What's the First Step?

Question

A lot a newbie investors spend so much time trying to learning "the right amount" of information before jumping into investing (as if there's such a thing). But every experienced investor says it's more important to just make the jump, take the leap, take action!, and learn as you go; that taking action is better than waiting for perfection. My question is, for someone who is usually so focused on planning everything out first, (ex. waiting to be in a strong financial position), what would you recommend the first 3 steps to be to "taking immediate action?"

Jonathan Greene · Answer

People make the mistake of thinking that take action means buying. That is not the case. Taking action is talking the next step. First, it starts with reading and podcasts so you have a base. Then, you start going to real estate meetups consistently for at least six months. That is taking massive action and you don't even own anything yet. But you will be ready to once you get there. Buying a property before you know anyone or anything is the quickest way to go on a short journey.

Mae Galang · Answer

Very true!

Starting a business or investing can make a person feel scared and anxious -- start anyway.

I'm not much of a planner and bought my first home in 2017, I didn't have the capital for the downpayment at the time. It was a new-build and it took GL Homes 18 months to build it. So I worked 4 jobs in that 18-month timeframe to come up with the money for a suitable downpayment (without touching my brokerage, 401k, etc).

Gosh! I was so young and naive at the time. I've learned that a little bit of naivety is good because otherwise an individual may never take the leap if they possessed all the knowledge and truly knew how much risks are involved. The experience taught me a lot. Sold that house a few months ago. Great returns!

3 Steps To Take Immediate Action:

1) Set small, short-term goals (establishing a one-year, three-year, five-year goal has helped me tremendously)

2) Seek help from people smarter than you (I am never shy to ask questions, even the stupidest ones)

3) You grow through what you go through (We will make mistakes along the way and that is ultimately what will help us become better investors)

Nicholas Ramirez · Answer

I get there is math involved. But how would a newbie incorporate "know your numbers" into taking action? Just seems a bit too broad to use as advice for taking action.

Nicholas Coulter · Answer

A lot of people struggle from 1-2 so congrats! I bet a lot of new investors would love to hear how you got #2 and what’s your plan for #3

Eric Gerakos · Answer

"Taking action" and breaking free from "analysis paralysis" cause many new investors to rush into bad, money losing deals. Invest when the numbers make sense. It's a marathon not a sprint.

Nicholas Ramirez · Answer

Wow Scott, such great insight! Seems like you've given a basic play by play to running the business, much appreciate! Once a newbie a can get past the paralysis and take the leap, and this seems like great advice on how to hedge the business. And I understand what you're saying to about just waiting until you're ready to make that leap. I guess it really is just a gut feeling.

Wale Lawal · Answer

@Nicholas Ramirez

To begin investing in real estate, first determine your investment strategy and objectives. Choose from single-family rentals, multifamily properties, house hacking, or BRRRR, and create specific targets. Understanding your risk tolerance can allow you to make more educated decisions. Contact numerous lenders, prepare financial paperwork, and acquire a mortgage pre-approval letter. Actively seek for properties that meet your requirements and run the numbers to ensure they are sound investments. Create notifications, utilize rental property calculations, and arrange viewings and open houses. Network with other investors, consult with a real estate professional, and move quickly when you locate a good offer. By taking action and learning from your experiences, you'll be well on your way to making your first investment.

Good luck!

Nicholas Coulter · Answer

@Nicholas Ramirez I always suggest house hacking. Its the best first step you can take as a new investor.

Nicholas Ramirez · Answer

Thanks Bob! Love the advice!

Scott Mac · Answer

Do not take immediate action until you believe you are ready to do so. If your thoughts are telling you to  wait until you're in a position that you think is strong enough financially to be comfortable with this new business, Listen to your own thoughts. Notice I said new business and not investment. If you look at your rental house as a business, which it is. That will allow you to see it more realistically.  Once you find a house that you believe would be a good rental, meaning desirable to your target market of customers (people within a couple of mile radius of the place), and all of the costs of monthly ownership that you can accurately project fall below the rental amounts that you project that you can get from your target customers, then you have a possible business asset that you can use to produce income, and have renters pay down the mortgage, while hopefully it goes up in value at least with the rest of the economy.

There are formulas that people use for the down payment amount and the return on their investment and et cetera et cetera. That is part of the learning process.

As you run your business, you may have to buy a new roof unexpectedly, or replace the hvac system unexpectedly, or replace kitchen items on a turn because they've been destroyed or reached the end of their service life.

What I'm saying here is the reality of it is you will most likely have to plow back into your business money that you receive as rents that you intended to keep personally- sometimes.

Also, There may be times when you must pony up some additional cash to keep your business operating.

Maybe the roof blows off in a storm before the end of its service life and all of the roofers are charging double and triple rates, and if you don't replace it the rain will come in and destroy your ceilings and your renters will leave and you will not have anyone as a customer for your business because the interior is destroyed.

This is called having a cash reserve for the business. You can draw on.

Also know that turns are costly and will eat into your profits like an alligator. So you need to be able to turn the unit quickly for a new renter every time you lose one.

Relying on just anybody to do this means you might have substandard work, or not to code work etc.

The turn is an ongoing part of the business that you cannot always predict when it will happen, but you need to have in your rolodex reliable people who can do a workmanlike job for you quickly and not three months down the road.

Sorry about all of the super long sentences. I wanted to give you this as a concise manner without any of the slingo slango of the industry such as take immediate action, etc.

If you decide to take action at the speed you are comfortable with and have the financial resources available to run it as a profitable business you will probably be much happier in life, and sleep a lot easier.

Also realize that the term landlord means business owner as well as investor. The reality of it is if you're going to rent to people you are a business owner and viewing your assets that way is something that they fail to point out a lot of times in books and seminars urging you to take immediate action.

But then again if you want to take immediate action and you are comfortable with that go for it.

Good Luck!

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