No doubt you’ve seen the late-night infomercials of snazzy looking gurus sitting by the ocean talking about how easy it is to get into real estate investing – even if you don’t have any money, credit, time, or resources. This image attracts millions of people to spend hundreds of millions on products, training, and more. In reality, however, real estate investing is not as easy as dialing a 1-800 number and getting checks in the mail. There is a process needed to get started and, while it’s not necessarily difficult, it’s not always apparent to a beginner. This post is going to break down the complications and simplify your entrance in to real estate investing with a five step plan for getting started – without paying an arm and a leg for training!
Step One: Decide and Commit
Your first step in investing in real estate is actually not a step at all: it’s a decision. The vast majority of those who buy the shiny guru product or read the newest real estate book never actually take action. All that knowledge is for nothing if you don’t put it into practice. This is why step one is to fully and irrevocably commit to your real estate investing journey. Recognize that it will not always be easy – but it will be worth it.
Step Two: Decide on A Niche and Strategy
There are hundreds of ways to make money in real estate – but as a new investor, you only need to learn one niche and one strategy.
A real estate niche is a property type. For example, the following are just a sample of the different niches you can invest in:
- Upper End Single Family Homes
- Lower End Single Family Homes
- Small Multifamily (duplex, triplex, 4-plex)
- Apartment Buildings
- Commercial (stores, malls, etc)
- Notes (mortgages)
- Tax Liens
A strategy, on the other hand, is the method you’ll use to make money with the above niche. Some common strategies are:
- Fix and Flipping
- Wholesaling deals to other investors
- Buying for cash and renting them out
- Buying with a loan and renting them out.
The fun thing about real estate is that nearly any strategy can be used with nearly any niche, so you can imagine the wide range of possibilities that real estate investing can hold. Perhaps you want to fix and flip low-end single family homes. Or perhaps you want to do some lease-option investing with an apartment complex. The combinations are numerous, but again, don’t get overwhelmed – just get familiar with the different niches and strategies and pick a winning combination that appeals to you. As you grow your business, you can add more niches and more strategies to the mix.
(Tip: you may find that certain niches/strategies work better in certain areas, so it is a good idea to talk with other local investors to determine the viability of your plan in your area.)
Step Three: Educate Yourself and Connect With Others
Once you have chosen a niche and a strategy, it’s important to educate yourself on it and become a pro. Read every book on the subject, listen to every podcast, and become friends with investors who are doing the same.
Your education is very important, and not to be taken lightly. While you don’t necessarily have to know absolutely everything there is to know about the subject, you should have a very keen understanding of your property niche as well as your strategy before jumping into the investment to avoid losing money.
Step Four: Make a Plan
You wouldn’t suddenly drive from New York to Argentina without a clear map or GPS; just knowing that Argentina is south isn’t enough to get you there. In the same way, just knowing the destination for your future isn’t enough. It’s important that you write down a plan for your investment strategy. What niche will you be investing in? What strategy? How much can you pay? How will you fund it? If things go the way you want them to, how much money will you have in five, ten, or twenty years?
Your written plan will be your guide as you start your investing career. You may not (and probably will not) be able to follow the plan exactly,but having a general map will help you know you are making the right decisions and headed in the right direction.
Step Five: Just Do It
Finally – when you’ve chosen your path, done your research, and made your plan, it’s time to take action. Don’t get stuck in “analysis paralysis.” Use your plan and simply begin to “fill in the blanks.” When you’ve completed steps one through four above, the final step is perhaps the easiest to do.
What has stopped you from investing in real estate? Let me know in the comments and let’s talk about it!