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Podcast Hard Money Lenders Books New York
BlogArrowReal Estate Investing BasicsArrowThe Single Most Important Piece of Advice I’d Give New Investors
Real Estate Investing Basics

The Single Most Important Piece of Advice I’d Give New Investors

G. Brian Davis
Expertise: Landlording & Rental Properties, Real Estate News & Commentary, Personal Finance, Real Estate Investing Basics
139 Articles Written

Learning how to invest in real estate is overwhelming. From finding deals to running the numbers to financing to legal entities and asset protection to tax strategies to property management to working with contractors, most new investors don’t know where to begin.

And that’s exactly why so many new investors fail. In the face of that overwhelm, they either experience analysis paralysis, or they focus on the wrong things, or they just start buying and figure they’ll learn what they need along the way.

None of those outcomes end well.

Here’s the single most important advice I’d give new investors to get them started as quickly as possible without risking the shirt on their back.

Focus on the Fundamentals of Earning a Profit

No matter your personal goals or real estate investing strategy, the fundamentals remain the same. The individual tactics and minutiae may vary, but the core skills required to earn a reliable profit through real estate should be your foundation.

Right now, I want you to start a simple two-column list. On one side, I want you to list the fundamentals—the things you absolutely must learn before buying your first property. The other column will be much longer, listing all the things that you’d like to learn about real estate investing, but which you don’t need to know in order to buy a property.

The fundamentals column is short and only includes three items. Make a deal with yourself:

“I will master these three concepts before I buy my first deal. In my continuing education, I will go on to learn more, but I won’t let the more advanced concepts stop me from buying my first deal.”

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Start with these three fundamentals, master them, and then you can dive into the deep end of investing and ongoing education.

Fundamental 1: Analyzing Deals

If you don’t know how to accurately forecast your profits, you won’t make any. In fact, you’ll probably lose money—and not just a little money, either.

It doesn’t matter if you’re planning on flipping houses or on buying long-term rental properties, short-term vacation rentals, mobile homes or trailer parks, or commercial office buildings. The calculations vary of course, but whatever type of investing you’re interested in, you need to master the math behind analyzing deals.

In my real estate investing career, I messed this up—badly. It cost me hundreds of thousands of dollars over a decade.

Close up view of bookkeeper or financial inspector hands making report, calculating or checking balance. Home finances, investment, economy, saving money or insurance concept

I bought long-term rental properties in low-end neighborhoods. Yes, my timing was unlucky (2007 to 2008), and yes, it’s easy to underestimate expenses in low-end neighborhoods. I clung to those excuses for a year or two. But many years and thousands in losses later, I can acknowledge that I’m no victim. I can’t blame external factors like the housing market collapse or my atrociously bad tenants.

The crux of my problem was that I didn’t know how to calculate rental cash flow, and I failed to accurately run the numbers on expenses like vacancy rate, repairs, maintenance, property management fees, and accounting and bookkeeping costs.

Learn how to accurately calculate profits for any deal in the niche you’ve chosen. When in doubt, ask experienced investors to double check your analysis.

Master this skill, and you’ll never make a bad investment in your life.

Fundamental 2: Finding Deals

Being able to accurately forecast profits on any given deal is great, but where do these deals come from?

There’s no “deal tree” that you can walk up to and pluck a deal from. It’s not like investing in stocks, where there’s a finite list of options and you pick the one you want and click “Buy.”

Instead, you need to choose one or two tactics for finding deals and master them. It takes work: work to learn, work to implement, work to constantly improve.

For example, say you choose “driving for dollars” as your tactic for finding deals. You need a process for choosing neighborhoods to drive, a schedule for when you’ll drive which areas. You need a process for looking up owners, and a template for contacting them, potentially using multiple methods.

When an owner responds to you, you then need a process for evaluating the property, and another for making your (low) offers persuasive.

You need to create, implement, and then master all of these processes in order to reliably find good deals. It’s not rocket science, but it’s not easy either. It requires discipline and grit to keep going and to keep improving your deal-finding strategy.

