Real Estate Investing Basics

3 Things All Rookie Investors Need Before Diving Into Real Estate

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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newbie-start

What does a newbie need before pulling the trigger and buying real estate investments? Let's explore some of the preliminary items all rookies should seek out before diving in.

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3 Things All Rookie Investors Need Before Diving Into Real Estate

1. Funds for Your Investments

Let’s get this out of the way first: You can’t make money in real estate until you have some type of capital already saved in your account. So go out there, work two jobs if you have to, be frugal, and save at least $50,000. Prove it to yourself that you can do it.

There is no magic pill, and there are no get rich quick schemes that actually work. You need money to make money. Whatever real estate strategy that you're looking at doing, you need capital to do it. Even if you're looking at wholesaling, the last thing that you want to do is put a property under contract and not be able to perform on that contract because no one is willing to buy that property for more than you have put that seller under contract for. You're going to look bad in the seller's eyes because they're depending on you to close on this transaction. The deal could be a good one, but you might not have the luck to find someone to buy it for more from you. But if you had that existing capital in your account, you could close on the deal and then figure out what else you're going to do with it. You could wholetail it to someone else, fix it yourself, or continue trying to wholesale it to someone else. Money gives you options.


Related: Why Newbies Should Adopt Richard Branson’s “Screw it, Let’s Do it” Philosophy

2. A Strategy

The second thing you’ll need to do is to pick a strategy. I’ve already mentioned these get rich quick schemes. Everyone’s plugging their products and services, so there’s a lot of room for confusion. Pick a strategy and focus on that one particular thing, whatever it may be. I strongly recommend you choose a strategy that suits your end goals and where you want to be in 5, 10, or 15 years.

Maybe wholesaling right now can help you obtain starting capital so you can buy, fix, and flip. Maybe becoming a real estate agent can help you learn the ins and outs of how real estate operates, from the MLS to negotiating deals to working with buyers and sellers. Regardless, master that one thing and execute on it. Do not be a jack of all trades and a master of none. Don’t spread yourself thin. They say that mastery comes after 10,000 hours of working in that one particular trade. So master that and then you can go into something else.

3. A Network

And last but not least, remember your network equals your net worth. My whole life as a real estate investor, business owner, and entrepreneur has evolved because I surrounded myself with the most successful, brightest people. If I’m not the dumbest person in the room, I’m doing something wrong. So go out there and surround yourself with the people that you want to be like one day.

Related: The Real Estate Investing Strategy I’d Recommend to Newbies (As a Seasoned Investor)

I’ve said it before: Your network equals your net worth. The more people you speak to on a daily basis, the more that you ask them about what they’ve done, the more their answers will mold you. You’ll not only become a better individual, but you’ll also become a better business owner and a better entrepreneur. Their stories, their lessons, and their experiences are valuable. 

Anything you’d add to this list?

Leave your comments below!

