10 Basic Real Estate Investing For Beginners Success
For a beginner, getting started with real estate investing with zero experience in business can be overwhelming.
The best way to start is to learn as much as you could from books, seminars, and mentors.
More education isn’t necessarily the key – as you learn you will face more challenges ahead of you.
Knowledge can be a two-edged sword – sometimes knowing too much or too many details can lead to analysis paralysis.
Ultimately it is the school of hard knocks that separate a newbie from a professional real estate investor who has a business plan.
As a newbie, you will want a roadmap and step-by-step plan from an experienced professional real estate investor to follow.
Noble Sky International Founder, Rauf Said with his mentor, American professional real estate investor Ray Dias has a combined 40 years of full-time real estate investing experience.
The upside is you get to leverage on their combined experience with Rauf Said and his team headquartered in Singapore and Ray Dias based on American soil.
In this article, you will find a 9-Step Plan to Get Started (or Restarted) With Real Estate Investing
1. Identify Your Financial Stage
2. Choose a Specific Real Estate Investing Strategy
3. Be Frugal; Reduce Expenses, Increase Income + Savings Decide Your
4. Saving vs. Investing
5. Grow Your Passive Income
6. Decide Your Real Estate Investment Criteria
7. Strategies To Increase Your Net Worth Growth
8. Generate Passive Income
9. Pick a Target Market
10. Generate Passive Income
Professional investors never buy blind.
In a nutshell, to win at real estate investing in the US market you need to know how to research and analyse the numbers to buy profitable properties confidently.
You can decide to either Flip or Rent the properties to maximise your returns on investment by following these steps and our comprehensive guide to real estate investing.
Step #1—Identify Your Financial Stage
All investors want to reach Financial Independence – the summit or peak of the mountain where all you daily living expense is covered by the income from your investments.
Real estate investing is one of the vehicles to improve your finances and grow your wealth.
The fundamentals of investing are the same – whether you invest in real estate or anything else.
For the savvy investor, they think like a farmer and invest their saving from other sources into a firm asset like real estate.
You don’t have to get everything perfect to start.
The important thing is to start hiking or climbing up that Financial Mountain.
Step #2—Choose a Specific Real Estate Investing Strategy
Your goal is to get started.
You will want to do this quickly instead of creating a big, detailed, multi-level plan with categories and tags.
For now, just choose ONE real estate strategy.
A simple strategy will help you move from your current financial stage to the next.
For example, if saving and growing money to you means holding multiple FD certs and earning a paltry 3% interest, you might want to 10X that to 30%.
However, this doesn’t mean that you can’t decide and upgrade it later.
It’s like buying your first car, five years and ten years down the road you may buy a different model depending upon your wealth stage.
You need the confidence to get started – Remember that starting now gives you focus to get your first house and eventually increase your rate of return for your investment.
Step #3— Be Frugal; Reduce Expenses, Increase Income + Savings
No matter your income, it is your expenses that eat up your savings.
All of us have been there before.
Remember the phrase ‘champagne lifestyle on a beer budget’?
That phrase aptly describes someone who lives way above his or her means.
Liking expensive things is fine IF you can afford it.
Saving money is limited as you cannot save an amount larger than your total living expenses.
However, many people splurge on expensive items, small luxuries, holiday aboard and pay for all these things on their credit cards.
Buying your daily morning cup of coffee at Starbucks can get pretty costly.
In America, a cuppa cost $6.04 with taxes.
Monday through Friday cost $30.20 for the week times 52 weeks is $1,570.40 a year!
Imagine saving $1,570.40 a year and growing that money instead.
You can still have coffee – bring a thermos from home to work.
Have that Starbucks every other weekend.
The frugal approach to growing wealth helps you focus on what you should spend on – the necessity not on whims or fancy.
Spending wisely is an essential factor in increasing your net worth.
Millionaires live below their means.
They grow their wealth by maintaining modest spending habits even when they have the financial capacity to spend more.
While some people may conclude that frugality is the path to long-term wealth; let’s look at Warren Buffet’s lifestyle.
In 1941, Warren Buffett bought six shares of Cities Service preferred stock at 11 years old.
The cost was $38 per share – you can grow your wealth in stocks, bonds and shares.
You can save that $1,570.40 in a bank and grow it on compounding interest.
If you skipped a year of Starbucks and opted to invest the money, with compound interest – here is what you can get
10 years – $4,551
20 years – $8,952
30 years – a whopping $17,611
* assuming a 7 per cent annual return
Step #4— Saving vs. Investing
What’s more important Saving or. Investing?
Saving Vs. Investing Money; Which is More Important?
While it is best to both invest and save your money, you will want to evaluate the risk against the potential returns when making financial decisions that impact your life.
Before you invest any amount, you need to feel comfortable with your earnings after all the bills and taxes are paid.
Foremost, you need to pay all your debts or liabilities, have your cash reserve or the emergency funds needed to help you if there is an emergency so you will never pull out your investment.