Deals don’t just happen. The deals that fall into your lap rarely prove to be great ones. You need to go out and find good deals, and it will cost you time, effort, and education to do it right.

Fundamental 3: Funding Deals

Analyzing and finding deals only takes you as far as your ability to actually buy them.

That usually comes down to two components: your available cash and your options for financing any given deal.

For cash, you want to maximize your savings rate. Savings rate is not only the key to reaching financial freedom at a young age, it’s the key to building wealth of any kind. That gap between what you earn and what you spend is what determines how much wealth you’ll accumulate in your life.

You can whine and moan about how you don’t earn much money, how you can’t save anything because the cost of living is so high in your city. Boo freaking hoo. Stop thinking in terms of why you can’t save more, and start thinking creatively about how you could do it.

For example, you can house hack or ditch your car, or move overseas—or better yet, all three. I’ve done all three and have no regrets whatsoever.

Start with this blueprint on how to save $50,000 in two years while earning the median U.S. income.

But there’s still a limit to how much cash you can save, and real estate is expensive. You’ll probably need financing, as well, so start researching lenders who work in your investing niche. For someone using the BRRRR strategy for example, that means two types of lenders: short-term purchase-rehab lenders and long-term mortgage lenders.

There are nationwide examples of both, and plenty of regional and local options, as well. Aim to build relationships with at least three lenders in each category that you need, because not every lender will accept every deal you run by them. You need a series of contingency sources of funding in order to reliably close deals.

And yes, there are plenty of creative ways to finance deals, but they fall under more advanced investing concepts.

Everything Else: The Advanced Stuff

Don’t get me wrong, you should learn the more advanced pieces of the real estate investing puzzle, too. Continuing education is vital to your success, in both real estate investing and anything else you pursue to earn money.

But it’s not strictly necessary to buy your first deal.

Here are a few quick examples within the “everything else” category that can wait until you’re ready to tackle them:

  • Legal entities and asset protection
  • Tax strategies and tax-sheltered investing
  • More advanced financing tactics like seller financing, privately raised funds, etc.
  • Renovations requiring more than cosmetic updates (which involve permits, multiple contractors, and more)
  • Niche real estate investments like low-end properties
  • New construction and development

Imagine feeling the need to learn all of that before buying your first deal! You’d never close a deal.

Start with what you need to know, and then gradually expand into what you’d like to know.

Related: 5 Tax Strategies Smart Investors Consider Implementing at Year-End

Final Thoughts

You have enough on your plate when you set out to learn real estate investing. So if you want to succeed without getting caught in the trap of analysis paralysis and overwhelm, you need to pick and choose the most important lessons that will prevent you from losing money on your first deal.

And then let go of the rest, and set it aside for learning in the months and years to come.

Because there are so many niches and strategies in real estate, this also means choosing one to focus on. Define your own goals and definition of success. When you know what you want, it helps you hone in on a path to get there.

A path that you can take one step at a time, starting with the most foundational lessons and gradually expanding from there.

You’ve heard mine; what’s your single most important piece of advice for new investors? What do you wish you learned when you were first starting out?

Leave a comment below!

By G. Brian Davis
G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their ...
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G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their living expenses. Through his company at SparkRental.com, he offers free rental tools such as a rental income calculator, free landlord software (including a free online rental application and tenant screening), and a free masterclasses on how to reach financial independence within 5 years.
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29 Replies
    Peter Murphy
    Replied over 1 year ago
    Hi Brian, Just as I was feeling completely overwhelmed with all there is to learn before I make my first deal I read your article. You've put it all back into perspective for me. Thank You very much!
    G. Brian Davis from Baltimore, MD
    Replied over 1 year ago
    Glad to hear it was helpful for you Peter! Very gratifying to hear, thanks for the comment!

