Real Estate Investing Basics

Your First Steps as a New Real Estate Investor

Expertise: Landlording & Rental Properties, Personal Development, Real Estate News & Commentary, Business Management, Flipping Houses, Mortgages & Creative Financing, Real Estate Deal Analysis & Advice, Real Estate Wholesaling, Personal Finance, Real Estate Marketing, AskBP, Real Estate Investing Basics
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newbie-start

I began walking just minutes from childbirth.

I walked right out the door as my mother was being carted out in a wheel chair. The doctors were amazed.

By three months old I was power walking around my local shopping mall (with sweat pants), by six months old I was running side by side with my old man,  and by one year I had completed(and won) my first Boston Marathon. It’s all been easy since then.

Impressive, right?

Of course this isn’t true.

I doubt I could do more than burp and cry by one year. I didn’t begin walking till almost two, and I still have trouble running to this day (that coordination is a tricky thing…).

Forgive my earlier lie (you didn’t believe me, I hope) but I bring it up to illustrate a point:

Learning to walk takes time.

Learning to walk takes patience.

Learning to walk takes determination.

I can guarantee there isn’t a soul reading this article who didn’t fall down many times before finally getting the hang of walking. Many of us still fall down often for no apparent reason (I swear, that sidewalk just moved on me…) No one is born with the walking talent but it must be learned and experienced by each and every person.

The same applies to real estate investing. It’s not something you are born with. Sure, maybe you are naturally good at math or built like an ox so remodeling is a one man job. The career, however, is a learned process. Like my parents pulling me up by my arms and encouraging me to take my first few steps, investors must also take those steps and learn how to invest.

I am often asked by readers of my blog, “What are the first steps I should be focusing on?”

While this question largely depends on the type of investing one wants to engage in, there are a few key steps that every investor should try to take early in their journey. These are not rules, just helpful guidelines. If you are an active investor, please feel free to add more tips below in the comments. And if you aren’t an active investor – well, comment anyways. I like feeling popular.

Read, Read, and Read Some More

I’m not kidding. Read… a lot. Don’t tell me that you don’t have time to read. Unless you’ve thrown your television and computer away, you probably are not that busy. Consume the best real estate books you can find. Internalize the lessons learned by teaching your spouse, parent, roommate, or best friend everything you just learned.  Even if you don’t like to read, download the audiobooks and listen in your car. Read the BiggerPockets forums. Read this, and other real estate blogs.  Read, read, read.

Reach Out to Other Investors.

One of my favorite quotes of all time was found in The Four Hour Work Week:

“You are the average of the five people you associate with most.”

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If you want to be a real estate investor but spend the vast majority of your time with your World of Warcraft video game guild – you probably are a pretty great gamer but not so hot in the investment (or lady) department. I’m not suggesting that you abandon your friends – but open your mind (and schedule) to the people who you want to be like.

The “rich” are often accused of being snotty and separate, but the simple fact is – the rich enjoy spending time with people who like the things they do.  Therefore, if you want to build wealth through real estate – make friends with those who build wealth through real estate.  BiggerPockets is one of the best ways on planet Earth to do this, because you don’t even need to put clothes on (yeah, that’s a little weird). Real estate clubs and landlord associations are another great way to meet other investors (but please, wear clothes.)

Furthermore, what do you bring to the relationship? What are you good at? If you are great at web design – why not offer to help an investor with their website. Do you like building things? Why not help an investor remodel a house. Are you just really fun to be around when intoxicated? Well, I’m sure that’s an asset somehow. However you do it – connect.

Begin Planning Your Escape

If you are looking to get out of your day job and into real estate, you need a plan.  This life transformation will not happen by itself. No one is going to give you the keys to your financial freedom. Instead, you need to take it.

Begin with a piece of paper (go ahead, I’ll wait…)

Where are you today?

Where do you want to be in five years?

What will you need to have in order to get to that place in five years?

Chances are, you are going to need money. You probably are going to need good credit. Those things you can begin assembling today.

You will also probably need property. Begin mapping your journey. It’s okay if you don’t know every part. Making the plan is half the battle.

