I was 21 years old when I bought my first investment property.
I’d like to pretend everything went smoothly — but that would be a lie. Sometimes it was downright messy.
Because I didn’t really know what I was doing!
That’s the story for most newbies. It’s a scary thing venturing out into the world of real estate when you don’t have a lot of experience. I still remember the fear, the uncertainty, the excitement — it all comes with the territory.
It’s my goal here at BiggerPockets to help you avoid the mistakes that I made in my real estate journey and to help you find your own path toward success. Therefore, let me share with you six critical lessons that every newbie (and advanced investor, I suppose) needs to know about investing in real estate.
***Hey you. We interrupt this regularly scheduled blog post to bring you a special announcement: Real estate is hard! That’s why I want to personally invite you to a free webinar this Wednesday on BiggerPockets where I hope to make it a little easier for you! This week we’re talking about “How a Newbie Can Start Building Wealth Through Real Estate.” Can you make it? Sign up now! OK, back to the blog post!***
Master these six — and you’ll be well on your way to financial freedom through real estate.
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1. You won’t get rich overnight.
Sorry, it’s just not going to happen.
You will likely get rich someday if you stick with it. But that’s the key: sticking with it. Ninety percent of those reading this article won’t.
So when things get tough, will you lose your passion? Or will you fight through?
2. No one is going to learn for you.
You can’t hire someone to do your pushups for you. It doesn’t work that way. In the same way, you can’t just start buying properties hoping that other people (your agent, your spouse, your mom) is going to make it work out.
The responsibility is 100 percent on your shoulders.
So take your education seriously!
Stop listening to the radio — you’ve heard those songs a thousand times. It’s time to turn your car into a mobile university. Listen to audiobooks about real estate, business, and productivity. Listen to real estate podcasts, like The BiggerPockets Podcast, and glean wisdom from the guests who share their stories. Get an Audible subscription and start listening to audiobooks like The Book on Rental Property Investing.
Pick up books from your local library, Amazon, the bookstore, or BiggerPockets.com/store — and then actually read them!
Attend local real estate meet ups and clubs and get to know people who are doing amazing things with real estate — and listen to them!
Remember, no one is going to do your learning for you.
3. Your greatest limitation is between your ears.
Inside your mind is a thermostat that controls how successful you become. If you set the thermostat at a certain level, your mind is going to regulate your actions to maintain that comfort level. For example, if you believe, deep down, that you are worth $50,000 a year, you’ll make about that much. Start earning more, and the thermostat slows you down. Earn less, and the thermostat kicks in and your hustle increases until you get to that level.
If you really want a mind-blowing revelation, Brian Tracey (author of The Psychology of Selling) states that this thermostat is actually set by the amount of income your father makes. Boom.
And this isn’t just about how much money you earn. Your mind sets limits on almost everything you do. This is often referred to a “limiting beliefs,” and they’re holding you back from greatness.
So if you want to achieve success with real estate, you’ve got to adjust your internal thermostat!
Get around people who have a higher internal thermostat. Spend the most time with five skinny people, and you’ll be the sixth. Spend the most time with joggers, and you’ll be up at 6:00 a.m. running with the best of them. Hang around with five millionaires, and you’ll be the sixths.
So crank that baby up!
4. Stop listening to your crazy uncle.
“I had rental properties once. I lost everything, including my shirt.”
Yes, I know your uncle had rentals and lost it all. Or maybe it was your cousin. Or your neighbor. Or whoever.
Everyone knows someone who lost a lot of money in real estate. Because failure does happen.
But does that mean it’s going to happen to you?
The truth is, a lot of people DO fail at real estate. But it’s not because real estate is impossible to succeed at. It’s not even because real estate is risky. It’s because real estate is hard. It takes work. It takes dedication. It takes a continual drive to keep learning, to keep improving, to keep growing.
So if you aren’t willing to put in the work, to continually improve, to invest your nights and weekends becoming a better version of yourself, then fine, listen to your crazy uncle. But you’ll never experience the phenomenal life that awaits you.
5. Math matters — a lot.
Repeat after me: “You make your money when you buy.”
What does this mean?
Simple — it means that if you don’t have the right math going into a deal, you’ll never get the right profit coming out of it. It means that if you overspend at the beginning, good luck ever trying to make money from the deal.
You have to buy it right up front. No one is going to come save you from a bad deal.
So understand that the math matters. The math is what tells you it’s a good deal. The math is what tells you that you’ll make cash flow. The math is what makes you a millionaire or another failed landlord.
The part that most wannabe rental property investors screw up is calculating the expenses.
Sure, there is the mortgage payment. And maybe some repairs. But that’s it, right?
There’s also utilities. And vacancy. And capital expenditures, like a new roof every 20 years. And management. And taxes. And insurance.
All these things are fairly straightforward to estimate before buying a property — even before going out to look at a potential property, and forgetting one of these can cause huge financial problems.
If you want the easiest way to do the math on your next rental, be sure to check out the BiggerPockets Analysis Calculators at BiggerPockets.com/analysis. Or come to the next BiggerPockets Webinar, where we analyze a real-life deal every week LIVE. Sign up for the next free webinar at www.BiggerPockets.com/webinar.
OK, on to number six.
Related: The Rookie Landlording Mistake Most New Investors Make
6. The market today is tough… but doable.
OK, I’ll admit it. The market today is different than it was five years ago.
Investors are coming out of the woodwork overpaying for crappy deals that I wouldn’t touch with a 10-foot pole.
So does that mean you should shut down your ambitions and go back to playing World of Warcraft with your little sister?
It just means you have to be smarter than the average bear.
It means you need to be smarter, faster, and cleverer than other buyers.
Maybe this means starting a direct mail campaign.
Maybe it means driving for dollars.
Maybe it means setting up automatic alerts with your agent for new listings so you can be the first one to get new deals.
Maybe it means looking for deals that need some sweat equity.
However you choose to do it, do it with all your might. Finding deals IS possible. In fact, I’m buying more deals this year than I ever have before despite the tough market. Because I’m willing to hustle when everyone else is waiting for a deal to fall in their lap.
Wake up, newbie. It’s not going to happen.
You have to make it happen.
Any tips you’d add to this list?
Be sure to leave a comment, and let’s talk.