Getting started with real estate investing

Achieving financial freedom through real estate

If you’ve made it here, odds are  you understand the incredible wealth building potential of real estate investing — or at the very least, you’re curious. Do you want to spend more time with your family? Travel the world? Free up time for other pursuits? Well, real estate investing can make all those things possible. Here’s how to prepare for the journey.

Start with the foundation

Many people arrive at the door-step of real estate investing with some baggage. Before you start on your journey, you’ll want to lighten this load.

Reduce your Debt

Start by gaining a better picture of your current financial situation. Lenders often look at your debt-to-income ratio to measure your buying power. The more debt tied to your name, the less purchasing power you have. Too much debt, and lenders may avoid lending to you at all. You don’t need to clear all of your debt, but you SHOULD have some clarity on where you stand.

Save up

It is possible to start your investing journey without any money in the bank. However, if you’re employed and receive a W-2, traditional banks or credit unions are a great way to get started. How much money you’ll need depends on your unique financial situation, but generally speaking, here’s the arithmetic:

You'll need something like this: 3.5% down minimum + closing costs + 6 months reserves.

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Educate Yourself

While you’re working on steps 1 & 2, take the time to educate yourself. If you’re unfamiliar with real estate investing, brush up on your basics. Do this before you even consider dipping a toe in the full-time waters. Start by deciding which strategy will be your focus. There are a number of different types of real estate, and each type has unique pros and cons. Wholesale, Fix & Flip, Buy & Hold

Design your blueprint for success

When you’re ready to get serious, sit down with your spouse and plan out how you can work together towards your goals. Design a roadmap for success that works for both of you. If you’re single, set up a similar conversation with your best friend or roommate. Even if they aren’t interested in real estate,  the conversation will help you set goals for your future.

Consider an accountability partner

If you’re serious about making real estate investing a top priority, consider finding an accountability partner to join forces with. Find someone who is pursuing their own road map for success and share some of the same interests as you. A weekly or monthly check-in can  help you stay on track.

Find the right people to follow

"Two roads diverged in a wood, and I—I took the one less traveled by, And that has made all the difference." -Robert Frost

When we were first getting started in real estate, we followed a few different people who were doing it full-time.  The more we invested and the more we learned, we realized that it wasn’t their methods or advice that worked for us. As such, we started to branch out and seek advice from people who had a different approach than they did. We found mentors in others who were doing what we wanted to do.

And if you're just getting started... Consider easing into real estate investing, with house-hacking. We've organized some of the best house-hacking methods into our first blueprint. These are methods we’ve followed to great effect. But note, you’ll get the most out of these blueprints by tailoring them to your unique situation. There is no one-size-fits-all solution. As your business plans gains clarity, so will you.

Build your team

When you have the right people in your corner, real estate becomes a lot simpler. The first step is to identify who you'll need by your side in most cases, and that list is rarely very long.

Financing

Unless you’re flush with cash, you’ll need financing. In fact, even if you had the capital to buy a property outright, it might still be in your best interest to borrow:

There is nothing stopping you from calling your local bank and speaking with the lending manager. Honestly, they’d love to have your business and are a great resource to understand your financial position and your buying power. If you bank exclusively with them, they will have all of your information on file.

As you acquire properties and your debt grows, traditional lenders will become less likely to lend on your deals. Build relationships with private lenders early and the transition away from traditional lending sources will be easy.

Broker / Listing Agent

You’ll need an agent if you want to view any listing, but not all agents are created equal. Most cater to the traditional home buyer, and as such, their goals may not be aligned with your own. Be up front about your intentions and find an ‘investor friendly’ agent. Here’s what a good agent can do for you:

• Help define your search parameters and identify opportunities
• Provide guidance on renovation ideas that will increase your homes value
• Advise on your behalf during negotiations
• Get you in to see listings quickly, by skipping traditional ‘open houses’ and faster listing access.
• If they’re connected, they can even introduce you to contractors, property managers, lenders, etc.
• Handle all the necessary correspondence and paper work to negotiate and close on your deal.

A good agent can be very difficult to find, but their impact is pretty clear. Be critical when choosing an agent to work with, and when you find someone great, treat them well!

General contractor / Sub contractors

Even if you fancy yourself handy with a hammer, you will inevitably need a contractor at some point on your real estate journey. If you have goals to scale your real estate business, the benefit of a competent and trustworthy team of contractors is essential:

• Competency: Make sure your contractors know their stuff. Ask for references and don’t be afraid pick up the phone and call previous clientele. Good contractors will have no problem with this request. If you get push back, that’s a red flag.
• Honesty: Can you trust them? Not all contractors are dishonest. However, a dishonest contractor can cause a lot of problems.
• Organizational skills: Find someone who lessens your workload rather than adding to it. A good contractor should take responsibilities off your plate.
• Communication Skills: A good contractor fills you in on the details you need to know and nothing you don’t.
• Savvy: They can advise you on your project and help ‘value engineer’ the best solution for you.

Decide what a good deal is (for you)

Before you can acquire a good deal, you have to know what ‘good deal’ means to you. That means filtering out everything you don’t need to analyze and identifying those that warrant a second look. Let’s be honest, you can’t run your deal analysis on every single listing in your city. You need to prune the list.

Make it an enjoyable habit to identify a few properties a day that are worth a deeper analysis. Find satisfaction in knowing you’re getting closer and closer to finding a good deal.

It’s not all in the numbers. In fact, plenty of good deals are made on properties that look terrible on paper. Here are a few situations where this might be the case:

• A home is listed as a 2bedroom 1 bath, but is actually large enough to accommodate another bedroom. Knowing this, you could quickly modify to a 3 bedroom 1 bath and build instant equity and cash flow.
• You discover a discrepancy between a property’s listed square footage and the city’s record, and own more home than you pay for.
• You identify unused space such as a basement or detached garage for additional living space and/or rental space.

There are many more factors to consider than simply pricing, as you can see. But be cautious about calculating prices; numbers may be deceptive. To put it another way, everything that glitters isn't gold, and everything that fits your equation isn't always a bargain.

Create a system to find deals

If you can't discover a deal, all of this effort will be for nothing. You want to put in place systems that grant you the chance to obtain discounts—also known as leads—so you don't have to constantly go after them. Consider incorporating the following features into your marketing strategy.

MLS leads

A real estate license allows you to access the Multiple Listing Service (MLS). If you're not licensed, your agent can help you set it up. To get listed homes straight to your email inbox, use daily filters.

Internet marketing

Here are some great ways to find deals online:

• Build your own website to attract would be sellers
• Comment on various real estate investing blogs to build authority and make connections
• Advertise! Sometimes paying to attract users to your website is a great way to find

Reach out to family and friends

Reach out to family and friends to find deals . Chances are, they know someone looking to sell or that recently sold. If you can provide value to them by helping their friends and family, it's likely they will return the favor.

Attend networking events for leads

Networking with others is one of the most powerful ways to find deals. Attend local real estate investor meetups to  get your name out there.

Your friends and family will always support you , but they're limited to what information they can provide. Depending on how far away the properties are, it may require a lot of travel just to see them in person. Plus, you never know who your contacts know or how deep their relationships go with potential sellers.

And take action!

Action is, without a doubt, the most crucial stage in the whole process. It's easy to stay in the planning phase, and many never find their way out! We often call this analysis paralysis. It's common for even the best of us to obsess over the numbers, and we don't want that to happen to you.

Don’t let yourself get overwhelmed by all of your options. Set your goals, make a plan of action, and start hustling!

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