Let’s walk through one together. If it’s your goal to leave your job by making $4,000 per month in passive income within five years – write that down.

Next, how many properties does that equate to? I suggest-  at minimum – to achieve $100 per month, per unit in passive cashflow. This means that after every bill is paid, including setting aside money to pay for vacancies and future repairs, you have $100 per unit in your pocket (for more information on this, see The 50% Rule in the forums). So how many units does that take to get $4000 per month?

Forty.

Now we have a concrete number to work toward. Forty units that meet your minimum requirements.  Whether you are buying single family homes, duplexes, small apartments, commercial properties, whatever.

Don’t get overwhelmed. Forty units is not that bad. Not when you have five years to do so. Perhaps begin with a house, then a duplex, then a small apartment, and finally a large apartment. With each purchase you will gain experience, relationships, and knowledge.

It does get easier.

Walking Through Your First Investment

I didn’t start walking at birth – and neither did you. I also didn’t suddenly become a real estate investor.

I learned, I grew, I worked.

I took steps. Small ones, which gradually became larger, and now I feel I can finally keep a steady jog through the real estate investment world.  Don’t be discouraged if you haven’t yet begun taking those steps. You don’t need money to begin. You don’t even need a lot of time. They are called “baby steps” for a reason – because they are easy.

If you are struggling to get out and make your first steps – you aren’t alone. However, don’t let that fear keep you from experiencing one of the best and most rewarding careers out there. Real estate investing is not easy, but it is not a complicated game either. Begin taking those steps right now and sooner than you realize you’ll find that walking isn’t really so hard.

