The First Steps To Your Investment Home

November 15, 2022

The First Steps To Your Investment Home

So you have decided to invest. That’s great, but where do you start? When I first decided to buy my first investment home, it was a quick and easy decision for me. I realize that not everyone is going to get up one day and just do it. But I will walk you through the steps if you are wanting to get started. This post is for the person who is thinking about the process and cannot get over the mental hurdles. There are a lot of obstacles in this decision that are mental, financial, and knowledge based. I will try my best to guide you through it.

1. Change your mindset

Getting your mind right is the first step in getting into investing. This is the most important step, and the reason why I list it first. Deciding to invest is no walk in the park. It takes a special kind of person to ignore the risks to gain the rewards. You are going to hear “no”, you will have people around you doubt your decision (even your family), and you may have little to no support. You will have to shift your thinking from getting an “easy and guaranteed” paycheck, to working diligently to work towards your future. There are high risks ahead. You can lose money and lots of it. You could fail, head first. There’s always a chance of things not working out the way you want, but if you are positive and persistent, it will happen for you. You don’t necessarily have to be the smartest person to do this, but what you do have to have, is grit. Identify your “why”. This is the reason why you want to start. This can be for your family, financial freedom, freedom of time, control over your overall life, whatever that reason, remember it during those hard times.

Get your finances together

I could write a whole post on this subject alone. I am very passionate about educating about money, but I will break this down the best I can. Getting your finances together looks like a few things: being aware of your credit, having money saved up, reducing your debt, and having a budget. These all apply to your personal credit in the beginning phases.

2. Knowing your credit

Being aware of your credit and knowing your credit score are similar but not the same. When I worked in banking, one of our trainings was on how to read a credit report. If I was working with a client and they have a loan and they had a lower score, but good payments, we could possibly work to get that loan approved. You can have a “decent score” but if you have collection items, a judgement, past bankruptcy, etc the chances of someone wanting to loan you money can be slim to none. Make sure you have a clean and diverse credit. I’m not going to go into the details of what your credit should look like, but most people who have challenging credit, already know it. And YES, it is a big deal. Don’t wait for that collection item to “fall off” of your credit. If you need help, use a well vetted credit repair company. I prefer to use local in most of my business aspects because I like to know a person and build a relationship with them. Your local realtor should have some connections as well.

The second part of knowing your credit, is also knowing your score. You will want a good score with no derogatory accounts. **Disclaimer, I am not a lender, nor claim to be one, but I do have some credentials for you to at least consider my advice.** If you want to focus on a score, I would aim for the high 600s. (680 and above) My personal goals may be higher but this is a good place to start. Even though you are not at the step of needing to pull out a loan, you want to be prepared to jump on an opportunity if it comes up. Waiting to get your credit together could make you lose out on a deal.

3. Save, save, SAVE!

I’m going to be realistic here and will not tell you to just do it without some savings. When I first started in real estate, I took a leap of faith and quit my cushy “normal ” job to become self employed. In saying that, I did have a few months of emergency funds saved up. I am not advising you to quit your job like I did, but you will need some cash on hand to plan to invest for the future. If you are living paycheck to paycheck and say you can’t save money, scroll up to step one, because that excuse it not acceptable. If anything, it’s the reason you HAVE to do this step. I am a single parent and had little to no financial support my adult life. If I can do it, you surely can too. If you do not follow Dave Ramsey, this is a good time to start if you are struggling with this step. Having little to no debt is a good place to start. Cutting back on eating out and other “luxuries” is another way to start. Categorizing your expenses as “needs and wants” is another method I use. I NEED to buy groceries, I WANT those new pairs of shoes. There are a lot of ways of saving money, but find what works best for you. If your method is too extreme, you wont stay consistent. Be realistic for you and your families needs. Set a realistic goal of how much you want to save and give yourself a realistic deadline.

Click here for this article: The average American savings balance by age, household size, and education level


4. Decide How You Want to Invest

Investing in real estate is obviously the last step, but there are so many ways to invest. Long term rentals, short term rentals, flipping homes, wholesaling, etc. Because you have so many options, the last and biggest step is for you to narrow down what is best for you. My first investment property was actually my first home purchase. I was looking for a house to rent but decided to buy instead. I was only 25 and knew this wouldn’t be my forever home. At 25 years old, I didn’t even know what career I wanted to do or even if I would want to stay in Tennessee. It wasn’t realistic to think I would stay in this house forever.

I bought my first home with intentions of it eventually being a rental home. I didn’t have a time frame of when I wanted to do this. I didn’t even have a plan of how, but I knew my “why”. So I bought a VA foreclosure that just needed a few cosmetic things. I did a lot of small DIY projects that I knew were easy but would increase the value. I changed out the carpet in the living space and added laminate. I put new updated vinyl in the wet areas (kitchen and bathrooms). I painted the entire home a neutral color. I also took pride in the exterior of my home. I painted the exterior door and shutters and added storm doors to the front and back and updated the front patio railing. These were very simple fixes that made my house into a home. I was living in my home and it was very quick and easy to turn this into a rental property when I finally found my next home. I also used my projected income of the rental to make this house a “wash”. (This term basically means to cancel out the debt. It was not used against me on buying my next home).

When deciding on what type of investments you want to get into, keep in mind steps 2 and 3. If you want to buy a 100 unit apartment complex, but have $2000 saved and a 600 credit score, this may not be realistic.

5. Educate Yourself

“Education is Power” is what my mother with a middle school education would always tell us. She moved to the United States with no education and still manages to own a successful high producing business. Even though she has no degree, like myself and my two sisters, I would consider her one of the smartest people I know. She is constantly reading, researching and cross referencing. You don’t necessarily need a degree for this business. I wouldn’t even say you need to take a bunch of expensive seminars. Some easy and inexpensive ways to do so is to read, research, and follow some people on social media who are doing the things you want to do. One of the best first books to read is “Rich Dad, Poor Dad” by Robert Kiyosaki. This book will also help you in step one of this process. This book was life changing for me and made me realize, anyone can do this with the right mindset. Audio books work best for me because I am in my car sometimes 80% of the day.

6. Surround Yourself with Like Minded Individuals

I think this is one of the most important steps. If you are hanging out with the same people who are stuck in the same habits, you will not change or grow. I’m not saying to dump those friends, but make some connections outside of your usual sphere. You can join some investor groups online or go to an in person meetup. There are so many resources you can find from just researching online. Finding a good and patient realtor should be in your list of someone you should connect with. Keep in mind that not all realtors are the same. Most of us have a niche market we like to stay in, and realtors that work with investors are different. They can help you with comps, find you listings, and can also help you resell if you decide not to keep the home. Some realtors don’t have that vision to see a distressed home turn into a money producing property.

Keep in mind that this is for a true beginner. Investing can be an overwhelming and scary process. Getting your foot in the door is the first step and this list can help you jump over that hurdle.

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