How to Start a Career
In Real-Estate Investing

Question: I am a young, naive gentleman reading your latest book, "Buy, Rent & Sell" (McGraw-Hill, 2001). I am excited and intrigued by the world of real estate and would desperately like to get started on a long and smart career of sound real-estate investing. I have good credit, but I'm single and don't have a lot of money available for a down payment. How should I get started?

-- Rad, city not provided

Rad: For a first-time buyer with good credit, the best avenue into real estate is purchasing a single-family home in which to live. This is true for several reasons. First, this will allow you to get the very best financing terms. With good credit, you can qualify for a mortgage of 95% of the home's value, meaning you'd only need to come up with a 5% down payment and closing costs. If your credit is sterling, you may be able to obtain a mortgage for as much as 103% of the home's value. Though you'll end up paying a slightly higher interest rate and will have to make larger monthly payments, such a loan won't require a down payment, and most of your closing costs will be covered. Just remember, however, that you must occupy the home yourself.

After a period of time -- perhaps a year or longer -- you can rent out the house and move to a second property, all the while keeping the original financing. This converts your personal home into a rental -- a real-estate investment. The rental income should cover your mortgage payment, taxes and insurance. Now you can go out and buy a second property and keep the ball rolling. Over 20 years, you could acquire as many as 20 properties, all rented and bringing in enough money for you to retire on.

Another reason to use this strategy: Single-family homes have shown the greatest appreciation of all residential real estate. You'd be using other people's money to buy into a market that over time appears to be consistently going up. For these reasons, the avenue into real estate that most home-grown investors take is the single-family home -- it's very hard to beat.

Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent book is "Tips and Traps When Renovating Your Home," (McGraw-Hill, 2000).

How to submit your real-estate question: Questions must include your first name and the city where you're located. Send your question by e-mail. Although we can't acknowledge all e-mail, we'll answer as many questions as possible.

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