The ideal amount of emergency funds should be at least 3 to 6 months of your income.
If your income is $2,500 per month, have $15,000 emergency funds good for six months.
After this, it’s time to know your risk appetite.
If you’re still young, you can take the high risk; you can choose to invest purely on stock equities.
For the mid-40s to 50s, you have to take a medium risk; a combination of bonds with equities is the right investments.
Over 50s investors may want to explore real estate investing as another stream of passive income to supplement their other low-risk investment like time deposits and bonds.
Where does real estate investing fall in the grand scheme of things?
Before you invest, you need to plan when to redeem your investments.
A project is useful if you work for it from start to end.
You start your investment account with the fund from the savings account intended to use as a business capital.
You can always start with the initial funding ready, top-up along the way with money saved from your salary or income every month.
Another way is to use the profits you make and stack up against the first house on your investment portfolio or co-invest with other investors (crowdfunding) to purchase bigger properties.
Risk & Opportunities: Think twice and do not invest your money in a hurry. For an investor to thrive, you need to be wise and unemotional in evaluating all the factors involved. Your decisions ultimately affect the chances of higher returns.
Step #5— Grow Your Passive Income
Passive income can be a great way to help you generate extra cash flow if you suddenly become unemployed or even if you voluntarily take time away from work.
One way passive income works is to pay for your daily living expenses.
You can use the money from your other active income sources, your job or other businesses can be used to grow other investments.
If you’re able to build up several streams of passive income sources, you can save enough of your earnings to meet your retirement goals.
According to the Internal Revenue Service (IRS), passive income can come from
• a business you do not actively participate
• paid book royalties
• stock dividends
If you think that passive income is getting a lot of money without doing any work, It’s a ‘get-rich-quick’ scheme.
Every investment involves work.
Every business needs money to make money.
To earn rental income, you need to be a landlord. To be a landlord, you need to own a rental property that well-maintained, to keep the passive dollars flowing.
You need a commitment to a strategy that can generate income, and you will create some extra financial security for your retirement years or when you can no longer work.
But if you’re committed to the strategy, it can be a great way to generate income, and you’ll create some extra financial security for yourself along the way.
US Real estate can deliver an excellent income stream because you make investment rental income after the initial investment over some time. So, you can generate a good income stream.
Investing in rental properties is an effective way to earn passive income, BUT it requires more management and dealing with tenants than people expect.
Opportunity: Unlike stocks, bonds and shares, buying real estate is an investment strategy that gives prospective real estate owners the leverage to buy a property – by paying a portion of the total cost upfront, then paying off the balance, plus interest, over time.
Risk: To make good money from investing in US real estate you need local knowledge of where to find and purchase heavily discounted property – that you can buy cash without a mortgage or loan eating into your rental income.
Step #6—Decide Your Real Estate Investment Criteria
Experienced investors look at the potential investment numbers or returns rather than making an emotional buy when they look at a house.
Many newbies think about things like whether they like the kitchen cabinets before buying an investment property.
Investment properties can be rewarding and profitable if you have found an investment strategy that suits you best.
Your target property will become more apparent when you choose a targeted niche for example – single-family homes.
A niche means you focus on one smaller segment of the entire market instead of focusing on famous locations like Beverly Hills, Hawaii or Alaska.
You need to look at two major categories –
• Target property
• Target terms (aka the numbers)
Once you’ve chosen your niche you can narrow it down to a description like this; Single-family houses with 3 bed, 2 baths with a full market price range between $150,000 to $200,000.
The one per cent rule is a property investment guideline used by professional real estate investors to evaluate a potential property before purchase.
This rule of thumb states that the monthly rental should be equal to or greater than one per cent of the target purchase price (including upfront repairs).
Repairs can be costly and eat into your budget if not factored in the total purchase costs.
Rental Income should be at least $1000/month per single-family homes.
Cash-cash-on cash return at least 10%,
Discount from the full value of the property should be at least 10%.
At Noble Sky International, our baseline is getting a property at a significant discount and with a return targeted at a minimum of 30%.
The first rule of Real Estate Investing: Make Your Profit When You Buy, Not When You Sell.
Step #7— Strategies To Increase Your Net Worth Growth
There are a few Strategies to increase your net worth growth for real estate investment.
To get yourself up to speed depends on your age, risk appetite and more importantly, the cash for the investment you have in hand.
Self-Directed Retirement Account Plan (READY CASH)
Use your own accumulated funds to invest tax-free in private loans, rentals, or flips.
The Debt Snowball Plan (DEBT)
Borrow on a few properties, speed up debt, pay off one property at a time.
Buy 3-Sell 2-Keep 1 Plan (CASH & DEBT)
Buy three property hold for rental income, then sell two and pay off debt on the third.
While the fastest way to build and grow an income property portfolio and generate bigger pockets is Fix and Flip Houses, you need Cash to make Cash.
