What Are You Willing to Do to Become a Real Estate Investor?

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The class was called Foreclosures and Short Sales 101. The room was filled with Realtors, likely there for the six hours of continuing education credits. I attended because I wanted to learn about foreclosures and short sales, and more importantly, meet a local real estate investor. It was 2003 and I’d been struggling for two years trying to figure out how to fix and flip houses. I’d spent over $5,000 on guru seminars, books and CDS. None of it was working. I’d been advised by a real estate attorney to stop wasting my money on boot camps. He said I should to learn from a real estate investor here in Phoenix.

I sat down in the back of the room next to a man with a large stack of papers in front of him. The papers included a list of homes in foreclosure. It turns out this guy worked for an investor that purchased homes at the courthouse steps. They also bought homes directly from distressed sellers prior to the auction.

To make a long story short, after the class was over I convinced this guy and his investor boss to bring me on board as a “bird dog”. They gave me a list of homeowners in foreclosure and I’d go knock on their doors. I did this every weekend for over a year, 60-80 houses at a time. They taught me the business and I brought them deals. It was a win-win.

How to Become A Successful Investor in 6 Steps

These days I’m often contacted by aspiring real estate investors about coaching and/or mentoring. For those that live in the Phoenix market, here’s what I advise them to do:

  1. Sign up for real estate school, take all the classes and pass the exam.
  2. Hang your license with a broker and become a Realtor.
  3. Come meet with me to learn how to search the Arizona Regional multiple listing service, download foreclosures from their database and write offers.
  4. Scour the MLS everyday and door knock on pre-foreclosures.
  5. Set up a website and voicemail to capture leads.
  6. Bring all prospective deals you find to me and get paid a commission or assignment fee for the contract.

Sadly, no one has made it past step 2. For those Realtors I meet that want to invest in real estate, none has made it past step 4.

Maybe I’m a lousy mentor.

Why is it that after instructing more than 20 people to follow these six simple steps not one person has succeeded? The reality is most aspiring real estate investors are unwilling to put in the effort required to become successful real estate investors. It’s hard work. Like most professional careers it requires dedication and a burning desire to succeed.

I made $24,000 my first year investing in real estate full-time, $70,000 my second. The six-digit paydays didn’t come until after year 3. There were days when I wanted to quit. But in the end I decided the alternative (going back to work) was not an option. I had to succeed.

What are you willing to do to become a real estate investor? Are you up for working nights and weekends? Can you knock on a stranger’s door and talk to them about their looming foreclosure? How about just taking 90 hours of real estate classes? Will you do exactly what a successful real estate investor in your home market says to do or dismiss their advice?

In the end you have a choice – pay a guru thousands of dollars to tell you real state investing is easy OR find a successful local real estate investor that will show you it’s difficult, for free.

Photo: National Library of Australia

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About Author

Marty (G+) is the Chief Financial Officer for Rising Sun Capital Group, LLC, a real estate investment firm based in Gilbert, AZ. His firm purchases homes at the courthouse steps and public REO auctions. They have two exit strategies, either fix and flip or seller financing.

34 Comments

  1. Brandon Turner

    Marty – this is honestly one of my favorite articles I’ve read on the BiggerPockets website, anywhere. So many people come to BP and say “I’m looking for a mentor” or “I need help getting started!” In my own life, I have friends constantly asking for help, asking for money, asking to find them a job. You’ve summed up the problem so well. I’m going to point people to this article. It doesn’t surprise me that no one takes you up on your offer. They could make great money. No one takes me up on mine either. There are no bird-dogs in my entire county – yet I know a number of people who would pay handsomely for one. Too much work, I guess.

    Okay, off my soap box. Great work though!

  2. I get the point of your article, but step 1 & 5 are not free!
    Plus it doesn’t look like those are the steps you followed to become a real estate investor.

    • Mark, I never said doing what is necessary to become a real estate investor was free. My advice, however, doesn’t cost a dime. That said, real estate school cost $400 in Arizona and a WordPress site with hosting cost $60 per year. A small sum to start a business.

      And no, I didn’t follow the steps I recommended here. The market is completely different today than it was in 2003 when I started.

  3. I am currently in year two of my real estate investing. My wife and I have four rental properties and looking for more. Our next five purchases we are hoping on using creative financing. Not sure how to do this but I have heard a lot about it . For example , subject 2, private money and seller / owner financing. We are currently looking for a real estate attorney who understands all these creative way to acquire properties. Does anyone have any suggestions on where I can find educational material on creative financing for investors?

      • Ronnie Sparrow on

        Marty, I am looking at a property now where the seller wants to sell to me subject2. Seller wants to get all his equity as a down payment which is around 23k and then I take over his loan with title transfer but without deed transfer. I believe you call this DEED IN LIEU, or something like that. Basically we will be paying market value without putting 25% down which we do not have. It is not a distressed property, it is ready for move in to use as a rental. Is this considered a subject2? And should I stay away from this deal?

