Where to start?

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Dave Foster · Answer

@Derek Helm That is awesome that you are thinking ahead and developing goals.  I literally just had this discussion with my 16 year old this morning before I read your post.  All the others on this thread are giving you great advice.  Max and I summed it up in three areas.

1. Educate yourself on real estate and everything associated with real estate.  And yes that means submersion into the world of numbers and math.  But practical math that you'll use every day.

2. Build relationships.  This is where you find mentors sources of knowledge and capabilities partners and investors.  BP is a great start.  Then search out people in all aspects of the business.

3. Build your war chest.  No matter where you go the borrower is slave to the lender so whether its mortgages or OPM (other peoples money) you'll always ultimately be better off and more free if you use your own money.    At your income level now it may seem tough but as you apply numbers 1 and 2 above you'll find ways to use even what seems like small amounts to start your career.  Then as you go always looks for the avenues to maximize your return and minimize your risk.  I put borrowed money and responsibility to investors in the risk category.

Good luck -Let's connect.  I'd love to hook up you and Maxwell to challenge each other.  I think you guys will blow the doors off.

Dave

Bill Gulley · Answer

Derek, I began a year older than you, not my official beginning investing date, but started in the RE arena.

At 18 I started a carpet company, ran it out of my garage of my house.

Actually, there are some important things to learn and become aware of before you say you want to get involved in real estate. Probably, the only thing you know about "business" is from being a consumer, just one side of the business world.

Have you taken any business course in high school? If not, do.

A personal finance course in school will teach you how to reconcile a bank account, introduce you to insurance, teach aspects of saving and investment, introduce you to banking services, types of accounts, how interest is computed, what types of contracts you'll be entering into and the use of your money and setting up a budget as well as where to begin with your personal financial planning. You'll also get an introduction to taxation.

You'd be surprised at how many trying to get into RE here, are unaware of these basic personal finance aspects. I know there are folks in their 40s that can't reconcile a bank account.

RE is a business, which means, like any other business venture, you need a basic introduction to business, basics, this is where you will learn very basic legal aspects applicable to all business activities. Need to take at least a glance at business law, types of contracts, what constitutes fraud, what tortuous conduct is and existing laws such as truth in advertising, fair credit, security & exchange, consumer protection matters and how to find the different agencies of government that regulate business.

I'm not saying study law, I'm saying you need to be aware of aspects of business that are regulated, how to find applicable laws and agencies to find the guidelines you're expected to operate under. Simply be aware of different levels of government, the agencies that are involved in touching business activities and what those agencies do. Much of this should be covered in a basic business course at school.

At this point you should have developed a sense of ethics, something greatly lacking in real estate. The "threshold to entry" in real estate (not counting those holding a license) is in the basement, anyone can get into RE and all kinds do. I find it rather ironic that landlords are so concerned with approving tenants with a criminal record when they may be going to investor meetings and dealing with other landlords with a prison record! Not saying everyone is a crook, there are, for the most part, reputable and honest folks in RE. But, you need to set your moral compass early on to avoid the bad players.

Next, learn the fundamentals of real estate, this is from a formal educational type setting, get a test book that real estate agents study to obtain a license. This type of education usually skipped by new types trying to get into investing, actually a big mistake as every strategy or method used by real estate operators or investors is anchored in the fundamentals. For example, when you understand the "bundle of rights" held by a property owner, you can then see how certain rights are transferred then you can understand what is going on in some strategy. Nothing is done or accomplished it real estate that is not directly related to the fundamental requirements or functions, nothing!

Now, you're ready to look at strategies used by operators and investors in real estate. I can assure you, that if you skip the fundamentals, you'll be lost in trying to adapt strategies to real situations and you'll be chasing your tail for sometime before the big picture comes into focus.

Then begin looking at books, methods and the stuff for investors. With the knowledge you gained from the above path, having one eye open, you can get ideas that you can use and spot bad or even illegal advice. You need a BS meter dealing in business and especially real estate, I mentioned the bad apples, following the wrong strategy or mentor can end up losing you money at the best and in jail at the other end of the spectrum. Don't take what is usual and customary in your area or applicable laws lightly as there are serious matters deal in real property. You'll find many who take RE matters lightly and go down the wrong road, so know how to read the signs.

Like any other profession, the education process is never ending. You need to stay on top of things to keep current and conduct business properly as well as profitably. There are two areas of what investors speak of as education, one is the formal education road, accredited schools, like a college or state approved RE school and continuing education, most small investor fall off this wagon. Then there are the gurus, the mentors or coaches that sell products or services as instructional materials, the "how to" stuff, I don't consider such as being an "education" as much as an opportunity for greater enlightenment.

In reality, you need to use both forms of education, not many text books will set lights off in your mind that bring you to some creative solution, running only with the strategy stuff can get you in trouble and burn up time if you select the wrong niche to operate in just because it sounds easier. There is a blending of both types of education that will make you a better investor and more successful. A real education comes first, then learn how to creatively apply techniques.

Not suggest that you jump off BP and go begin as I outlined, but understand that you need to begin at the beginning and learn before you get caught up in the sizzle of not needing to know anything except this or that strategy.

You have plenty of time, use it well, study, do well in school, you'll never stop learning. Good luck!  :)

Neil Schoepp · Answer

Derek,

Start socking away 50% of your income.  You will be surprise how quick it adds up.  Read, read and read some more.  Listen to the podcast here on bigger pockets. At the end of each one are book suggestions the beauty is these suggestions are coming from real life investors that are successful and use these some books. That's a beautiful thing. Some books right of the top of my head are rich dad poor dad and the cashflow quadrant these are very easy read and explains a lot.  The Ultimate buyers guide from biggerpockets is awesome also and you can start right now. That last tidbit I will chime in with is you set your goal (that you want to start investing) now devote a portion of each day getting there. Each day I ask myself if what I am doing is getting me closer to my goal if it is great if not then i begin doing something that is. Good luck. And don't ever be afraid of asking questions.

Joshua Dorkin · Answer

@Derek Helm - I think our Ultimate Beginner's Guide and Podcast are probably great places to start to get you up to speed on real estate investing concepts and ideas.

Jon Huber · Answer

@Derek Helm   I wish I had your ambition at 16... What I would do is to begin read the beginners guide and listening to the podcasts. You are too young to have any credit which, TRUST ME, is not a bad thing. If you begin putting away your money now, by the time yuo are ready to invest, you will have a head start. Good luck, and if you ever have any questions, feel free to ask. Good luck.

Christopher Winkler · Answer

Best of luck to you Derek, great to see you are starting off so young, you will be in great shape by the time you are ready to retire...

Tyler Shackelford · Answer

I'm new to this as well. Where are the podcasts?

Neil Schoepp · Answer

@Derek Helm I just came across This post and thought it would be good reading.  Please remember that frugal does not mean cheap.  Frugal means smart. Do I need that nice SUV for 10k or can I get by with a civic for 5k. I then have 5k to put towards real estate. I recently was paying over a hundred dollars for my cell phone. Two lines 750 minutes and 500 text. How dumb was I being. I now get unlimited calls and text on two lines for $20.  The trade off is in my area (non major city) the cell reception can be spotty sometimes, especially indoors.  But I haven't had a problem in over two months.  Another great place to read is Mr. Money Mustache. Another blog that just talks about being smart with your money and not wasting it.  Now get reading :)

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