When to start real estate investing
The ULTIMATE Beginner's Guide to Investing in Real Estate Step-By-Step
what's up you guys it's Graham here so
this video is really meant to be a
real-estate beginner tutorial where I
can really cover the basics and outline
the blueprints of exactly what's needed
in order to prepare for and actually
invest in real estate with this I'm
going to try to keep it as basic and
step-by-step and non complicated as
possible and believe it or not with this
video this is something that you can
begin working on today it's that easy as
soon as you finish this video so I
highly encourage anyone who's watching
now to actually go and utilize these
techniques start as soon as possible in
that way in the future
you're gonna be in a great position to
actually go and utilize all of these
techniques to their fullest extent and
with that you will make money so just as
some clarification here what I mean
investing in real estate I'm not talking
about wholesaling I'm not talking about
flipping I'm talking about actually
owning a property as an investment where
you then get a tenant in there who pays
your mortgage down for you while
hopefully still providing a little
profit on top of that long term and then
fifteen to thirty years from now you
will end up owning that home out rights
you will own it free and clear you will
start making a lot of rental income and
with that you can pretty much just chill
and do whatever the [ __ ] you want and
that you guys is the entire point of
investing in real estate now step one
and this is something I realize I say so
often in my videos but the reason I do
this is because repetitiveness actually
works because people either don't pay
attention they forget they put it off
and it keeps me saying this over and
over and over again for it to sink in
and that you guys is simply just
building your credit score and they
pretty much have a million bajillion
videos I've already made exactly on this
topic so I will just link to them down
in the description but basically you
need a good credit score because lenders
look at that anytime they determine what
sort of loan they're going to give you
and in what interest rate the higher the
score the lower the interest rate you
pay and with that the more money you get
in your pocket every single month and
when you have a bad credit score at
lenders either look at you and say you
know what we're not even gonna let you
because you don't have a good credit
score because you didn't watch Graham's
videos or if they're gonna look at you
and say yeah we can charge you a really
high interest rate if you want that loan
and that makes me very very sad so
literally just not paying attention to
this step and not bill
your credit will cost you a lot of money
over your lifetime and this is one of
these steps you can start immediately
after watching this video so as soon as
you're finished watching the video and
after you've hit the like button on this
video because you've enjoyed it
hopefully go in the description click
the video about credit cards just watch
that and then click the like button on
that one and then begin building your
credit now the second step is to go and
save your money the reality is that you
can't really invest in real estate with
no money down with no credit with salary
finance it just it doesn't really exist
those are unicorn anomaly deals that I
have never myself seen firsthand in the
last ten years of me doing real estate
and probably 999 out of a thousand deals
out there you will need to put down
anywhere between 5% and 20% of the
purchase price have the income to
actually get the loan and have the
credit score to get the loan at a good
interest rate so this means that in
order to actually save money not only
will you be required to live frugally so
that you could save the money that you
make but you're gonna have to actually
make money now I know this seems just
super common sense like notion gram you
got you got to make money but believe me
I get probably five to ten messages a
day from people who ask how can I invest
in real estate with no money down with
no credit with no job how do I do this
and the answer is that doesn't exist you
will actually need to go and make money
to then invest and in terms of actually
making money that's really up to you to
decide how you want to go about that
maybe you want to take the steady
nine-to-five and get the guaranteed
paycheck every other week just so you
could be able to qualify for a loan
nothing wrong with that or you can start
your own business and then try to make a
little bit more money and speed up the
process the choice is really up to you
as long as you actually make and can
actually save money now the third step
here is to actually show your income on
a tax return this means that you can't
just go and have one phenomenal month on
Shopify and then expect to use that
income as a down payment and then invest
in real estate just a few months later
lenders really want to see a consistent
stable long-term source of income before
they end up giving you a loan this is to
prevent people from getting a loan based
off maybe just a few phenomenal
that are unlikely to happen again or
also to avoid high-risk borrowers that
might not be able to make the payments
after a few months and then default
after the first year so in order to do
this you're gonna be needing to show
proof of income on the last one to two
years of your tax returns for me because
I'm self-employed they look at my last
two years of tax returns they take the
average of the income between those two
