Chapter 2 & 3

1. Chapter 2 & 3 • Give yourself plenty of time • You should plan on at least one full year from the time you decide to get into real estate investing and when you close on your first property. • Clean up your personal finances. • Get your household expenses under control, payoff your credit cards and save some money. • Try to keep the basic payment called “PITI” to 25% or less of your before tax income, including the rental income. • Determine your focus: apartments, homes, shopping centers, land developer. • Then learn as much as you can about that business. • Get a network of real-estate professionals: lenders, broker, lawyer, an accountant, and contractor • Avoid get rich quick schemes. • Look for someone that practices what they preach and ask them questions

2. 3 Important questions • If you can’t answer all of them yes don’t buy the property • “Is buying this property the best use of my money?” • Is it going to make more money then a 5% treasury bond? • Calculate the cost/return on renovations. You don't want to end up making the home nicer than it can pay to be. • “Will this property pay for itself?” • An investment doesn’t cost you more every month. They are suppose to make you money. The doomed investor tells himself that they can carry the negative on the property for a while, until he can raise rents or sell for a profit later is a formula for failure • Focus on cash flows & don’t be afraid to walk away if the deal doesn’t beat your IRR (Internal Rate of Return). Don’t let your emotions effect your purchase • “Can I increase the value of this property?” • Check community conditions to see what could happen in the area (large company layoffs) • Imagine what it could be, be realistic. can you make this property more profitable with the existing space? • Be creative and give your tenants some worth paying for before you raise rents • Cash flow is how you determine profitability. Real estate professionals define cash flow as the money that remains after paying the operating expenses and the mortgage of an income producing real estate.