Most entrepreneurs have considered investing in real estate at one time or another. Some jump in and actually make a business out of real estate investing. Most of the rest of us do not. Most of the rest of us do not go past the research in the newspaper or, at most, visiting properties. Why is that?

After reviewing the responses of many different entrepreneurs from different walks of life, the conclusion to be drawn was initial investment. I am speaking of the total initial investment package which includes time, money, resources, and education. Most entrepreneurs have their hands full as it is with growing their main business and increasing their positive cash flows. They do not want to make the commitments it would take to make their real estate endeavors successful as well. So why not treat real estate like you do your own business?

In the beginning you may have looked at going into business and doing it all yourself. That is until you realized that you could not grow all by yourself and you were forced to build a team and delegate. (If you knew that before starting your first business, my hat is off to you.) Apply that same principle to real estate investing. Build a team and delegate.

However, I am suggesting you build a team with other entrepreneurs like yourself. Others who are interested in investing in real estate but do not want to make the commitment required to build successful real estate investments on their own. Currently the United States, as of this writing, is a buyer’s market with many foreclosures and real estate bargains. You can literally pick up land and buildings for pennies on the dollar. But, the flip side to that coin is that lenders are not considering the type of ‘creative’ financing that is suggested in many books. Especially now, they want stronger financial statements, more collateral, personal guarantees from everyone, etc.

So what do you do? I will give you the simplified version. If you want a more detailed and in depth description, contact me. As mentioned before, find yourself a group of entrepreneurs with similar real estate interests. They should not be hard to find. More likely than not, you already know everyone you need to get started. Next you need to create a legal entity. Talk with your tax and legal professional for the best choice according to your wants and needs. Most opt for the Limited Liability Company as their legal structure of choice. It is low cost, easy to govern, and easy to maintain. 

**Note – pay close attention to your governing documentation so that you have checks and balances in place to allow for automatic governing of the entity in order to help all investors maintain honesty when money is injected into the deal. Ensure everyone is given an equal say and, if needed, make it so that everyone has to sign in order to expense any company funds.** 

After you have your entity and have done all the requisite tasks to make it operational (founding paperwork, FEIN, etc), next you need to fund it. Fund your initial real estate investment entity equally. Pick a financial institution and make your initial monetary investment. For further example, let’s assume you have 10 investors and that you each invested $5,000. This grants you a total of $50,000 worth of investment capital.

Next, decide what type of return you want and the type of real estate you want to invest in. For your type of return, do you want monthly passive cash flow or are you seeking capital gains? Regarding the type of real estate, do you want residential or commercial? Open land or developed? Multi-family or single family? Storage or office space? Once you, as an entity, decide on the type of return sought and the type of real estate wanted, it is time to look for your first piece of property. With foreclosures, courthouse step auctions, over extended spec home builders, and individuals who have more than they can afford, there is plenty to choose from. Research the possibles that fit into your entity’s investment parameters and get started.

What you do next is completely dependent upon what type of return you sought and the type of real estate your entity decided to purchase. However, the point is that you did it with minimal risk and maximum resources. You invested minimal time, money, and additional educational expense and gained an intelligent professional team to assist you in managing your first real estate investment.

This entry was posted on Tuesday, April 14th, 2009 at 9:03 am and is filed under Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.