years and based my loan on that now for
salaried employees oftentimes banks will
look at the last one year of your tax
returns and often the last six months of
your bank statements and then base your
loan off of that but it's really
important to any time you're showing
income on a tax return to not go too
heavy with tax write-offs because
lenders often look at your net income
after all of your expenses now I made
this mistake in 2014 when I went really
aggressive on my tax write-offs I
basically tried to write off as much as
I could to lower my tax obligation but
in 2016 lenders saw my 2014 tax return
they saw all the write offs and they saw
that year was lower in net income than
the subsequent years simply because I
wrote off so much and they lowered the
amount I was able to qualify for because
that one year brought down my average
now thankfully this wasn't a big deal
because the property ended up buying was
within my price range regardless but
this could have been devastating had the
property I wanted to buy was more money
and with that it would require me to
show more income that I might not have
had so what I do to get around this is
that before I file my tax return I
talked to a lender I will have the
lender look over my tax return before I
file it with the state in order for them
to determine whether or not the income
I'm showing is sufficient for the loan I
want to get this works out amazingly
well because oftentimes if I'm showing
too much income I'm overpaying on my
taxes and I can write off a little bit
more but if I'm not showing enough
income I could simply ease off my tax
write-offs and be okay to get the loan I
want to get and then with that final
number what I usually do is give myself
an extra 10% buffer on my tax write-offs
that way it can show a little bit more
income just in case interest rates go up
I can qualify for the slightly higher
payment now the fourth step with this is
to actually get pre-qualified with a
lender and this is such an important
step and
step will save you from a lot of
disappointment what always ends up
happening for the people that don't get
prequalified as they go out they start
looking and they find the perfect spot
they fall in love with it it's amazing
but it's slightly outside what they can
afford and they can't buy it then
everything else they see after that they
compared to that one deal that's
obviously more expensive and a higher
price point that they couldn't afford
and every deal in comparison to that
just looks like crap so just save
yourself the heartache and the
frustration and the wasted time by just
speaking with a lender first it's really
as easy as going to a few different
banks having them run your credit giving
them your tax returns and bank
statements and anything else they need
and they will pre approve you for a loan
based off that information you can then
go and take that rate sheet and go shop
it around in other banks who will run
the same information they will require
pretty much the same things and they
will often beat that loan of the first
place and then you just keep shopping
them around against each other until you
end up getting the best rate possible
now the advantage here of having
multiple banks approve you for a loan is
really two reasons the first one is just
having the security in the event the
first bank can't perform and giving you
your loan and second is you often just
get the lowest price possible on the
loan you get now a lot of people are
worried that by going to different banks
and having them run your credit it's
gonna dramatically lower your credit
score and this is false any time a
lender runs your credit anything within
a 30 to 60 day window after that is
grouped all as one inquiry this is to
encourage rate shopping so that
customers get the lowest price possible
so running your credit score at ten
times is going to have the exact same
impact on your credit as simply just
running it once now as an example on
this working first hand on the last deal
I got I got approved by three banks and
was intending to move forward with Chase
until last minute one of their
appraisals came in low for rental income
and they wanted to give me a slightly
lower loan amount so I ended up going
with my backup option which was the
exact same rate same everything except
their appraisal came in much higher and
I was able to get a much higher loan
amount this saved me from wasting a lot
of time because I had already done this
work ahead of time I already shopped
around the loans and with this I was
really able to get the best
and best loan possible so with this step
five is to really do your research and
see everything on the market in the area
that you want to buy in find out which
areas you feel are undervalued and
poised to go up in price for me I invest
in areas that are just outside of other
areas that have dramatically gone up in
price and seen a lot of dune development
for instance if I see one areas going up
in price massively but if you drive five
minutes away it's like half the price I
invest five minutes away because I feel
like most people will eventually be out
priced of those areas and want to move
just further outside of those areas
where it's a lot cheaper and more
affordable and that in turn will end up
driving prices up there and then it just
continues to expand outward so in order
to notice this and see this just be
really really good at being able to
notice what's going on in your market
drive around all the areas and see where
new restaurants are going in see where
