ForeclosuresMass - ForeclosuresMass Monthly - Feature Article - How to Become Financially Literate - Without Getting a Degree in Finance (May 2007)

Are you thinking of investing in real estate but you haven't taken that first step because you don't "understand money"? Or maybe you've never been "good with numbers" and since real estate is a numbers game, you think you'll never be able to make those great deals.

The truth is, if you can do simple math, you can become financially literate. All it takes is patience, curiosity, and the drive to continually learn new things.

What follows are my seven tips for becoming knowledgeable in real estate finance and investing.

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Are you a line manager responsible for a product or department? Or maybe you're an administrative assistant in a small office. Whatever your job, look for ways to work with numbers.

This could mean learning how to read financial statements or taking on bookkeeping or accounting functions.

For years I worked in retail and was promoted to store manager quickly enough that I had no knowledge of how to read financial statements. Although I had zilch in the way of a financial background, I was responsible for results on the Profit and Loss (P&L) statement, so I had to learn quickly.

Because I wanted to advance in my career, I ended up taking a basic accounting course and learning what those numbers meant.

I got started in real estate by watching Calton Sheets - the original late night infomercial guru - and buying one of his courses. After listening to it, I decided no one could buy houses for no money down or at 50 - 60% of value. (Boy, was I wrong!)

However, I did want to invest in real estate, so I started to read books. One of my favorites is Real Estate Investments and How to Make Them by Milt Tanzer. In it he talks about the ways of making money: appreciation, depreciation, cash flow, equity, and leverage. Once I read his book, the light bulb went on and I began to see real estate investing in a different light.

While reading the books on real estate, I found myself gravitating toward those on income producing properties such as multi-families.

I bought my first multi-family at "full price" in 1998 - when no one was buying them. By this time, however, I had learned a few things, such as how to "run the numbers."

So even though "no one" was buying multi-families, the numbers looked great to me. I couldn't believe everyone wasn't snapping them up!

Of course, if you had seen my first property, you would have thought I was crazy. My agent did. It was the worst dump on the planet! But, it was only $66K. I fixed it up using inexpensive labor, rented it out, and sold it three years later for a profit.

Real estate investing is risky and yes, it can keep you up at night, especially when a deal is going south or you run into unexpected problems. But you can't let fear of making mistakes keep you from trying new things.

I learned this lesson when I got together with a realtor and built a house on spec.

When it was time to sell, we learned the house was too close to the road, so we couldn't get a certificate of occupancy. That meant all my exit strategies went out the window. For a while there, all we had was a liability, not an asset. Talk about sleepless nights!

My real estate lawyer got us out of that one. (Having an expert attorney on your team is the best financial investment you can make.)

After a few years, I had three investments under my belt, but was still working with a real estate agent who wasn't investor oriented. And, I continued to figure things out from books as I went along.

In other words, I lacked a network - which is a crucial component of real estate investing.

On the advice of a colleague, I joined a real estate investing group - and realized the phenomenal power of networking. I began meeting people who had the resources I needed.

I can't over-emphasize the value of a network. Groups like ForeclosuresMass' Turning the Key can make all the difference. Attend as many meetings as you can - you never know who you might meet!

I had an epiphany when I learned my associate was moving funds from one money market fund to another in order to gain an eighth of a percent. "Hey! Wait a minute!" I thought. "I can help him."

I knew he could make way more money lending it out as 'hard money'; that is, lending private money - aka "OPM" or other people's money - to real estate investors. And, since I was already connected to a few networks, I knew lots of those.

Once I knew the ins and outs of hard money lending, I became a hard money broker. In fact, I quit my full-time job a few months ago.

If you've followed my story, you've probably realized that becoming financially literate didn't happen over night.

If you're serious about wanting to invest in real estate, don't let the fear of not understanding "finance" or money stop you. Go out right now, find your first book, and read it. Then attend a ForeclosuresMass networking meeting.

One step leads to another and before you know it, you'll be on the exciting and very fulfilling path of real estate investing.

Ann Bellamy is a real estate investor and hard money broker. She can be reached at 603-801-2247 or via email at annbellamy@gmail.com.