Beginner’s Real Estate Investing Guide – Ep. #249

Two big mistakes are: 1) Renting out your former primary residence. 2) Only being invested in one market.

This Beginner’s Real Estate Investing Audio Guide also helps you step-by-step with buying an income property:

Credit Scoring Mortgage Pre-Approval Writing An Offer Inspection Vetting A Property Manager Appraisal Insurance Closing LLCs **The entire audio from this episode is transcribed into words and can be found at the end.**

People set up LLCs for asset protection, anonymity, or tax purposes. But there is a lot of administrative work. Is it even worth setting up?

Your FICO credit score has five ingredients. Down payment, debt-to-income ratio covered.

Mortgage pre-approval is better than pre-qualification.

Select income property in: job-growth economies, high rent in proportion to low purchase price.

Cash flow = Rent Income minus “VIMTUM”.

Why would someone sell you a cash-flowing property?

“Turnkey” defined. Should you make a lowball offer to a turnkey provider?

Also discussed: Negotiation Strategy, Earnest Money, Purchase Contracts, Management Fees, Management Agreements, Mobile Notary, Title Company, Rent-To-Value Ratio, Collecting Cash Flow.


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Complete Audio Transcript:

Welcome to Get Rich Education. I’m your host Keith Weinhold and I’m here to help Beginning Real Estate Investors Today.

The biggest beginner mistakes to avoid, when you make an offer – can you lowball a turnkey provider, and all those buyer steps like LLCs, mortgage pre-approval, inspection, appraisal, and closing. Today, on Get Rich Education.


Welcome to GRE. This is Get Rich Education Episode 249 – and this is your Beginner’s Real Estate Investing Audio Guide. Hi, I’m your host Keith Weinhold.

We’re talking about how to get into long-term buy & hold RE investing – and that’s because it’s the most generationally-proven way to build wealth.

First, let’s talk about a couple of the biggest mistakes that real estate investors make – it’s being invested in only one geographic market. Often, that’s the market that they just happen to live in.

There is more risk with being in only one market than most realize, because you’re now tied to the fortunes or misfortunes of just one area’s economy.

Another substantial, common real estate investor mistake is that they continue to hold onto one – I’ll call it – special – property in their portfolio that they usually need to get rid of – but they have either sentimental ties to it – or they just hold onto it for convenience, and do you know what that property is?

I’m actually talking about a specific property here.

It’s the home that THEY YOU USED TO LIVE IN yourself. Well, what’s wrong with renting out the home that you used to live in yourself?

You might still have the preferable owner-occupied financing locked in on that one – and afterall, that’s a better rate than you could get on a non-owner-occupied rental.

The problem is that the property probably doesn’t perform BEST as a rental.

But you might be clearing, say $500 per month by using your former primary residence as a rental today.

Look, for you, it’s often about the cash flow – and yes, it is about the cash flow.

But there’s something even more important than cash flow – that’s because nearly any property will cash flow if the loan were paid off.

That’s why it’s really more specifically about the rent-to-value ratio of a property.

If you’re renting out the home that you used to live in, and it wasn’t strategically bought as a rental, if your rent-to-value ratio (or RV ratio) is 0.6%, meaning that for every $100K in value it has, you’re only getting $600 of monthly rent income, then you’re losing cash flow dollars every year – and every month.

Look, let’s give a real life example of the .6% RV ratio. Say that you can get $1,800 rent out of that $300K property that you used to live in.

But instead, three $100K homes bought strategically as rentals can have a combined rent income…

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