new hotels are going and see where new
apartment buildings are going in see
where things are just generally
improving and prices are increasing and
then just drive a few minutes away from
that also grow and see every single open
house you possibly can on Saturdays and
Sundays the more you see the more
references you have so that when you
actually see a good deal you know it the
more you see the more you know and the
more you know the better you're able to
invest and spot the best deals without
doing this and without seeing a ton of
properties you're really gonna have no
idea what you're looking at because you
simply have nothing else to compare it
to and ideally you'll want to find
something that just needs a little bit
of love just some really light cosmetic
work maybe the kitchen just looks like
crap or maybe the bathroom is just old
maybe the landscaping just sucks maybe
the paint is all spilling off you want
to find some really easy lights cosmetic
upgrades that you can probably do in one
to two months maximum there aren't too
complicated that most contractors could
easily do and these make the best
remodels and these often have the best
ROI once you get into redoing
foundations and rearranging floor plans
and adding square footage and all that
stuff it just becomes a lot more
expensive time-consuming and riskier to
make your money back on especially as a
beginner I don't recommend this if
you're just starting out now step six is
make offers on places you think are a
good
deal it's really important with this
that you know your price you know what
the home is worth and you've had the
patience to wait until you find that
deal even for me it took me about six
months to find the place I ended up
buying and I lost out on maybe four or
five offers because they had the
patience I knew what the properties were
worth and I didn't want to over spend on
something that I didn't feel was 100%
worth it
and also when I bought my first three
properties in 2011-2012 I probably wrote
close to a hundred offers on places and
just low-balled everybody until I found
a few that actually went and accepted my
offer just have the patience to really
take your time with this and do not get
caught up in the emotional rollercoaster
of competing and multiple offers to the
point where you will overpay for
something that's just not worth it
however don't be stubborn don't be an
idiot and look at this with a long-term
outlook over the next 20 or 30 years
overpaying by a few thousand dollars to
get the absolutely perfect property is
going to be worth it you're not gonna
look back thirty years from now and be
like I only spent five grand in that
property it wasn't worth it no if
overspending by a few thousand dollars
is going to get you the perfect place
then otherwise you're gonna have to
spend another year of looking to find
something similar to that where maybe
the market went up five percent and all
of a sudden that few grand you spend is
nothing go ahead and overspend on that
property buy a few thousand dollars
knowing that in the bigger picture it's
going to be worth it don't be penny wise
dollar foolish to pass up otherwise the
perfect deal just because you get
stubborn with it and think you're this
you and think that another deal will
just magically pop up a few days later
it's more important to find the right
property at a fair price than it is to
wait years potentially to find the
unicorn of a deal that you could buy at
a steal because those deals rarely ever
come up and oftentimes people lose
hundreds of thousands of dollars just
waiting around for those deals to come
up and they don't exist trust me I have
seen this firsthand as a real estate
agent
I've seen people wait years to find the
perfect place and in the process the
market goes up 50% and all of a sudden
they're priced out of all the homes they
were originally looking at that would
have worked amazingly well simply
because they wanted the perfect place at
the perfect price that didn't exist now
step 7 once you actually get your offer
accepted is to then do inspections
I recommend doing it as many inspections
as you possibly can just to get to know
what you're getting into and the
condition of the property I usually tell
my clients that these inspections are at
the very least a break-even from what
they're investing for instance if
they're spending $2,000 on inspections
at the very least usually you can get
$2,000 worth of repairs or credits to
compensate you for all the money that
you've spent I also take this a step
further and bring in one to two
contractors to give me actual bids of
what it's going to cost me to bring the
property up to date and fix any issues
the good news with this is that
oftentimes contractors will do this
entirely for free because they want your
business with this they actually give
you the first-hand experience of what's
actually needed what it's really going
to cost and with this you get your work
out of the way because you get bids in
escrow now combining the inspections
with the contractors I know everything
that's wrong with the property from both
a cosmetic standpoint and from a
functionality standpoint and with this I
could then go and negotiate the price
with the seller accordingly depending on
what's wrong with it what needs to be
upgraded and what I didn't anticipate
especially if your plan is to then go
and buy the property and remodel it it's
so important you get these estimates out
of the way early on so you know exactly
what this property is going to cost what
your ROI is and what the property is
