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Posted about 5 years ago

5 Steps for Real Estate Newbies to Scale Fast and NOT Lose Money

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“How do I get started in real estate?” Every aspiring real estate investor needs the answer to that question. 5 years ago, I muttered the phrase for the first time, and I found my answer in one of the most unique places. I didn’t gain insight at a local REIA (Real Estate Investment Association) meeting or a BiggerPockets meetup. I now know these places offer tremendous value to both new and seasoned investors, but back then, I had no clue what a REIA was. My formal real estate education began at a barber shop, when I overhead an investor speaking about his latest property. After a 15 minute internal struggle, I built up the courage to talk to him. I shyly introduced myself, admitted to eavesdropping on his conversation, and asked if he had any advice for a newbie struggling to find his first deal. His response was extremely important to my real estate success, and I’m hoping the 5 steps he gave me will be just as transformative to anyone else trying to get started.

Step 1: Learn, learn, and learn some more

Knowledge is power, and in real estate, the lack of knowledge will either keep you on the sideline, or make you easy bait for the money sucking gurus with $30K training programs. The investor at the barber shop told me if I was serious, I should read a few books, listen to some podcasts and YouTube videos, and learn the definitions of key real estate terms. No one can help you if you are not first willing to help yourself, so it’s every newcomer’s responsibility to have an understanding of common investing terms and basic calculations. You should research the meaning of after repair value (ARV), gross rent, net operating income, mortgage expenses, cash-on-cash returns, and capitalization rates (Cap rates), to name a few. There are several other key terms you will need to be familiar with to have an informed conversation with other investors. A really good resource for learning real estate investing lingo and calculations is The Book on Rental Property Investing by Brandon Turner.

Step 2: Know what you want

Real estate investing is way too broad of a field to have vague goals. Decide where you want to start and why. Are you trying to retire early, replace your income, supplement your income, protect your cash against inflation, etc.? Do you already have a high paying job and want to start buying and holding nice A and B class properties in high growth neighborhoods? Do you have no money and need to start by wholesaling for a year or two to gain some capital? Are you willing to invest in a less desirable part of town with low appreciation but great cash flow? Do you have any connections with contractors willing to help you fix and flip properties (I wouldn’t suggest this method as a first time investor)? Be as clear and concise with your goals as possible. Having a general direction will save you time and energy; and most import, it will guide the questions you ask and the people you look to for help along your journey.

Step 3: Know your financial status

Get pre-qualified to know how much house you can afford. Know your credit score, and understand how the interest rates fluctuate on the loan products you are considering. Be certain about the money you have available (cash, credit cards, home equity, stocks etc.). Know how much money you can borrow, raise, and generate from a side hustle within a few months if needed. Consider everything from extra shifts at work to part-time Uber driving. Nothing should be off the table if you really want to get started. You shouldn’t limit your search for great deals to the amount of cash you have on hand, but knowing exactly how much you have available is the best way to determine how hard you need to hustle to get that real estate empire started.

Step 4: Know your strengths

Figure out what you are good at and market yourself as someone who is willing to trade those strengths for information, training, connections, deal flow, and/or money. Are you great at social media? Awesome! Introduce yourself as a real estate investor who specializes in helping other investors improve their social media presence. Are you a CPA? Great! Leverage that skill to entice seasoned investors by offering to review tax returns for free or at a discount if they will show you the ropes. If you are a college student with free time, monetize that strength by learning how to wholesale. Then, send great leads to an investor for a reduced wholesale fee in return for the opportunity to shadow her while she manages a full-gut rehab. If you use your strengths to provide value to others who can teach you, or generate extra capital for your future investments, you will fast-track your investing career.

Step 5: Network to find mentors

Attend local REIAs regularly. People network, share ideas, and build connections for future partnerships at these meetings. After working with my barber shop mentor for a while, I quickly learned that networking effectively can make you a ton of cash, shave years off your learning curve, and keep you from losing money. The golden rule of networking is never expect something for nothing. Knowing what you want, knowing your financial capabilities, and knowing your strengths will allow you to leverage your good credit, cash, home equity, knowledge of the law, marketing skills, video editing background, etc., as a tradeoff for someone else’s expertise in the area you want to grow your business.

In my example, the investor I met at the barber shop was willing to help me get my first deal for a few reasons. 1.) I had a decent credit score and wouldn’t have a problem qualifying for a loan. 2.) I was serious about investing in a property over the next three months. 3.) I had a degree in finance and was good at putting together high level presentation decks for savvy businessmen. He was looking to offload some of his properties, so he agreed to help me with my first purchase, assist me with getting tenants, and ensure I received great cash-flow, if I bought one of his houses. He also needed help putting together marketing material for potential buyers of his fix and flip projects. Since each person’s strengths met the other person’s needs, the mentorship made sense. Remember, networking is a numbers game. Kiss as many frogs as you need to in order to find people whose interests align with yours.

Follow these five steps and you will earn more by learning the real estate investing game faster, building mutually beneficial partnerships, and avoiding rookie mistakes that could cost you tens of thousands. 



Comments (2)

  1. Hello, new to Real Estate Investing in South Florida this article was very informative. I'm glad I took the time to read it. Thanks for sharing your thoughts it will help others down the line. 


  2. Hi everyone. I'm new to the blogging world. If you find anything in this article helpful, have questions, or want my opinion on other topics, please leave me a comment, and I'll help however I can. Thanks!