Lesson#1 Start Now
Welcome to real estate lesson #1; How to start real estate investing. The purpose of these series of lessons is to prepare the beginning investor on his/her new path to real estate investing. Sometimes, you just need a simple road map to get started. This is it. I want people to succeed in real estate because its one of the best, straight forward ways to generate wealth without being a business entrepreneur with a big payroll. Real estate is unique because you can work one hour a week or sixty and still be able to play in the game. Good luck…
The complete series of lessons is shown below. I plan to have the series completed by December 2006.
1. How to start investing
2. Education
3. Goals
4. Marketing
5. Making Offers
6. Systems
Part 1 How to start investing
So you want to invest in real estate, huh? Maybe you saw a late night TV commercial of the hottest real estate techniques on how to make money. Or, maybe you have a friend that has made some bucks flipping a property or owning some rental properties. I started looking for something “else” when I figured out my 401k was more like a savings account than an investment vehicle. How could this be? I am a successful engineer working full time and saving more into my 401k than most of my co-workers. I’ve done the right thing, I got my masters in engineering , I got a secured job, I have no credit card debt, no student loans, I don’t drive expensive cars, or have the latest fashions (I am from Tucson you know). I even have more financial support. My wife is a successful working engineer making top pay in her field as well. It seemed to most people that we are on the top of our game. In the early stages, we were called D.I.N.K.s Dual Income, No Kids. People were very envious since they assumed we could afford expensive trips and cars.
After being in the industry for over 5 years, I realized that we are living a middle class lifestyle. Nothing more, nothing less. I am very grateful for what I have and believe I’ve earned every cent. However, one day I sat down and studied the retirement numbers and than reality hit me. I was not going to make it! I was not going to retire wealthy. What is wealthy? I wanted a lot more than just one million after 60 years of age. I began to get scared. I finally realized that I was not in control of my finances. I had a fixed income and my earning potential was severely capped. After being taxed to death, the remaining dollars went into mutual funds that I have no control over. After making those initial realizations, nothing was ever the same. I went into work one day, and saw my future through my co-workers lives. The engineers that I one day will replace were not living the lifestyle that I wanted. These are people with over thirty years experience driving mediocre cars and middle class housing. And these are some of the smartest, hardest working engineers in the country, yet how am I going to be more financially successful than them? The bottomline is that I didn’t want to retire over 60 years old.
Have you ever asked the question, what does this guy/gal do to afford that extravagant hillside house or how did he retire so young to be playing golf everyday in his forties? One thing for sure, I bet he/she is not an engineer.
What do these people do? So I started searching using the best research tool since slice bread, the internet. I immersed myself for hours. When the dust settled, investing in real estate was always the common theme of the wealthy. I tried to scratch real estate off the list since at the time, I didn’t know a thing. I would much rather invest in stocks or play the option game since I already had previous experience. However, the benefits of real estate were so obvious that I had to dig in deeper, and eventually, I stumbled on one of the secrets. Successful entrepreneurs create businesses and use the income to invest in real estate.
So, how do you actually start real estate ivesting? I believe that you start real estate investing as soon as you close on a property. I have seen people that have taken literally years before making offers. I suggest you take a path of least resistance to get results the fastest and most efficient way. I will provide you a better road map than what I took since I know I waited too long to get into the game. If I got into some deals just a few years before my first purchase, my net worth would have skyrocketed. I read recently that for the Phoenix market (close to where I live), real estate has appreciated on average of approximately six percent for the last 20 years. The time to start is now.
Real estate investing takes action to get results. Please read that one again, its takes action to get results. What am I really saying? I mean, reading 100 hundred articles or taking a few real state courses is not taking action. Taking action is talking to sellers, executing marketing strategies, making offers, and closing deals. This is what successful investors do. Period.
If you’re a beginner, you need education before taking action. Don’t waste your time stumbling along and making mistakes. Finding education in the right places is critical to start your career and you’ll be able to take action sooner.
