For this week’s post, I wanted to give you an overview of the top 10 things nobody tells you when you’re first starting out in real estate.
You see, personally, I was introduced to the real estate industry with unrealistic expectations, and I have found other people who have had very similar experiences.
I was told that in one deal, I could make more money than I could make in an entire year at my day job, and though this is true, most of the time wealth is built slowly, and real estate is no exception.
The following is a realistic depiction of what to expect in real estate. I hope it helps you!
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1. The Industry Is Known For Delayed Gratification
Real estate can be one of the most lucrative industries to get involved in; however, in most people’s experience, it takes time to build. Paydays in real estate can take months or even years (look at development, for example) of planning and working to make happen.
It is very common for things to fall through or to get delayed, whether it’s the seller backing out, funding issues occurring, or renovation time turning out to be longer than expected.
Be prepared to learn patience.
Your hard work will definitely pay off — it just may take a little bit of time for things to pop!
2. There Are Well Over 100 Ways to Make Money in Real Estate
Real estate is probably the most diverse industry in the world. If you think about it, it touches every component of human experience.
Where do you work? In a building.
Where do you live? In a house.
Where do you buy food? In a store.
Typically when people are first starting out in real estate, they feel as if their only option is to get into fixing and flipping houses or wholesaling, but these really aren’t their only options. There are tons of ways to make money in real estate!
For a complete break down, Brandon Turner did an excellent job of it here.
3. Real Estate Is Harder Than You Think
A lot of the time real estate investing is associated with late-night infomercials that promise a life of riches, fame, and glory for no money down and with minimal work.
The truth is, though, that this couldn’t be further from reality.
Real estate takes work — and a lot of it!
In order for you to be successful in real estate, you need to be in the mindset of working hard now, so that later you can reap the rewards.
Real estate is a definite way of building wealth, but if you want “easy” and “get-rich-quick,” I’d suggest you look elsewhere because you’ll simply end up getting hurt and losing money.
4. The Most Important Step Is Learning to Run the Numbers Accurately
Something I regret is not taking more time to really grasp the numbers and common formulas used for determining and evaluating deals. The more math you understand, the better your assessments and ultimately, the better of an investor you are.
If you were to take 3-6 months when first starting off and do nothing but run comps and evaluate potential investment deals, it would give you a foundation stronger than most people have in real estate.
There really isn’t a greater skill set you could have in this industry.
5. Every Single Market Is Different
A lot of people make the mistake of believing that there is a “one-size-fits-all” approach to real estate, and it simply isn’t true. Where I live in the San Francisco bay area, a lot of the time your investment strategy in neighboring markets needs to change drastically, even if they are within 5 miles of each other.
To be success, you have to master your local market.
For example, bandit signs may be a strategy that would work in certain parts of Oakland, CA. (It’s home to some pretty rough areas. My sister used to live there, and one time there was a shooting right outside her house — on Christmas day, no less!) But they definitely don’t work in Mt. View, CA (home to the Googleplex).
Real estate truly is a local game. Learn the quirks of your market first, then start implementing acquisitions.
6. Most “Real Estate Education” Out There Is Bogus & Simply a Means to Make Money Off of You
The best education I have found concerning real estate has always ended up being free of charge. Now, I’m not saying there isn’t some good paid material out there, but the vast majority is just straight up fluff.
There are people out there selling education on real estate who make more money on their education programs than they actually do in real estate.
Don’t buy into their gimmicks!
To be very frank with you, BiggerPockets has everything that you would need to know concerning real estate, 100 percent free. A better alternative to purchasing an education course is getting involved on the forums here, rubbing elbows with seasoned investors in your area that you find on the site, actually doing deals.
You have the power at your fingertips. Use it!
7. You Don’t Actually Need a Real Estate License to Make a Living in Real Estate
It’s a misconception that you have to hold a license to “do” real estate in any fashion. Though there are some major perks to having a license, real estate investing can be done entirely as a simple buyer, avoiding all the training and costs associated with being an agent.
Don’t let things limit you!
If you want your real estate license but don’t have the time or money to invest in it right now, just get proactive about investing and learning the industry as a whole and worry about the credentials later.
Disclaimer: You cannot list or show a home or act in a fashion that depicts you as an agent if you are not licensed. Don’t deceive people!
8. The Place to Begin in Real Estate is Finding a Mentor in Your Local Market
The place to begin for someone starting in real estate is to find a local expert who can show you the ropes.
What does that look like?
It looks like you giving them value and serving them with your time in exchange for knowledge.
It takes work to make it happen, but this honestly is the best thing to pursue first.
9. It Can Take Over a Year to Begin Making Money in Real Estate
Are you prepared for that kind of commitment? It’s definitely worth it if you are!
It legitimately may take a year of studying or a year of grinding (or both) before you reap the fruits that real estate investing has to offer.
A lot of gurus like to sell the success but not the struggle behind it.
Success is hard. Otherwise everyone would have it, right?
The truth is you have to be willing to put in the work to get it. There are no easy roads, just better ones — and real estate is one of the best!
10. Approach Your Real Estate Interest as a Business, Not as a Hobby
The last thing I want to leave you guys with is to value your time and commitment to real estate. Structure it as if you had a boss who could fire you for screwing around and messing things up.
Too many people get involved in real estate thinking it’s “fun” and then soon find themselves in trouble because they weren’t organized or serious enough.
Don’t jeopardize your opportunity! Treat your real estate endeavors with care.
[Editor’s note: We are republishing this article to help all of the newbies who have found BiggerPockets more recently. Let us know what you think with a comment!]
What else would you add to this list?
Leave your insights in the comments below!