Let’s get right into it, and start with the basics. The first step is to determine what part of the business appeals to you, and also what part of the business you can get into at this moment based on your circumstances. Let’s start by reviewing a couple of options for those of you that have very little money to start with, or even no money. Later, we will discuss options for those of you with money to invest.

Getting Started with no Money

There are a few ways to get your foot in the door in the real estate business without actually having your own investment funds. The quickest and easiest way into the business is to become a “birddog” for investors. This simply means you find the deals, they buy them. You can earn a fee from bringing them what they are looking for. I recommend looking in the phone book, on the internet, and watching for signs that belong to an investor. Call these people and tell them what you are looking to do. Ask them exactly what they are looking for, and ask if they will work with you if you bring them a great deal. Nine times out of ten, they will say yes, and give you a good idea of what their investment formula is. Pay close attention, even if they don’t buy a property you bring them, you have just gained valuable knowledge about what local investors are looking for! Be sure to get something in writing regarding your payment, before you give them all the details of the deal!

Another way to start with little or no money is wholesaling. I don’t recommend this if you are a complete novice. Most wholesalers have this strategy: Tie up the property with a contract, find a buyer that will pay more than your contract, and you make the difference when it closes. Be sure your contract has an out in case your buyer does not close. If you have no money, you don’t want to have the seller try to force you to close on the property.

The third no money technique, and the way I broke into the business, is to create a partnership with someone that has money, but not the time to search for a property and put the deal together. Again, this is not for a complete beginner, you need to know the basics to ensure you actually profit from the deal! Form a “LLC” with the partner, and use that to hold the property you have chosen to purchase. Be sure to treat it as a business. Everything to do with the business is to be kept separate from your personal funds. If you are getting paid for anything, write an invoice, and “submit” it to the business. Keep good records, you will need these for tax time!

Investing With Your Money

OK, I realize there are still people out there that have money, and many investment books leave you out! Let’s look at a few options for you to get started.

First, you need to build a solid team. There are a lot of people that will work for you, for FREE! Truthfully, it’s not actually for free, but a lot of this business is based on commissions, so it is not costing you anything to have people working for you. In fact they are getting paid when they bring you a deal that will make you money. So you need to build a solid team. I recommend having a real estate agent on your team. They have access to bank owned foreclosure listings, and are your best bet to gain access to these properties. Foreclosures and REO’s are at an all time high right now, so it would be foolish to miss this opportunity.

Second, find a good “birddog”. Read above for details on that term. Find a young aggressive person that is really looking to make it in the investing business. Please be sure if they bring you a great deal that you actually close on it! Most people starting in the bird-dogging business don’t have money. Help them out, and they will be loyal to you. This is how you get the best of the best. They have the time, you have the money. It is a win – win relationship.

The next person to add is a banker. You may have money, but the more of your own money you can keep, the better. I suggest getting in with a local bank or credit union early on. As you move on to more deals, they will be comfortable continuing to lend to you. Be sure to speak with residential and commercial lenders to find who may be the best fit for your personal investing strategy.

Conclusion

This article barely touches the surface of getting started in the real estate and foreclosure investing business. Proceed with caution, double check all your numbers, and be extra conservative. Pass up a deal if it is not what you expected. Don’t get emotionally involved, remember that every property is just numbers in your spreadsheet! With that said, get excited, and go flip some houses. -Justin Razmus

Investment decisions should be made within a clearly defined Investment Plan. Investing is a goal-orientated activity that should include considerations of time, risk-tolerance, and future income… think about where you are going before you start moving in what may be the wrong direction. A well thought out plan will not need frequent adjustments. A well-managed plan will not be susceptible to the addition of trendy, speculations.

The distinction between Asset Allocation and Diversification is often clouded. Asset Allocation is the planned division of the portfolio between Equity and Income securities. Diversification is a risk minimization strategy used to assure that the size of individual portfolio positions does not become excessive in terms of various measurements. Neither are “hedges” against anything or Market Timing devices. Neither can be done with Mutual Funds or within a single Mutual Fund. Both are handled most easily using Cost Basis analysis as defined in the Working Capital Model.

Investors become bored with their Plan too quickly, change direction too frequently, and make drastic rather than gradual adjustments. Although investing is always referred to as “long term”, it is rarely dealt with as such by investors who would be hard pressed to explain simple peak-to-peak analysis. Short-term Market Value movements are routinely compared with various un-portfolio related indices and averages to evaluate performance. There is no index that compares with your portfolio, and calendar divisions have no relationship whatever to market or interest rate cycles.