        • Ronnie, I agree with ThosMN – find a local investor if possible. I don’t know how you take title without transferring the deed. In Arizona the deed and title one in the same. I don’t believe it’s a Deed in Lieu. Those are done with borrowers in foreclosure. They deed the property to the bank in lieu of foreclosure.

  4. Ronnie,

    Don’t put your faith in attorneys, even RE Attorneys. They don’t advise you on deals, only on what can go wrong, since that’s all they usually see. Very few understand creative REI in general, much less subject to and some think it’s illegal! It took me a mentor and a couple of deals to really understand subject to, but I’ve done over a dozen sub2 deals now, and short of free-and-clear seller financing (the best) they can be very juicy deals with high % returns. Just closed out one last month, calculated the annual return (18 months to final refi) on my $1000 down was 6203% on that original investment, plus $350/mo positive cash flow while it was leased. Some can drag out for years, though, but as long as they cash flow, I don’t mind.

    Study the forums, here and elsewhere, and/or try to find a local investor who’s done a few, bring him/her a deal, watch how it’s done. It’s not the easiest kind of deal (chging addresses, insurance, interest deductions, etc.) but it’s a great tool to have in your bag.

    • ThosMN, I had a real estate attorney, who was also a real estate broker, tell me once that he became a real estate attorney to kill his own deals. You’re right these deals aren’t easy to understand for the beginner but they are an excellent way to acquire distressed real estate for a minimum amount of cash.

  5. I agree with the article about most folks not following through, however so many posts speak about most people aren’t willing to do “all the work” or as you put it, work nights and weekends etc. I think where many get confused is what are the details of all the difficult work..door knocking? Sending direct mail? Driving neighborhoods? Scouring MLS or craigslist?
    I find a lot of posts are vague when the difficulty of real estate is not actually explained, therefore the gurus take their money because they can at least offer some level of comprehension to someone starting out. Scouring through foreclosure lists, sending mailers out or talking to homeowners for example is not demanding work for me, but tryin to do repairs to a house would be exhausting work by comparison. I for one have a lot of free time during the week, so taking a class or setting up a template site really is easy work.I’ve done both for other business ventures. Can you elaborate more on what the longer hours of work entails?

    • Excellent point Morris. You have inspired me to write another post. I’ll describe my typical day, which includes 2-4 hours of research (pre-foreclosure lists, MLS), 1-2 hours of calls and emails on current deals (weekends, nights included), social media marketing (1 hour a day), etc.

      • Great!!! I would love to read this to fill in the blanks…hats off to you for sharing your knowledge. I have been looking up tax sale properties since last week, probably 6-10 hours in already, but i don’t feel it’s killing me time-wise.
        My biggest issue is always “what next” so to speak. I have no mentor, etc, but i have read a bunch on BP and just gonna go with what i know, and press on with the limited knowledge i have. Most difficult things in success are pushing through the wth do i do now moments, with no one looking over your shoulder…but that’s when you become great, IMO

  6. Marty, almost monthly I get someone contacting me about selling EIULs. They are usually in school to get their life insurance license or have just gotten their license. I always talk to them, sometimes at length. And I offer to mentor them through their first couple years by teaching them how to structure the policies correctly for their clients as long as they work under me and share the commissions. I always tell them that at any time they want to stop working with me they are free to go their own way. I tell them they will have happier clients and better referrals if they don’t screw up deals because of lack of knowledge and the time spent learning how to do the job right will help them for the rest of their career. So far I have had exactly 0 takers on my offer. I assume they hook up with some broker who will send them out to sell product to their friends and relatives until they run out of those folks and then they will leave the field as 95% of folks do! And once their relatives discover they were sold a poor policy, they will have some explaining to do!

    • David, I just finished writing a book about fixing and flipping houses. In it I explained the business from A-Z. My publisher was concerned I was “giving too much away”. I told him that I could tell someone EXACTLY how to do what I do and 99 out of a 100 still wouldn’t do it. You’ve learned the same thing in your business.

  7. As a principal broker I used to have right at 50 agents at my brokerage. You could tell them what to do to succeed but they didn’t want bad enough. They were working a part time job and waiting to hit it big and quit that job. Sadly the real world doesn’t work that way.

    I got rid of all of them. If I knew someone had what It took then it might be worth it. I have tried to help friends over the years break free from the rat race. They all want it but then fall right back into the same patterns.

    These days I am happiest working with my commercial clients and doing my own investment deals.

    • Joel – A lot of people want to be successful, but simply don’t have the work effort to do it. That’s why the failure rate in real estate and much of the rest of society is so high these days. Too many people are looking for the shortcut instead of putting in the time.

