Chapter 1:

How to Invest in Real Estate: An Introduction

Are you new to real estate investing? Learning how to invest in real estate doesn't need to be complicated, difficult, or expensive. In this beginner's guide, you will learn how to get started investing in real estate from beginning to end—with no hype, false promises, or pitches.

This chapter includes the following sections:

Why Invest in Real Estate?
Can I Invest in Real Estate if I Have a Full-Time Job?
Do I Need to Pay Some Guru in Order to Be Successful?
Can I Invest in Real Estate if I Have No Money?
Is Real Estate Investing a Way to "Get Rich Quick?"
What to Expect in This Beginner's Guide

Ninety percent of all millionaires become so through owning real estate.

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—Andrew Carnegie

Why Invest In Real Estate?

There are many places you can put your money besides underneath your pillow, including in stocks, bonds, savings, mutual funds, CDs, currencies, commodities, and of course, real estate investments. There are positive and negative aspects to each investment option, but since we're here to learn about real estate, we'll focus on that and that alone.

One of the most commonly stated reasons people give for investing in real estate is that they are seeking out financial freedom, but there are others, as well. Of course, each person will have his or her own personal reasons. They are typically seeking one or several of the following:

  • Appreciation
  • Cash Flow
  • Depreciation
  • Leverage
  • Tax Benefits

The decision to begin investing in real estate is a personal one, and we absolutely recommend that you make sure you and your family are 100 percent committed before deciding to move forward in doing so.

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Can I Invest in Real Estate if I have a Full-Time Job?

Yes. The kind of real estate investing you see on television or may hear about from a guru is not the only kind of real estate investing there is. In many situations, the kind of investing you see on TV is not even investing at all, but rather gambling or speculating.

The truth is, there are hundreds of ways to make money in real estate. Some of these techniques or strategies may require 40 hours a week, while others may only require 40 hours per year. The amount of time it takes to grow your real estate business largely depends on your investing strategy, your personality, your skills, your knowledge, and your timeline.

You’ve probably heard the age-old question (perhaps from your high school guidance counselor), "If you suddenly had one million dollars and didn’t have to work anymore, what would you do?" The answer, some say, reveals what career field you should enter.

Would you invest in real estate?

If your dream path is to open up a shelter for abused animals or to move to Aruba and train tourists to surf, you probably should not become a full-time real estate investor. That's not to say that you shouldn't invest in real estate—you just probably shouldn't go full time.

However, you don’t need to make it your career in order to build wealth in real estate. If you love your job, you don’t need to quit it to invest in real estate. You can achieve the same (or better) results by investing on the side, same as you would as a full-time real estate investor.

Advantages of Investing While Working a Full-Time Job

By keeping your day job, you have several advantages over a full-time investor. First, you do not need to live off the cash flow you make—that's what your nine-to-five is for. By reinvesting all the profits from your investments, you can fully realize the incredible benefit of exponential growth. Additionally, you have a much easier ability to get long-term bank financing thanks to the stable income from work, which can also help increase and stabilize your wealth building.

You can invest in real estate while keeping your day job by doing the following:

  • Partnering in a larger piece of property
  • Investing in a buy-and-hold property with property management
  • Serving as a private or hard-money lender
  • Investing in notes (mortgages)

Real estate can be highly profitable whether it’s your career or you're just investing while working a "normal job." However, the choice is yours as to which path you take. Don’t simply decide to quit your job and become a full-time investor because you read about other investors who have been successful doing it that way. Having a concrete plan for how you're going to proceed in real estate is essential; we'll get into that a little later in the guide.

That said, life is too short to be stuck in a job you hate. Choose a career that makes you excited to wake up in the morning, energized throughout the day, and content when you fall asleep at night. If that desire leads you to full-time real estate investing, welcome to the club! Just make sure you are not simply building a career, but building a future.

Do I Need to Pay Some Guru In Order to Be Successful?

Absolutely not. Countless investors have become successful without the help of the guru crowd. The goal of many of these individuals is to sell you on the dream of quick riches, fancy cars, easy money, and so on—many prey on people who desperately want to make money and may use very slick and often dangerous (for you) techniques to sell you on their very expensive courses, bootcamps, mentoring, training, etc. In fact, the tactics used to get you hooked are very well documented, and there is absolutely no such thing as a free lunch.

