6 Critical Lessons Every Newbie Needs to Know About Real Estate Investing

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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.

Why?

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.

Single Family Rental House***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.

How to Purchase Real Estate With No (or Low) Money!

One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.

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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?

newbies-wholesaling

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!

Related: The #1 Reason Newbies Go Broke in Real Estate (& How to Avoid It!)

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!

How?

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.

newbie-harsh-reality

Sure, there is the mortgage payment. And maybe some repairs. But that’s it, right?

WRONG.

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.

It’s hot.

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?

NO!

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.

About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on BiggerPockets.com. Like... seriously... a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of "The Book on Investing in Real Estate with No (and Low) Money Down", and "The Book on Rental Property Investing" which you should probably read if you want to do more deals.

13 Comments

  1. Mike mckinzie on

    Actually Brandon, it’s Aion with my son! Great article. The real estate market is always changing, always dynamic. The ability to adapt to the changing market is invaluable to your success. Back when FHA rates were 18%, seller carry was very common. AITD’s were too. Buyers markets. Sellers markets. Even Lenders Markets require the ability to adapt. So your statement about learning is very important.

  2. Bill Regan

    Great tips Brandon! I’ve been practicing analyzing deals now with the BP calculators and they are great. Have been enjoying the webinars and podcast archive too.

    #5 is so true. We bought a home in 2006 when we were young and naive right at the top of the market. No matter how much we improved the property it never came back up after the market crash in 08. If we knew then what we know now we would have analyzed, analyzed, and then analyzed again. But, even though we failed on that one we are back at it and more motivated than ever (having a baby girl will do that to you, when you want to spend more time with her than at work).

    Keep it up and I look forward to the future webinars and the BRRRR calculator!

  3. Yele Omo

    Anyone that lived through 2007 & 2008 (present company included) will agree that “you make your money when you buy” is critical advice.
    Now that I am a second time around “newbie” breaking back into the game, I appreciate articles like these. Thanks for the tips. Best of luck to all my fellow noobs.

  4. This was some very good information. I must say in the world of REI it’s no rose garden but, getting to know and meet some good investors and actually going out into the field and getting a taste of real estate is a experience and yes; I almost quit but, told myself I can’t and soon I will succeed!!:0)

  5. Eric Couturier

    Yes, Number 3 is so true also, as I’ve heard before, “don’t turn your glow on low”. I’ve been recently reading quite a few psychology books, and it truly boils down to how much you believe in yourself and how much faith/ courage your willing to put forth!

  6. Great idea BRANDON. My name is Justin and i am a newcomer in Real Estate business. I was in a confusion about the investment\’s. I was searching for the Tips for successful investment. After reading this i am cent percent happy. If i follow these steps i will not be a looser in Real Estate field. Thanks again BRANDON!!

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