How to Start Your Real Estate Investing Journey: A 5 Step Plan

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.
  • Lease-Options

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!

Published or Updated: February 26, 2013

Comments

  1. Grant says:

    What stopping me from buying small multifamily is renting it to someone who may destroy it and wipe out any potential profits.

    • Grant –
      There really isn’t anything that is stopping someone from destroying your potential property. The key to protecting your asset is to ensure you’ve done a good job screening your tenants. If you have, you decrease the chance of a problem happening, but you can certainly never eliminate it. As with anything in life there is always some level of risk.

      That said, we compiled a comprehensive free guide to help walk you through the process of screening at: Tenant Screening: The Ultimate Guide

      I think you’ll find that helpful. Good luck and let me know if you’ve got any other questions.

      • Grant says:

        7 years ago, I almost bought a 2 unit apartments. I backed out because the risk was too high and I did not have much money at that time. After reading some of your articles, I am thinking I want to revisit this opportunity in about an year.

        7 years ago, I read some information about how to get rich crap through real estate. Its not what I want. I am so glad I found your website as that is more realistic in terms of owning 4-8 units and generate realistic income. You will see me post some questions in the forum in the near future.

        Thanks

        • Grant – I wish I had access to our site when I started too — I would have saved myself a fortune in money and stress. We’d love to have you on board . . . when you have a chance, be sure to check out the Guide we’ve got linked in my by-line above — we put almost 2 months of work into it with the goal of helping out new investors. There’s no catch — no need to give an email address — just a great guide to get newbies going.

          Good luck, and be sure to take your time getting things together and planned out.

  2. WOW! Great article. I wish I would have gotten started investing much sooner. Mr. Dorkin, your ebook is really well done as was this article. I’ve enjoyed reading it quite a bit.

    • Hey Arthur –
      Thanks as always for the comments.

  3. Kenneth says:

    Hello,
    I am new to real estate investing. I recently got married and my plan is to rent my house. I am don’t have much time to learn all that it is needed to know. What do you think of having a property management company manage my property until I truly understand real estate?

    • Hey Kenneth –
      First off, we actually put together a guide for folks in your position as well: How To Rent Your House: The Definitive Step by Step Guide

      That said, using a property management company is certainly a good option if you’re not up to speed on local laws or if you just don’t have the time/knowledge/experience to do it. That said, you definitely should make sure to carefully interview and vet any property manager you use, and should absolutely make sure to keep an eye on them. You should make sure to account for their costs in any possible cashflow analysis when looking at possible investments.

      I STRONGLY recommend you have a complete understanding of how things work before you decide to jump in and become a landlord — even if you have management. If you buy the property wrong, you’re going to be setting yourself up for potential trouble, so even the buying process and analysis is extremely important — before you ever even think about a PM.

      Do some research on Google or our site, where we’ve written many articles on the topic of finding good manager, and do check the Beginner’s Guide I reference in my signature for some assistance in getting the basic knowledge down.

      I’m happy to answer any questions you’ve got here as well.

      Good luck.

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