Basic REI questions often asked: answered
I thought it might be helpful to post a quick list of many of the common REI questions I see posted on here that are fairly non-specific and have similar answers across the board. While I am no expert in real estate, I do feel I can provide a little insight on some of these often seen generic questions and consolidate them into one thread. If you want to add /answer any others you can think of, feel free to post and we'll see if we can string together a nice list all in one place for individuals newer to BP.
What is the best market?
There is no “best” market. There may be areas that are “hotter” than others and where certain types of investing are more common and easier to pull off. However, there is no singular best market out there. If you are stuck going back and forth between places to invest and don’t want to choose the “wrong” market, remember that people are investing EVERYWHERE. It all depends on what your goals are and what types of investing fit you. Cash flow rentals tend to be more prominent in the Midwest whereas investing for appreciation/flipping potential could be higher on the coasts where values are more volatile. Decide what you want to do first and what your end goal is, then choose a market that you feel you could be successful in and start focusing on it. Waxing and waning between locations is just a waste of time and will get you nowhere.
Can I get into real estate with “xxx” money?
Yes. You can get into real estate with no money if you necessary, however, your options may be more limited and you will have to work very hard to hustle, grind, and learn the game. You might start with wholesaling, or networking with people to find partners, hard money lenders, etc. but if you want to start bad enough there is always a way. Real estate does not include only those with a lot of cash. Cash can make things easier, but it can also lure people into making stupid decisions because they have extra cushion in case things go wrong.
Should I wait for the “crash” before investing?
No. “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves” Peter Lynch. If you buy smart it doesn’t matter what the market is doing. Analyze the numbers and account for possible dips in the market if necessary but don’t wait for something to occur. You cannot predict a crash and so many people have been waiting on the sidelines for years missing out on opportunity after opportunity because they think the crash is coming tomorrow. This is really just an excuse not to take action.
What type of strategy should I do?
This can only be answered based on what your end goal is. Are you looking for cash flow, appreciation and equity, passive income, a job you can do to build capital and income, do you like to be hands on/hands off? You need to answer these questions first and decide what you r end goal is. If you want exponential growth you may want to consider leveraging more to acquire faster. If you want a little nest egg with lower risk you might consider paying off a property at a time and building a portfolio that way. NOBODY can answer this question for you until you have clearly outlined your goals.
Should I pay off debt or invest in REI?
This is a very legitimate question and has many factors involved. In general, higher interest debt like credit cards, payday loans etc. should be paid off as soon as possible because they can sink you very fast. Lower interest debt like mortgages, car payments, student loans etc. are a bit more personal and again involves your own personal psychology and comfort level with debt and risk. No matter what anyone says, if you can't sleep at night while you have debt then perhaps you should focus on that first and then move into REI investing. There are many ways to use REI to accelerate debt pay down so that could be a great option too, but you might have to take a little more upfront risk or be very active in working hard to make sure you succeed. Each has its advantages and disadvantages.
How do I find out information about other markets?
Simple. With the internet you can find out almost anything you want to know about a market. You can search population growth, employer diversity, median income, crime rates, future development plans, population demographics, average rent compared to housing cost etc. A few great sites to see some of this info is datausa.io, rentometer.com, city-data.com etc. After that, talk to people in that market! Call or seek out local investors, property managers, and brokers and ask them about market demand, trends, demographics and acquire as much information as possible while making connections in the area. Those connections will be more helpful than anything in the long run.
Should I invest out of state?
Again, depends on what you are looking for. Some markets are more challenging than others to get started or may not suit the type of investing you are looking to do. Figure out your goals first, realize that OOS investing will take a bit more leg work to connect with people in the area, do your homework to learn the market, and be comfortable with overseeing or managing from a far. You may consider turnkey investing if you have little experience to start, or you might want to jump right in and go for it. Always remember to run your own numbers and don’t trust anything others say without verifying for yourself.
Should I get my real estate license in order to invest in RE?
It can be helpful to gain early/easy access to properties and you can buy at a little more discount since you won't pay buyer realtor fees. You will have access to the MLS yourself and perhaps find it easier to make insider connections. But it isn't required and there is a lot of work and some annual fees associated that you should consider as well. Depends on the volume of investing you plan to do, whether or not you want to function as a realtor for others as additional income and how much you want to invest in maintaining your license.
How do I find a mentor?
Connect with people on BP, REI meet ups, go to open houses, auctions etc. and just reach out and talk with people. This is the best way to build a natural, organic relationship with someone that could turn into a mentorship. You have to have trust and align on some of the same goals and the best way is just to be patient and talk with people until you develop that relationship. You could pay for mentorship too and some have found that incredibly valuable. But make sure you vet the person out to ensure they aren't just trying to scam thousands of dollars out of you in some "get rich quick" scheme designed only to take your money.
What is the “best” way to learn REI?
Read books, forum posts, go to REI meet ups, connect with other investors, and actually DO IT. Much of what you learn isn't read, it is through experience. Try to learn as much as you can and surround yourself with wise people to minimize mistakes, but ultimately you just have to put in the time and effort and do things and learn it. The most important thing is consistency. A little each day compounds over months and years and will snowball to success. You cannot dive in with a burst of enthusiasm, expect to learn it all in a few months, and become ultra-successful and rich. This is a slow game, consistency is what sets apart the real "winners" from those who come and go.