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    Jill L Ripley Flipper/Rehabber from Massachusetts
    Replied over 1 year ago
    Thank you Brian for this insightful article. I have been feeling overwhelmed. Not knowing where to start can be paralyzing. I just turned 51 and just starting into RE investing. I don't have time to be paralyzed. Looking to gain financial freedom with 5 yrs.
    G. Brian Davis from Baltimore, MD
    Replied over 1 year ago
    I know that feeling of overwhelm all too well myself. Love the 5-year goal for financial independence - let me know how I can help, that's my company's focus!

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    Gina Cardarella Rental Property Investor from Los Angeles, CA
    Replied over 1 year ago
    Hi Brian looking to do my 2nd purchase and wanting to do multi units -- good to know I am on the right track first how to do the numbers...and reading a lot from all the people who have done it thank you for your advice
    G. Brian Davis from Baltimore, MD
    Replied over 1 year ago
    Thanks Gina, and best of luck with your second property!

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    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied over 1 year ago
    Great article Brian!
    G. Brian Davis from Baltimore, MD
    Replied over 1 year ago
    Thanks Andrew, much appreciated!

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    Wenda Kennedy JD from Nikiski, Alaska
    Replied over 1 year ago
    I've made a bunch of those mistakes too over the years. I tell new investors to take it slow. There's a long learning curve. A lot of those skills can only be acquired through experience. There's nothing instant about being a real estate investor. It's a game for the long haul.
    G. Brian Davis from Baltimore, MD
    Replied over 1 year ago
    So true Wenda!

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    Suzan Hampton
    Replied over 1 year ago
    Thanks for the excellent advice, Brian. It really helped to be reminded of the K.I.S.S. concept to reduce analysis paralysis preparing for my first deal!
    G. Brian Davis from Baltimore, MD
    Replied over 1 year ago
    Glad it was useful Suzan, and K.I.S.S. is a great rule to live by. Best of luck with your first property!

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    Adrian Corrales
    Replied over 1 year ago
    Great article! One newbie questions: What deal finding strategy would you suggest I focus on as someone who will have to invest out of state? My local market (San Diego) is too expensive for me to start with.
    G. Brian Davis from Baltimore, MD
    Replied over 1 year ago
    I'd network with turnkey sellers in the market where you're looking to invest. You may not get fantastic deals, but they'll be easy at least, which is what you need if you're long-distance and don't have a local partner.

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    Jeffrey Grieshop New to Real Estate from Coldwater, OH
    Replied over 1 year ago
    loved this, I think I am in analysis paralysis. Some of those advanced concepts are things I worry about when I should just stick to the basics as a new investor. I have done extensive reading and learning but so much of it will not apply to me, yet! Those things would include many of which you touched on: creative financing, asset protection, marketing plans (I think this can even fall under advanced), and maybe some others. I think for now I need to stick to the basics you outlined. I think I can gather and assess the needed information to calculate cash flow (BP calculators lay it out real nice). I have sat down with one lender for a preapproval (traditional financing) and I will reach out to others! Now, I need to simply get through more properties and make offers that work for me(finding deals). The timing of this article along with the timing of this video https://www.youtube.com/watch?v=NZN4mTe2PJ0 (I discovered Coach Carson just today) helped put things in perspective for me today, dumb it down and get to work. Thanks, Brian!
    G. Brian Davis from Baltimore, MD
    Replied over 1 year ago
    Glad it was useful for you Jeffrey! Thanks for the comment, and best of luck breaking your analysis paralysis!

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    David Pierce Property Manager from Orlando, FL
    Replied over 1 year ago
    Yes. Very good overview. Also look and see if there are investor groups. Here in Orlando I belong to one and they are a very good source of money - and experience. If there is a good deal you have a group of experienced investors to fund you. But you have to put in your dues by getting to know them. Best advice? After 30 some years in the business? Never fall in love with a deal....
    G. Brian Davis from Baltimore, MD
    Replied over 1 year ago
    Great point David - deals come and go, and you need to stay focused on the numbers, not get fixated on any single deal. They fall through all the time.

