What's Holding You Back from Your First Real Estate Investment?

Question

Hi BiggerPockets Community, Specifically Our Rookie Real Estate Investors!

I'm curious to know, what's the number one thing holding you back from closing your first real estate investment deal? Whether it's financing, finding the right property, understanding the market, overthinking the process, or something else, I am interested to hear your experiences and challenges.

Melinda Francis · Answer

Just not sure where to start. I've been looking at properties, found a realtor and have been doing tons of research. I think my biggest fear is funding. There are so many different options and how do I know what's best for me? Do I need to get an LLC or put the loan in my name? So many questions so I know I am simply overwhelming myself.

Max Smetiouk · Answer

Hi,

1. solid financial foundation - working on it now

2. Knowledge, reading and participating in coversations currently.

Max

Kevin S. · Answer

@Salvatore Lentini

Very true.  While I know there are many successful investors who started as novice or even 'accidentally' there are many who have had an edge or advantage but do not reveal it, such as:

1.  Used to be and still is a real estate agent/broker.

2. Has construction background either working it or if not, has family who is in construction.

3. A friend/neighbor is contractor/construction or even a whole seller/realtor that introduce to real estate investing.

4. Starting as a business that came with real estate is an easier start than someone who has a W2 job.

5. Not many people are able to house hack for various reasons.

6. Real estate handed down thru family after their passing.

7. I know of a lender myself who I was talking to about getting into REI just bought his first duplex. Being a lender definitely give an edge as one knows all the nuances, the ins and outs of fundings compared to someone like Melinda Francis (another post) that her biggest fear that stops her is not knowing anything about funding.  While that can be learned, one may argue, the point is about some people having the edge which an entirely W2 person do not have.

8. Others with different 'stories' I haven't thought of...

While I don't have any stats, I think the number of investors that started off with an edge or introduced in to with help/information is no small number.  People with no one to turn to have the hardest time taking the first step. But then what do I know :)

Salvatore Lentini · Answer

@Melinda Francis - I know this sounds surprising but you don't have to have ALL the answers before starting.  You will learn as you go.  There are some basics that you need to know but every deal has its idiosyncrasies.  Even now when I'm buying large commercial deals, I'm constantly learning.  I started with single family rentals and made the leap into a 14 unit multi family.  Wasn't as hard as I thought it would be.  Certainly wasn't 14x harder.  Before I bought an office building I had zero experience and zero knowledge in that space.  I learned after being presented with an off market deal.  I bought another.  And contrary to what you hear out there, office buildings can still be great investments if you buy them right.  Never owned a farmers market before.  Knew nothing about them.  Bought one a few years ago and its been one of my best investments.  Bought a motel and now am planning on buying 2 more.  I'm also developing a small townhouse subdivision.  I've only ever done rehabs (with some so extreme that they were practically new construction!) but I'm learning as I go along by meeting with an architectural firm, meeting with the borough and talking with contractors.  Bottom line, know that it's ok to not know.  Unlike stocks, real estate transactions take a long time giving you PLENTY of time to learn along the way :)  Feel free to message me with any specific questions.

Kevin S. · Answer

1.  Property management(company).  Especially the first one where you don't have enough properties to hire one and you don't want to do it yourself bc you're busy with either your W2 job or your business.

2. Not knowing the market enough.  In terms of demand, appreciation, changing neighborhood(affects the value of your property) etc.

Tom Linehan · Answer

Quite honestly, just not sure where to start. I have been working in commercial real estate for a few years too but when it comes to diving into my first investment, I am feeling overwhelmed. I am from North NJ so very expensive locally and not sure what type of investment to get into out of all the options. I have a lot of cash ready to deploy just not sure where to begin.

Casey Nelson · Answer

Funds is what is holding me back. Have I think one investor that’s willing, have four off market properties that need slight rehab and have been rented for awhile but are getting kicked out because they are up for sale.  I have smarts and knowledge and good salesmanship, plus my w2 job I pump septic tanks and do inspections.

My local town I am in prices are way way to high. juat trying to snag my first buy and hold desl.  two years ago did a fox and flip and made great money but should have kept it because the equity was there

75k into 227k. But I was young and dumb.

Chris Ayars · Answer

@Melinda Francis Being a real estate agent is not as easy as it looks or as people might expect. It also tends to be costly. Some people have the personality and contacts to be able to get their license and experience success quickly. Others struggle immensely.

When I discussed the possibility of going into real estate with someone I trust, he said that I should not expect to start earning back my investment of time and money for 6-12 months. He was right, but that is the nature of investing time and money.

As a person who has introverted tendencies, yes, being a real estate agent has helped me to get beyond my insecurities and forced me to network with people. I keep learning as I go, but I still have to step outside my comfort zone to do these things.

There is a certain level of satisfaction that comes with stepping out and doing something you are not comfortable doing and experiencing the success in doing so. I do really enjoy helping people to achieve the dream of home-ownership or seeing the relief of getting a property sold for someone who needs to move on.

One thing to keep in mind... I provide a service. I do not see myself as a salesperson (even though that is what my license says).

Whether or not you personally find it beneficial to become a real estate agent as a stepping stone to other investment, like I am trying to do, is really up to you. You need to assess what you are trying to achieve and what paths will produce the opportunities to get you there. Choose a path and follow it without looking back. Grow and change as you go.

Melinda Francis · Answer

@Chris Ayars  Do you find it beneficial to be a real estate agent? I've been playing with the idea of becoming one in the hopes that it would help me branch out and meet more people, learn the lingo and just be more involved overall.

Chris Ayars · Answer

I have several things that have been keeping me back that I am working on simultaneously.

1. Financing: I have always had a tight personal budget. Some years are better than others as you can all relate to. At one time, my only debt was my mortgage... then I moved 1000 miles and all that changed. Working that out and making sure I have good cash flow personally has to take priority, but soon I expect to talk numbers with lenders to see what is possible.

2. Knowledge: I do not come from a construction background, and I certainly lack the skill to do most of the work myself. I am learning what it takes to look at a property and evaluate what needs to be done and how that will affect the value. Which leads me to...

3. Contacts and partnerships: I need to build relationships with local investors, lenders and contractors and learn from them how the process works, who to go to for what and when as well as how I can help them reach their goals.

Since my broker has done a few flips himself, he has provided insights and will continue to do so.

What's Holding You Back from Your First Real Estate Investment?

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