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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

you're not already subscribed just make

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on snapchat and Instagram and finally I

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