5 Basic Rules to Start Investing in Real Estate

In This Article

Let’s go through a few tips for getting started investing in real estate. More specifically, this is five things that every new real estate investor needs to know.

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Interested in REI? Here’s Where to Start

1. Get crystal clear on what it is you want.

See, a lot of people say they want to get into real estate, but then they’re like, “Should I buy single family or multifamily? Maybe I should flip houses? I think I’ll do wholesale. You know, apartments look fun.”

They jump from thing to thing, and they never have clarity—that crystal clear opinion—on what it is they want. Maybe they want to do everything, or maybe they’re just not sure. But I would encourage you to get crystal clear on what it is you want.

And honestly, it doesn’t even matter that much. You’ll change over your career. But if you sit there forever going, “Oh, this sounds fun! That sounds fun!” You’re never going to do anything.

It’s more important that you choose than what you choose—if that makes sense. That’s pretty good, right? You can tweet that!

2. Learn the basics of creative finance.

Look, I don’t care if you have a million dollars in the bank or six bucks in the bank. Doesn’t matter. Learn how creative finance works.

In other words, how do people put together big real estate deals or small real estate deals using other people’s money? Because chances are you don’t have all cash to buy a property. So, learn things like:

• How does a loan work?
• How would you get a loan from a bank?
• What do you need to qualify for that?

And you might be saying, “Well, I don’t know. That’s why I’m watching this video.”

Cool, but go to the bank and ask them. Or pull out your phone and call somebody. Get those questions answered.

Or what if you don’t have any money for the down payment… does that mean you can’t invest? Of course not! Once you learn that there’s a lot of avenues for creative real estate, you’ll figure out other avenues.

For example, early on in my career, I used to partner with people often. In fact, I still do partner with people today—just in a little different way.

Related: Creative Financing: 5 Outside-the-Box Tools Savvy Investors Use to Build Wealth

But I learned that if you bring in other people to fund your deals, they can fund it and you can do all the work. So at the end of the day, you really need to have three things:

1. Knowledge of what you’re doing. That comes from experience, from reading books, from working with other people. But you’ve got to have knowledge.
2. Hustle—somebody has to go out there and do the work needed to find those deals. Real estate’s not super easy. Now, I’m not saying it’s the hardest thing in the world. But you’ve got to put some time, some effort, some searching into finding deals and putting together things.
3. Then, there’s the money. You’ve got to have money involved. There’s very few zero down loans. That just means you’ve got to hustle to figure out the money side.

But here’s the cool thing. These three things—the knowledge, the money, and the hustle—you don’t need to have all of them. If you can just come with one or two of them, you can bring on other people with the other parts.

So, maybe you have the hustle and you have the knowledge; you can find a partner with the money. They can bring the down payment, and you can get the deal done.

And that’s not the only way—there’s seller financing, there’s lease options, there’s wholesaling to make cash. You can then put that down on properties.

You can flip houses, and take that money and put it into things. There’s a lot of creative ways to get into real estate. Hard money, private money, lease options.

Anyway, there’s a lot of ways you can get involved with real estate—but you’ve got to understand the basics of creative finance.

3. Become a master at analyzing deals.

I always like to say, I do this webinar every single week on BiggerPockets, and you should come. Every week on this live webinar, I tell people the number one most important skill a real estate investor can have is deal analysis.

Here’s why. Once you know how to analyze a deal to find out exactly how much you should pay for it, you can find good deals. You just analyze a whole bunch and eventually you find pretty decent ones that work out.

You make some offers, and you will get deals. And once you have deals, you can find the financing for it.

But it all comes down to being able to identify what a good deal is. And the way we do that is through deal analysis.

Now, that scares a lot of people. And so I talk a lot about it again every week on these webinars. I do real-life deal analyses live with people, showing them how I run the numbers.

I cover:

• How do you determine cash-on-cash return?
• How do you figure out what the average return is per year if you hold it for five years?
• What’s the cash flow look like?
• What’s your appreciation look like?

You have to understand these things. But the good thing is it’s not that difficult, and it can be learned.

In fact, I did a video for our YouTube channel called “Calculating Numbers on a Rental Property [Using the Four Square Method!].” That’s a great way to get started.

If you want software, we have software on BiggerPockets that can help you with that, as well.

Really learn how to analyze deals, and become a master at it.

4. Seek to build a deal pipeline rather than finding deals.

Now, I said being able to analyze deals is super important. It helps you find them. But what’s more important than finding deals is building a machine that delivers deals.

For example, let me tell you two stories.

Let’s say you were looking for breakfast, right? You’re looking for breakfast, and you decide you want scrambled eggs. So, you go out to the store, and you pay $3 to get yourself three big eggs. You go home, make breakfast, and eat your eggs.

But then the next morning, you’re hungry again. You want more breakfast.

Now, you’ve got to go back to the store, buy more eggs, come back home, and so on. That’s what most people do.

But when it comes to deals, it’s a lot of work to go out there and find a brand new deal every time. Especially if—imagine this—every time you bought an egg from the grocery store, that grocery store never again sold that egg. You had to go to other grocery stores. Pretty soon, you would always be searching for grocery stores to buy eggs.

Related: 27 Ways to Find Real Estate Deals

But what if instead you got a chicken? What if you got chickens who delivered consistent eggs? That’s what I’m talking about when I say “deal pipeline.”

You’ve got to get a system where leads just come in automatically.

Here’s one tangible example: You find a real estate agent to set you up with automatic email alerts for properties that are coming on the market in your market. So you get an email whenever a new duplex hits. Boom! Or maybe you want an apartment complex. Boom! You get an email for every new apartment.

That’s a deal pipeline—it runs. You can also do things like direct mail marketing, driving for dollars, Craigslist ads. There are a lot of ways you can find deals. But focus on building a machine, a deal pipeline, rather than looking for that one yummy egg.

5. Work on your business with persistence every single day.

I love the phrase “consistent daily action,” because that’s really what it takes to achieve success in pretty much anything.

Like if you want to lose weight, you’re not gonna go to the gym one time or even once a month. You’re going to go regularly—like every day, maybe every other day. Right? You’re not gonna eat healthy some days and not other days. You’re going to be consistent and do it every day.

And so work on your business every single day.

The cool thing about real estate is it doesn’t take four hours a day, five hours a day. You could literally build an entire real estate portfolio working 15, 20 minutes a day if you’re consistent with it.

But the problem is people are never consistent. They just do little bits here and there. So, set aside time every single solitary day to do something that we talked about.

Here’s a simple goal for you: Analyze one real estate deal every single day.

Think about if you did that… If you spend five minutes analyzing a deal once a day, after a few months, you’re potentially getting hundreds of deals. Over the course of a year, you’re getting 300-some deals analyzed.

Do you think out of those 300-some deals, maybe some were close enough? You could make an offer and maybe some of those got accepted? Yeah.

It’s all just a funnel at the end of the day. But the only way that funnel works is when you’re consistent, and you’re doing it every single day.

Are you stuck on any of these phases of getting started? What do you need help with?

Ask experienced investors in the comment section below.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.