Step by Step Process on Getting Started

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Step by Step Process on Getting Started

Tommy Keay
New to Real Estate · Sarasota, FL · Member since 2020 · 13 posts · 3 votes

I am writing this as a new investor, to draw out my steps for action. Some I have already completed/are completing and others are what the near future looks like. Comments, tips and advice are welcome!

1. Start analyzing deals.

This step involves a lot of moving parts. For one, you have to understand all of the terms. Familiarize yourself with what to specifically look for (what makes a good deal) and more importantly, understand WHY it is a good deal. Understanding the WHY behind things is what makes everything tough at first but creates a solid foundation for you moving forward. This involves a lot of upfront education and patience. For Example...in my market rent prices are almost always below the 1% rule of thumb. When I run the numbers on condos, I realize they are almost impossible to produce positive cash flow for long-term rentals. HOA fees that all condos have is what puts it in the red. I now know WHY I am looking for single-family house opposed to condos. This is an easy example but there are a million other why's you need to answer when analyzing deals.

2. Connect with people 

Once you know what you are looking for and know why you are looking for it, reach out and make connections. Go on your market's REIA website and call every member you can. Go to meetups. Get yourself out there. Everyone hears this, but I can say from example, until you pick up that phone and actually make 20 calls, you're going to be stuck running your same own thoughts over and over again! The power of one conversation (especially with someone who has experience) can produce so much value to you.

3. Connect with more people

Step #2 is more for mentorship, advice and just to have a connection with other investors in the industry. This step is to reach out and connect with people who you want to possibly do business with. Lenders, agents, Pm's, contractors, attorneys, etc. Having genuine conversations with these people to share your goals, and ask if this would be of any value to them as well, is an important step. Here is where you will actually learn about mortgages and what you will qualify for (pre-approval). You will learn how much a PM will charge you and exactly what they will do. You will learn how different contractors communicate and do business. This is another stepping stone for more knowledge! 

4. Putting in offers

For steps 1-3 hopefully you are saving money and learning a lot. Once you successfully understand what you want, how to analyze it, connect with people who have experience, and connect with people you want to possibly do business with, then you throw out your offers. From here you have all of the pieces in line and it is time to dive in. There is only so much you can do before you have to start taking action. 

Right now I am on step 3 so I am not exactly sure on what is to come next! When an offer gets accepted, its going to be real hands-on experience an knowledge from then on out. 

So far I have: 

1. Realized I want to buy a property with an FHA loan to renovate while I live there (gain instant equity to pull out later)

2. Connected with a good real estate agent. 

3. Connected with a new investor in the process of buying his first deal. Luckily I am going to shadow his experience while I save for my first deal.

Next steps are: 

1. Connecting with lenders, contractors, attorneys and PMs.

2. Throwing out offers. 

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Joseph CacciapagliaBusiness Member
Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
6y

It seems to me that you are overthinking this a bit. If it's just because you want to feel productive while you're saving, then I get it. Otherwise, it seems to be an awful lot of "preparation". I think a lot of people will get distracted and end up doing something else if they follow this recipe though. Assuming you've read 1 or 2 real estate books or watched some podcasts as step #0 (I don't know how you would make your way here otherwise), I would suggest finding a good agent as step #1 (use the search on BP, and if that doesn't work, use the google). Step #2, start analyzing those deals. If the agent is half way decent, they're going to save you a ton of time sifting through areas and properties that will never work for you. If they're not decent, find a new one. Step #3, make offers. You don't need a ton of education and a mentor before you buy your first property, especially not if you're going  live in it while fixing it up.

In general I believe that most new or would-be investors fail or never get started, because they are trying to learn everything before they make their first move. This is a business that favors action. Of course, you should do your due diligence on each property, and on the members of your team. But until you're out looking at actual properties and making offers, it doesn't really get you anywhere. I've worked with a ton of new investors over the years, and in general, the ones that succeed tend to value action over preparation. Your time is valuable. If it's really just a matter of saving for the first down payment, you'd be better off getting a part-time job to save faster, than to spend an inordinate amount of time preparing.

