How do you get ahead in order to get started?

Question

Hello All. My name is Kristen and I am a 33 year old mother and wife. I am getting a late start in life, but I am now ready to take risks and boost any income to make my family and I more comfortable. I am extremely tenacious and motivated to be a major success personally and professionally. I have a business management degree and desire a real estate license as well.  My main concern and dilemma is obviously getting started. I know the term, "You have to have money to make money" and I hate it. There has to be a way to get started without having hundreds of thousands of dollars in your pocket. I know people have done it and I know I can be one of them. I just need to be smart and not fall for one of the many scams out there. They certainly do know how to paint a pretty picture though! Any words of wisdom are very appreciated!

Justin Ericsson · Answer

Kristen,

There are three components to starting out as real estate investor.. 1) good credit this will be important later 2) 20 to 30% below market real estate properties you can buy 3) cash to invest. You really only need two of the three to start your RE career so good credit and hard work finding your first deal will ensure success...

Step one talk to friends and family and ask them if they will invest with you if you find a house substantially below market value. Pair up with a local seasoned investor / realtor to help you find your first property so you buy right. Don't be afraid to spend 3 to 5 months to find the right deal. You make all your money on the buy meaning if you over pay up front it's almost impossible to make money on the backend when you sell it.   Once you have a contract on your first deal your will need to package up your due diligence nice and tight with real numbers, good graphics, etc. I can email you these docs to present to investors, friends and family.

Step two present your due diligence package to a few seasoned investors for feedback on the real estate deal to see what they think. Send to me as well I will tell you if its marketable. If they like it ask for referrals to people they know that will invest with you (JV, note, joint title). Asking for a professional investors advice on a real deal you have under contract that has equity usually leads to success as they can't pass up a good deal (I'm one of the those people lol). If you don't get any bites showing the deal to investors start shopping around the opportunity to friends and family. You will be surprised how open people are to investing in real estate if you can show equity in the property.

Step three is financing and deal structure once you have interested investor to go in with you on the deal. Having all cash to buy and fix your new acquisition is nice but not necessary. Every local market has numerous hard money lenders that will loan you and your new partner up to 80% of the total budget. For example if you are buying a single family home for $50k that needs $20k in rehab worth $100k the lender will loan you up to 80% of your $70k total cost so long as the after repair value has at least 35% equity after you put down 20% on the total cost. That means the maximum loan amount is $65k on $100k market value house. So how much cash do you need from your investor? You need 20% of $70k which equals $14k plus closing costs and six months of interest payments. Let's just round that up to $20k in cash from your investor to buy a $100k house with $25k+ in equity.  This is very attractive to investors as they don't have to invest $70k upfront only $20k in this case. I mentioned above good credit is important as you can sign for the loan not your investor which puts the risk of the loan on you not the  investor giving you the $20k to buy your first house. The deal structure with your investor can be many things the easiest thing to do is to setup a new LLC in Delaware ($300) and have a operating agreement defining your investment share (I can provide you this document to save you attorney fees if you like). Take title to this property in your new LLC which gives your investor equitable title to the property in partnership. Close with the hard money loan, rehab and sell it or if keeping as rental refinance out your hard money loan once you move in your tenant.

Happy hunting!!!

George P. · Answer

you nailed it.

Brian P. · Answer

Wow, 33, it sounds like it is time to apply for social security. God, to be 33 again, sounds like a dream come true. Rule #1, yes it takes money to make money but the par't t they leave out is it doesn't need to be your money, something the rich have known for years.me

Now my advice get your real estate license, you will run into deals by the ton that you will pass on as an investment but can be profitable by listing them, and buyer prospects that you don't have something to sell them now, but are prospects for a listed property.

,The advice of picking one area of activity and learning it well and then adding another down the road is good advice. My personal experience taught me that for me it was better for me to build a tool box and when I found a prospect or lead that wasn't a fit for my current main activity I could find the right tool for them and make money rather then passing on the deal. If I were starting today my foundation would be wholesaling with a side of lease optioning.

