Can I have your attention please?
Please have a seat, we’re about to get started.
Please fill in all the available spaces – this class is full and we want to make sure to get everyone into this room. Remember to turn off your cell phones or I will be collecting any phone that rings!
This is Real Estate Investing 101 and I’m your professor for the day. You signed up for this class because you want to learn how to get started with real estate investing. Chances are, you are probably a little bit overwhelmed by the massive amount of information that’s out there so it’s my goal to help simplify all that real estate investing knowledge into this class.
By the time you leave today, you should have a good understanding of what real estate investing is, what your first steps should be to get started, and why I believe now is the best time ever to invest in real estate. If you have any questions, please don’t hesitate to write those questions down and ask me after class. I’m always happy to talk real estate, and if you really want to commit to this journey – I fully expect each and every one of you to join with us here at BiggerPockets and become an active and engaged member of this community!
But first, let’s talk about money.
How many of you are comfortable with your current financial position in life?
Yes, I see a hand way in the back. Is that… yes, it is… class, it looks like Mr. Buffett has decided to join us today for Real Estate Investing 101, no doubt taking a break from managing his $50 Billion dollar stock portfolio to learn more about real estate investing because, isn’t it right, Mr. Buffett, that you said “I would load up on them…It’s as attractive of an investment as you can make,” referring to residential real estate investments?
Great, well – Warren, thank you for joining us here today and I hope even you can learn a thing or two about real estate investing today. But for the rest of us – most of us are not content with our financial position in life. Maybe you don’t want to be as rich as Mr. Buffett up there, but you at least be able to afford to live life on your terms and have the freedom to do what you want, am I right?
Alright, alright settle down. I’m glad you are all as enthused about this as I am. So let’s get started. I’m going to put some slides on the wall, so be sure you are all taking notes.
How to Invest in Real Estate While Working a Full-Time Job
Many investors think that they need to quit their job to get started in real estate. Not true! Many investors successfully build large portfolios over the years while enjoying the stability of their full-time job. If that’s something you are interested in, then this investor’s story of how he built a real estate business while keeping his 9-5 might be helpful.
Real Estate Is About Solving Problems
Not quite what you were expecting, is it?
I know you all came here to hear me tell you the step-by-step way you need to start making money in real estate. And I promise I’m going to get there. But first, let’s look at the foundational truth behind all real estate wealth. It’s about solving problems. Until you understand that fact, no amount of time in the classroom or hours of homework is going to turn your dime into ten cents.
It’s about solving problems.
I once knew a young man who left home, moved across the country, and ended up on his girlfriend’s parent’s couch. He had a problem. He didn’t want to end up on their couch for any longer than he had to – so he began searching for a place to move to.
I knew a contractor who did amazing work, but being a slow time of year, found himself with an empty wallet and growing expenses.
I knew another individual, an older woman, who got a job opportunity in California and had to quickly pack up and leave. However, the house was in need of a lot of work and she had no skills or money to do the labor.
As a real estate investor, I solved three problems and created wealth out of thin air. I bought the home from the older woman, hired the contractor to rehab the property, and rented it out to the young man. The woman was happy, the contractor was happy, the young man was happy, and I made money.
This is real estate investing 101: problem solving.
Let’s move on to some actionable steps that you can do.
Real Estate Investing 101 in Seven Steps
I’m going to play a quick film to help illustrate my points. This is a film from Brandon Turner, over on that real estate investing site BiggerPockets. Don’t mind the amateur production value or the silly haircut these young punks seem to find so cool these days. However, you will want to pull out your text book, The Ultimate Beginner’s Guide to Real Estate Investing. If you don’t have yours, you can access it on your fancy little iPads or laptops by going to BiggerPockets.com/UBG. Brandon is going to mention it, and we’ll be touching on it after the film. Now, please quiet down.
You there – yeah, you – in the yellow Christmas sweater and the funny hair … can you please hit the light switch?
Thanks. Now class, please be quiet during the film …
Alright class, simmer down, simmer down. Can anyone tell me what you learned from that video?
Alright, let’s go through each point real quickly and talk about it. Being that this is only Real Estate Investing 101 – I’m going to go through this rather quickly and won’t be able to spend a whole lot of time on it. But, you have your textbook ,The Ultimate Beginner’s Guide to Real Estate Investing, there in front of you so be sure to spend some more time reading that on your own.
Also -I’ll be sure to point out some additional resources that you can use to get more info along the way, so be sure to take some time to check those resources out as well.
