get into real estate investing here is what I would do.

  1. Do your homework.  Learn about real estate investing.  What are the major expenses and how will you handle them.  Join a local REIA for expert local advice.  Get this book for some real expert advice.
  2. Pick a place to farm as I explain here.  You need to start out in someplace you know and someplace you can get to rather easily.  Find a place and get to know it like the back of your hand.  Learn what properties rent for and what they are selling for so when a deal comes along you can run your numbers quickly and grab it.
  3. Get your money lined up.  If you have your own funds, great!  If not, you should go and talk to a mortgage broker about setting up some investor loans.  If you have good credit and income, it can be done.
  4. Look at buying foreclosures.  Foreclosures are everywhere right now and can really be priced right because banks can’t get rid of them fast enough.  There were over 4,000 in my area just this year alone!   Plus, with a foreclosure there are many other advantages that Richard, Jo and I talked about here.
  5. Once you find a deal, jump on it!  You have done your homework, plowed your farm and have some money lined up.   These conditions will not last forever.

Trust me, in a few years you will be wishing you had bought more real estate.  Like my friend Richard says “Don’t wait to buy real estate, buy real estate and wait.”  That’s great advice!

There Is No “Right Way” In Real Estate

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My last post was about analyzing a good buy and hold deal.  In it I went through many of the criteria that I look at in evaluating if a potential deal is a good one or not.

A fellow investor and friend of mine read the post and we then had an e-mail discussion on a couple of the points.  He pointed out some of the criteria he uses and the logic behind his methods, which were very sound.  I did the same.

He is quite successful and good at what he does and it got me thinking that there just is no “right way” to do this business.  And that is one of the things that make the real estate investing business great.  As an investor, you can mold the business to fit you, or your customer’s needs based upon expectations or experiences.

However, you have to start somewhere.  You can go it alone if you want to, but I don’t recommend it.  If you are just starting out or fairly new to real estate investing here is what I suggest:

  • Read all you can on real estate investing, business and entrepreneurship.  Even if the subject is not real estate, you need to get your mindset to that of a real estate investor and an entrepreneur.
  • Join a local reia to network with other local investors.  The price of admission will be rewarded back to you many times over.
  • Buy a few of the more respected “Guru” courses.  As I said you do not have to go it alone and you should not.  Some of these gurus have already invented the wheel and will provide you a sound base to get started that again will reward you many times over what you initially invest.  Some of the gurus I have invested in include:
      • Mike Butler
      • Alan Cowgill
      • Robyn Thompson
  • Once you do the above get out there and get a few deals under your belt!  You have read the books, bought the courses and attended the reia meetings.  Now do it!  There is no better teacher than experience.
  • Once you get a few deals done, then you can begin to modify and refine the techniques you have learned to fit your particular niche.  You may want to focus on a particular area, or a particular form of real estate for example.
  • As you become more and more experienced, you can begin to write your own business systems for your particular circumstances and who knows, maybe you become the guru.

Whatever you do, remember there is no “Right” or “One” way to do real estate investing.  There are so many different deals in so many different areas with so many different customers that the sky is literally the limit.

Until next time work smarter not harder!

Future Real Estate Investors

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Ridgeway HS Investment Club

Many thanks to the newly formed Ridgeway High School Investment Club.  They invited me to speak to them this afternoon about real estate investing.  You have got to admire these kids for sitting and listening to me after school when it was a beautiful 70 degrees outside on February 2!   I enjoyed talking with you and I wish you much success in the future!

Top 5 Real Estate Investing Books

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Give a quick listen as I talk about my top 5 Real Estate Investing books.  These 5 books really helped (and still do help) me in my real estate investing career.  Then stop by the Smarter Library and order a copy for yourself.

Don’t see your favorite on the list?  Drop me a comment and let me know what your favorites are.

Searching For Help? Join Your Local REIA Group

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A smart way to get help and advice with your rental properties (besides smarterlandlording.com) is to join your local Real Estate Investment Club.  I belong to the Memphis Investors Group and I can’t tell you how much this group has helped me.

Be Smarter!  Join your local REIA.

 

These clubs are not investment clubs that pool money and buy properties.  Rather, they are clubs of local real estate investors that get together for real estate education and networking.

 

Join up and get to know other investors in your area.  Most will be happy to share knowledge and info with you once they get to know you.  One of the great things about real estate investing is that my competitors are also my colleagues.  We often call or talk with each other for advice or feedback on deals.  Why is this possible? It is because there is so much real estate out there.  So join up and meet like minded people today

 

There are real estate clubs like the Memphis Investors Group in major cities all across the county.  To find one near you, take a look at the National REIA website.