How To Get Started In Real Estate Investing

As we discussed in a previous blog I firmly believe that real estate is the best way for most people to achieve their financial freedom over time. While I believe that everybody should have some real estate in their portfolio not everybody is cut out for physically owning property.

The first decision you need to make is, “how am I going to get involved.” You can be the ‘real estate expert’ and actual own and manage your properties with your own funds or those of a joint venture partner.

Alternatively, if you have the financial resources to do so you can be the ‘money partner’. This is where you team up with a real estate expert, supply the funds and let them actively manage the property. Since this involves a small group you would still have a good deal of control but not be involved day to day.

A third way is to invest in public real estate companies like REIT’s (Real Estate Investment Trusts). These are listed on public stock exchanges and can be purchased like any other stock or mutual fund. These are large companies that buy and hold different types of real estate. These are really hands off as a professional manager overlooks the entire portfolio.

The level of time spent, money invested, responsibility required and knowledge you will need differs greatly. Somewhere in there is a mix that works best for you. That is the great thing about real estate. There really is something for everybody.

You can progress as quickly or as slowly as you want. You can buy large or small properties. You can buy buildings that are beat up and fix them up or you can buy properties that are in great shape with existing customers that are already cash flowing.

You can buy one suite or multiple suites. You can do all kinds of different strategies – fix and flip, long term rental, condo conversion, land parceling, land development, new construction and changing the use of an existing property. You can deal with residential or commercial properties.

There really is something for everybody. Give it some thought, get educated and then go for it.

Read more about this in Comparing Real Estate Strategies.

Excuses for Not Investing in Real Estate

Over the years I have heard a lot of excuses why people don’t invest in real estate. Let’s look at a few of these:

  1. I am too busy: We are all busy. People that are already investing in real estate are no more or less busy than everybody else.
  2. I don’t have any money: There are many practical ways to solve this problem, as detailed in the book. If that fails spend some time to get really educated and then find a joint venture partner. Get as much hands on experience as you can first.
  3. Property management scares me: My advice would be to spend the time and energy up front to investigate your potential tenant before letting them into your property. There are some good books out there on how to be a better manager. You can always get a property manager to handle the day to day as well.
  4. I am too old: “The best time to plant a tree was twenty years ago. The second best time is today.” Chinese proverb. While it is true that the older you are the less time works in your favor, owning property is never a bad thing. Also, typically, people in their fifties and early sixties have more money saved up and make a higher wage which allows them to maybe buy more properties and pay down mortgages quicker. Managing your own properties in retirement will bring in some extra monthly cash flow. Focus more on cash flow than the long term appreciation. Try to buy properties that have the really big cash-on-cash return or put down a larger down payment.
  5. I don’t live in a big city: If you live in a rural area and you don’t think that there are many rental opportunities close by, almost all of us will live within two to three hours of a larger center. You don’t have to live right next to your properties.
  6. I don’t know enough to invest: Read more books, get a mentor, or join an investment group. This one is definitely not a valid excuse.
  7. I am scared of being in debt: There is good debt (debt that lets you buy assets that appreciate; like real estate or retirement savings plans) and bad debt (debt that lets you buy assets that depreciate; like a boat or snowmobile). If you want to sleep better at night put a larger down payment on your properties. This will keep your mortgage payments lower, which will give you larger monthly cash flow.

You see. There are no excuses.

Read more on this topic in Cash Management in Real Estate Investing.

Why Invest in Real Estate?

The reason I like real estate and am comfortable with it is that you have a lot more control over your investment than you do with stocks or mutual funds. Let’s face it: when you buy stock, no matter how much homework you do on it, after you buy it, you have no control over it.

Once you buy 100 shares of Coca Cola, you have no control over what the stock price is, what management does day-to-day, what the rest of the investing community will do with the company, etc. There are so many factors that will affect the stock price, and you have zero control over any of them. Even if you do your homework and pick a great company, a plane crash can scare the market and cause the stock price to go down.

Compare that to real estate: You control what strategy you want to follow, you control where you buy (both what city and what community within that city), you control what you buy, you can negotiate terms and price with the seller so that you control what you pay for the property, you control who will rent/lease your property, you control what renovations or improvements you make to that property, you control who will manage your property, you control (within market realities) your revenue and costs, and you can control what time period your investment will take.

Read more about this in Comparing Real Estate Strategies.

What I Believe In

I believe in three things:

  1. I believe in real estate: I believe it is the single best investment, period. I believe that it is the key to financial success for most people because it gives ordinary people more control over their investment than anything else.
  2. I believe that success is getting out of your own way: By that I mean that far too many people don’t achieve what is possible for them because they are their own worst enemy. They stop themselves from moving forward by making up all kinds of reasons or excuses why they can’t do something. They invent reasons not to succeed.
  3. I believe that you can control your future with conscious decisions: So many of us go through life letting life happen to us. We react instead of controlling our own destiny. If you are unhappy with your current situation then you need to make conscious decisions to change that. You have been led to the life you have now by your past decisions or inaction. If you truly want a different life, do something about it. Set goals. Plan your life consciously and follow through.

I believe real estate investing is the best way for most people to do this.

Read more about this in Comparing Real Estate Strategies.

 

Hello world!

Welcome to my personal blog. Once or twice times a week I hope to put down a few thoughts, tips and advice on real estate investing. Sometimes we might discuss the economy and how it affects investing directly and everyone generally. New projects that I am working on or roadblocks that I am facing will also come up. It is my hope to help you avoid the pitfalls of real estate investing and get you to your goals sooner.

I love to buy real estate. My wife says I never saw a building I didn’t like. I love to look for deals. I love to do the quick analysis to see if something is going to work for me. I love to calculate the cash flow and cash-on-cash returns. I love to negotiate the terms and conditions with the seller. I love to come up with a plan. I love all of that stuff. In short, I love the hunt.

I also love to be creative and look for unique ways to increase revenue or decrease costs or lower the purchase price. After years of investing, I have learned what my individual strengths and weaknesses are and have put them to my advantage.

I invite you to share the journey with me.