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Alright friends, so, I know you're new to real estate investing and the biggest
thing that's on most of your minds is, "How do i best prepare to buy my very
first real estate investment property?"
Hey friends, Stephen Michael Miller here and you've got questions, we've got
answers. So, i'm going to jump right in here. I've got a question here from Eric and
Eric said, "Do I need a full-time job to get started in real estate investing?" And
the answer is, it depends. You don't necessarily need a full-time job to get
started investing but you do need income and you do need "know-how" in some way
shape or form. Whether that's from you or from a partner, we'll discuss some of
that as well. But I want to talk about how to prepare to really buy a property.
So, hopefully I'll answer a lot of your questions here Eric in and as I go
through how to prepare to buy real estate. Now, I know we also had some
comments from Tahoe, he, Tahoe Tuck or Touche, something like that. Alright, so, we
got a comment from you and you were asking, "Hey, you know, what if I put $3500
down, what if I put $10,000 down on a property?
What do I need in terms of credit?" You know, you're just looking for some more
information. I thought these kind of two went together so, we decided to kind of
sandwich them in in this one video and give you a good response. So, first of all,
I want to talk about what you need to do to prepare. Now, couple of things and the
very first thing is, in order to do real estate on your own, you're going to need
money, right? You can't do real estate on your own without money. Now, I know we
often talk about doing real estate with no money, no credit, all those things but
when you're doing real estate with no money and no credit,
what we're referencing is none of your own money and credit and using
partnering as that ability to bring those assets into your world, right? So,
I'm talking about right now, doing moneys...Are... Doing real estate just on your own,
you need, you do need money, you need credit of some sort as well. I would say,
networking or relationships that's another
big thing that you need to focus on and education is also huge. So, let's start
with money. How much money do you need to be able to buy a property? Well, if you're
buying a single-family residence, right? Just a single-family home and you're
buying it as a primary residence, then you need less than you would need for an
investment property. For a primary residence, you're looking at typically
somewhere between a 3 to 5% down payment. Now depending on
where you live and what your average purchase price of the home is, that will
fluctuate a little bit. But you're typically right in a 3 to 5%
range that you need as a down payment for that property. If you're
buying an investment property then you're looking at a very typical 20%
down payment. So, again, in your area, look at the homes that are in your area. What
the me... The the median home price is. We like to buy a little bit below the
median home price and then do the math and determine what that would look like.
What would that down payment look like for a home that you're buying as a
primary residence and what would that look like as a home that you're buying
as an investment property. The second thing that you need is credit. Okay, credit
is really important if you're looking to get loans from a bank. Now, if you're not
looking to get a loan, if you have the cash and you're just going to buy the home
outright with no loan, no mortgage, then you can do that. But if you are looking
to get a mortgage, then credit score is one thing that they really are big on.
They look at that really, really, heavily. And for a primary residence loan, you
typically need a 620 or higher. There are some different government programs that
may be able to allow you to dip below that 620 mark but 620 is very, very
typical. If you have a 620 or higher you can qualify for a loan with with most
banks and lending institutions. If you're looking for a... That's for a primary
residence loan. If you're looking to do an investment property, you're typically
looking at somewhere between a 680 or higher,
right? So, 680 on up into the 700 and higher, you can then qualify for a
investment purchase mortgage. So, you need credits. So again, we've gone over money,
we've gone over credit and I want talk about education now here for just a
moment. Education is extremely important. Knowing what you're going
into is really really important. I know it happens all too often where people
jump into real estate, they get the first loan that they come across, you know, they
buy the first home that they see because they're not... They aren't really educated
and what to look for. And oftentimes that puts them behind the eight-ball,
right? There they're kind of stuck in a situation that they don't want to be in.
So, as you're preparing to buy, the more education that you can get, the better
you're going to be. Education, knowledge, truly is the foundational parts of power,
right? I don't like to say that knowledge is power because it's not the knowledge
alone but implementing that knowledge. But you do have to have that foundation
in education, that foundation of knowledge before you get out there and
start doing things, right? This is a ready-aim-fire not a ready-fire -aim, right? You
want... You want to make sure that you have some information before you just jump in.
And sometimes you can get that education from mentors, sometimes you can get that
from a course, sometimes you can get it even from school and some from
different places. But make sure that you do have some that education. Another
thing that I mentioned is before you, you know, as you're preparing to buy, and for
someone of you, for some of you that may be in college right now or maybe you're
even pre college right now or maybe you're out of college, I mean,
wherever you are, networking or your relationships is some of the most
important capital you can have. You know we talked about other people's money and
and you know your your financial capital but relationship capital is so important.
The reason why I say that is because as you're preparing to buy properties and
as you start getting into the binding game at some point, you're going to get
outside of your own assets and resources, right? You're going to use up all of your
money and you're going to use up all of your credit. This is where relationship
capital comes into play. Because if you want to continue to build a portfolio
outside of your own resources, then you're going to need to tap into other
people, other relationships and that means that you've hopefully been
networking for years and years and years even meeting people. If you're in school
right now, use school, get good grades and do all your work and do all that as well.
But use it for networking. I mean get after it, join clubs, meet people, get to
know them, what their needs are, serve them.
The more you can do that now, earlier on in life, the more it's going to pay off for
you later on in life as well. And when you're going to find partners, when
you're going to expand and grow your portfolio, there will be a lot of people
that will want to work with you because of the person that you've been and the
relationships that you've created with them. So, that is a huge one. Now, another
part of this question was, "What if I have $3,500 to put down
on a home or what if I've got even $10,000 or more to put down on
a home, how does that help me as I am preparing to purchase?" Well again,
depending on whether you want to buy this home as a primary residence or as
an investment purchase is going to determine the amount of money that
you're going to need. Now, just because you know, maybe are going to buy a
primary residence, you may want to put more money down. The more you put down.
typically, the less your monthly payment is going to be because you're having to
get less of a loan, right? Sometimes the more money you put down, also enables you
to buy a cheaper rate. Sometimes you can buy a cheaper interest rate with more
money. I will say this as well, the higher your credit is as well... The higher your
credit score is, the lower your interest rates often are as well. So, those are
correlated. So, as you're preparing, the better your credit can be, the better
you're going to be. The more money you can save, of course, the better you're going to
be. And the greater the relationships that you can forge, the better off you're
going to be. Whether you've got a full time job or you've got a 1099 contract job or
you know you own your own business, none of that really matters, per se, as long as
you're keeping proper records and your, you know, paying taxes. If you're doing
those things, then qualifying shouldn't be a problem. One of the things that you
want to know... You're going to need to know to prepare to buy a home, is that most
banks are also looking for a credit history. And credit history, not just a
credit score in and of itself because you can have a 700 credit score but have
a very short, short history of credit. So, they are looking for a good credit
history that typically means that they want you to have a revolving line of
credit of some sort. Maybe you bought a car at some point and you're paying that
down. They're also oftentimes looking for multiple credit cards at least two,
sometimes three is good. But at least two different credit cards.
And those are things that you can do in establish credit, to establish credit now.
So, gain that credit history. If you... If you take all those different things that
we've listed off right now and and you make sure that you're hitting all those
different points, you'll be much better prepared to purchase a home in the
future. Hey, thanks for watching. Stick around, watch some more, click around.
We've got lots of great videos to teach you, so much more in real estate. And if
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