Step One: Education
You’ve got to get smart. Clearly, class, you’ve already decided this was important and that’s why you are all crammed in here like sardines in a blender. I do want to point out some of my favorite ways to learn about real estate investing:
- Books – like any of those found on the BiggerPockets’ “Best Real Estate Books Ever” list
- Podcasts- like the BiggerPockets Podcast
- Forums – (yep, you guessed it) like the BiggerPockets Real Estate Investing Forums,
- Blogs – like The BiggerPockets Blog or the BiggerPockets Member Blogs or
- Other Investors. Yep – some of the best teachers are not even teachers at all, but simply seasoned investors in your local community who have been there before!
Let’s move on.
Step Two: Choose Your Niche and Your Strategy
There are hundreds of ways to invest in real estate, so you need to decide how you are going to do it. Real estate investing is about solving problems, right? We covered that earlier. However, those solutions are found by combining a certain “niche” with a certain “strategy.”
For example, in the story of the three individuals that I told you of earlier, I combined the “single family house” niche with the “buy and hold” strategy to create a win-win-win.
Niches include single family properties, small multifamily property, large multifamily properties, commercial real estate, and more.
Strategies include flipping, wholesaling, buy and hold, lease-options, seller financing, etc.
The fun part about real estate is – you can combine different strategies and niches and truly be creative! For a good example of this, check out the blog post on BiggerPockets called “How to Buy a Small MultiFamily Property: A Step by Step Case Study”
Step Three: Create Your Plan
Can anyone tell me exactly how to get from here to Lima, Peru?
I see what you all did there. Pulling out your fancy computers and i-devices to get you there. Exactly my point. As Brandon said in the film we watched earlier, you aren’t going to drive from Saskatewan to Lima, Peru knowing only that it was “South.” You need a plan. You need a map, or at least a GPS or fancy phone to give you the directions you need.
Your plan is going to be your guide for the start of your real estate investing career. Where do you want to get to? How long will it take? This is where you define your path.
A great way to build your plan is by determining your destination, and working backwards. If you want $1,000 per month in passive income – how many houses does that take? —> How much does each house cost you? —> How much cash do you need to have? —> how can you save this cash?
Talk with seasoned investors on the BiggerPockets Forums to create your plan.
Step Four: Go Find Your Property
Next, you need to actually start following through on your plan. Start looking for the property you want to buy. You already know the kind of property you want to buy, and you already know how much you want to pay for it – so go find it.
However, finding the perfect property won’t do you a lick of good if you can’t pay for it. That’s why the next step is to pay for the property.
Step Five: Pay for The Property
You don’t need to write a check for the whole amount – though you are perfectly welcome to. Instead, you can find a bank to lend you a good portion of it and can simply put up a small down payment. This amount can change depending on the property type and use, but typically 3.5%-25% is the norm.
There are alternative methods for finding financing as well, such as using partners, hard money, private money, and more. For a great article written by that same man in the film we watched, read “A Strategy For What To Do When The Bank Says No.”
Also, class, if you are looking for a hard money lender in your area, be sure to check out the BiggerPockets Hard Money Lender Directory for the internet’s most comprehensive list!
But enough of that, let’s move on to marketing.
Step Six: Master the Marketing
As a real estate investor, you will need to become good at marketing. This isn’t really an option, because so much of your business depends on it.
You may need marketing to find deals.
You may need marketing to find lenders.
You may need marketing to find buyers.
You may need marketing to find renters.
You get the point. Marketing is really, really important so learn everything you can about it! Chapter 7 in your text book goes into a lot of detail on Marketing.
Let’s move on to our final section – and everyone’s favorite – making money.
Step Seven: Get Paid
As Brandon said in the video “whether you are holding your property for sixty minutes, or sixty days, or sixty years, at some point you’re going to need to get paid.”
There are multiple different exit strategies you can use, from the normal selling through a real estate agent, selling it without an agent, using seller financing, trading up with a 1031-exchange, or one of a number of different methods. Learn how to sell properly, and make it part of your plan from the beginning, and you’ll do great!
And with that…
And that’s the bell, class.
Thanks for sitting through Real Estate Investing 101. If you all have any questions, don’t hesitate to reach out to me anytime! However, I’m just a old professor and there are hundreds of seasoned investors talking every day on BiggerPockets that can help you with any aspect of your real estate investing journey.
Go home and log on to BiggerPockets.com and check out the Forums and the Blog and the Member Blogs. Get involved. This business is about solving problems, and the best way you are going to learn how to solve them is by getting connected with others who have been there.
Your homework for the day is to leave a comment below and to share this post on your Facebook wall!
Class is dismissed. I hope to see you all back in here for Real Estate Investing 202 in the Fall.
Mr. Buffett – would you like to grab some lunch?