Real Estate Investing Basics

Essential Real Estate Investment Tips for First-Time Buyers

Expertise: Real Estate Investing Basics, Personal Development, Landlording & Rental Properties, Real Estate News & Commentary, Business Management, Flipping Houses, Real Estate Deal Analysis & Advice, Personal Finance, Real Estate Marketing
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New investors are always asking me for my top real estate investment tips. In truth, investors should absorb any advice they can get their hands on—but there are two essentials you must know.

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Just thinking about buying a home for the first time brings waves of emotion. It’s both an exciting and frightening concept for most people. First and foremost, know you’re not alone! Over one-third of all Americans are considering buying a home in the next five years. Our First Time Home Buyer’s Guide prepares you for the road ahead.

Must-Have #1: A Solid Real Estate Investing Team

When you’re looking to buy an investment property or build a large portfolio, start with your team. And never compromise.

I can’t explain how vital building a solid team is to your survival, success, growth, and everything. You must surround yourself with the right people.

Now, if you're looking at buying turnkey, there's a lot of shady operators out there. So make sure that you conduct your due diligence and find a good, trustworthy operator.

If you're looking at doing it yourself you need to look at real estate management, a property management company, a construction company, maintenance people, a trustworthy real estate attorney, an accountant that understands real estate, a title company, a building inspector, and an appraiser and lender.

Another one is a mentor—someone excelling in the game every day—who you can rely on for advice.

Related:20 Must-Have Team Members for Real Estate Investing Newbies

These people are your eyes and ears and the heart and soul of your real estate endeavors. So it’s very important that you never compromise on these people and that you don’t start until you have a competent bunch of people around you. This can take six, nine, 12 months to establish.

Guys, there is no rush. Real estate is not a one-night stand. It’s a marriage, a long-term play, and a commitment. Sometimes it can take five, 10, or 15-plus years to get you where you need to be—from a real estate portfolio standpoint, from a passive income standpoint, and from a growth standpoint.

So why are you rushing in?

Take your time, and remember that all good things take time. Network equals net worth, so build the team before you start your real estate endeavors.

Must-Have #2: Knowing the Numbers

The second thing you should never compromise on is the numbers in the deal. Before you start your real estate investment journey, you have to know what kind of passive income you want to generate every single month to achieve financial freedom and to be able to live the lifestyle that you want to live.

Once you’ve established that passive income amount, let’s just say it’s $10,000 per month, then you know that every single property that you buy needs to get you a step closer to achieving your end goal.

Then you start looking for markets, areas, regions where you can buy a good property in a good area with good structure. And maybe a bit of room for capital appreciation even though it's not that important. Plus, since you have good people there, you can predict the longevity of your investment from a return-on-investment standpoint.

So it’s really important that you are only accumulating and buying properties that get you one step closer to your goals.

We've established our goal of $10,000 per month, or $120,000 per year, so why are you buying properties where the return on investment breaks even—or worse, you're losing money every month? Why?

Related: Quit Your Day Job and Find Financial Freedom: Here’s How to Become a Real Estate Investor (Full-Time!)

If your expenses are more than the income, that’s insanity. That is not investing to suit your end goal.

Don't compromise and buy such properties because someone says they can wave their magic wand and the property is going to appreciate in value. They say your're going to be a millionaire.

Guys, all good things take time, and nothing happens overnight. There is no get-rich-quick here. You’re going to have to pound the pavement for many years to achieve financial freedom.

systems-not-goals

That’s why it’s very important that you never compromise on the numbers. Ensure you’re not including any capital appreciation in your projections, because it’s speculative. Look at the core fundamentals of every single transaction, including purchase price, expenses, and income.

Underestimate your income, and overestimate your expenses. Always give yourself a margin of safety.

How much does that property produce in passive income every single year?

It produces $10,000 per year. Great.

Does that $10,000 get me one step closer to achieving my end goal?

Yes, because I want to have $120,000 a year in passive income, and this property gets me one step closer to that.

It’s very simple.

Back to the first thing: Find the best team, because teamwork makes the dream work. The second thing is to never compromise on the numbers and make sure the net return on investment gets you one step closer to your end goal. That’s it!

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Questions? Comments?