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    Phil Hucke
    Replied over 1 year ago
    Working my way through my first project right now. HUGE learning curve and some late nights going down analysis rabbit holes. I crunched enough numbers at the outset to know it was a solid investment, but figuring out all the other aspects of managing the investment is real work. I find myself slowly weeding out strategies I don't want to use, hoping I'll uncover the one that works for me.

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    Tom Cyr Flipper/Rehabber from Grand Prairie, TX
    Replied over 1 year ago
    New investors need to be aware of context. In this part of the real estate cycle where properties are fully or overvalued, margins are thin. They need to know it's not always like this and if they choose to deploy limited capital with little prospect of making a decent profit, they could be trapped in a project when the market shifts and becomes a buyer's market. They need to know that at market tops, the gurus are mostly selling training and referring to deals that they did in the good ol' days when they could buy with less competition with a decent margin. Timing means a lot in this business and too many beginners fall prey to experienced investors looking to unload expensive property. If they knew context, they would spend this time raising capital and learning the business and waiting for the first right deal to come to them. In my market, the normal pricing a wholesaler would offer used to be 65% of ARV minus repairs. Today wholesalers are getting buyers to pay 80% so by the time a new investor pays carrying costs during rehab and transaction costs to sell, they are lucky to break even. At best they learned something they can take with them from the school of hard knocks.

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    Kurt Alder from Panama City Beach, FL
    Replied over 1 year ago
    Great article, I'm following now and looking forward to more great content!

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    Steve Mcmahel New to Real Estate from Wake Forest, NC
    Replied over 1 year ago
    Very helpful article as well as replies that help me see the big picture. Thank you

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    Jessi Hrouda
    Replied over 1 year ago
    Thank you ... I am just in the learning phase of real estate investing and kept reading and reading and reading stuff. This helped me to put things a little into perspective.

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    John Murray from Portland, Oregon
    Replied over 1 year ago
    Great article Brian. As a successful RI guy I would add some bigger picture stuff. Learn how Ginnie, Freddie and Fannie work as well as the mortgage broker industry in general. There is discussion about privatizing the big 3 mortgage giants once again. Learn about Dodd-Frank and how the subprime crash was created by Mark to Market accounting and the signs of market problems during the Bush Administration. As the millennials approach 40 we will see if they are aware or asleep at the wheel, I think they are pretty smart. We will see.

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    Account Closed
    Replied over 1 year ago
    Great job clearly putting down the "101" of REI. With over 1100 close transactions behind my belt on the financing side- I think I would need about 300 pages to relay the same message- analysis paralysis has always been my issue though. Education is the key- I would suggest any rookie investor to partner up his first deal with a seasoned investor- even if you break even on the deal it's the best investment you will ever get- as long as they are good. Also when it comes to lending- traditional lending is NOTHING like a seasoned broker that has the resources for investment stuff.

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    Shellie H.
    Replied over 1 year ago
    Great article Brian! Yes... the dreaded analysis paralysis in my nemesis.

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    Diana Lealaimatafao from San Antonio, TX
    Replied about 1 year ago
    Im a newcomer & this article is just what I needed. Thank you!
    G. Brian Davis from Baltimore, MD
    Replied about 1 year ago
    Glad to hear it was useful Diana! Feel free to reach out at any time via direct message, happy to send some free resources your way.

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    Sarah R. from North Central Florida
    Replied about 1 year ago
    Another thanks for great article helping hone in (& back to what I've learned already but ..... Think fear is taking form by leading me into further research (consuming time) on those "advanced" items of which there are So. Very. Many. One question, my home/office are in quite rural area.... Nearest decent sized city is Gainesville, FL. Mostly interested in buy & hold (rentals), multi-family. But SF likely fine as first. Gainesville is 45 minutes drive each way, but again, not much besides cows & trees between... Thoughts? Perhaps same as other gent you replied to, turnkey investment opportunities? While won't sell my land & house, have flexibility to Airbnb or rent it & live semi-perm in larger city too. Thoughts?

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