Everyone has seen the infomercials, advertisements, and TV shows about real estate investing. All claim that it is the best way to build wealth, to work for yourself, or to make yourself rich while only using other people’s money. All of these are technically possible, but they are much more difficult than they are portrayed by our industry’s gurus.
They aren’t wrong, but most of the coaches and gurus in the real estate investing industry do undersell how much time, effort, planning, and networking go into making money.
To make it easier for you to get started, let me share one of the best ways to get started in real estate investing. It is a six-step process, so let’s begin at step one.
Step 1 – Ask yourself “What is my goal?”
Common answers may be:
- Make short-term money
- Build long-term wealth
- Prepare for a comfortable retirement
- Augment your existing income
These are all viable answers, but the way you would achieve each of them would likely be different. Each of these goals would have a handful of different roads to follow.
For short-term money, the common examples would be: fix and flip projects, wholesaling, fixing rentals and reselling.
Fix and flip projects:
This is where you purchase a property that is undervalued, renovate the property, and sell for a profit. This is likely the most glamorous of real estate investing strategies, as the potential short-term profits can be large.
This is where you network with property sellers and buyers. Your job as a wholesaler is to acquire access to purchasing properties, and also acquire a network of buyers who are willing to purchase the properties you acquire. There are a bunch of ways to do this effectively.
Fixing rentals and reselling:
This is where you purchase a rental property that is not cash flowing (not turning a profit) and work to get the property to turn a profit, before selling the property to another investor, at a premium.
This looks similar to a fix and flip project but ends up being much different in marketing efforts, as you would be focusing on selling to other investors rather than end home buyers.
For long-term money, a common example would be rental portfolios.
Continually adding to your rental portfolio in an effort to constantly increase the number of assets, and the dollar value of your net assets.
Preparing for retirement:
This is where you establish an amount of money you would need in order to retire on a certain amount of income. The idea is to have rental units (or other commercial units) provide a replacement income so you can continue your existing lifestyle without needing to work.
Augmenting existing income:
A strategy where you use the income from rental properties to add to your current income, but not entirely replace it.
Step 2 – Ask yourself “Why do I want to invest in real estate?”
There is really no wrong answer. Some answers will be the same as step 1, but you might run into some others like:
- I am tired of working for someone else
- I want to be my own boss
- I want to have my hard work dictate my income
- I want control over how I spend my time
- I want the work flexibility
These reasons will be what keeps you going during the difficult times. It’s important to have a reason before you really get started. Your financial goals for real estate will help you get started, but for most people, the emotional and lifestyle changes are what keep them pushing through the tough times.
Step 3 – Ask yourself “How much capital do I have available?”
Capital, in this case, is how much cash, or liquid assets, you have access to. This includes liquid assets or more solid assets that you can convert into cash to use. Retirement funds can often play a part here.
If your cash is low, you might need to investigate options that allow you to get into real estate investing without large up-front investments. This could include wholesaling and lease options.
If you have decent cash reserves, but not enough to afford an entire down payment you can consider partnering with other investors or syndication.
If you have the cash reserves to afford a down payment in your ideal market you can consider flips or rentals.
Step 4 – Check out BiggerPockets.com
Bigger Pockets is a great resource to use for learning about real estate investing in all of its forms. Be aware that Bigger Pockets is usually a forum style, so it can be tough to see the track record of the person providing you with advice.
Step 5 – Researching real estate media that focus on investing.
These are three great sources for educational materials: real estate specific books, podcasts, or YouTube videos. All three are viable ways to consume information about real estate investing options, financing and networking groups.
Step 6 – Attend a local investor meeting (or several).
This can be easy to find if you know how to search. One of the best ways to start is to search your local city/state/county/region and “REIA” or “REIC.”. REIA stands for Real Estate Investment Association. REIC stands for Real Estate Investment Club. These groups will connect you to people who were once in your shoes and just starting out.
In the next few months and weeks, I’ll be going more in-depth about each of these topics, so keep a lookout for new videos and articles every other week!