Are you just starting out?
Sometimes real estate investing for beginners can seem a bit intimidating and it’s easy to get lost in the lights and sounds of all the blogs, books, and television gurus with their slick hair. To help cut through the crap that’s out there I wanted to create a short list of tips you can use as you embark on your journey to find financial freedom through real estate.
No, this isn’t going to teach you everything you need to know. However, I hope this list will help point you in the right direction. It’s not exhaustive by any means, just a brief list of lessons I’ve learned along the way and hope will help propel you toward success. If you are reading this and have a little bit of experience in real estate investing – I’d love for you to share some of your favorite tips in the comments below; but first – here are fourteen tips for beginner real estate investors.
1.) Be Resolved.
Real estate is not something to do on a whim. Investing in real estate is a life long pursuit to take control of your financial future – not a get-rich quick scheme. As an investor – you will struggle. You will make mistakes. You will fail. The successful investors are the ones who can take those experiences and turn them into lessons to improve their skills.
2.)You Don’t Need to Be an Expert in Real Estate Investing.
Too many individuals talk about investing in real estate but instead just get bogged down with the vast amount of information out there. I once wrote an article for BiggerPockets titled “The Top 100 Ways to Make Money in Real Estate” that chronicled multiple niches, careers, and methods that investors use today to build wealth. Want to know a secret? I only am good at a small handful. People often email me and ask me advice on areas of real estate I know very little about. I try to help as much as possible or at least point them in the right direction, but the simple fact is no one knows it all. You don’t need to be total expert in all things real estate.
3.) You DO Need to Do Your Homework.
On the opposite end of the spectrum are investors who heard about real estate being a great investment and jump in with both feet – unsure of where they are going to land. Sometimes these investors get lucky and make it big (and usually go on to be the next big guru) but the majority of the time these investors fall and fall hard. Don’t be like them. Do your homework. Study the niche you want to invest in and learn everything you can about that subject.
4.) Learn to Love Reading.
You are obviously reading this article, so you apparently know how to read. Do more of this. Check out my list of the Seven Must Read Books for Real Estate Investors and also my follow-up post, “Seven MORE Must Read Books for Real Estate Investors.” If you don’t like reading – at least learn to listen to audio versions. Books have so much information in them and it’s a shame so many individuals are losing their love of books.
5.) As a Beginner, Connect with Local Investors.
This doesn’t mean to spam them with requests – but simply reach out. Begin hanging out where they hang out. Ask them to show you some of their properties. Most investors love to show off their accomplishments, so allow them to and pick up on every tidbit of information they can give you. Local investors will have a much better grasp at what works in your community than I or any other online investor will know.
6.) Learn the Lingo.
If you don’t know the lingo – you are going to look like a fool. Plain and simple. Don’t start talking to an investor about how you think his cap rates are the wrong color. You’ll just look stupid and display your ignorance. Be honest if you don’t know something and don’t try to be something you are not.
7.) Get Creative.
One of my favorite lines in one of my favorite books, Rich Dad Poor Dad, says “The poor say ‘I can’t afford it.’ The rich say ‘How can I afford it?” I love this. Lasting wealth is built through creativity. (click here to Tweet this quote!) Practice changing your thought patterns from “I can’t” to “how can I” in every day life. This simple practice will change the way you view conflict in all areas, including your real estate business. My wife likes to throw this on me when I tell her we can’t afford something she wants. She’s a smart gal.
8.) Learn to Sacrifice.
How bad do you want financial freedom? If you want to use real estate to start living the life you’ve always dreamed you are going to have to sacrifice. You may need to forgo a vacation and use the money toward a down payment instead. You may need to move several times in order to build up enough capital to begin investing. You may need to learn how to use a paint brush and do your own work. Investing in real estate is the most rewarding thing I’ve ever done – but it’s not always been easy. There were years of sacrificing (time, money, and opportunities) to get financially free. If you are looking for a get-rich quick scheme – look elsewhere.
9.) Learn (and Trust) Basic Math.
The math involved in a real estate investment is not college calculus. We’re talking fifth grade math and it isn’t difficult to learn. Income minus expenses equals cashflow. A gallon of paint costs $20 but a painter is going to cost $200. That’s the kind of math you need to get good at. Don’t assume anything – but use your math to make sure a deal is solid. Use a basic spreadsheet to analyze a deal or (shameless plug) spend $19 and download the very investment property calculator I use to analyze every single deal I do. Once you understand the math – don’t deviate from it. Trust it. Don’t let your emotions get involved. Real estate is a number’s game and the quickest way to fail is to forget that.
10.) Make a Written Plan.
You wouldn’t take a road trip across the country without a map, so why take your trip through financial freedom without a map? When I first began investing, I actually sat down and created a plan to get from where I was to where I wanted to be. While I didn’t follow the plan exactly (life never follows the ideal) I stuck by the principles which later were expressed in my first eBook “7 Years to 7 Figure Wealth” which you can get by signing up for my weekly newsletter at the top of this page (or below, or on the right. It’s all over. Seriously – if you haven’t read it … why not? It’s free!)
11.) It’s Okay to Start Small.
You don’t need to buy a 24 unit apartment complex right out the gate. Perhaps your first investment will be your first home. Perhaps you’ll start with just a 50/50 partnership on a small flip. This is okay. It’s easy to get over impressed by the big deals that the internet gurus talk about but even they had to start somewhere.
12.) Treat Your Business as a Business.
Real estate is a business, so treat it that way. Keep it organized, build systems to manage your life, and seek to improve your efficiency. The reason so many landlords get burned out and hate the role is because they treat it as either a hobby or a job. It’s neither. You are a business owner and as such it is your job to manage the business to the standard which suits you best.
13.) Start with Good Bookkeeping Now.
This was a huge mistake for me. When I first began, the paperwork was just a small blip on my radar and as a result my bookwork – to this day – is a giant mess. I’m slowly untangling the mess and creating a system that works but had I started with a system I would ave significantly less stress (especially around tax time.) Meet with an accountant as well as a lawyer after your first purchase and begin plotting your bookkeeping, taxes, and legal holding status. Your future self will thank me.
14.) Don’t Quit Your Day Job.
Investing has two faces: the career side and the investment side. It doesn’t need to be both. I use real estate as both currently, but I honestly believe that if there were a career I liked better I would do that in just focus on the investing side. Let me explain – flipping houses is part of the “career side,” as is “wholesaling” and managing. However, by buying cashflowing properties, reinvesting that cashflow into bigger and better real estate, and setting up systems to manage that business, you are creating investments for your future. There is a principle I believe strongly in called “The Minimum Wage Millionaire” which states that anyone, regardless of their salary, can become financially free if they invest smart and plan. If your ideal job is the “career side” of real estate- then make that your job and your investment. However, if you ideal job is teaching gym at a local high school – do that and invest on the side. Find whatever job makes you the happiest and do that but use real estate as your investment vehicle to gain financial freedom.
Today’s Episode was Brought To You By the Letter “C”
The letter “c” was broke on my keyboard and I still managed to type up these 1600+ words. Every time I pressed “c” I had to press it like five times. I probably have quite a few words like “I like ookies better than andy” throughout this post.
I bet you, with a wonderfully working keyboard, can do a lot better If you’d be so kind, please leave me a comment below: what is one tip that you got the most out of OR what is one tip you want to share with others?
Photo Credit: Alessandro S. Alba
p.s. Looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.