Defining Your Path to Success - Best Real Estate Investing
Advice and System
Many new investors are confused about what type of real
estate investing they should be doing. There are so many
choices and so many gurus telling you what is best that it
is hard to figure out where to start.
Most go for the obvious answers: rehabbing or landlording.
While there are huge profits to be made in both of these,
are they really the best things to start off doing?
I argue that they are not appropriate for a beginning
investor who is looking to do their first deal and launch a
career in real estate investing.
The main reason I do not recommend starting with these
techniques is that there is too much downside risk.
Renovations take far longer and cost way more than you
expect them to and they can wipe you out if you are not
prepared or if you do not have enough financial staying
power to survive your own miscalculations.
Ditto for rentals. Unlike stocks or mutual funds, real
estate investing requires management and managing tenants
can be a nightmare (ask me how I know…). So many things can
go wrong and what you thought would be a cash cow turns into
an alligator. Rentals also have no end in sight, as they are
a long term investment. That is why I do not think they are
good for the beginning investor.
I am not trying to say that renovations or rentals are never
good investments, but rather that they are not good for a
rookie investor. The type of investing you do needs to
compliment your CURRENT business and personal situation.
If you are broke and struggling to put food on your table,
why would a rental that requires a large down payment and
only pays out a couple hundred bucks a month be a good idea
now? What happens when the roof leaks or the toilet clogs
and it wipes out three months of profit? How many days in a
row can you eat tuna? (My record is 13).
Likewise, if you only have five grand in the bank and no
job, why would a rehab be a good idea? Do you really think
you are going to come in on-time and under budget? Most
seasoned renovators struggle to do that, what makes you, who
has no renovation experience, better? And what happens when
you burn through that little nest egg?
The key to figuring out what to focus on at the beginning is
to figure out what you need right now.
What do you need right now? Think about that and write the
answer down.
Do you need money? Do you need debt relief? Do you need tax
breaks? Do you need an income stream for retirement?
What is your current position and what do you need
CURRENTLY?
Long term goals like building wealth are different. If you
already have significant amounts of money in the bank, then
maybe this would be your answer, but most first-time
investors are usually either broke or have only modest
savings.
I see so many investors mess up because they want to do a
particular type of investing but it isn’t suitable to their
current situation. If you are truly in this for the long
term, then you need to think long term. Be patient. If you
really want to be a renovator, you will be, but wait until
your circumstances make it possible.
Your business plan (which must tie into your life plan)
needs to consider your current situation. The goals you set
and the strategies you choose to pursue need to help you
meet those goals. Match your plan to your current needs!
That being said, I recommend every investor start with
Wholesaling. Wholesaling has very little downside risk. You
have a minimal amount of money at risk (no more than $500)
and no long-term obligations. The deal moves quickly and
before you know it you are cashing a very substantial check.
(My average wholesale profit is $24,829)
You also get to build a team and test that team in action.
You’ll learn the basic building blocks of the real estate
investing business: contracts, negotiation, handling
objections, estimating repairs, and most importantly,
marketing. You’ll also be able to safely learn about the
next steps of the business by keeping in touch with your
buyer and his progress. You can stop in and see the
renovation in progress and then see the final result and get
an idea for what it takes.
Most importantly, you will have gotten through an entire
deal from start to finish. This does something magical to
you. You suddenly start believing in what you are doing. It
is no longer theory. It is no longer just something you read
about in books or hear speakers talk about at the local
meetings. It is something that you have done, something with
tangible evidence of your accomplishments.
This gives you the confidence to go forward and do it again.
You start to be less fearful of marketing or answering
seller calls. Your family and friends start believing in you
and quit trying to hold you back. You go forth and just do
it!
If you had used a technique like land lording or rehabbing
that didn’t have a quick or foreseeable end, you wouldn’t
have that wonderful sense of closure nor would you have a
large check in your hands. An unfinished renovation or a
nightmare rental property might discourage you from
continuing in the business or even wipe you out financially.
At least with a failed wholesale you don’t destroy your life
or your bank account.
So, think about your current position and your current
needs. There is a time and place for everything. When you’ve
built up a strong cash reserve, by all means start to
consider other options. But when the time is right.
Your needs will change, and therefore so will your business
plan and the techniques you use to achieve your goals.
Always be sure the techniques you choose match the needs you
have at that time.
Are you looking for custom-tailored guidance to help you
make money fast?
Be sure to check out our mentoring program.
We will hand-hold you through the difficult parts of
building your business — from marketing to inspecting to
settlement.
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