Official Carleton H. Sheets^® Website

Most investor wannabes want so badly to "flip properties" that they forget on the outset that they are talking about launching a business, a real estate investing business. They simply think and say: "I want to begin buying and selling real estate."

Sounds pretty simple, don't it? Find a run down home, maybe a foreclosure; go through it repairing and painting walls, replace flooring, install new appliances; put it on the market and make $50,000 each time. Yeah, right.

Before you launch into the real estate investment world, first consider how the transaction went with your primary residence. The agent probably took care of many of the minute details, such as lining up contractors for inspection items, helping you with financing and insurance, and even getting the inspector. If you're going to start investing on a regular basis, then you'll want to develop relationships with these professionals yourself and follow these steps to begin your real estate business:

1. Locate financing.
All investing hinges on this first action. If you don't have financing, most likely you won't be investing. You'll want to find a program that will allow you to put as little of your own money into the property as possible. In today's competitive mortgage environment, there are now investor programs that allow five percent down on the investor's part.

Since you may have remodeling or rehab costs, don't forget to look for programs that include money for those activities.
If you can get it, try to get owner financing as this can be the easiest way to get into a property. The owner holds onto the note until you've completed your rehabilitiation of the house. You can try to get the owner to take just interest-only payments until you sell, then pay them the balance once the property is sold. There are plenty of other ways to finance an investment property, so talk with several mortgage providers to find out your options. Even if you purchase with "No Down Payment" you still need...$$$$$

2. Set up a limited liability corporation. This protects you from any accidents that may happen during the refurbishing process. If someone gets hurt on your property, they could sue you -- the LLC purports to protect your personal property.

3. Find a real estate agent who knows the marketplace you're interested in to find the properties.

4 Line up your contractors. Unless you're going to do it yourself, then you have to ask the following questions:

The LLC only protects you if:

1. It's set up properly;

2. You do not do the renovation work. If you do, then you must be an employee of the LLC (with negative tax implications...) otherwise you are personally liable for your work, and a good lawyer can pursue you as part of a claim against the property (which defeats much of the benefit of an LLC, unfortunately).

Useful mitigation is having good insurance that kicks-in in the event of you being sued (a so-called personal liability umbrella insurance, for example). It's only a mitigation, not a cure.

WiZ

GREAT information for the new investor, like myself.

Thanks and all the best for your future!