Real Estate Investing Basics

A Letter to My “Family” About Real Estate Investing

Expertise:
11 Articles Written

Dear Family,

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

I know I am not an expert in real estate—and especially real estate investing. I know I have made many mistakes financially and have failed, in large part, to adequately prepare my financial self for retirement. I have failed to give myself “options” for much of my life and have failed to build up an estate that I can pass on to my kids to ensure they have options later in life.

However, in spite of my past failures, I have educated myself about real estate. I have prepared and challenged myself to right the metaphoric “faltering ship” and focus on the opportune years I have left to build at least a modest real estate portfolio.

I have read many thousands of pages of real estate investing books, listened to hundreds of hours of real estate investing podcasts, and have even obtained my real estate license, all as part of an effort to adequately prepare myself for the realities of real estate investing.

I have stacked the deck in my favor, as much as anyone can, and have carefully established a plan that is not only realistic—but simple—and greatly reduces the personal financial liability that I face. Furthermore, my plan was designed to include others, including my family or team, because one thing I learned during my education phase is that success in this is not something easily done alone.

Therefore, I am offering you the opportunity to invest only yourself and your “sphere of influence” in building something that can improve all of our financial situations during our retirement years. I am not promising riches or even a path to “coasting” during your retirement years; I am simply offering “options.”

I will not ask for money nor even much time from you. All I ask of you is for you to tell everyone you know what we do and what we are looking for and to be ever vigilant for an opportunity to exploit. In return, I will give you equity in each property you locate that we obtain and reward you for each lender who offers to provide private financing.

That’s it—no financial risk to you at all. I simply want to take advantage of your sphere of influence in order to exponentially increase mine.

All that I ask is that you are determined and entirely committed to building our portfolio in order to give each and every one of us in our “family” options by striving to connect with people each and every day.

Sincerely,

He Who Is Seeking Options

male hand writing in notebook with pen

The Importance of a Village

There is an old saying that it takes a village to raise a child. I will offer that it takes a “village” to build a successful real estate investment business. Anyone and everyone who has listened to Brandon Turner of BiggerPockets has heard him say on numerous podcasts that he built his property portfolio by telling everyone he knows what he is doing.

In my brief few years as a real estate investor, I have found that statement by Brandon truly to be the key to scaling a portfolio. Think of it by using the well-known analogy of dropping a small pebble into a large pond. The corresponding ripples created by the pebble travel farther and farther than the small area the pebble actually touched.

Simply put, I have a small sphere of influence. But if I begin to add the spheres of influence of the people I tell, and then who they tell, and on to others, eventually that sphere becomes exponentially larger.

Related: Why You Should Tell Everyone You Know You Invest in Real Estate

I am excited about the potential that real estate holds for our company and most importantly, our retirement income, which is the purpose of all of this. My brother and I are building a real estate portfolio not just to amass wealth or property but also as the means to an end—retirement income.

More pointedly, our real estate portfolio will provide options for us later in life.

I tell my children constantly that money, in and of itself, does not make you happy. However, it does give you options in life, and those options can be the catalyst for your happiness. I am not the only one who believes this.

Chris Rock, the actor and comedian, said about wealth, “Wealth is not about having a lot of money; it’s about having a lot of options.”

hand drawing on blackboard with chalk social or social media network scheme

Who Is Your Family?

The title of this article indicates that it is a letter to my family. In my circumstance, my actual family is not only my current business partners but also my potential business partners. Your “family” may simply be your team that you have built in order to further your real estate goals and build your portfolio.

Whomever you have in your “family,” make sure they are dedicated to the end goals of the whole and not simply the individual.

Look at it this way, you can assemble the best team out there. You can fill all the blanks with experienced people who can deal with any and all potential issues and who are experts in their respective fields. But without commitment to the team and a willingness to always keep that team moving forward, their attributes are greatly diminished.

I will offer that it is better to have a team of like-minded individuals with similar (if not the same) goals and drive as you, who may have far less expertise in their respective field than a group of so-called “experts,” who see you as just a project or a “feel-good” cause.

People with joined hands as a team

What Are Your Options?

My brother and I see the options that this business holds for us—the potential. Potential can be explained as the ability to do something; however, you have not quite yet realized that ability yet. In other words, you have the skills, the desire, the dedication, the determination, etc. to succeed. But for whatever reason, you have not put all of those attributes to work in the proper way to realize your full potential.

As I stated earlier, we look at real estate investing as a way of providing options for us later in life. We do not have the luxury of investing for 30 to 40 years before we reach our retirement years. I will be 50 this year.

We are not looking for a home run, but we are focused on “small ball” investing (to use a baseball term). We are looking to score—but not in the same traditional way as many investors.

Related: 5 Smart Ways to Start Investing in Rentals Later in Life

We understand that time is against us and that our ability to build a portfolio of 100 properties, all paid for in the next 10 to 15 years, will be a difficult undertaking (although far from impossible). However, a portfolio of 20 to 25 properties that we can self-manage until we turn 65 is within our “potential.”

