Young and Inexperienced: 4 Steps to Jump into Real Estate NOW!
“Fear regret more than failure”
The idea of buying and flipping homes or purchasing rental properties is exciting and seems to be a goal of many people we come across. Regardless of your circumstance in life, you can do it! We’ve met and seen individuals from all different ages, backgrounds, education (or lack thereof), and experiences be successful investing in real estate. So how can you take that first step in your real estate investing journey?
For us, we were planning on buying investment properties later in life, probably closer to retirement age when we’d supposedly have this magic pot of money where we’d buy whatever we wanted. We realized if we followed that plan, we probably wouldn’t have this pot of money and we would miss out on the tremendous opportunity of starting now. We decided to get educated, surround ourselves with people who knew what they were talking about, and we got to work. So here are the first 4 things that you should do to jump in the real estate game.
1. Educate yourself
When we started in real estate, we were 21 and 23 years old and were not wealthy. We had no idea how to purchase our own home or how to fix a leaky sink, let alone buy or fix real estate investment properties! So we decided that if we wanted to do this we needed to learn from experts. For every industry there are proven systems and processes that other successful people use and your best bet is to follow what they have done in order for you to be successful.
You can find hundreds of different courses, books, and online communities to educate you on the ins and outs of how to do a real estate deal. For us, this was probably the key to our success because it gave us confidence knowing that if we followed the processes others were teaching us, we would be successful. We actually did purchase a course, but there are a lot of resources out there and we would recommend starting with a free one: Bigger Pockets. They are an online resource for all things real estate with great podcasts, discussion boards, networking, and property marketplace. Once you start doing some research, listening to podcasts, and reading some books ("Millionaire Real Estate Investor" is a good one for beginners) you can decide if it is something you want to move forward with and can look into other paid education courses which expedite learning.
In almost every city there are investors who are already in the market doing deals. Take advantage of learning from these local experts and getting to know them. Find the local REIA (Real Estate Investors Association) or other real estate organization meetings, go to city commerce meetings, and don't be afraid to talk to people you know about wanting to get into real estate. Getting involved in the local organizations helps you to understand your local market and challenges, builds your team (realtors, contractors, wholesalers, lenders, etc), and increases your overall real restate knowledge.
Looking back on it now, more so than learning the intricacies of the industry, these people taught us how to think like an investor and how to set ourselves up for a successful future. Seeing other people being successful and watching presentations on real estate topics in person really get your motivated. These people and organizations gave us the encouragement to start now!
3. Get in the investor mindset
We have been taught our whole lives to avoid debt at all costs- and we still believe this to be true in many aspects. We strongly believe in living within your means and not buying luxury cars or toys or other things if you cannot afford them with money already in your bank account. However, with real estate investing you can turn what would normally be considered debt (in the form of a loan) into an investment vehicle designed to pay you monthly while also gaining value in an asset-backed piece of real estate. Besides, if someone else is more than covering the debt-service amount, is it really considered a debt? :)
For us, thinking about using other people's (or banks) money as an asset rather than thinking of it as a pit of debt was a major mindset change. If you buy an investment house that you have done all the research on and have a well thought out plan of fixing and selling or renting and have looked at all the numbers and know it is profitable, using a loan is just a tool that you can leverage to make more money in your pocket.
Now the key is that your numbers must work, not just buying houses you are emotionally tied to or buying every house that comes your way. But if you buy right, you make money from the day you purchase it because although you have a debt from a loan you also have an asset that should be worth more than that loan and it increases your net worth and brings in passive income.
4. Start now, but be patient!
When we started, we were fresh out of college. We lived in an apartment and knew that we soon wanted to buy a house. While looking at homes and figuring how this would impact our investment plan, we decided to start with a duplex. We loved the idea of getting a better loan and having a our mortgage paid for by our tenants next door (you can read more about this in our other blog post). For us, this strategy worked great because we could get our feet wet by buying a house and learning how to fix it and manage tenants while living there. Whenever someone asks us how to get started, to us it’s a no brainer. Start with a multi family property, generate some cash flow, and go from there. If you are already in a home that you own and love, buying a multifamily home (2-4 units) that you don't live in is still a great way to get started with more bang for your buck because you get more rent for one mortgage.
It took us a couple years after this first duplex and a few more rental properties to get the courage to jump into flipping houses to sell. During that time we had been learning as much as we could from different resources, events, real estate organizations, and our personal experience through rental properties. When it came time to getting our first flip under contract, we were confident in the systems and had a supporting network around us to help us along the way. By following this plan we were happy and grateful to sell our first flip in 2 days over list price. Our systems worked!!
Too often we talk to new investors who are eager to jump in without doing their due diligence and get themselves in a bit of trouble. While creating the dream lifestyle with financial freedom through real estate is the goal for many, we encourage people to pursue their dreams but take it one step at a time. This is no get rich quick plan, but when done right it can pay dividends for years to come.
The moral of the story: real estate is a great investment that YOU can do!
If you are willing to put the work in to learn some basic real estate strategies, you can become a successful real estate investor in no time! Follow our four steps of getting educated, networking with pros, getting into an investor mindset, and having patience. Don't let anyone tell you that you are too young or too uneducated or too poor, put yourself out there and hit the ground running!