Brand new - looking for advice

2 Replies

Hi everyone

I came across this website in 2016 but never really participated a lot in it - now I have decided to post my first ever thread!

I have long been interested in real estate, but 100% of that time has been filled with me just dreaming about it, never actually doing anything. So today I have taken the first step and hopefully this will be a fruitful one.

This is my first post, so I will make it simple and ask 2 questions only:

1. I am complete beginner. I have read the ultimate beginners guide and for me, what I like/plan to do is that when starting out, I have zero. I have nothing. Therefore, let's say I am able to purchase my first ever investment property, wouldn't it be better to sell my very first one, which means while I lose out on the opportunity to get passive income (rental), I get a huge chunk of cash, and then going forward with my next properties, I can maybe buy 2 more properties, and then rent them out. In essence, I will only sell the first one to give me a huge money boost, which I can then use to get more properties and renting future ones. So in short, sell the first one for big money, as a stepping stone. To propel me forward.

Is this a bad idea? Should I never never never ever sell my property until later down the track?

2. Secondly, I currently work a normal job. Not really a question....but what is the very first step you guys suggest I do to start my journey in real estate?

I thank you all for reading. Hope to see some responses. Have a great day all!

@Edward Ottorino

Welcome to the forums!

First off, I would like to say that you are certainly on the right track with educating yourself, but inevitably you will get advice from all types of people telling you what you should do and what is the best way to start.  Real estate does not operate in a vacuum - what works for someone else may not work for you.  Take everyone's advice, mine included, with a grain of salt.  You need to find your own way in this game so that you can play to your own strengths and deal with your starting situation.

That being said, I would caution anyone trying to do a first deal as a sale.  Think of real estate like running... You can do sprints (flips) or you can do a marathon (buy and hold).  If you make ANY mistakes in a sprint, you're most likely going to finish last.  If you slip a little in a 5 hour run, you have plenty of room to make up the distance.  Same goes for real estate.  If you try to flip your first property and make mistakes, you stand to lose quite a bit of money.  If you make a mistake on a buy and hold, you have 10+ years to spread that mistake out over.  

Never say never about anything.  There is always a price for anything in life.  I have a single family home that currently turns out about $3,000 per month in net profits and I would never sell it... unless someone offered me enough lol.  If I stand to make $500k on a sale, it would take me many many years of cashflow to get that $500k saved up.  Also, if I sold and lost the $3k in net profit, how long will it take me to deploy the $500k and how much cash flow do I stand to gain?  It's really simple to calculate - I don't look at anything unless it gives me 15% cash on cash or more.  15% x $500k = $75,000.  Divide that by 12 months to get your monthly cash flow - $6,250 per month.  The math tells you what to do.  Would I ever keep the property and make $3,000 per month, or if I could make $500k and reinvest that at 15% to make $6,250?  It's really a stupid question, BUT you wouldn't know to even ask that if you didn't do the math.

As for your second question - I will revert back to my original statement and tell you that YOU need to come up with what is best for you.  A great question to ask people with experience is, "If you had to go back to when you first started, what would you have done differently in the beginning?".

I will save you the time of asking me that lol - When I first started learning real estate I was about a year out from graduating from college.  I didn't know squat about flipping and wanted to be more conservative so I decided on the buy and hold.  California is really expensive to invest in.  Cash flow can usually range from a few hundred per month to negative, certainly not ideal.  I'm not patient at all... so I decided to get a huge single family house with tons of bedrooms and rent the rooms out while I lived there.  It really solved a lot of issues that I had with buy and hold.  I was working in the car business and was making six figures my first year out of college so I was fortunate to be able to buy homes quickly and expand my holdings.  

Now I would not change ANYTHING about how I first started, but I did make a few mistakes that I wish I didn't.  

- My 3rd property was a monster... 3,500 sqft with 7 bedrooms and a mother-in-law suite.  I swaggered into that dumpy house and "knew everything".  Fast forward a few months, I ran out of money for the rehab in a big way lol... I thought $50k was going to cut it, but I ended up needed $110k to finish everything.  I had to take a quick loan out to get it done.  I really learned a lot and would have bought that house again knowing what I know now, but I would have offered much less than I did to purchase.

- I quit my job after buying the 3rd property in order to start my own businesses.  It was the best decision I made in my entire life, BUT I wish I had held on another 6 - 9 months to save up some more cash and buy another home.  While the freedom was awesome, having another property or two would have been even better.  It's incredibly difficult to get financing once you lose that good w-2 income.

- If I had to go back to the start, I would have skipped the car business and gone straight into mortgage origination from the nationwide lender (at a call center).  While I cannot replace the knowledge I gained from being in a sales and management environment and the money was good, I would have been much better off in an industry that was tied to my area of interest.  I originated loans for less than a year (a few years back) and it was an amazing experience.  You really learn a lot about what goes into financing real estate, how to run comps, how to explain real estate math to others (trying to get your client onboard with a refi) and just being around real estate in general.  The money is crazy as well... Even the terrible sales people are making $15k per month.  The good ones can do well over $25k month.  The call center was ideal because the leads came to you, no need to network outside of your job to get loans (which takes years to do successfully - often unpaid along the way).  I ended up quitting because my Amazon business was quickly taking off and I couldn't juggle loans, my rental portfolio and my Amazon store.  In short, I would have loved to do loans right out of college because I would have made more money, worked less hours and learn the business that I wanted to get into.

Best of luck to you and I hope you find your way sooner than later : P

@P.J. Bremner thanks for the insight.

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