going to be worth when you're done with
it now step number eight here is to
actually then close in your property in
the process of doing your inspections
and everything chances are you gonna be
speaking with your lender and giving
them information that they request from
your tax returns bank statements credits
and all that stuff I mentioned earlier
at the same time they're gonna be doing
an appraisal on the property to show the
bank that they're actually lending on a
property that's worth what you're
actually paying the process of closing
usually takes anywhere from as low as 20
days to as high as 45 days depending on
the type of property how involved it is
with the bank and how much work you did
ahead of time before getting your offer
accepted with the bank but once it
closes this is where the real fun begins
step 9 is starting to do your minor
cosmetic renovations this is where you
end up making instant equity because not
only are you buying an undervalued
property in an area that's poised to go
up in price but you're also buying a
property that needs some work where you
can add F
by simply fixing it up that's the
trifecta making money and real estate
right there now in addition to that
number four is that the more the home is
worth the more you can rent it out for
which means the more money in your
pocket now at this point most people ask
me Graham
where do you find your contractors at my
simple answer to this is two ways the
first one is word-of-mouth if I see
someone that remodeled the property I
simply ask him hey who ended up doing
this remodeling who is the contractor do
you mind if I get their contact
information most people are very happy
to give a good contractor more work
because it looks good on them and it
helps the contractor out and in turn
oftentimes the contractor will give the
first person cheaper prices in the
future because they know they're gonna
bring in more business that's number one
simply word-of-mouth just asked around
number two comes from Yelp anytime I
want to look up a different contractor I
simply type in the trade I need look on
Yelp and then look for people who have
really good reviews I then call them up
you get a few bids and few estimates
from a few different people and you pick
who you feel is going to be the best fit
this is honestly how I found my best
contractors so far it's word-of-mouth
and Yelp it's really that easy
and also people ask me how do I know how
much something should cost and the best
answer is simply by getting multiple
bids from multiple contractors getting
one bid from one contractor doesn't tell
you anything if you're totally
inexperienced you have no idea how much
something cost that's not gonna help you
need to get multiple bids and you'll be
able to see the differences in price and
more people come in about the same and
with this you can usually estimate okay
I think the drywall is gonna cost on
average this painting is going to cost
this you can also break it down by
material whereas let's say you're
painting materials are gonna be $500 and
they're charging you two thousand
dollars well this means they're charging
you fifteen hundred dollars in labor how
many people are gonna be there and how
long is it going to take with this you
can usually determine how much the
contractor is making and how much
they're paying their workers so yeah
there's a little bit of math there
you'll probably have to use your
calculator but the more you end up doing
this the better you get at doing this
and then pretty soon you're able to do
the second hand just by looking at
something and also one last piece of
advice is whatever estimate they give
you just always
at 15 to 20% more on top of that even
with the most honest contractors there
will always be things that crop up that
weren't anticipated you won't want to
change things you won't want to make
things better and upgrade things just
trust me on this one it's always 15 to
20 percent more than what you think it's
actually going to cost
now finally step 10 assuming you've done
all the renovations you're hopefully on
budget is then going to find a tenant my
favorite way to then go and find a
tenant
I love Craigslist I have found
Craigslist is one of the best ways to
get tenants I get a ton of people asking
about my properties it's absolutely free
super easy to post on there and that
believe it or not is how I found the
majority of my tenants I also have a
video of what I do in terms of getting
leads on Craigslist I will link that
video down below in terms of the format
I use and everything on that it's really
easy it's a 20-minute video just
everything is down below in the
description but hopefully at this point
you've been rented the property out by
using my techniques on posting your ads
on Craigslist your positive cash flow
and now you're officially a real estate
investor who's making money every month
and then 15 to 30 years from now your
property's paid off you're ballin you're
living living the dream and and you make
sure you hit the like button so with
that said you guys thank you so much for
watching I really appreciate it if you
guys enjoy videos like this make sure
like I said just to hit the like button
if you watch it all the way through and
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have a link in the description to a
private Facebook group for anybody who's
interested in real estate real estate
investing agent ding wholesaling just
anything real estate the link is in the
description so make sure to add yourself
to that thank you again for watching and
until next time
