The first step in real estate investing

A question from Yahoo! Answers:

What’s the first step in investing in real estate?

I’ve read alot of book and right now a bit lost on where to start. Do I look for financing or house first as an investment property? mobile home, single or multi family? Do I need to build a team/network to work with me?

The first step is to look at the relationship between prices, rents, and interest rates. Take the rent and multiply it times 12; this will give you your annual rental income. Then take this income and divide it by purchase price; this will be your property’s annual yield. Now compare this yield to the interest rate that you are likely to get on financing; the yield should be SUBSTANTIALLY higher than the interest rate (your simple yield calculation ignores vacancy, maintenance, and fluctuation of rent over time).

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