Jeana posted a few questions for me so I thought I'd answer for everyone.  Here's her question:

I was wondering how you got your start in real estate? Is it hard? You see all those advertisements for courses and such, but it seems like they are just another scam. I'd love to hear how you got started and how your portfolio has progressed!

There are scams everywhere in life, especially on the internet!  Real estate investing is not for the timid nor the disorganized.  It takes research to really learn about it like anything else in life.  There are no easy shortcuts unless you've got a bundle of cash and someone to manage everything for you.  I got into it by chance as many people do.  I had no idea what I was getting into when I purchased my first property.  Don't get me wrong, I'm very glad I did it but ... lions, and tigers, and bears ... oh my!

The short story is this: the apartment building I was renting a unit in went up for sale.  I'd been renting there for seven years and the former owners were ready to unload their cash cow vacuum.  The place needed lots of repairs that were obvious and some, not so obvious, that were pointed out by the local borough code enforcement folks.  There are many more requirements that must be met for rental property.  And, you know, it's not just code enforcement that has a concern with them -- it's also your lender.  One lawsuit can bankrupt you.  No money ... no loan payments.

It went up for sale back in 1999 and I purchased it with a regular lender using a straight 30-year mortgage.  It was my first house and I figured I could break even with the apartment that was rented.  I had saved up quite a bit and was making a decent salary so I started the repair list.  A long, long ... list of *must fix* stuff ... and some *wouldn't that be nice?* stuff. 

It took me several years to renovate and tens of thousands of moolah (it's a huge Victorian in a desirable rental area- LOCATION LOCATION LOCATION).  I renovated the third floor and added a fire escape so I could rent out the vacant third unit.  All the while, I lived there and saved as much as I possibly could in between writing out checks for taxes, utilities, and repairs.  I finally bought my own house in late 2002 and began renting out all three units.  So, it was a slow process as I worked my way through my plan.  It's so key to have a plan.  And money.

The real lessons came when I bought my first landlording book and, quite frankly, this one probably saved me more headaches than any book I've bought on the subject since then.  It's titled "LANDLORDING: A Handmanual for Scrupulous Landlords and Landladies Who Do it Themselves."   Start there.  When you catch your breath after imagining everything that can possibly go wrong in landlording (and that's the abridged version), buy yourself a good state specific law book.  Find out what your state allows. 

Sometimes, landlording keeps me up at night.  I can't lie.  If I start imagining ever conceivable thing that could go wrong, I'd be in the local looney bin.  The key, and I can't stress this enough, is to insulate yourself from some things with personal liability insurance and SCREEN SCREEN SCREEN tenants.  This is your property and your income.  Once they're in, they're HARD to get out!

Don't mess with family, friends, or other "gee it would be so great to rent from you" types that can't pass a credit check.  If someone comes across as the "dream tenant" because they're willing to shovel snow, cut the grass, balance your checkbook, and command the corner ... RUN ... don't walk away from them.  They either have lousy credit or are in a lousy situation.  Red flags in tenant screening are learned tricks.  Once burned, you never forget.  And don't forget to learn from others who have suffered the skin charring in your place -- learn from other landlords via bulletin boards and message boards.  MRLANDLORD.COM is a good place to start.  Join a local landlording group -- they're everywhere and can provide sample leases, advice, and investment opportunities.

Taxes.  Ahhhhh .... taxes.  I am not an accountant nor a bookkeeper.  I do not understand what depreciation goes with which assets.  I do not immerse myself for months on end in the new tax laws that are written each year.  I found a decent CPA to do all of that.  It still costs me a few hundred to have them do the taxes each year.  Depreciation of assets and direct write-offs are a great side benefit to owning property.  Plus ... you earn equity in the property as you improve it and pay off the loan.  You can leverage that money to buy other properties.  I haven't, as of yet.  Keep IMMACULATE records.  Buy a ledger and record every receipt. 

You need a good, strong lease for your outstanding tenants to adhere to.  You need to sit down with them and splain it all, Lucy.  You need to do a walk through of the unit before they move it to note any problems with the unit so when they move out (assuming they've been outstanding tenants) they can get their deposit back.  You need to check the apartment every so often to make sure it hasn't become a hell hole festering with rotten food and cigarette burns.  If you've done a good job of screening, this shouldn't be a huge problem but it's still a good idea to do a walk through every so often.  Beg them to call you if the littlest thing (like a constantly running toilet that can add hundreds to your water bill) isn't working. 

Hopefully, this answers some of your questions, Jeana.  It's not a cash cow in the short run - this landlording thing - but, if you play your cards right, you can establish some great equity and continue buying properties with it.  When I retire in 20 years, I'll have some well-maintained properties with good rental records to sell that are mostly paid off.  That's a nice thought in these days of no defined benefit pensions and questionable stock markets.  The markets, over time, pay about 8% by the way.  Real estate really depends on the market and the interest rates but it's usually (if you buy at the right price and get a good interest rate) a fantastic investment that increases over time.  Housing prices rarely go down although I suspect that the bubble is about to burst in some over valued markets.  Pittsburgh ain't one of them.  Sometimes it's nice to live in a really stable town where nothing much ever happens.  *wink*

Oh ... and one final thought -- the investment property market is not an emotional market, meaning the price is established with hard numbers.  Investors look at the annual rents and multiply those by a market factor to establish the offer price or they look at the rents minus expenses for income and express their offer on that.  So you can't really look at what houses are selling for in a neighborhood to figure out how much to offer.  It's totally based on forecasted cash generation.

If anyone else has any other burning questions, I'll be glad to answer them as best I can.  Thanks for reading.

Cheers!