The best strategy that has worked for Noble Sky’s Clients is The All-Cash Plan.
All-Cash Plan (CASH ONLY, DEBT FREE)
By paying 100% cash for each property, you put yourself out of debt without needing a mortgage as the best way forward to build, save and reinvest your profits.
Step #8— Generate Passive Income
You can make money actively with your job, take a second hustle or even build your own company if you factor in the costs of your time.
The strategic goal for investment income is to turn existing equity into investments that produce maximum income tempered with minimal risk and inconvenience.
You can start by paying off debt to decrease overall debt levels.
In a nutshell, you reduce your risks and increase your income simultaneously.
You will need to do a sound audit and write everything down before deciding.
Properties that do not generate any income is a liability.
Look at your portfolio carefully.
Do you have properties that you could not rent out or the rental is not sufficient to pay your monthly loan?
These properties are not generating a positive cash flow.
Sell these properties off and refinance any remaining debts that are not optimal with fixed, low-interest, long-term debts.
Replace them with properties of more value (where you can buy below market cost).
You can look into a House Flip – a good short term strategy.
Flipping houses may sound simple, but it’s a lot more complicated than it looks.
You will need a Property Manager to run the show for you unless you are positioned in the USA.
Buy more passive assets – higher-quality residential rentals by yourself will require large capital or funds.
You can co-invest with other investors for a profit share in a larger pie.
Keep overall debt levels to Zero.
You need a focused decision-making process to help you identify knowledge gaps as you go along.
We recommend that you choose the proven to work All-Cash Plan strategy, which has proven to help our investors do exceptionally well since 2014.
Finding the right strategy for yourself is a lot more than finding something interesting – if you are interested, then let’s move to the next step.
Step #9— Pick a Target Market
People often ask me whether they should invest close to home or choose a new market.
With prices so high in many locations, the market you select could make a big difference in your final results.
The prices in Asia are high in comparison to US real estate.
Whether you stay close to home or choose to invest in the US, comprehensive research and market analysis are what determines your profits and losses.
When you buy at a discount, it doesn’t mean the prices of all the houses in the neighbourhood has dropped.
You are only buying one property heavily discounted via a county auction, or a wholesaler from someone who is motivated for a quick sale.
Having ready cash upfront is the way to get a good property fast if you’re buying at an auction.
An auction property is a piece of real estate that the homeowner could not settle the outstanding Property Taxes on the property.
When you are not confined to apply for and to wait for a loan to be approved, you can move in fast to close the deal.
It can either be from bidding at an auction or buying from a seller directly.
To summarize here is what you would need to do.
By combining these criteria, you can then choose a target investment market.
- Evaluate big picture location criteria
- Jobs and economics
- Population growth
- Rent/price ratio
- Evaluate small scale location criteria
- Safety and Crime Rates
- School Districts
- Public Transportation
Much of starting your own real estate business without a mentor is by way of is trial and error.
With Noble Sky’s Sky Invest Concierge, we take the sting out of self-learning.
At your disposal, you have a combined 40 years’ experience from our Founder Rauf Said, his US counterpart Ray Dias and an entire “boots on the ground” team in America to step up to ensure everything works according to clockwork.
While managing real estate from a distance can be done, it’s still more efficient and effective locally based in the US.
The best part of living in Asia is you have an entire US team and Noble Sky headquartered in Singapore to take care of matters on your behalf.
Step #10— Generate Passive Income
Investing in US real estate is a way of getting rich slowly.
If you’re looking at doubling your income in a matter of months – that is gambling not investing.
Warren Buffett started at 11 years old to build his empire the world looks at today, not overnight.
An important part of the wealth-building picture is accumulating wealth to arrive at your day of financial freedom – You are Debt Free.
You have enough savings, financial investments, a steady income and cash on hand to live the kind of life you desire for yourself, your children and family.
And maybe to leave a legacy.
Growing and generating a passive income with real estate deals and profitable investments enables you to retire to pursue your life’s passion without exchanging your energy and time for a salary determined by someone else.
When you are financially free your cash flow equation is: Passive Income pays for Living Expenses and Perks too!
The Cashflow actually increases both your income and savings reduce expenses or do both simultaneously.
Partner Up With Noble Sky International for Real Estate Investing For Success
If you know that you want to invest in the US real estate market, have the ready cash and want to buy cash, do reach out to us at Noble Sky.
Our clients want stellar results and the flexibility of running their own real estate business from Asia without travelling to Stateside.
It is simple.
You don’t have to be an American, a Green Card Holder – You can remain a Foreigner and a Non-Citizen of the USA to be a single investor and buy a house in the US.
There is no restriction whatsoever from anyone, from anywhere to buy a property and own a property in the US.
If you find this interesting and you are interested, fill up the request for a Free Consult and our Consultants will get in touch with you.
We invite you to attend our Free Webinar or Workshop, to learn more and ask your questions on the investment method including the minimum investment to get started.