7 things to know about as a newbie investor

As a newbie investor, I closed on my first house in San Diego, CA in February 2020. It was a cute, single-family, California Bungalow built in the 1930s. It honestly could not have been a cooler house for my girlfriend and me. It was home to a professional baseball player and was built at the height of the Great Depression. To me, my home represents change and prosperity. Ironically enough, I bought my home a month before the coronavirus shut down, forcing a whole lot of change in my life.

I lost my job as a Special Education Aide at the beginning of the shutdowns, forcing me to get creative in making my monthly mortgage payments each month. After finding BiggerPockets.com during my supplemental income search, the real estate investing beast was unleashed within me.

Through my research and discovery, I learned that while I was living in my “dream home,” I could’ve been doing more to have my property make money for me. I learned that with better knowledge going into my first deal, I could’ve put my “dream home” on hold and found deals that cash flowed for me immediately, even in California.

Finally, when I got into BiggerPockets, I found a lot of the more experienced investors, and real estate investing in general, to be very intimidating. So, for me, talking with and reading about people who are in the same stage of Real Estate Investing as I am was comforting. So this article is for newbie real estate investors written by someone who was a newbie not so long ago. 

Here are 7 things I wish I had known going into my first deal:

1. House Hacking

This is something that I really wish I knew about when I was looking for a property. While my 2-bed, 1-bath house is a charmer, it doesn't allow for me to house hack very easily. For those of you who don't know what house hacking is, the strategy involves buying a property and renting out the remaining bedrooms to help cover the cost of a mortgage. Having a multi-family or larger single family home (3-4+ bedrooms) would've allowed us to live with tenants whose rent may have covered my mortgage entirely. 

2. Alternative Financing Options

I was raised on the premonition that in order to buy a house, you needed a conventional loan. This means saving up enough money to put down a 20% loan with closing cost and all the other expenses that are involved. It was the way my parents did that, but the times have changed. FHA loans allow for a down payment as low as 3% in some cases. While I didn't qualify for this, a VA loan entails no money down for qualified investors. There are also tons of people on BiggerPockets, and in the real estate world overall, with deep pockets desperately looking for a deal that will make them money. In California where I live, 20% down with a traditional loan is an incredible amount of savings which can be hard to put down when you aren't even sure if you're getting the good end of a deal.

3. Analyzing Deals With BiggerPockets Tools

Whether you want to Buy and Hold to rent like I'm doing, or BRRRR distressed properties to make a profit, the BiggerPockets calculators are essential to any investor who is serious about making money. Sure, you can run your own calculations through an excel spreadsheet, but what if your numbers aren't correct? Or what if you forget to account for certain expenses such as Capital Expenses or Management fees? The BiggerPockets calculators help you organize each expense that must be accounted for in any deal you may get in to. They also have links which help you understand how much you're going to have to pay for things such as repairs, vacancy, management fees and more a newbie investor may not fully understand. Anyone who creates a profile on BiggerPockets gets five free deals to analyze. After that you'll have to upgrade to pro. Trust me, as someone who has analyzed over 100 deals in under a month, I have a much better understanding of good deals versus bad one. I recommend that anyone looking to become a real estate investor should do the same. 

4. Working With "Investment-Minded Agents"

Assuming your first or second deal is going to be done on the MLS, this is the most underrated piece of advice in my opinion, because I have worked with both investment and non-investment minded agents. I can't stress this enough...THERE IS A HUGE DIFFERENCE. When getting into real estate investing, it will be tempting to work with your aunt or best friend who is as an agent. This is great and nice, but do your homework a little bit. This is someone who you are trusting with your money to help you find and close a deal that you're going to want to cash-flow on to help you realize your dreams. Are you going to let just anyone control that? I hope you say no. 

To put it simply, there are unfortunately a lot of agents out there who are not very good and are only looking to close their next deal to make their own profit. Understandable, but they might not care if you are profiting, because they have already profited off you. Investment-minded agents know that if they can work with an investor to close on a deal that cash flows every month, that investor will come back time after time, sometimes more than once in a year. Also many investment minded agents tend to have a team of other investment minded people around them to help in the overall process. 

So where can you find such an agent? Hmmm, if only there was a website you can go to where you can search investment minded agents right? Oh wait there is! Under the "Networking" tab on BiggerPockets, you can search investment minded real estate agents in any city of your choosing. So lets say you read How to Invest in Real Estate by Brandon Turner and Finding and Funding Great Deals by Anson Young (Both great books that helped me) to start off your real estate investment career. Wouldn't it be nice to work with an agent who is familiar with these books and who understands your strategies? 

5. Networking 

This one goes without saying, but deserves to be said again and again. Networking. Networking. Networking. I just met a General Contractor/Real Estate Investor who was telling me that the five people you spend the most time with are reflections of who you are as a person. How does that make you feel? 

Now, I'm not saying that you need to drop all of your friends and family who don't invest. But surround yourself with people who are already in the game and having success. BiggerPockets has a tab under "Networking" called "Events" where real estate investors in your area plan meet ups. With COVID-19, it is hard for people to meet in person, but zoom is a good option. And you don't need any experience to start your own real estate meet up group. I started one with some of my friends, and our meetings have been very beneficial and informative. And we have plans now to do deals together. You really never know what someone might bring to the table.

If meet ups are your thing right now, that's all good too. A good place to start networking might even be taking your agent out to lunch. One of the best learning opportunities I got came from a lunch I had with my agent. We really broke down what I wanted to accomplish and what she had done in her own real estate investing portfolio, and ever since then our goals have been crystal clear.

6. Having a Crystal Clear Criteria (C.C.C.)

I first learned this technique after reading the classic book Think and Grow Rich by Napoleon Hill and have since expanded my understanding of this concept through the BiggerPockets mediums. The concept revolves around the idea that understanding exactly what you want, how much you want to make, and how you are going to get there is the only proven way to fulfill your dreams. 

Most people never get to this point of understanding, and they aimlessly wander the real estate investing world wondering why they never made any money. They read a book on commercial investing and got super into that idea. But then, a few months later, read about house hacking and went to invest in a 2-4 unit suddenly, getting burned along the way. They never actually get a good deal done because they never actually knew what they wanted. Your first deal doesn't need to be a home run, so you might as well pick something that excites you and run with it. 

In narrowing down the C.C.C. for my next deal, I realized that I want a 2-4 unit multifamily property in a few different areas I like in San Diego that is going to make me at least $1000 per month after all the bills are paid. Now that's crystal clear! And I am going to find my deal. This helps me eliminate properties that won't work for me sooner, because they don't meet my C.C.C.

7. Continuing to Discover BiggerPockets

My friends and I joke now that any real estate investor who doesn't know about BiggerPockets isn't worth our time. We're only half kidding. It's true! The fact that you have found this website is a sign that you are beginning your path toward greatness. Brandon Turner, Josh Dorkin, David Greene, and the many other BiggerPockets contributors are some of the greatest real estate investment minds out there. Other investors on BiggerPockets are genuinely good people who wish to connect with and help other investors. After reaching out to some of the investors on here, I am so much farther ahead of investors I know who aren't on BiggerPockets.

Seriously, they have created this space where anyone can become a real estate investor for free. Don't allow some guru to trick you into thinking "they have the secret" to real estate investing, but only for tens of thousands of dollars of course. The free content available to BiggerPockets browsers is enough to kick start your journey. As someone who is a pro member though, the $312 I spent for the year two months ago is already worth it as I am in the process of closing on my second deal.