We may not have every property paid for (our business model says we should) by then. But even if we do not, we will have a large amount of equity in those and will be in a position to have the properties managed by someone else. We can then sell them off one by one and pocket the equity in them—or sit back and enjoy the monthly cash flow they provide.

Whether we make $1,000 or $10,000 a month in income, it is more than we would likely make without the property. This income is designed in part to supplement our retirement. But more so, it is designed to help build wealth for our children and grandchildren (at least my wife says we better have grandkids by then!).

I used to play a lot of church league softball and one of the older guys on the team, Lee Englund, was fond of telling the batters that “a walk is as good as a hit.” What he meant was that it really was more important to get on base than worry about how you got on base.

Don’t let your pride get in the way because you wanted to hit a home run. After all, you can’t score runs if you don’t get on base, and if you can’t score runs, you will never win the game!

Close-up of a baseball sitting near the foul line

The Meaning Behind My Letter

I firmly believe that the statement my friend Lee made is applicable to investing—and in this case, real estate investing. The point of this article (finally) is that you need to construct a team that is DEDICATED to the end game and is vested in creating options, not simply wealth.

Furthermore, dedication is just as important—if not more important—than experience. I will offer that you will go further with a dedicated team than an experienced team. Experience is taught or learned; dedication comes from within.

One of the last questions asked on the BiggerPockets Real Estate Podcast each week is what sets successful investors apart from those who fail. My response would be faith.

I am not talking about religious faith, per se. I am speaking about faith from the “family” in the process and the end game. Faith that by increasing the sphere of influence, it can greatly increase the opportunity for success for all the players.

My desire is to motivate my “family” to see things through my eyes, to see the potential that their sphere of influence can create.

This is much like how dropping that small pebble into a pond affected a much larger area than what the pebble actually touched. Essentially, just like that pebble, expanding my sphere of influence outside of what I actually touch provides for the potential to give each and every one of us options.

I am not promising we will hit a grand slam—or even a triple or double. However, if we all are committed, dedicated, and exploit our sphere of influence each and every day, and if we have faith, we will get on base. This, in turn, leads to scoring runs and ultimately provides us with at least the “option” to win the game.

For those of us out there for whom time is waning, remember: A walk is as good as a hit.

Do you agree with my position? Are you and your team tapping into your sphere of influence?

Let’s discuss in the comment section below!