Image: seandreilinger

Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He is a nationally recognized leader in the real estate education space and has tau...
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    Jeff Brown
    Replied over 7 years ago
    Hey Brandon — Good food for thought. In general, how are these investors acquiring these 40 properties? At $100 a month in cash flow each, I’m assuming there are loans involved. Thanks
    Brandon Turner
    Replied over 7 years ago
    Yeah, definitely loans. So, the $100 is cashflow after the loan payment, utilities, vacancies, repairs, etc. There are obviously many strategies – this is just one way to look (and easily understand) the “buy and hold” strategy using loans. It’s actually one of the reasons I like multifamily properties so much- because it’s a lot easier to get a 40 unit apartment than to get 40 single-family homes. Obviously, there are risks/rewards with any strategy. This is just my favorite way!
    Jeff Brown
    Replied over 7 years ago
    In today’s conventional lending atmosphere it’s not difficult, it’s virtually impossible to acquire 11 homes with financing, much less 40. Wish it were otherwise for sure. Thanks Brandon.
    Ahmed T Aijazi
    Replied over 7 years ago
    In my opinion, Lesser the loan better it is. Best way is to buy cash (at least I do). In the long run its less stressful and more fruitful. To arrange for cash best way is to partner with like minded.
    Brandon Turner
    Replied over 7 years ago
    That’s why I like multifamily property. Economy of scale!
    Brandon Turner
    Replied over 7 years ago
    And Jeff- you think those days will ever return where a guy could pick up and finance 40 properties?
    Jeff Brown
    Replied over 7 years ago
    I do, Brandon. BawldGuy Axiom: Lenders lend. 🙂 Once the government gets out of private lending decisions, and yeah, it’s a two way street, the lenders will once again look at every loan in the specific context and circumstances of that borrower, that property, and the overall picture. Back in the day, how many loans a borrower might already have on the books, was merely another factor to consider. Nothing more or less.
    Brandon Turner
    Replied over 7 years ago
    That’s why I like multifamily property. Economy of scale!
    Jeff Brown
    Replied over 7 years ago
    I do, Brandon. BawldGuy Axiom: Lenders lend. 🙂 Once the government gets out of private lending decisions, and yeah, it’s a two way street, the lenders will once again look at every loan in the specific context and circumstances of that borrower, that property, and the overall picture. Back in the day, how many loans a borrower might already have on the books, was merely another factor to consider. Nothing more or less.
    Dale Osborn
    Replied over 7 years ago
    Every one must start somewhere. By starting out with the basics – you can figure out what you need to accomplish to arrive at the end result of “financial freedom”. Reading or any other type of education is crucial before taking the leap into the action mode. Being around other investors and networking with them can make your learning curve smaller. However, from my observations, some mistakes just have to be made by each individual to learn from them. By writing down your goals and checking on them periodically, you can see gradual progress from start point towards the end goal line. Once you get that first one under your belt, you will be hooked and the adrenaline will kick in so fast you will be ready to try another one before the ink is dry on your closing papers from that first deal.
    Brandon Turner
    Replied over 7 years ago
    Thanks Dale! Great advice!
    Brandon Turner
    Replied over 7 years ago
    Thanks Dale! Great advice! Reply Report comment
    Kyle Taylor
    Replied over 7 years ago
    I found your article to be very motivational. I’ve been feeling a bit discouraged but I just have to keep taking those baby steps and surround myself with like minded individuals. Great job!
    Ali
    Replied over 7 years ago
    Hey Kyle! I just graduated from real estate investing “newbie-hood”, as I like to call it. If you want to chat, I might be able to help you along? Since it’s all very fresh in my head 🙂 [email protected] Ali
    Brandon Turner
    Replied over 7 years ago
    Thanks Kyle! Those are the steps that worked best for me, anyways!
    Mike
    Replied over 7 years ago
    Brandon, another well written gem….and humorous as well. Overcoming fear is such a huge part of overcomng those small steps at first. But after you take the first small steps, the fear starts to dissipate, the confidence grows and as long as you keep getting up after each misstep or tumble, as well as learn from on each one, goal achievement and success is often just a matter of time.
    Brandon Turner
    Replied over 7 years ago
    Thanks Mike! It is tough to overcome the fear of the first deal, but it does get easier, huh!?
    Michael LaCava
    Replied over 7 years ago
    It sure does…especially when I’m reading your stuff for inspiration! Mike
    Brandon Turner
    Replied over 7 years ago
    Oh, now I’m blushing! 😉
    Gerald
    Replied over 7 years ago
    Brandon – this cracked me up this morning. You are right about planning your escape. I think most people who dream of escaping the nine-to-five race don’t dig into this step enough. Sure they dream of it but, Creating a plan that they will follow usually doesn’t happen. Then they wonder why nothing isn’t working. Great article. Gerald Reply Report comment
    Gerald
    Replied over 7 years ago
    Brandon – this cracked me up this morning. You are right about planning your escape. I think most people who dream of escaping the nine-to-five race don’t dig into this step enough. Sure they dream of it but, Creating a plan that they will follow usually doesn’t happen. Then they wonder why nothing isn’t working. Great article. Gerald
    Brandon Turner
    Replied over 7 years ago
    Thanks Gerald! I agree, without a good road map, road trips are a lot more stressful, expensive, and lengthy! Thanks for the comment!
    Roselle
    Replied over 7 years ago
