How to do an Indiana Jones-style step of faith into Real Estate?

Question

So, I'm new to seriously vetting the ability to invest in real estate, and I found incredible motivation after going to a meetup and seeing, meeting and picking the brains of full-time investors.

My question to shoot out is this: what really motivated you to buy your first deal?  What made it possible for you to break the ice?!

Mike Dymski · Answer

Motivation won't help...it's too short-lived.  You need to understand 'why' you want something and that will give you the discipline/perseverance to accomplish it.  It's not a 'want', it's a 'must'...it's part of your identity.

Greg Scott · Answer

Some people think that real estate is risky.  They consider it but do not get in. They often miss the idea that by doing so they have chosen to get sub-par returns on their investment.

Those of us who have played the game a while realize the real estate is actually less risky.  With the exception of appreciation, I can pretty much tell you exactly what my returns will be in the year or two after I buy a property.   I can't do that with stocks.

If you get some education, buying a rental property is really quite a simple business.

So, what do you fear most?

• Turning 80 and not being able to afford food 
• Doing something that feels scary and risky even though many who have done it become wealthy

JoJo Tucker · Answer

I want to bet on myself. I had a well-paying 9-5 job, but outgrew it quick. I understood that my trajectory as an individual would out-pace what that job had to offer. I am motivated by the notion that with RE investing I will receive what I put in. That does not always apply to a regular, salaried job.

In the past I had been so afraid of failure that I pursued things that were too comfortable. I learned pretty quick that complacency should be what scares me the most.

Kiera Underwood · Answer

@Greg Scott Love your answer!

Ross Denman · Answer

@David Nemrow I guess I was pretty driven from the beginning. My grandfather "hustled" new construction after he retired and moved to Fl. Growing up, my best friends father was a GC for a group of real estate investors and I got to meet some of them and was interested in what they were doing. With a little education and mentorship I started off on a JV deal for a property that I found. I probably could have wholesaled the deal and made more money, but I was eager to understand actual investing.

I was a little scarier when I had enough capital to go out on my own. I had the knowledgebase, but I was preparing to take on all of the risk. As expected, I made every other move poorly, even though I knew better, but I still made a little money on the deal.

______

Now to answer @Greg Scott. What do you fear most?

Newbie Investors :)

Kiera Underwood · Answer

I became friends with investors who had a really simple way to run numbers. They use (propertytracker.com) I live in OKC and it's an incredible market. Once I had access to being able to punch in the numbers to see if something was a deal.. I was off!

Also, all the "fear" was taken away when I realized you really only need 3k per door to protect yourself. Worst case scenario is that the HVAC and Hot water tank go out at the same time.. that'll be around 3k. Almost any other repair is going to be more affordable than that. The only thing to fear beyond that is a main line break in your plumbing. So as long as you scope the lines to make sure they're good and have 3k cash, you're good to go!

Brian Ellis · Answer

You only live once! If you have the ways and means to invest, then do it. Especially if you find it interesting.

Account Closed · Answer

Hey David!

Depends on your personality and what drives initiative in you + what you're looking for in your real estate purchases!

For me, it's having a clear decision making process and knowing what I'm looking for. I like very high cash flow deals in neighborhoods that are not likely to depreciate much in a crash that are already in operable condition & it's what I always recommend to investors that don't want to go at this full time!

It helps to talk to people! I see you're of the analytical type of person. I am as well, and for folks like us I would recommend taking a close look at the factors that you're examining while you do your research and be very honest with yourself as to which of these truly deserve your allocated efforts and which ones don't. Narrow your focus so that you're only analyzing the most important criteria for your investing strategy.

Here are the four criteria I focus on when I'm looking at my strategy from a rental property investors standpoint.

1. Rent to value ratio. Obviously higher is better.

2. Property taxes and owner paid utilities. Lower are better.

3. Landlord friendly laws.

4. High rental demand. Keeps turnover down, your number one risk in the remaining high yield properties today.

Of course, if you're not set on being a rental property investor these criteria change- but having fewer things to FOCUS on in your analysis will allow you to make progress where it matters & reach the point of initiative more quickly.

Hope this helps! Let me know if you'd like to exchange ideas any further.

Ali Boone · Answer

Not to go all psychology on you, but I have questions. Your three questions (the Indiana Jones one being my favorite) suggest a hesitation, or a possible hesitation. What is that hesitation or presumed hesitation in getting started?

Then I can give a more direct answer :)

Lynn Burson · Answer

Several reasons I suppose... watching tax deferred plans (SP 500) bounce around, RE seemed easier to create spread / leverage/ arbitrage,  Simple & forgiving over time and just not liking my full time job.

I noticed that brokers even CFPs never made anyone I knew wealthy.  They would invest what money YOU made (your wealth) for you... IMO.

How to do an Indiana Jones-style step of faith into Real Estate?

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