Investors tend to fall in love with securities that rise in price and forget to take profits, particularly when the company was once their employer. It’s alarming how often accounting and other professionals refuse to fix these single-issue portfolios. Aside from the love issue, this becomes an unwilling-to-pay-the-taxes problem that often brings the unrealized gain to the Schedule D as a realized loss. Diversification rules, like Mother Nature, must not be messed with.

Investors often overdose on information, causing a constant state of “analysis paralysis”. Such investors are likely to be confused and tend to become hindsightful and indecisive. Neither portends well for the portfolio. Compounding this issue is the inability to distinguish between research and sales materials… quite often the same document. A somewhat narrow focus on information that supports a logical and well-documented investment strategy will be more productive in the long run. But do avoid future predictors.

Investors are constantly in search of a short cut or gimmick that will provide instant success with minimum effort. Consequently, they initiate a feeding frenzy for every new, product and service that the Institutions produce. Their portfolios become a hodgepodge of Mutual Funds, iShares, Index Funds, Partnerships, Penny Stocks, Hedge Funds, Funds of Funds, Commodities, Options, etc. This obsession with Product underlines how Wall Street has made it impossible for financial professionals to survive without them. Remember: Consumers buy products; Investors select securities.

Investors just don’t understand the nature of Interest Rate Sensitive Securities and can’t deal appropriately with changes in Market Value… in either direction. Operationally, the income portion of a portfolio must be looked at separately from the growth portion. A simple assessment of bottom line Market Value for structural and/or directional decision-making is one of the most far-reaching errors that investors make. Fixed Income must not connote Fixed Value and most investors rarely experience the full benefit of this portion of their portfolio.

Many investors either ignore or discount the cyclical nature of the investment markets and wind up buying the most popular securities/sectors/funds at their highest ever prices. Illogically, they interpret a current trend in such areas as a new dynamic and tend to overdo their involvement. At the same time, they quickly abandon whatever their previous hot spot happened to be, not realizing that they are creating a Buy High, Sell Low cycle all their own.

Many investment errors will involve some form of unrealistic time horizon, or Apples to Oranges form of performance comparison. Somehow, somewhere, the get rich slowly path to investment success has become overgrown and abandoned. Successful portfolio development is rarely a straight up arrow and comparisons with dissimilar products, commodities, or strategies simply produce detours that speed progress away from original portfolio goals.

The “cheaper is better” mentality weakens decision making capabilities and leads investors to dangerous assumptions and short cuts that only appear to be effective. Do discount brokers seek “best execution”? Can new issue preferred stocks be purchased without cost? Is a no load fund a freebie? Is a WRAP Account individually managed? When cheap is an investor’s primary concern, what he gets will generally be worth the price.

Compounding the problems that investors have managing their investment portfolios is the sideshowesque sensationalism that the media brings to the process. Investing has become a competitive event for service providers and investors alike. This development alone will lead many of you to the self-destructive decision making errors that are described above. Investing is a personal project where individual/family goals and objectives must dictate portfolio structure, management strategy, and performance evaluation techniques. Is it difficult to manage a portfolio in an environment that encourages instant gratification, supports all forms of “uncaveated” speculation, and that rewards short term and shortsighted reports, reactions, and achievements?

Yup, it sure is.

Investment decisions should be made within a clearly defined Investment Plan. Investing is a goal-orientated activity that should include considerations of time, risk-tolerance, and future income… think about where you are going before you start moving in what may be the wrong direction. A well thought out plan will not need frequent adjustments. A well-managed plan will not be susceptible to the addition of trendy, speculations.

The distinction between Asset Allocation and Diversification is often clouded. Asset Allocation is the planned division of the portfolio between Equity and Income securities. Diversification is a risk minimization strategy used to assure that the size of individual portfolio positions does not become excessive in terms of various measurements. Neither are “hedges” against anything or Market Timing devices. Neither can be done with Mutual Funds or within a single Mutual Fund. Both are handled most easily using Cost Basis analysis as defined in the Working Capital Model.

Investors become bored with their Plan too quickly, change direction too frequently, and make drastic rather than gradual adjustments. Although investing is always referred to as “long term”, it is rarely dealt with as such by investors who would be hard pressed to explain simple peak-to-peak analysis. Short-term Market Value movements are routinely compared with various un-portfolio related indices and averages to evaluate performance. There is no index that compares with your portfolio, and calendar divisions have no relationship whatever to market or interest rate cycles.

Investors tend to fall in love with securities that rise in price and forget to take profits, particularly when the company was once their employer. It’s alarming how often accounting and other professionals refuse to fix these single-issue portfolios. Aside from the love issue, this becomes an unwilling-to-pay-the-taxes problem that often brings the unrealized gain to the Schedule D as a realized loss. Diversification rules, like Mother Nature, must not be messed with.