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Engelo Rumora, a.k.a."the Real Estate Dingo," quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate al...
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    Douglas Spence Investor from San Diego, CA
    Replied 5 months ago
    Engelo, thanks for writing that great article! Keep them coming!
    Engelo Rumora Specialist from Toledo, OH
    Replied 5 months ago
    My pleasure mate Thanks for your comment
    Patrick Pierre New to Real Estate from Garden Grove, CA
    Replied 5 months ago
    I definitely needed to see this. I'm currently analyzing a few properties and I started to get creative with the numbers just to make it work for me. But big mistake, the numbers never lie. I may lie to myself but the numbers don't lie. Thanks for the article.
    Engelo Rumora Specialist from Toledo, OH
    Replied 5 months ago
    My pleasure mate and good point. The numbers will never lie. Underestimate your income and overestimate your expenses. Be a suspect :) I wish you much success
    Barry H. Investor from Scottsdale, AZ
    Replied 5 months ago
    ENGELO Excellent article and I especially like your second point. As a Turn Key Remodel Seller in Kansas City MO with tenants already in place for my investors, I ALWAYS tell them you are not buying appreciation, you are buying CASH FLOW. With my Seller financing with loan and all Cap Ex included, my Borrower/Buyers earn upwards of 20% ROI annually, but I have to constantly remind them that there will be no appreciation. It astounds me how many buyers of rental properties want to include appreciation in their calculations.
    Engelo Rumora Specialist from Toledo, OH
    Replied 5 months ago
    Thanks Barry and same here. Cashflow is investing. Appreciation is speculating. Keep being great
    Frank Casi Investor from Staten Island, New York
    Replied 5 months ago
    Another thing I might add is be very careful dealing with any and all Turnkey companies. They will put you in low income areas . They will rehab by putting lipstick on a pig so don't be surprised by the every month maintenance for repairs you totally did not include in your number calculation. My advice is pick an area that is no more then 3 hours from where you live so you can ensure the area is not a bad area and due the rehab/ spruce up yourself, your contractors so you know it is being done correctly. Always add 10% for vacancy and repairs and if your not managing it yourself another 10% for management fee.
    Jhon Restrepo
    Replied 5 months ago
    Absolutely true.
    Engelo Rumora Specialist from Toledo, OH
    Replied 5 months ago
    There are good companies and bad ones across all industries. 3hrs is not enough IMO. I moved 14hrs by plane from Sydney to the USA in search for great deals. Make the sacrifice Much success
    Zane Paul
    Replied 5 months ago
    .... Or maybe the turnkey company did a fantastic job at rehabbing the property, but they neglected to tell you it hasn't been rented out for 6 months and they "forgot" to turn the water off. So everything looks great until you get someone in there and turn the water back on and now you find the broken pipes and have $15,000 worth of damages on a $50,000 home
    Dennis Morgan
    Replied 5 months ago
    Great article! Thanks for the advise! I'm relatively new to Investing. Do you recommend any turnkey companies?
    Engelo Rumora Specialist from Toledo, OH
    Replied 5 months ago
    My pleasure. My company off course lol Ohio Cashflow :)
    Tatiana Bryner
    Replied 23 days ago
    I believe in OH cashflow! Numbers do work most of the time, not sure of the appreciation. Great article Engelo!
    Tom Gillotti
    Replied 5 months ago
    The only issue I have is with the numbers. If I always underestimate my income and overestimate my expenses I'm going to miss out on a lot of deals because I wasn't just realistic with both of them. Estimating low and high respectively maybe I see a 7% return but if I run them realistically maybe I see a 12% return... one of those I might act on, one of those I might not...
    Engelo Rumora Specialist from Toledo, OH
    Replied 5 months ago
    You will only miss out on the crap deals. The good deals speak for themselves You will know value when you see it Much success ps. I don't get out of bed unless I'm netting 15%. Look harder, the deals are there to be had
    Juan Luna New to Real Estate from Wadsworth, IL
    Replied 5 months ago
    Thanks Engelo, two important point to never comprise when investing on property. I am a new investor and I haven't purchased my first property yet. But I definitely need to develop a team that will help me along the way to my real estate journey. I understand it will take time and I am willing to learn what it takes to be a real estate investor. Thank you Juan
    Engelo Rumora Specialist from Toledo, OH
    Replied 5 months ago
    Thanks Juan, All good things take time. Don't rush. Much success