Highlighted Topic – Getting Started in Real Estate
The #1 question that we get asked is “How do I get started in investing in real estate?” You’ve likely heard us (and so many others) say it before and here it is again – just do it! It’s not just a Nike slogan, it’s an excellent motto to live by, particularly, as it relates to your first real estate or other investing deal. For beginners, we recommend starting simple. Super simple. Starting with a small single family home as a rental or a small 1st position loan as a private lender is the easiest beginner advice. These strategies provide the most amount of flexibility when you’re trying to get started. And while there is still a lot to learn on the 1st deal, you don’t know what you don’t know yet, so OTJT is going to happen. This is also where we began so you are not alone!
How do I get started?
Real Estate investing comes in many shapes and forms.
Here is our 3 Step Guide to Getting Started in Real Estate Investing:
- Determine which vehicle is best for you by determining your goals. This is really 2 steps, but each step is closely tied.
- First and foremost, you should know what your goals are and how much risk you’re willing to take to achieve those goals. Options for vehicles include investing in rental real estate, private lending, REITs, crowdfunding, wholesaling and many others. Like all investing, real estate can be very risky, when done incorrectly.
- Here are just a few key questions that are essential to answer in order to set your goals:
- How much time per month do you want to spend on your investment(s)?
- How much capital do you have to invest in your (first) deal? Or how much are you willing to lose to learn how to do this investing well?
- How much risk are you willing to take on?
- Are you interested in cashflow or capital gains?
Answering these questions will help you narrow your choice to determine the exact strategy to define your search. For instance, if you know you don’t have much time to spend each month on your investment, that you have less than $50,000 to invest, and you’d like a safer investment that provides cashflow, then you may want to invest in rental real estate or private lending. If you’re willing to invest more time and capital into your investment, and have done some deals already, then you may be interested in expanding to apartment complexes or commercial property.
Be sure to dig deep into your vehicle of choice. For rental real estate, do you want to invest in single family homes? Residential rentals (2 – 4 units, such as duplexes or triplexes)? Commercial rentals (5+ units)? Mobile home parks? For private lending, do you want to invest in 1st position or 2nd? Where are you comfortable investing? What size projects do you want to be involved with?
Still need some guidance on how to pick your vehicle? Here’s a great article on 101 Things Everyone Needs to Know. Or post a comment on this article and start a dialog with us! If you have a question, we can promise you that someone else out there has the same question.
Come up with a date by which you plan to execute that strategy! Set a date that’s realistic, but also be firm with yourself. Less than 10% of people that think and learn about real estate actually do a real estate deal! One of the main ways to be on the right side of statistics is to set a deadline for yourself and hold yourself accountable for taking action by that date! See the fear and push through it!
- Find an expert in that field and draft your action plan to achieve your goal by your due date. It’s impossible to learn everything you need to know in a short period of time, so it’s best to find an expert that can help you answer some of the questions you didn’t even know to ask. The best entrepreneurs and business leaders out there are constantly learning new things from as many different sources as possible.
- Be sure this is someone you trust, but leverage their knowledge and have them help you develop an action plan. Remember to offer help to them, as well. Everyone is busy, so finding partners that can help you goes both ways when building relationships.
- Your plan should include, at the minimum, your selected investment vehicle, the amount of money you have available to invest with, the date by which you want to complete your first deal and your why. Why are you doing what you are doing and what will help you persevere when things get difficult?
- Look at this plan daily or weekly and make progress each day towards the different actions needed to achieve your goal. If you have more in depth knowledge of the details, your action plan can also include the key success metrics you will use to determine whether the deal is right for you. Metrics such as cap rate, cash flow, costs, reserves and many other. Do what you can, and when you know better, do better.
- If you need a plan template to work from, please feel free to use our plan template. If you have one that you like already use what works!
(Bonus) Step 4:
Then.. just do it! Start with an amount of money that you’re comfortable losing 100% of. We sincerely hope that you don’t lose it all, but the actual experience of investing will teach you more than anything you can learn by reading or leveraging other people’s experiences. Be active. Be informed. And just do it.
Legal disclaimer: We are not CPAs, agents, attorneys, or any other type of certified professional, so we encourage each and every one of you to do your due diligence before investing in any of the strategies we discuss in our blog. Our blog should not be considered legal or certified professional advice. Please consult your own trusted professionals.