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  • Joseph CacciapagliaBusiness Member
    Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
    6y

    It seems to me that you are overthinking this a bit. If it's just because you want to feel productive while you're saving, then I get it. Otherwise, it seems to be an awful lot of "preparation". I think a lot of people will get distracted and end up doing something else if they follow this recipe though. Assuming you've read 1 or 2 real estate books or watched some podcasts as step #0 (I don't know how you would make your way here otherwise), I would suggest finding a good agent as step #1 (use the search on BP, and if that doesn't work, use the google). Step #2, start analyzing those deals. If the agent is half way decent, they're going to save you a ton of time sifting through areas and properties that will never work for you. If they're not decent, find a new one. Step #3, make offers. You don't need a ton of education and a mentor before you buy your first property, especially not if you're going  live in it while fixing it up.

    In general I believe that most new or would-be investors fail or never get started, because they are trying to learn everything before they make their first move. This is a business that favors action. Of course, you should do your due diligence on each property, and on the members of your team. But until you're out looking at actual properties and making offers, it doesn't really get you anywhere. I've worked with a ton of new investors over the years, and in general, the ones that succeed tend to value action over preparation. Your time is valuable. If it's really just a matter of saving for the first down payment, you'd be better off getting a part-time job to save faster, than to spend an inordinate amount of time preparing.

    [email protected]979-218-2286
    Joseph Cacciapaglia powered by Morty
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    3Reply
  • Kirk R.
    Peoria, IL · Member since 2013 · 967 posts · 383 votes
    6y

    Call Banker.  Apply for loan.  Dun! 

    1Reply
  • Tommy Keay
    OP
    New to Real Estate · Sarasota, FL · Member since 2020 · 13 posts · 3 votes
    6y

    @Joseph Cacciapaglia Appreciate the comment! I think most people that start out, don't have the capital to go through your steps so quickly. I could be wrong on that take, but that is true in my situation and true with the only two other people I know personally interested in RE. It is important to be productive in educating yourself while you save. If people get distracted along the way during the learning process, it was probably not meant for them to begin with!  I agree action is so much more valuable than preparation. Over the last 5 months where I grew initial interest in RE investing, I have learned so much. I guess this advice is for people that can't afford a down payment in the next 2-3 months. For me my #1 goal is to get rid of student debt then save to put down my first down payment. I don't agree that getting a second job is more valuable than putting time into learning but I do agree that experience is more valuable than learning for too long. Well in all honesty both could be true. I could get a second job (which I have been thinking about lately) and still find time to learn real estate. The bottom line is every situation is different just like everyone says. For me, I have 6-8 months until I'll get rid of debt, save for properties in my market and make my first offer. I want to use that time wisely connecting with people, reading more books, and getting experience (like my shadowing example above). Now that you know my situation a little more, what would you recommend I do differently? 

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  • Joseph CacciapagliaBusiness Member
    Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @Tommy Keay:

    @Joseph Cacciapaglia Appreciate the comment! I think most people that start out, don't have the capital to go through your steps so quickly. I could be wrong on that take, but that is true in my situation and true with the only two other people I know personally interested in RE. It is important to be productive in educating yourself while you save. If people get distracted along the way during the learning process, it was probably not meant for them to begin with!  I agree action is so much more valuable than preparation. Over the last 5 months where I grew initial interest in RE investing, I have learned so much. I guess this advice is for people that can't afford a down payment in the next 2-3 months. For me my #1 goal is to get rid of student debt then save to put down my first down payment. I don't agree that getting a second job is more valuable than putting time into learning but I do agree that experience is more valuable than learning for too long. Well in all honesty both could be true. I could get a second job (which I have been thinking about lately) and still find time to learn real estate. The bottom line is every situation is different just like everyone says. For me, I have 6-8 months until I'll get rid of debt, save for properties in my market and make my first offer. I want to use that time wisely connecting with people, reading more books, and getting experience (like my shadowing example above). Now that you know my situation a little more, what would you recommend I do differently? 