    Brandon, Thanks for the encouragement, and the practical advice. I have recently made some big goals that sometimes overwhelm me when I look at them next to my current financial state and time constraints. Thanks for reminding of what I already know. It is possible, and I can do it – one step at a time.
    Brandon Turner
    Replied over 7 years ago
    Awesome Roselle! Goals are great, but make sure you spend some time creating a road map to get there! Good luck and keep in touch!
    Maria
    Replied over 7 years ago
    Thank you for this. I’ve been avidly reading this over and over just trying to get a sense of how to start. Great article! Great advice! Maria
    Brandon Turner
    Replied over 7 years ago
    No problem Maria! I think I should put together a checklist for starting, huh? Maybe another blog post soon!
    Maria
    Replied over 7 years ago
    Absolutely, that would be aewsome! Looking forward to reading it! 🙂
    Brandon Turner
    Replied over 7 years ago
    No problem Maria! I think I should put together a checklist for starting, huh? Maybe another blog post soon! Reply Report comment
    Willam
    Replied over 7 years ago
    I would just like to say that this article is very inspiring to me I am jumping into the real estate market and buying a 6 unit 3 floor apartment building which will be my first real estate investment property. If you can think out of the box get a partner to share your dreams,and to have someone may it be a relative or friend that knows a lot about fixing stuff I think this can be a good recipe for success. Thanks Brandon for the advice I will be using it toward my financial freedom
    Brandon Turner
    Replied over 7 years ago
    Awesome and thanks for the comment and nice words! I love properties like the one you are buying (as long as the number’s make sense!) Good luck and keep me updated on how it goes!
    Kim
    Replied over 7 years ago
    Thanks for the laugh. I’ve been reading quite a bit on articles but yours crack me up. Its very informative and inspirational. I love the learning how to walk analogy I’ve been doing direct mails for some time but still no luck with motivated sellers. Your article is just what I need to keep me going. Question, how would one go about doing this job with no money ? I can’t get loans because bad credit, no one I know has money to partner up, and doing direct mailing cost money. Any sugestions?
    Kim
    Replied over 7 years ago
    Thanks for the laugh. I’ve been reading quite a bit on articles but yours crack me up. Its very informative and inspirational. I love the learning how to walk analogy I’ve been doing direct mails for some time but still no luck with motivated sellers. Your article is just what I need to keep me going. Question, how would one go about doing this job with no money ? I can’t get loans because bad credit, no one I know has money to partner up, and doing direct mailing cost money. Any sugestions?
    Brandon Turner
    Replied over 7 years ago
    Hey Kim! Thanks for the comment! I’ve written a lot on my own blog about investing with no money, as well as on BP – but for a quick summary – partnerships are my favorite way! If you can be the “knowledge side” of the partnership and they can be the “money side” both of you win!
    Miko
    Replied over 7 years ago
    Thank you for this wonderfully written blog! Great information….I am looking forward to growing in more knowledge about this industry! Reply Report comment
    Miko
    Replied over 7 years ago
    Thank you for this wonderfully written blog! Great information….I am looking forward to growing in more knowledge about this industry!
    Brandon Turner
    Replied over 7 years ago
    Thank you MIko! I appreciate it!
    Ali
    Replied over 7 years ago
    Awesome blog! And it’s all so true. I started out by just reading every book I could get my hands on. Then you have to start researching, and eventually something is really going to resonate with you. You have to just keep pushing.
    Ali
    Replied over 7 years ago
    Awesome blog! And it’s all so true. I started out by just reading every book I could get my hands on. Then you have to start researching, and eventually something is really going to resonate with you. You have to just keep pushing.
    Brandon Turner
    Replied over 7 years ago
    Hey Ali, I started the same way. I still love reading, though after a while you realize that it’s the same info repeated time and time again. Each time, though, I do pick up on new things – which makes it worthwhile to keep reading (and makes reading RE books much faster!) Thanks Ali!
    Ali
    Replied over 7 years ago
    Ha. All true! Occasionally I find a new book to dig into, but for the most part I just go back and reread a lot of the good ones I’ve already read. As I progress on, I pick up different things in the books that either didn’t apply at the time or for whatever reason didn’t stick with me the first time. Like you said. Any favorites of yours you want to share? I’m sure I may have missed a couple good ones that are worth grabbing.
    Ali
    Replied over 7 years ago
    Ha. All true! Occasionally I find a new book to dig into, but for the most part I just go back and reread a lot of the good ones I’ve already read. As I progress on, I pick up different things in the books that either didn’t apply at the time or for whatever reason didn’t stick with me the first time. Like you said. Any favorites of yours you want to share? I’m sure I may have missed a couple good ones that are worth grabbing. Reply Report comment
    Bret
    Replied over 7 years ago
    Thank goodness i found some realistic advice. I am looking into investing in a very poor section of a large city. Im glad i found a site full of people willing to help. Thanks for the article i will stay tuned.
    Joshua Dorkin
    Replied over 7 years ago
    Bret – You’ve found the best community of real estate investors online. Be sure to read through the articles here on the blog, and then spend some time on our real estate forums where you can meet over 100,000 other people like you. Sign up for free and start asking any questions you’ve got.
    Brandon Turner
    Replied over 7 years ago
    I “second” what Josh said. The forums are amazing! They helped me huge when I was beginning and continue to do so. Keep in touch Bret!