Getting Started - Top 3 Things To Do First?

5 Replies

Hello,

Let me start my introducing myself. My name is Myles Cardenas, and I am a 22 year old recent college graduate that currently works as a Land Development Project Manager for CalAtlantic Homes in Atlanta. I have a little over a year and a half of experience in Commercial Construction in Project Management, and I have over a year of experience in Residential Land Development. I majored in Construction Management and geared my coursework towards learning Real Estate Development processes. I have always wanted to own and invest in real estate, so I have finally decided to work my first deal within the next few months. I have started to identify properties that I believe would be ideal single family rental properties for me to start out. However, I have been having some trouble with figuring out how to start. Do I create my own company in order to own and operate the properties that I invest in? How do I secure financing under my own company if I do need to go that route, does it follow the same path as if I was requesting financing for my own permanent residence? Do I need to have legal documents in place now in order to effectively lock in and screen potential tenants? I have so many questions, but what I wanted to reach out you guys to see if you may have a list of maybe 3 things that I need to focus on as someone just starting out. What top 3 things should I be doing right now, before I even reach out to a seller of a potential property in efforts to purchase my first deal? What are some things that I can do now that can help create a smooth organization and professional environment as I start small and grow along the way?

Thank you guys for your help in advance.

Sincerely,

A New and Eager Real Estate Investor

Myles,

You don't mention if you own, rent etc. so I am going to assume you don't have your own home.

1) Get your financial house in order. Loans paid off (as much as practical/possible), credit cards zeroed out, 6-12 months expenses in the bank, plus a down payment. AS A MINIMUM. If you need help, take a look at mrmoneymustache, affordanything, or any other such site. Read, read and more read on real estate, stuff like "The Guide to Buying Your First Property", "Rich Dad, Poor Dad" etc. (yes, this is all #1)

2) Assuming #1 is complete/in progress. Go see a lender and get Pre-Approved for a mortgage. If not approved, then this will tell you what you need to work on.

3) Assuming #1 & #2 are complete/in progress. look to househack a 4 unit. SFR's probably won't cashflow, and you'll have roommates (this is a no-go for me, some love it, you decide for you). 2's, 3's & 4's might cashflow (depending on area/price).

Leave the entity stuff out of the equation for now, Don't worry about the tenants stuff. Make sure that you read about those things, but to just start out, concentrate on the basics of having your finances in order, financing, and finding a 4 unit.

Hope that helps.

Good Luck,

Jim

I agree with pretty much everything @James C. said above. First of all is putting yourself on a good financial track. House hack if at all possible. Make sure you don't stretch yourself too thin. Get the mortgage in your own name for the better financing, worry about entities later when you are more sophisticated.

Above all else, educate yourself - you asked a few questions that indicate that you haven't really dug deep into details (no offense intended, just trying to be honest.)

As far as forms, etc. go, my advice would be to find a mentor that can help you with this. I did this by finding a friend-of-a-friend RE agent who was also an investor. I work exclusively with him on the acquisition side, help him with some of his properties, etc. In return, he helps me with the lease docs, screening, etc. and has been an invaluable resource. I provide value to him, he provides value to me, and it has actually turned into a pretty good friendship. 

Since you are already in development, I can almost guarantee you that you know someone who knows an excellent person to fill this role for you.

I agree with James as well, but I would add a parallel education track. While you're getting financially ready you'll need to better define your "why" and the strategy you're going to use to get there. For action steps:

  • Listen to the Bigger Pockets podcast - download the last 20 and start there, then go back through and listen to them all. This will give you a wealth of information to start with, and provide some of the questions you'll want to ask on the forums. If you're anything like me, this will also help you determine your "why" and strategy through hearing others. 
  • Go to every open house. Unless you're getting a second job to repair finances (which could be more important than this point) you need to see as much product in your market as possible. Walk through everything, and talk to the realtors there. This will help you narrow down the housing features are the most impactful in your area, give you a deep sense of your target neighborhoods, and start networking. You can (and should) spend all day Sunday doing this until you have your market cold. 
  • Analyze, analyze, analyze. Analyze the open houses, analyze listed rentals, analyze the place you're currently living and your friends are living. This site has great tools for determining if a deal is a deal, so get familiar with the tools and the standards of your market. You may want to execute a single strategy, but your market could be completely unsuited for what you think your initial strategy should be, and you'll need to pivot. Better to know that before you buy your first deal. 

Do this for 3 months and you'll be head and shoulders above other investors and most realtors. If you're diligent it's also likely you'll find a screaming deal along the way. Good luck!

NOTE: I wasn't paid for the shilling for Bigger Pockets, lol!

Mr. James, thank yo for responding. You're totally right, I left out quite a bit of information about myself. I am currently back home with my parents, and plan to purchase my first home in about 6-7 months with the intention of staying under the first time home buyer status and having the opportunities to use resources available to first time home buyers. 

That's why my entity question came about. If I purchase my first deal under my name, I'm afraid my first time home buyer status will go away and I won't be able to use the resources on the home I actually want to live in.

I've currently going through the pre-approval process with lenders when it comes to my first home purchase so I know all of the processes around making sure my credit is good, credit cards, student loans I have to pay back, etc. 

My question around creating and entity and then acquiring financing through that entity is what I am struggling with at the moment, due to the fact that I want to keep my eligibility for first time buyer programs when it comes to buying my first home once I move out.

Thanks Mr. Steven. I am currently in my learning stage now. I have been listening to the podcasts and am currently reading the beginner's guide I received after creating my account. I have a real estate agent who is also an investor that has reached out to me about doing my first deal using a property of his. He mentioned that owning and operating real estate under a business entity of my own was the way to go, and I have read this to be a common thought in other posts. My main thought in leaning towards doing so is because I am wanting to purchase my first home in about 6-7 months. I really don't want to mess up my first time home buyer status by pulling out a loan for an investment, and then not being able to benefit from the first time home buyer programs when it's time to get my own place.

Mr. Shawn, thank you so much for the great advice. I have been an avid BP listener since I found it for the first time about a month or so ago. I have also attended local investment group meet ups to get a feel for everything and meet some people. Right now I'm in the education stage, and I'm ready to learn while doing. I have identified how I want to start in regards to my first deal, I'm just nervous about how to go about getting this thing off of the ground when I'm trying to move out and get my own place not to long down the line after I plan to have acquired my first deal. It's tricky right now for me. So my intentions here were to figure out exactly what do now in regards to taking off. I'm aware of the pre-approval process for loans and making sure I'm green in regards to my credit score, but right now I'm stuck on exactly how to get off the ground with this thing while trying to get my own place somewhere down the line as well under the first time home buyer status.