I started investing a week after my 16th birthday with my 19 year old brother, you needed to be 21 then to contract but he was married thus could contract for us legally. By chance I was in the office of a top mover and shaker in town and saw a card taped to his desk that said "If you don't take a chance, you don't stand a chance." I wrote that down and read it every morning for a year or more.

Zachary Vanderwiel · Answer

Hello Kristen,

I am an investor in the NJ area.  I am strictly an investor, I am not Realtor and when I started 2 years ago I had Zero experience.  My best advice to jump start is to find someone in your area that is doing the Deals you want to do.  You need to find someone in the top 10% and hound them until they agree to work with you.  Someone that has a good reputation with the local groups/Buyers/Lenders/ and is a professional.  To make it beneficial to you so called Mentor, You will have to sacrifice your time if you do not have the money or skills.  If they are worth their salt they will test you in some way and continue to test you at some point  so be ready for it.  You will need to produce on what they have taught you!

When I started two years ago with no experience in Real Estate this worked for me.  I still continue to work a full time job, and in the past 18 months as my business grown to over 12 Wholesales Sold and currently have my 6th Rehab four of which have Sold.  I am still with my Partner and Mentor today because we can make more money with less risk together than alone.  You also will continue to be taught on every Deal you do together.  That is a FREE education that is hands on and better than any book .

Stay focused.  It is possible.  Follow the 80/20 rule.  You want to be on the 20 side.

Hope this helps

Zach

Kyle Grimm · Answer

It's not all about what you know, but who you know.  Surround yourself with knowledgeable people in your market.  Attend your local REI meetings and even see if you can shadow or be mentored by someone.  I have found that my biggest motivation comes from seeing others doing it.

Leonid Sapronov · Answer

@Kristen Schlueter you are on the right track. Explore the "Learn" section (see menu at top of page), starting with the Free How-to Guides, especially the Ultimate Beginner's Guide to REI. Figure out what type of investing you are interested in (unless you already have your heart set on something). Then, and this is very important, write down your ultimate goal - where do you want to get in RE investing. Literally, write it down on a piece of paper and post it up on a fridge or somewhere visible. Then, write down a goal for this year. Recite them every day :-)

Like @Mike Huang said, Brandon's book is a great reference. You can find it here:

http://get.biggerpockets.com/nomoneydown/

To say the guy is passionate about REI is to say nothing and he's been spreading the love on here for a while. :-)

While you are reading all this stuff, think about: how smart is your monthly budget? how much exactly are you worth? If you have a house, how much equity (market value - mortgage balance) do you have? Do you have parents or relatives who have houses paid off? Do you know people who have cash sitting idly in the bank? Do you have skills you can offer other investors? Getting your mind thinking in this direction will help you find sources of money down the road.

Lastly, either search on here or go to meetup.com and find a local REIA group. Almost every town has one and most of them are free. Sign up and go check out one of their meetings.

That should keep you occupied for a couple of weeks :-)

Mike Huang · Answer

So the first real estate book I ever read was @Brandon Turner's The Book on Investing in RE with No or Low Money Down. And there are several different ways that range from FHA loans (and thus house hacking), partnerships, private lenders, etc. I would say your first priority is to learn as much as possible right now and network with as many real estate investors or professionals.

And listen to Podcast 92 or look for one of Brandon's blog posts, he has created a ton of content on creative financing.

Brian Gibbons · Answer

Brian I love love love this awesome awesome awesome

My advice is don't be a one trick pony, get your license, be a transaction engineer or list it

Bill S. · Answer

@Kristen Schlueter it's not to late to start. I didn't own my first investment property until I was 36. I haven't been too smart along the way as I didn't have Bigger Pockets in my early days. Yet it's all worked out and I'm pretty happy where I am.

Kristen Schlueter · Answer

Thank you for your story Scott. Great job, BTW. Congratulations.

Well Anson, Ideally I would like to buy, flip, and sell, but as I continue to learn, maybe renting will be a good idea as well. I just watched the intro webinar and I am eager to further my education.

How do you get ahead in order to get started?

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