What’s the 1st step for a new Real estate investor?

Question

Hello there,

My Wife & I are going into our 3rd year of owning our first home. We have a little over $20,000 in equity with another $5,000 in cash.

We want to get into the small multi family market and are looking to hold them long term to start.

Our current obstacle is not knowing how to start!

Thank you kindly ~ Bryan

Nathan Gesner · Answer

I recommend you build a strong foundational understanding of real estate investing.

1. Start with BiggerPockets Ultimate Beginners Guide (free). It will familiarize you with the basic terminology and benefits. Then you can read a more in-depth book like The Book On Rental Property Investing by Brandon Turneror The Unofficial Guide to Real Estate Investing by Spencer Strauss.

2. Get your finances in order. Get rid of debt, build a budget, and save. The idea that you can build wealth without putting any money into it is a recipe for disaster and the sales pitch of gurus trying to steal your money. A wise investor will not try to get rich quick with shortcuts. If you can't keep control of your personal finances, you are highly unlikely to succeed in real estate investing. Check out my personal favorite, Set For Life by Scott Trench , or The Total Money Makeover by Dave Ramsey.

3. As you read these books, watch the biggerpockets podcasts. This will help clarify and reinforce what you are reading. You can hear real-world examples of how others have built their investment portfolio and (hopefully) learn to avoid their mistakes.

4. Now you need to figure out how to find deals and pay for them. Again, the BiggerPockets store has some books for this or you can learn by watching podcasts, reading blogs, and interacting on the forum. There is a handy search bar in the upper right that makes it easy to find previous discussions, blogs, podcasts, and other resources. Biggerpockets also has a calculator you can use to analyze deals and I highly recommend you start this as soon as possible, even if you are not ready to buy. If you consistently analyze properties, it will be much easier to recognize a good deal when it shows up. Find Brandon's videos on YouTube for the "four square" method of analyzing homes and practice. It doesn't take long to learn how to spot a good deal.5. Study the market. You can learn to do this on your own or get a rockstar REALTOR to lead the way. I highly recommend a well-qualified REALTOR that works with investors and knows how to best help you.

6. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. The truth is, you could read 100 books and still not know enough because certain things need to be learned through trial-and-error. You don't need to know everything to get started; you just need a foundation to build on and the rest will come through experience and then refining your education.

You can build a basic understanding of investing in 3-6 months. How long it takes to be financially ready is different for everyone. Once you're ready, create a goal (e.g. "I will buy at least one single-family home, duplex, triplex, or fourplex before the end of 2019") and then do it. Real estate investing is a pretty forgiving world and the average person can still make money even with some pretty big mistakes.

Justin Winn · Answer

One thing I would recommend based on your post is to figure out how much money you need in reserves for your market and how much you would need for a down payment. Equity is great, but equity doesn’t necessarily protect you when a tenant doesn’t pay or a roof needs repaired. A healthy balance of cash on hand is dependent upon the strategy and the market.

My wife and I own a few C class properties and have determined for us, we feel most comfortable with six months mortgage plus one major repair as our reserves. But we expect low turn over. If our market had high turn over, or our strategy produced irregular income we would lean toward 12 months mortgage plus a major repair.

I hope this is a useful framework for something to consider.

Ty Ash · Answer

Hi @Bryan LaValley!

First, I'd recommend that you keep/start learning! Podcasts, Books, and Mentors you find by networking. These are things you will do the rest of your real estate investing career.

Second, I'd pick up a copy of Set for Life by Scott Trench as it has a good framework for financial independence, especially for a newer investor. Real Estate is just a part of your total financial picture so don't become too focused on just real estate. You'll want to learn more ways to increase your income now and in the future, keep your expenses low, and take the difference to invest into assets, real estate/business.

Third, if you're not tied to your current home consider transitioning to a house hack if that works in your market.

Fourth, after making a decision on what strategy you want to use, start building your team including an agent, lender, property manager, and handymen/contractors (most likely in this order). An agent (use the find and agent tool here on BP) will get you on the MLS and start sending daily drips of properties to analyze. Find out what your pre-approved for with your lender and start making offers!

In the end, getting a property is just math. In order to write enough offers to get something accepted in today's environment you need to make sure you're receiving enough properties to run the numbers on, that lead to showings, which leads to making offers.

Best of luck! Always here to help!

Lorenzo Prieto · Answer

Welcome to Bigger Pockets Bryan!

If you click on Forums on the top search bar there is a drop down and you can search your location or a location near you and see if anyone has created a meet up in your area. Also, you can do a google search or social media search for local meet ups in your area.

As for investing the best thing to do would be consult with a mortgage consultant and explain exactly what you are wanting to do. What your goals are, how much you plan to put down, etc etc. Typically with an investment property you will need 20% down or if you are planning on making your current primary into a rental and moving into a multi unit and do a house hack you may be able to get away with 3-5% down. But best to talk with a mortgage lender/consultant.

Hope that helps.

Eliott Elias · Answer

Learn how to run comps

Logan Graham · Answer

The posts above have great advice and I ditto what they said. The one thing I did also was I was always running the numbers on all the multi-family houses I could find in my area. It helped a ton when I had the cash to jump on a deal. I was so used to running the numbers and I knew exactly what I wanted and when the deals came up I was able to make a quick offer.

Carolina Solorzano · Answer

Hi Bryan, welcome to the group. As an investor for now off/on 10 years, the best advice I can give you is to start figuring out your finances. Budget everything out and once you have an idea of what type of property you want, then establish an LLC. You want to treat your first investment as a business and creating one will save you loads of headaches in the future. The other advice that I completely agree with everyone here is that you should start absorbing as much information as possible. Grab as many books from multi-family investors in the BP authors and go through as many podcasts as you can. Lastly and very importantly, your net worth is completely tied to your network. Go to physical meetups if possible. Go to them as often as you can, network as though you life depends on this, because I think this is what slowed down my process. I'm not a very shy person until you get me in a room with a bunch of strangers. Go anyways, even if you walk away only talking to one other person- do it and don't stop. One place to look for local meetups is meetup.com- create an account and go from there.

Bryan LaValley · Answer

What meets up? And how do I find them?

So it sounds like I am unable to make another purchase until I have some reserves built up?

Karl Denton · Answer

Biggest thing you can do is find meetups in your area and go to them, talk to people and network. You'll learn lots just by doing this and may even seek someone who has a deal or can help. That's how most get started and continue to learn and network.

What’s the 1st step for a new Real estate investor?

Most Popular Reply