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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    Dan Heimer Developer from California
    Replied about 3 years ago
    How about having the knowledge or following a system etc so much is missing in this article!
    Engelo Rumora Specialist from Toledo, OH
    Replied about 3 years ago
    Thanks for your comment Dan, This blog was meant to be short, sharp and attention grabbing without consuming to much of the readers time. The long, more detailed strategies are for the “book nuts” Much success
    John Murray from Portland, Oregon
    Replied about 3 years ago
    The Beatles 10,000 rule rings true for most important professional exploits. When I started in my profession I barely scratched the surface at 10,000 hours by 20,000 I was pretty good and by the time I reached 100,000 hours I was an expert. The transferable skills are essential to success in real estate. Rapid problem solving skills and conceptual thinking with a broader big picture mentality will be the difference between success and failure. The most important concept is transparency, if you do not understand a concept bring in more horsepower to clear the concept in simple terms. So clear that an average eight grader could understand. Twisted calculations with woulda, shoulda, coulda will bring disaster. When I started my BRRRR biz 2 years ago, I had capital, knowledge of concept and the skill set to complete each phase. Some of the pieces were missing but I have always winged and faked it until I could clear the concept and made money.
    Account Closed from Philadelphia, Pennsylvania
    Replied about 3 years ago
    Some people have capital, read piles of RE books, attend seminars and still never start, being paralyzed with fear. I would say ” just start already, get your feet wet”. I doubt a lot of investors have and follow any system at the beginning. Creating a system that works for you is important and helps you scale your business. What works for one, might not work for others.
    Engelo Rumora Specialist from Toledo, OH
    Replied about 3 years ago
    Agreed Lana, “Taking action” as I mentioned in another comment is the best way to start. I see many folks getting caught up in stats and demographics only to find out later that it’s about having/working with the right people that will either make or brake their investment and not the stats/demographics. Thanks
    Account Closed from Philadelphia, Pennsylvania
    Replied about 3 years ago
    The Beatles became popular only after their manager Epstein noticed them and used one of the sales strategies to promote their records. Undeniably they had charisma and talant to go with that. I ?The Beatles
    Account Closed from Philadelphia, Pennsylvania
    Replied about 3 years ago
    LOL the BP forums doesn’t recognize mojis I meant to say I love The Beatles and the question mark appeared instead of heart.
    Engelo Rumora Specialist from Toledo, OH
    Replied about 3 years ago
    lol
    Engelo Rumora Specialist from Toledo, OH
    Replied about 3 years ago
    Great comment John, Another thing to make mention of is “hard work”. I see way to many people everyday talking the talk but not walking the walk. I always say that “actions speak louder than words” Take action, make mistakes, learn from the mistakes, repeat taking action and get better. Have a great day.
    Allan Sabo Real Estate Investor from Scottsdale, AZ
    Replied about 3 years ago
    I have to say it… Cliches like this “If I’m not the dumbest person in the room, I’m doing something wrong.” tick me off. If those people you surrounded yourself with, held the same value – then you wouldn’t be in their circle now would you? I am grateful to those who guide and mentor me and to whom tolerate me not being at their “level”, and just as they do for me, I also do for a couple others. I feel it better to be the relay of great advice and guidance (a temporary stopping point) as shared freely to me by those far more capable than to be the hoarder of it. Just my 2 cents.
    Engelo Rumora Specialist from Toledo, OH
    Replied about 3 years ago
    Thanks for your comment Allan, I guess the saying is cliche and off course there is value that everyone in the room can bring. I think your comment tho is contradicting. You mention being “grateful to those who guide and mentor me to whom tolerate me not being at their “level”. In my opinion that means “being the dumbest person in the room” But hey…. There many different ways to say “potato” and “tomato” it would just depend on the accent hehe Much success
    Bryan Mitchell Rental Property Investor from Columbus, GA
    Replied about 3 years ago
    I agree as well. I know people use catchy phasing, but that one I don’t care for. In other words, I doesn’t elicit the response the author is looking for.
    Robert Ferrell from Yuba City, California
    Replied about 3 years ago
    I agree, financing is extremely important when it comes to being successful and having the ability to execute when opportunity arises. However, I think waiting to get into the game until you’ve saved 50k would likely deter most people from ever getting started. It would take nearly 4-5 years saving every penny from a part time minumum wage side hustle to come up with that kind of money. And the prospect of working 65 hour weeks for the next 250 weeks does not soud appealing. Using that method, I feel the majority of people would probably stop before they could ever even really get started. Instead, I would highly suggest going the creative financing route. House hack your way into a low down payment multifamily and start building your experience and cash flow as a landlord, try and negotiate seller financing with a low down payment, or start asking the people in your circle if they would be interested in or willing to put up some money to help you fund a great deal. Using these methods, you’ll be able to get started much faster, learn skills that would be much more valuable, and best of all, won’t have to spend any extra hours slaving away at some minimum wage dishwashing job for the next 4-5 years.