     There are certainly plenty of people in the same boat as you, but most new investors that I work with come into this business with a decent amount of cash. Even without the capital restrictions, I see a lot of them get caught up in a learning/analyzing habit that keeps them from ever actually getting started. If I were in your situation again (I started young with little capital, like you), I would focus on increasing my income over additional education. It will allow you to buy sooner and qualify for more money. I bet you already know way more than I did when I bought my first duplex.

    I might set aside a little time every week to view properties and analyze a few. Learning your market is important. That's why I would get an agent first. If you aren't actually looking at the properties, you might as well just be make up numbers to analyze. The math in this business is pretty simple, it's applying that math to reality that is the challenge.

    I always get nervous when people talk about needing a mentor. I've seen so many people blow money on coaching, courses, and mentoring that could have been invested in deals. There aren't any secrets in this business. If you have a knowledgeable team, and you're willing to do your own due diligence and ask a lot of questions, you shouldn't need a mentor to get started. As you start to grow, networking becomes more and more important. Having a little experience first will keep you from falling into the wrong crowd and getting taken advantage of. Unfortunately, there is a lot of that in this industry.

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  • Tommy Keay
    OP
    New to Real Estate · Sarasota, FL · Member since 2020 · 13 posts · 3 votes
    6y
    Originally posted by @Joseph Cacciapaglia:
    Originally posted by @Tommy Keay:

    @Joseph Cacciapaglia Appreciate the comment! I think most people that start out, don't have the capital to go through your steps so quickly. I could be wrong on that take, but that is true in my situation and true with the only two other people I know personally interested in RE. It is important to be productive in educating yourself while you save. If people get distracted along the way during the learning process, it was probably not meant for them to begin with!  I agree action is so much more valuable than preparation. Over the last 5 months where I grew initial interest in RE investing, I have learned so much. I guess this advice is for people that can't afford a down payment in the next 2-3 months. For me my #1 goal is to get rid of student debt then save to put down my first down payment. I don't agree that getting a second job is more valuable than putting time into learning but I do agree that experience is more valuable than learning for too long. Well in all honesty both could be true. I could get a second job (which I have been thinking about lately) and still find time to learn real estate. The bottom line is every situation is different just like everyone says. For me, I have 6-8 months until I'll get rid of debt, save for properties in my market and make my first offer. I want to use that time wisely connecting with people, reading more books, and getting experience (like my shadowing example above). Now that you know my situation a little more, what would you recommend I do differently? 

     There are certainly plenty of people in the same boat as you, but most new investors that I work with come into this business with a decent amount of cash. Even without the capital restrictions, I see a lot of them get caught up in a learning/analyzing habit that keeps them from ever actually getting started. If I were in your situation again (I started young with little capital, like you), I would focus on increasing my income over additional education. It will allow you to buy sooner and qualify for more money. I bet you already know way more than I did when I bought my first duplex.

    I might set aside a little time every week to view properties and analyze a few. Learning your market is important. That's why I would get an agent first. If you aren't actually looking at the properties, you might as well just be make up numbers to analyze. The math in this business is pretty simple, it's applying that math to reality that is the challenge.

    I always get nervous when people talk about needing a mentor. I've seen so many people blow money on coaching, courses, and mentoring that could have been invested in deals. There aren't any secrets in this business. If you have a knowledgeable team, and you're willing to do your own due diligence and ask a lot of questions, you shouldn't need a mentor to get started. As you start to grow, networking becomes more and more important. Having a little experience first will keep you from falling into the wrong crowd and getting taken advantage of. Unfortunately, there is a lot of that in this industry.

