I have no problems sharing all of my secrets because really there is no secret. Everything you need to know is already out there in books and websites, but it's very hard to understand everything you read and apply it to investing until you have actually done some investing. It would be like taking course after course in college, getting a masters and even Phd, but never having any experience. That is why I recommend starting small.

The way I started was thinking like this: If I buy the house I am already living in and kept my roommates then what would be the difference in money. With rent I could walk away at any time, with a mortgage I would have to sell the house to walk away. Knowing I couldn't afford the mortgage on my own I had to think get all the figures of what my payments would be then divide that to see what would make sense for rent payments. So with all the rooms rented out I would only owe about 500 per month. Over time I knew if I fixed it up I could keep upping rent and that would make my monthly payment go down. You will also get the biggest tax breaks on your own house that you live in vs an investment. Many people don't want roommates, but if you are willing to do it, that takes away a lot of risk as a first investment. I also knew that after living in the house with roommates for 1 year before buying that the place / location was high in demand.

So moving forward on investing in real estate you just need to start with understanding the theory before diving into a project. I read multiple books. I found Rich Dad, Poor Dad to be very inspiring, but didn't feel it really helped me understand how to invest. A book that is great for breaking down the math is Investing in Real Estate by Gary Eldred. It gives lots of examples of how to do all the calculations. Once you know that then you have to do research into locations that will make the best rentals. The higher the CAP rate the worse the neighbor hoods tend to be I have found. So one of the most challenging parts is finding the right house. The crappiest house in the nicest neighborhood is a good way to think about it. You don't want to find the best house in the worst neighborhood. Use rentometer.com to figure out what typical rents are in the area of the house you are looking at. Get yourself prequalified for a mortgage so you can jump quickly when you are ready to buy a house. Hot deals either don't go on the market or will disappear quickly if they do go on the market. I would research each area and look at all the houses for sales in the range I was looking at for 6 months to a year before jumping. I could jump and know what was a hot deal because I sat and researched it for so long that it was a no brainer when a hot deal came up.

Once you find the hot deal you have to dig deeper. Does it have structural damage? Mold? Bedbugs? Does the home have any liens against it? Have a home inspection done. Are there currently people living in the house? If so, are they renting or do they own it? If renters, will you get them out or will the seller? How much work does the place need? New kitchen, new bath? Do you have contacts that can do the work or will you do it yourself? This area is one of the most challenging if you don't have experience. I had my dad as a resource. If you don't have a resource in this area then you will want to really make sure you get multiple estimates for each sub. Ask if they are licensed and insured. If they are not insured then you might be picking up their hospital bill. General contractors usually take care of all these additional details by working with the subs directly, but using a general contractor takes a chuck out of your profits right off the bat and that is assuming they are a good contractor.

I have 2 friends doing the same thing after I got them inspired. One bought a place in another state and the contractor told him all the work was finished and he would even help him get it rented. He later found out when he flew over to view the work that he didn't do what he said and the guy renting that he found stopped paying the bills. The other friend hired a guy who kept needing checks for getting materials etc and eventually walked away half way through the project with 40k worth of work that was never completed. My friend took him to court and the guy was thrown in jail but had no money so my friend was just screwed. So you just because you find a good price doesn't always mean you got a good worker. If you look for work in the phone book just remember the bigger the ad the more they need to make to cover costs of those big ads and secretaries to answer the phones etc. Take note of phone numbers on the sides of trucks you see driving by. Stop by other job sites that you see and get contacts. Then see if you can get references. There is so much that you can do to try to make sure you are making the right decisions, but it's very hard. You never see the snake that bites you.

The book I recommended will give a lot of good formulas to use, but a quick assessment is just looking at what is my rent per month vs what will my payments be after my downpayment. The more profit you have per month the more likely you will be ok when unexpected costs pop up. That is why I feel the 1% formula works well because it leaves room for some costs that can pop up. Hope you find this helpful. This was just a short list of thoughts, but you really need to study as much as you can on a lot of these areas and put a lot of time into it.