Keep in mind that there are many in our industry who benefit from marketing these gurus. Most websites that focus on the investment niche are affiliated with them, collecting large referral fees—often to the tune of 50 percent—in return for marketing their wares. Additionally, a large percentage of real estate clubs derive revenues from products and events sold by gurus who "teach" there. And yes, they also get a nice 50 percent cut for doing so.

Remember, real estate gurus are in the business of marketing and selling you on the dream. Through this guide and the thousands of articles and hundreds of thousands of discussions available on BiggerPockets, you can absolutely learn everything that you'd pay thousands of dollars to a guru for, and you can do so for free. If you want to read an excellent article about the guru seminar trap, read "The Real Estate Guru Trap—How It Works & 4 Ways to Avoid It," available on BiggerPockets.com Also, if you find a real estate guru that you are interested in learning more about, be certain to be careful, and check out our real estate guru review forum to find out the real deal from other investors.

That all said, they aren't all bad, and some of these individuals are very knowledgeable. Just remember: caveat emptor (let the buyer beware). Do your homework and don't get caught up in the hype or promise of secrets; there aren't any.

Can I Invest in Real Estate if I Have No Money?

No Money Down. The simple answer is: yes, it is possible to invest in real estate if you don't have any money at all. However, money is involved in every real estate transaction. The issue, therefore, is not whether you're investing with "no money," but instead whether you’re investing with "none of your own money." Investing in real estate without using any of your own money requires using Other People's Money (OPM). Learning to strategically invest in real estate without any of your own money is one of the most complex, but important, tools you can develop in your real estate investing career.

The key to investing in real estate without any money of your own is simple: bring something to the table. If you lack money, there are other things you can bring to the table in a transaction—if structured correctly—including education, time, connections, confidence, intelligence, and creativity. By reading this guide, you are already taking steps toward building your strengths in those areas.

Many investors use little or none of their own money when investing in real estate. They’re able to achieve this by using one of several methods, including:

  • Wholesaling
  • Using partners
  • Using lease-option strategies
  • Via FHA (3.5 percent down payment) loans
  • Using USDA or VA (no down payment) loans
  • With home equity loans or lines of credit
  • Using private/hard money

We will look at each of these options in more depth later in this guide, but we want you to recognize that investing in real estate without income is possible. It just may not be as easy as the gurus would have you believe.

Working in Real Estate Without Investing at All

Many would-be real estate investors get their start by simply working in the real estate industry—earning money while gaining a solid hands-on education. Here is a brief list (far from exhaustive) of careers you can take on to learn the real estate business:

  • Real Estate Agent
  • Mortgage Broker
  • Appraiser
  • Construction Worker
  • Resident Manager
  • Title/Escrow Agent
  • Project Manager

If you are looking to get into real estate investing with no experience and no money, choosing one of these careers may be a great way to get your feet wet in the industry, helping you to begin plotting your move to a full-time real estate investing career. The experience you'll gain from mastering one or several of the other trades in the industry can be invaluable in helping you succeed.

Is Real Estate Investing a Way to "Get Rich Quick?"

How many late-night real estate infomercials have you seen where the real estate guru is sipping drinks on the back porch of their beachside home, beckoning you to join them in the life of luxury?

No doubt one of the largest draws to real estate investing is the image of investors driving fancy cars, living in large homes, and ultimately being rich. And while many real estate investors do build significant wealth during their careers, real estate investing is not a get-rich-quick scheme. Yes, there are some who make a lot of money in a short time; however, these situations are generally the exception, not the rule.

Investing in real estate takes planning, patience, and persistence. Don't expect to make millions of dollars in your first year. Instead, plan on creating a business through real estate that will steadily grow year after year, enabling you to meet your financial goals—and hopefully accomplish your dreams. No matter what you may hear, being successful in real estate requires hard work, just like any other field. It is also important to know that there are no shortcuts to being successful in real estate—there are no products or tools that will do the work for you, either. You must learn the fundamentals and then apply them. Of course, our goal here is to help you with that.

Moving On

Whether you decide to go full time or just invest on the side, real estate can be the path toward a bright financial future for you and your family. In the next chapter, we are going to look at the very first step (and one of the most important ones) you should take on your journey: education.