Hey Newbies - Here's How To Get Started

[Ken M.]

It's usually helpful to give guidance on what to expect when starting out in real estate. It will at least get you going in a direction that is beneficial.

There is no such thing as "no money needed" real estate. Subto, Wholesaling, fix & flip all require money. And if you don't have the right amount of money, you will lose the entire thing and get sued. Don't do that. It's an experience you don't want.

There are ways to get the money you need, but don't expect it to be cheap or easy.

As others have already pointed out, house hacking is a popular starting point for a lot of people.

To jump to rentals, usually a lender wants 20% down, which on a $300,000 property is $60,000 along with the usual closing costs and reserves which can run anywhere from $3500 for closing to 6 mos of reserves. Ask a lender and ask what the cost of borrowing will be. In my opinion, making less than a few hundred dollars a month on a rental is losing money. You still have to account for vacancies, replacing broken things, taxes and wear and tear.

There are creative ways to get into properties for around $20,000 but you still need some reserves for "just in case". This one normally has start up costs and training involved. I can explain that in more detail but it's a whole conversation.

Then there is “Joint Venture”. That's where one partner does all of the work and the other provides the capital to do the project.

Some people go with "wholesaling", but frankly most people that go that way work hard at it for 6 months then give up with not having done a single deal. A few strike it big, promote what they've done and give the impression everyone does as well as they have. Things are not always as they seem.

Some people use Hard Money Lenders or Private Lenders to fund the project if they qualify for that particular lender’s requirements.

I wouldn’t get caught up into worrying about LLCs, asset protection and other eventually needed aspects until you have at least gotten started going in a direction that works for you.