I am constantly asked "When is the right time to Invest in Real Estate?"  There is no right or wrong time.  With the proper guidance any time is a great time.

Here are the basic steps for investing in real estate:

1) Determine your strategy early: flip, renovation, or long-term rental. Do you want to hunt for something undervalued, hold it, and then flip it in the coming months? Are you a skilled carpenter, or do you know what’s involved in a renovation? Are you willing to deal with a renter? If so, the renter will pay your mortgage and give you some immediate profit.

2) Interview realtors. Don’t waste everyone’s time looking at property with a realtor until you know you’re with someone who is investment-focused. Most realtors will not be able to tell you the basic numbers you’ll need on a property. Not all realtors deal with investments.  A good rule of thumb is if they dont invest themselves, Dont trust them to guide you.  You wouldnt hire a mechanic that didnt trust his or her skills enough to work on their own car would you?

3) Interview mortgage brokers. Once you find a realtor, ask for three broker recommendations and check out what your local bank or credit union offers. You’ll want to know what each offers in terms of interest rates and closing costs. Bring a copy of your credit report to your meetings, along with a sample property (in the same price range), so they can run hard numbers.

4) Put contracts on the cheapest house in the best neighborhood. These contracts will put you in control of that market. For example, let’s say the cheapest two-bedroom house in the best neighborhood in Houston costs $100,000 and the next cheapest, comparable home goes for $140,000. You can buy the home at $100,000 and raise your price to $130,000 the next day and still make a profit.

5) Contract to Close. You’ll sign a contract, show the seller a pre-qualification letter from your lender, and get your home and termite inspections. Next, your lender will do an appraisal of the home. If you want to renovate the house, a Purchase and Renovate loan may appeal to you - this wraps the cost of construction up in the loan so you have few out-of-pocket costs - and this may require an estimate from a general contractor and plans from an architect. Once your lender approves the loan, you will close on the house. In general, this process takes about 45 days.

6) Execute your investment strategy.

Flip: Just sit and wait until the market allows you to sell at your target price You don’t even need to turn on the utilities until you go to resell it.  Some minor renovatons may be needed.

Renovate: Set a budget and stick to it.  Do not over renovate the house.  The idea is to appeal to a broad range of buyers.  In general, your lender doesn’t care if you use the general contractor who provided them with an estimate, so make sure you’re working with a solid crew who will get the project completed on time and does quality work. You can burn up a lot of money if they’re inattentive to your house.  You will find the more houses you do the better rates they will give you.  Once the project is done, determine how much property in the neighborhood is selling per square foot, and you’ll know your new sales price.

Rental: This is where most people get scared.  Do not get attached to the house.  It is not your house to live in, It is an investment.  If your Realtor or Property manager are doing their job, you will have a qualified tenant.  Drive around the neighborhood and determine what the average rent is for the number of bedrooms you have (renters care more about bedrooms than square footage). This can be a long term investment or a short term property (2-3 years) that you will sell after leasing.  Owner financing can be a great investment. 

These are just the basics, but they demonstrate that the buying and selling process isn’t too tough. Keep in mind that if you have good credit,  your rates will be much better. If you are fortunate enough to use cash, you will often get a much better deal and also have a better chance of getting a contract if in a multiple offer situation.  Also, typical closing costs are about 3% of the sales price, and this can either be paid for by the seller or wrapped into the loan.

Don’t wait as long as I did to try real estate investing.  The truth is that there is never a bad time to invest.   If you’ve got the right motivation and resources, then it may just be the best investment you ever make.