    Engelo Rumora Specialist from Toledo, OH
    Replied about 3 years ago
    Thanks for your comment Robert, My opinion is that in todays day and age, if it takes someone 4-5 years to save $50,000. They have no business trying to invest in real estate. With so much opportunity in this beautiful country and so many ways to make extra money, it would just come down to hard work, sacrifice and living a frugal life. Work at McDonalds during the day and Walmart during the night for 2 years and rent a room instead while saving every penny. During that period, immerse yourself in everything and anything real estate so you’re ready to pull the trigger once the time is right. People are lazy and looking for a way to get rich quick and the many “guru’s” are happy to sell them the “get rich quick schemes” Success in real estate in my opinion comes from hard work who isn’t willing to work hard, just won’t make it. No matter how creative they get with financing. I like house hacking but that is for big time amateurs in my opinion. A “house hacker” can do only so many deals while someone saving the cash to start flipping or wholesaling can really super charge their investment efforts. Thanks and just my opinion off course.
    Bryan Mitchell Rental Property Investor from Columbus, GA
    Replied about 3 years ago
    I don’t think working at McDonald’s and Walmart will get you the cash you need in less than 4-5 years. It is not good use of your time. Possibly house hack, get a roommate or two, and have a side hustle in which you actually can learn something that helps you realize your real estate goals is more appropriate.
    Engelo Rumora Specialist from Toledo, OH
    Replied about 3 years ago
    I agree Bryan, I think working at McDonalds and Walmart can get you the needed money to start much quicker than 4-5 years 🙂 I’m using those 2 as an example but I’m sure folks could find other/higher income ways to earn faster and save harder. I’m yet to see a “house hacker” that has truly taken their portfolio to another level with a substantial real estate holding. It seems to be the “in” thing to do now because folks live in expensive markets and have no other choice but to leverage. And off course, moving to another market where the numbers make more sense and $50,000 goes a long way won’t work as mummy, daddy or wifey say “No”. On the contrary, there are quite a few folks on the forum that have flipped their way to financial freedom. I chose a different route of working hard, saving every penny, flipping one house and fast forward 5 years to now over 400 deals. Thanks
    Terrence Allen Kinchen from Bellefontaine, Ohio
    Replied about 3 years ago
    What if I have equity in my house. Does this qualify as the $50,000 to invest?
    Account Closed from Philadelphia, Pennsylvania
    Replied about 3 years ago
    You can take out a HELOC inthe amount of up to 80 -90% of your equity and use for down payment. I am now researching the same thing. Our local banks are giving 4% interest only rate with 10 to pay it out. So you really have to have a certain property in mind to calculate the numbers. If mortgage on the investment property + HELOC payment is higher then your potential income you will be under water. You need to choose a property that would generate enough cash flow to cover this payments + property maintenance expenses.
    Engelo Rumora Specialist from Toledo, OH
    Replied about 3 years ago
    Thanks for your comment Lana, I wouldn’t use the $50,000 cash only to buy another property and get into more debt. I’d use the $50,000 to help me make more lump sums so I can pay off the HELOC as quickly as possible. Just my opinion. Much success
    Engelo Rumora Specialist from Toledo, OH
    Replied about 3 years ago
    Thanks Terrence, As long as you have $50,000 in capital and understand the risk of owing that same amount that would be ok. Use the $50,000 to make more. Money makes money and that is a decent enough amount to get started Thanks again and much success
    Account Closed from Philadelphia, Pennsylvania
    Replied about 3 years ago
    You can also do cash our refinance if you are going to get smaller interest rate that you currently have on your primary home. And unlike HELOC, you will need to pay closing costs.
    Felix Arteaga from Nevada, Texas
    Replied about 3 years ago
    Awesome article. Thanks for posting.
    Engelo Rumora Specialist from Toledo, OH
    Replied about 3 years ago
    Thanks for your comment Have a great day
    TJ Nash from Milwaukee, Wisconsin
    Replied about 3 years ago
    Great information…suggest some step-by-step insights or methods to help another get started going the creative finance route
    Engelo Rumora Specialist from Toledo, OH
    Replied about 3 years ago
    Thanks TJ, I don’t believe in creative financing for beginners. Work hard and live frugally. Save some money and get started with a buy, fix and flip or wholesale deal. Much success
    Krishnan T. Real Estate Professional from Tampa, FL
    Replied about 3 years ago
    Nice article Engelo. I am interested in buying properties that can get me good rental income.Is that approached in a different way vs flipping a house?. thanks,
    Engelo Rumora Specialist from Toledo, OH
    Replied about 3 years ago
    Thanks Krishnan, It sure is different. When you buy and hold, you aren’t liquid and will quickly tie up your money so you won’t be able to grow quickly. Unless you have a tonne of cash lying around then you can buy and hold. I suggest buying, fixing and selling and building your cash position before you start holding. Do flips to make money and when you have a surplus of money, then start holding. I just started holding after doing over 400 deals and 5 years in the biz lol Much success
    Taizion Durr from Tampa, Florida
    Replied almost 3 years ago
    Great article
    Engelo Rumora Specialist from Toledo, OH
    Replied almost 3 years ago
    Thanks for your comment. Have a great day