What are the characteristics of a successful investor? What does it take to become successful? Well, I can tell you right now; you don’t have to be school smart. There are many millionaires that have no higher education than a high school diploma.
Does it take a lot of hard work to be successful? The simple answer is yes, but the more complicated answer is not really. Real estate is flexible because your success is a function of how much energy you put into it. And the more knowledge you gain to implement systems, the more successful you will become with less effort. Another reason why investing in real estate is flexible is because you can spend one or 60 hours a week and still be able to buy houses. Sure, it will take you longer to reach goals, but you can be a lazy investor or be a go getter and still be in the game. That is powerful. For the part time investor, this is critical. There are not too many financial vehicles that you can do this. For example, if you start a business franchise, there’s no turning back, you need to work as hard as necessary to make the venture profitable.
Right now, real estate investing is not a lot of work for me. It’s because I’m motivated, I have passion, and I love the thrill of the chase. I don’t look at the clock when I’m working on investing and it’s been over three years. How can you put yourself in this state of euphoria? Find your motivation! Go to your local real estate club meetings. If you take only one gold nugget from these articles, it is to go to local real estate club meetings. Once you find out that an investor in your town bought a house down your street, fixed it up, and flipped it for $40,000, you’ll have as much of a high as I do. Learn to ask questions, find mentors, discuss deals, and learn to negotiate, get confidence, and learn your local market. This is a teaser for lesson #2, education.
Real Estate clicked with me after I talked to 5 investors that were doing deals in my town. Here they are making 20k to 50k per deal and doing it in my town. How are they doing it? How do they find the deals? The contracts? The legal issues? It didn’t matter to me; I was going to figure it out because if they could do it, so could I.
So, is real estate investing really for you? If you said yes to any of these statements, you are ready for real estate investing.
1. I have made a commitment to change my lifestyle to a better one.
2. I am willing to commit to learning techniques that will enable me to take action.
3. I understand that real estate takes work, and it’s not a get rich over night scheme.
How to start real estate investing the RIGHT way:
1. Have a good attitude. You probably don’t realize this, but real estate is a people business. You will need to talk to people and talk to them well to be successful. This scared me for the longest time and only over came this obstacle by doing deals.
2. Join a local real estate club. Find one using the internet. Introduce yourself and ask people what type of investing is working for them in your town. If they can do it, so can you. This will help gain confidence.
3. Start your education by listening to people that have real estate knowledge. Don’t listen to your brother about the failed venture with his ex-girlfriend. Read estate books, articles, and RE courses from knowledgeable real estate investors that you can trust.
4. Make a commitment to stay in real estate for many months.
5. Focus your energy on the first deal.
How to start real estate investing the WRONG way:
1. Thinking that you can become wealthy very fast. Real Estate is typically not a quick rich scheme however you approach it. Sorry.
2. Telling your family that you’re going to be a real estate guru. This can be a mistake because family members may not support your enthusiasm and you may be disappointed if you’re looking for a family support network. Wait until you have a deal under your belt before forcing them to listen to your big plans. Dealing with wive’s can be an extremely touchy and difficult topic and I hope to write about this soon.
3. Signing up for seminars blindly. Focus your energy like a laser beam, your motto is, “get the necessary education to start taking action”. Don’t turn into a personal real estate student because you’ll be poor doing it.
4. Buying TV commercial products. I don’t recommend it. This has been a starting point
for most (including me). The problem with these TV courses is that they are usually outdated and they are too general. They give you too many knobs and you don’t know which one is best. And you’ll always be asking the question “does this work in my town.” Go to the real estate clubs to find the right knob.
5. Expecting to get rich this year. Real estate is pretty much a get rich slowly program. Sure, you can make a 30k in just a few months from now with the right training, however it usually takes time.
Next Lesson, Get your education!
Additional articles for the beginner investor.
1) Getting started in real estate by Steve Cook at REIclub
2) Real Estate 101 by Sheba King-Simms at biggerpockets.com
3) Six things I wish I knew before starting real estate by Peter Conti & David Finkel at REIclub