Investors often overdose on information, causing a constant state of “analysis paralysis”. Such investors are likely to be confused and tend to become hindsightful and indecisive. Neither portends well for the portfolio. Compounding this issue is the inability to distinguish between research and sales materials… quite often the same document. A somewhat narrow focus on information that supports a logical and well-documented investment strategy will be more productive in the long run. But do avoid future predictors.

Investors are constantly in search of a short cut or gimmick that will provide instant success with minimum effort. Consequently, they initiate a feeding frenzy for every new, product and service that the Institutions produce. Their portfolios become a hodgepodge of Mutual Funds, iShares, Index Funds, Partnerships, Penny Stocks, Hedge Funds, Funds of Funds, Commodities, Options, etc. This obsession with Product underlines how Wall Street has made it impossible for financial professionals to survive without them. Remember: Consumers buy products; Investors select securities.

Investors just don’t understand the nature of Interest Rate Sensitive Securities and can’t deal appropriately with changes in Market Value… in either direction. Operationally, the income portion of a portfolio must be looked at separately from the growth portion. A simple assessment of bottom line Market Value for structural and/or directional decision-making is one of the most far-reaching errors that investors make. Fixed Income must not connote Fixed Value and most investors rarely experience the full benefit of this portion of their portfolio.

Many investors either ignore or discount the cyclical nature of the investment markets and wind up buying the most popular securities/sectors/funds at their highest ever prices. Illogically, they interpret a current trend in such areas as a new dynamic and tend to overdo their involvement. At the same time, they quickly abandon whatever their previous hot spot happened to be, not realizing that they are creating a Buy High, Sell Low cycle all their own.

Many investment errors will involve some form of unrealistic time horizon, or Apples to Oranges form of performance comparison. Somehow, somewhere, the get rich slowly path to investment success has become overgrown and abandoned. Successful portfolio development is rarely a straight up arrow and comparisons with dissimilar products, commodities, or strategies simply produce detours that speed progress away from original portfolio goals.

The “cheaper is better” mentality weakens decision making capabilities and leads investors to dangerous assumptions and short cuts that only appear to be effective. Do discount brokers seek “best execution”? Can new issue preferred stocks be purchased without cost? Is a no load fund a freebie? Is a WRAP Account individually managed? When cheap is an investor’s primary concern, what he gets will generally be worth the price.

Compounding the problems that investors have managing their investment portfolios is the sideshowesque sensationalism that the media brings to the process. Investing has become a competitive event for service providers and investors alike. This development alone will lead many of you to the self-destructive decision making errors that are described above. Investing is a personal project where individual/family goals and objectives must dictate portfolio structure, management strategy, and performance evaluation techniques. Is it difficult to manage a portfolio in an environment that encourages instant gratification, supports all forms of “uncaveated” speculation, and that rewards short term and shortsighted reports, reactions, and achievements?

Yup, it sure is.

An IPO i.e. Initial Public Offering is offered by a private company to the public. It is the first sale of stock. Generally offered by smaller, younger companies who need funds to establish themselves but at time there are established companies offering IPO’s for new processes or additional cash inputs. Companies usually take the help of investment banks to go public, which in turn “underwrites” the process. Which in reality is nothing is but the authority to investment banks to raise the capital from the public on behalf of the companies that are issuing the securities.

Than there are “Hot IPO’s” are the IPO’s which rises dramatically above the offered price on the very first day itself.  Seasoned investors buy them just to flip them for getting a much higher profit. Generally the stocks are not available at the offered prices to the average investor and if the average investor gets an stock offering than that is generally the one you don’t want. Whereas investing in a brand new stock always has some risk attached with it. You might get lucky and get some money by flipping but you can’t see a profit from it in the long run.

Experts and researchers say that IPO shares generally perform mush worse than shares of seasoned companies in the first three years and in fact have negative returns.  Some experts even say that one-third of the companies go down over 50% to their opening prices and only one-fifth of the companies had really doubled their offering price. This data was achieved from the companies who became public from 1989 to 2000.

We could never ignore the fact that people have made money from IPO’s, for example remember Google. But for starters you should try to get the shares early and as close to the original offering price as possible. It is going to be much better if you have ties with the underwriter, as that could win you allocations. Then sell it early I.e. just before the decline of shares start. As for every winner, there must be some losers who buy the shares at the wrong time.

Finally opportunities do exist in here but it should never be considered as easy money. To be successful in IPO investment you must have a giant degree of skepticism, some strategic planning, a bit of far sightedness and should never be thought of as a short-cut to riches. So go have happy IPO investing period guys.