     Really good input Joseph! Certainly I don't understand how people spend thousands of dollars for education...So much better use for that money (like actually getting into it) I'm sure a $1,000 mistake is more valuable than a $1,000 coaching program! I bet one could arge a $3,000 mistake is more valuable than a $1,000 coaching program. One point you made that I didn't even consider is...making more income not only allows you to save faster and invest sooner, but increases your annual income so you can qualify for a larger/better loan. Great to get some encouragement to dive right in maybe a little sooner than I was anticipating. 

    1Reply
  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    6y

    @Joseph Cacciapaglia and @Tommy Keay why are you so against real estate coaching? I helped coach my wife’s friend with the purchase of two properties at the end of last year. She was able to create about 50k in equity between the two of them following the BRRRLO model and she cash flows about $600 a month with only about 30k of her own money invested. I charged a 6k fee to help walk her through that from start to finish. So it looks to me like she was able to increase her net worth by 50k for a 6k fee and start to accumulate $7200 a year in cash flow And take advantage of the tax advantages of having rental properties. So what part of this example of paying for coaching was inferior to her doing it on her own?

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  • Joseph CacciapagliaBusiness Member
    Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @Shiloh Lundahl:

    @Joseph Cacciapaglia and @Tommy Keay why are you so against real estate coaching? I helped coach my wife’s friend with the purchase of two properties at the end of last year. She was able to create about 50k in equity between the two of them following the BRRRLO model and she cash flows about $600 a month with only about 30k of her own money invested. I charged a 6k fee to help walk her through that from start to finish. So it looks to me like she was able to increase her net worth by 50k for a 6k fee and start to accumulate $7200 a year in cash flow And take advantage of the tax advantages of having rental properties. So what part of this example of paying for coaching was inferior to her doing it on her own?

    I've worked with hundreds of successful real estate investors over the years, and I don't know of one of them paid a coach to get started (it's possible I missed one or two, but I try to ask everyone how they got started). I've also met tons of people that have paid coaches, and gotten nowhere. I'm sure there are some exceptions, but those are the results I've seen in general. Most coaches will share their success stories, but don't tell you about the other 99% of people that they took money from who didn't ever purchase a piece of property. 

    Maybe you're different. Like I said, I'm sure there are exceptions. I just don't see enough exceptions out there to think it's worth the risk for someone that is already short on capital.

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  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    6y

    @Joseph Cacciapaglia Well right now I’m helping 3 other investors purchase properties in the same way that I mentioned above where each of them are walking into 30-40k of equity and are getting between $300 and $500 of monthly cash flow on each of their properties while leaving 10k or less into their properties.

    My issue is when people state that mentors or coaches are not worth their cost as a blanket statement. Or they come up with made up statistics like 99% of people that pay for coaching never purchase a property and the coach just ends up taking their money. 

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  • Tommy Keay
    OP
    New to Real Estate · Sarasota, FL · Member since 2020 · 13 posts · 3 votes
    6y

    @Shiloh Lundahl well there are a few things to mention here. Do you do coaching as a business? Because this sounds like a unique situation where you helped someone that you had a great relationship with (greater than just an average stranger) and there was a lot more trust and accountability involved. I am sure there are numerous examples out there where people went to a $10,000 conference and either did nothing with the information or made the same mistakes they would have made if they just jumped right into it. It also has a lot to do with the coaching you are actually getting. If you think of all of the coaching programs out there, do you think they all bring as much value as the price they charge? In some cases absolutely. In some cases absolutely not. So it definitely depends on the program and the price. It also depends on the intention of the people paying for the coaching. A lot of people pay for coaching because they just don't know how to do everything and they want to feel more secure by paying for coaching. To me, this is the wrong intention and not worth it. I would imagine there are people in my shoes (who have read and learned for 5 months) and still just don't truly grasp all of the moving parts in real estate (just like I don't) so they pay for coaching. That is the wrong intention in my opinion.