Wayne Connell is a Deputy Sheriff by night and a budding real estate entrepreneur at all other times! In 2015, Wayne and his contractor brother teamed up to purchase and develop a real estate portf...
Read more
    Allyson Edwards Rental Property Investor from Goleta, CA
    Replied 11 months ago
    Hi Wayne Nice article. My question for your business model (which i like) how do you pay off the property but also still buy orhers? Do you use cash flow? Do you use CF to bulid down payment and also pay down current properties? Thanks
    Wayne Connell Rental Property Investor from Hershey, NE
    Replied 11 months ago
    Allyson, What we do is try to find owner financed properties with low or no down payment. On the properties we do put money down we use the equity in other properties to put money down and then roll that payment into the expenses for the property we are buying. To date we have purchased four duplex's and built a micro duplex and are currently purchasing a small coin operated laundromat, all with zero out of pocket expense for purchase or closing costs. I hope that helps but I am more than happy to try to answer any other questions you may have. Thank you so much for reading and commenting. I do appreciate it. Wayne
    Jordan Berry Real Estate Agent from Fullerton, CA
    Replied 11 months ago
    Hey @Wayne Connell. Sounds like you're doing some interesting stuff! Love to hear it. I own a couple of laundromats and run a website for laundromat owners and prospective owners that has a ton of free information and resources. DM me if you're interested and I can share the link. I'd love to hear how it goes with your business, too!
    Wayne Connell Rental Property Investor from Hershey, NE
    Replied 11 months ago
    Jordan, Thank you so much for reading and commenting. I would definitely be interested in learning all I can. I will DM you for that information. Thank you again. Wayne
    Jordan Berry Real Estate Agent from Fullerton, CA
    Replied 11 months ago
    No problem. Glad to help any way I can.
    Eddy Ogbekhilu
    Replied 11 months ago
    Hello Wayne, Your thread was so captivating and brilliant simple model to follow."Options" are wonderful.
    Wayne Connell Rental Property Investor from Hershey, NE
    Replied 11 months ago
    Hello Eddy, I agree, options are a beautiful thing! Thank you for reading my article and for the kind comments! Wayne
    Obadiah Roszman Investor from Nw Ohio
    Replied 11 months ago
    Wayne, Great letter and well written article. Thoughtful insights to keep a positive outlook when beginning an investing career a little later in the game than one would want. I would have liked to see you use the word "leverage" rather than "exploit" when referring to you sphere of influence, but other than that, very tasteful article. I look forward to the next one. Keep up the great work!
    Wayne Connell Rental Property Investor from Hershey, NE
    Replied 11 months ago
    Obadiah, Thank you for the comments and for taking time to read my article. I agree with you 100% that "leverage" was a better choice of words and is more descriptive of what we are trying to do. That one slipped past. Thanks again I truly appreciate the insight! Wayne
    Dwayne Phillips
    Replied 11 months ago
    Wayne, great article, very inspiring! I’m also looking at REI as a means to supplement my retirement but want to leverage my family to help us all get there; we’re close to those retirement years....Any suggestions on how I can get them be more dedicated to believe in that common goal taking action (getting to first base) and building wealth and having options for all of us to gain?
    Wayne Connell Rental Property Investor from Hershey, NE
    Replied 11 months ago
    Dwayne, family is fickle thing. While I have had nothing but good experiences mixing family and business many do not. As far as how to get them to be more dedicated, if you figure that out please let me know!! In all reality I think it is a combination of educating them and persistence. I am not talking about badgering them but using any opportunity to get your point across. I do this with my family and slowly but surely they seem to be getting more comfortable with the idea. Demonstrating the possibilities in real life scenarios also seems to help. Good luck! I do appreciate the fact you took the time to read my article and comment. If I can ever be of assistance please let me know. Wayne
    Account Closed
    Replied 11 months ago
    I have take the real estate but I can't remember what I have learned. How can I change my thoughts of habits
    Wayne Connell Rental Property Investor from Hershey, NE
    Replied 11 months ago
    Account Closed, Changing habits is often a difficult thing to do. What I have found that works for me is to make small, sustainable changes over time. Work on recalling one thing then slowly add others one at a time. Another thing is making real estate part of your daily routine. I have found this often helps me in retaining information. Thank you so much for reading and taking the time to comment. Please let me know if I can help at any time. Wayne
    Eddy Ogbekhilu
    Replied 11 months ago
    Hello Wayne, Having to take equity from other properties you own that still has a mortgage...how often are you confronted with the issue of DTI? How do you resolve this issue with lenders if you don,t meet the minimum threshold! I have equity of at least 400k (owned free and clear) but having road blocks due to other properties that has mortgages. Anyone in the BP community is free to offer helpful insights on this issue. Thanks Wayne and the BP community.
    Jeff Bosaw Rental Property Investor from Saint Louis, MO
    Replied 11 months ago
    I am pretty sure you either need to refinance a loan up to 80% loan to value or use a Heloc which will also limit you to an 80% loan to value ratio. Just depends if you already are locked into a good rate or if you could improve it with a refi.
    Wayne Connell Rental Property Investor from Hershey, NE
    Replied 11 months ago
    Eddy, I have not come up against this issue but with 400K in equity I would think your DTI it would not be an issue with many banks. I use three different banks and recently refinanced my personal residence to take equity out for business purposes. Due to my track record I was allowed to do a 90% refi, equity loan and use part of that equity to purchase a commercial business. There are often options to exploit but you may have to shop around until you find a bank that will allow you to do what you want. I have found that with some exceptions, banks do have the ability to adjust their loan parameters. My refi is a perfect example. I was told they could not loan more than 80 percent but then they got permission to loan up to 90% after I requested more. I hope that helps. Thank you so much for taking time out of your day to read my article and comment. Wayne
    Bryan Drury Investor from Owensboro, Kentucky
    Replied 11 months ago
    Dwayne Phillips, you can lead a horse to water, but you can’t make him drink. I’ve found the best way to help people is by setting examples, and taking action myself. That doesn’t always work, because they don’t see the money. It helps if they can see the money, but we are kind of private, unless they ask with good intentions. But most people don’t have a big enough “want to” to ask, so rather than inflame them by words, just take action and if they notice, great. If not, then you can say you tried.
    Wayne Connell Rental Property Investor from Hershey, NE
    Replied 11 months ago
    Bryan, You offer excellent advice and I love that philosophy to take action and see if they notice! Thank you so much for reading and for the wise words! Wayne
    Dwayne Phillips
    Replied 11 months ago
    Thanks Bryan, that sums it up; “Take Action and Set the Example”
    Amani Na
    Replied 11 months ago
    I so appreciate your honesty, humility, and commitment to creating possibilities. As a new rental investor, much of what I read feels like it involves breakneck urgency to get started, move to the next deal etc. The pace and tone of your writing and the strategy outlined resonated deeply for a sense of a calm and methodical, yet still ambitious, approach to REI. Thank you!
    Wayne Connell Rental Property Investor from Hershey, NE
    Replied 11 months ago
    Amani, Thanks so much for the kind comments and for taking time to read my article! Stay the course and you will succeed. Good luck and if I can ever be of assistance please feel free to reach out. Wayne