  8. THIS is a great post. So many people want to start but never do it. Amazing – just like anything else, real estate investing takes actual WORK. I know it sounds crazy to the late night gurus, but it’s true. I love how you gutted it out and made it happen on your own too. Excellent post, Marty.

    • Thanks Mike. I think there’s a difference between the person that fails to start because of fear vs. the person that fails because of a lack of effort. Not to sound like an evangelist, but thanks to BiggerPockets.com our readers know what it takes to overcome both.

  9. This is INSANE! For months, I’ve been obsessing about “how to get into real estate investing” the main problems being 1) I’m broke 2) I know zero people 3) I don’t know what I dont know/need to know… Alas, I’ve been browsing zillow for fun and running numbers for practice. I’ve found some great deals… “If only we had $16,000″ I exclaim! Anyway, last weekend, I said (out loud to my husband) “Im just going to get my real estate license, hang it with a broker-mainly for some credibility, then we can go check out properties and I’ll take classes/workshops and meet some people”. 3 days later, I read this article. WOW. Thank you for the reinsurance:-)

    Happy Holidays everyone!

      • I’ve been connecting thru local REI’s… i was gonna get my license, but thru some online version at my own pace. I can see the value going to live class – if most of the class do graduate and get their licenses. BUT the question now is… do I take it online at my own pace and really connect with people who i KNOW will be in the business AFTER i get my license?

        Like BB, I had been practicing getting familiar w/the numbers and analyses… THEN I went out there to local rei groups… i’m now talking w/agents and brokers, contractors, and other re investors. I’ve been going back and forth on the value of a RE license when you can get connected to pro’s w/o the license.

        So where I am now is: do I get it online or in a class? does it matter how/where i get the license? AND of course, the question in the back of my head… do i REALLY need a license when i can network w/o the license and worry about disclosure as an agent (if that really can/does work against me as an investor)?

        lastly, I really did believe I could get into a RE deal in 3-4 mo’s… it took me about that long to become proficient w/analyses and my market tho… i’ve “invested” in the past, but not with intention or purpose. i “invested” by lemming/herd mentality… terrible way to invest and good way to lose money!

        • Kevl!n, I’d take the live classes. Better networking opportunities. Plus, taking online classes can be distracting. You’ll need to devote your full attention to learning the material and passing the exam.

          Pre-boom I didn’t have a real estate license (2001 – 2006). When the bottom fell out in 2007 I became a Realtor because of all the short sale/REO deals on the MLS. I’m certain now that, in Phoenix, it would be impossible to operate my business without a real estate license. MLS access and access to properties is crucial. There are days I analyze 30-50 deals. I couldn’t ask someone else to do this research for me.

          As for disclosure, in 5 years it’s never been an issue for me. I note on each offer I write and that I receive that I’m a licensed Realtor in Arizona. As far as I know I’ve never lost a deal because of it.

  10. Great article Marty!

    I have a current Mentoree that did the same thing that you did. Although, she had spent many, many thousands of dollars to learn all about the business (I told her she was over-educated ;)

    In any case, she found me on LinkedIn, realized we’re worked together before (she owned a biz related to the RE industry and we’d used them before). We talked, connected, and hit the ground running. She got 3 deals under her belt within a month and I simply do a profit split with her, no fees, courses, tapes, or seminars.

    Simply, lots of personal coaching and her following the simple steps. It’s really about connecting and taking action!

  11. Hi Marty

    Thanks for the article. If New Jersey wasn’t so far from Arizona I’d take you up on your offer. Also, what is this book you speak of? Is it out yet or on the way. And is It available in kindle format? Thanks again and keep writing, some of us need all the help we can get. :)

  12. I found your book on amazon but it’s not available in kindle format :( do you know if it will be? I read everything on a my iPad now because I can have many books in one :)

  13. I love these articles. The notion that it is easy to be successful.
    It is not to build wealth, statistically it is the easiest but still not easy.
    I would love to run into someone like you in Central PA.

  14. Marty,

    Great article! I’m currently mentoring someone and make time to explain to others who ask. The mentoree is seeing what all REI people understand, what we do requires changing your perception. It’s not for everyone, and that’s a good thing because if everyone was a REI who would do the daily grind jobs that are so important to keeping things running. My mentoree once asked me why I took a couple hours out of my day to explain to a young man what I do. I said, because he asked. I gave him a couple of books to get him started on learning the terms, concepts and ideas that are involved in the industry, and told him once he read those and wanted to learn more. Contact me. I haven’t heard from him yet. Follow through has become something like the famed Unicorn. Talked about but not seen. Thank you Marty for your suggestions and for sharing your story.

  15. Great article! Will start putting this six steps into place, I’m in the Houston TX area and its booming out here can you mentor “Me” here in Houston. Thank you JL

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