    So 1) I don't think coaching and mentorship is as personable and accountable for the average new investor and 2) New investors have the wrong intention by wanting to feel like they need to know everything before they buy their first property which they will never happen

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  • Greg Dickerson
    Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    6y
    Originally posted by @Tommy Keay:

    @Shiloh Lundahl well there are a few things to mention here. Do you do coaching as a business? Because this sounds like a unique situation where you helped someone that you had a great relationship with (greater than just an average stranger) and there was a lot more trust and accountability involved. I am sure there are numerous examples out there where people went to a $10,000 conference and either did nothing with the information or made the same mistakes they would have made if they just jumped right into it. It also has a lot to do with the coaching you are actually getting. If you think of all of the coaching programs out there, do you think they all bring as much value as the price they charge? In some cases absolutely. In some cases absolutely not. So it definitely depends on the program and the price. It also depends on the intention of the people paying for the coaching. A lot of people pay for coaching because they just don't know how to do everything and they want to feel more secure by paying for coaching. To me, this is the wrong intention and not worth it. I would imagine there are people in my shoes (who have read and learned for 5 months) and still just don't truly grasp all of the moving parts in real estate (just like I don't) so they pay for coaching. That is the wrong intention in my opinion.

    So 1) I don't think coaching and mentorship is as personable and accountable for the average new investor and 2) New investors have the wrong intention by wanting to feel like they need to know everything before they buy their first property which they will never happen

    All you know is what you know and what you don't know or what you think you know to be true that isn't is what costs you the most and holds you back. 

    Example is the 1% rule. I know many people look at this but it's a meaningless formula. It is a gross rent multiplier not net ad does not account for debt. There are no rules of thumb. Every property is different, every market is different and debt and expenses like taxes and insurance are all over the map and can really affect the profitability of a property especially smaller ones.

    Another example is CAP rates. You never want to use that as a factor for whether or not you should purchase a property as this is only good for evaluating stabilized properties and does not take into account the debt.

    1Reply
  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    6y

    @Tommy Keay my guess is that you posted your comment before reading the one I posted above yours. I have coached 5 different people over the last year in purchasing 8 properties and each of them gained about 30k equity on average for each property.

    Yes. I do have a coaching business. I detail it in my bio. But to answer your question, all of the people I coached in getting properties had lent to me on previous deals that I had done (except for my assistant - we helped her get a property because she is a rock star). They saw my model and they wanted to do it. So I coached them through it for a fee.

    I don’t plan on changing your mindset on thinking coaching is a waste of money. You seem pretty entrenched in that belief. But hopefully other people who reach this thread may recognize that coaching can be a viable option to creating deals that create more money than they could do on their own when they get started.

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  • Tommy Keay
    OP
    New to Real Estate · Sarasota, FL · Member since 2020 · 13 posts · 3 votes
    6y

    @Shiloh Lundahl yes if people read this and find a person like Shiloh who take on just a handful of people and are invested in each person 100%, I think that could be a great idea! I guess to sum up what I am saying is when I google real estate training in my area or real estate mentorship in my area these are all conferences and classroom-style learning atmospheres. You pay your dues, you attend and hopefully you use the stuff they said and the rest is history. If you can find a one on one mentor who can physically guide you through the process, that is awesome!

    0Reply
  • Stephen E.
    Rental Property Investor · Member since 2020 · 172 posts · 110 votes
    6y

    Hey @Tommy Keay I think you're doing things right. I wouldn't listen to people criticizing your process. Shadowing someone going through their first deal will be enormously helpful for you. Also, since it sounds like you haven't saved your down payment yet, why not go through all these steps you're outlining in the meantime.

    I used to be a writer. I wrote a bunch of published books. I would often outline the books and then throw away the outline. That doesn't mean the outline wasn't useful. It kept me engaged in the process when I was stuck or had nothing else to do. And sometimes it wouldn't inspire something beautiful.

    Of course, when you have the down payment and closing costs, you really just need to go get a house. Don't wait around for perfect. You don't want to wait six months to save a few thousand dollars. You need to get in there with both feet. Then the real learning starts. Often, especially with the first house, a good deal is a good enough deal.

    Good luck!

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