New investor looking for advice

[Lia Veit]

Hello BiggerPockets community!

I’m a 21-year-old college student majoring in physics and economics, I am the president of the Commercial Real Estate Club at my University, and am preparing to enter the investment banking industry after graduation. I am very eager to start my real estate investing journey — I have a large amount of capital that I am looking to invest into single or multi family homes. My long term goal is to start a real estate investment company, and I am hoping to purchase my first investment property within the next six months. 

In an ideal world I would start with a house flip, but I am tentative about starting out with this kind of project given than I have zero experience with buying real estate or managing a commercial real estate property. I would start with purchasing a multi family investment property, but I have heard different theories about whether one can make above average returns in a real estate market without making significant upgrades to a home. I have read many books, listened to many podcasts, had a few networking calls with real estate investors, and am currently taking a LinkedIn Learning course on real estate investing, but I am not sure about what to do as a next step. I have narrowed down five different US cities where I would like to begin my investing journey and plan on picking one in the near future. I’m not sure when to decide that I “know enough” to make this kind of investment, or if I should continue educating myself before pulling the trigger on a property. 

I would greatly appreciate some advice on the following topics:

1. House Flipping vs. Multi-Family Properties — is it wiser to start with a turnkey investment for ease of entry, or should I pursue house flipping at the get-go?

2. Does anyone have insight into specific investment strategies or markets favorable for beginners?

3. How should one determine when they are ready to take the first steps in real estate investing? What signs or knowledge can help someone feel confident at the very beginning?

4. Are there any books, courses, or mentors anyone might suggest for someone in my position?

5. Does anyone have recommendations as for how to get "experience" in the industry without necessarily taking on a project entirely on my own? One idea I have is to "shadow" a real estate investor (although I am not entirely sure how to go about asking for / finding this kind of opportunity), but I am wondering if anyone has insight into other ways to gain a comparable level of experience.

If anyone has insight into any or all of these topics, I would greatly appreciate the feedback. Thank you in advance for your time!

[Nathan Gesner]

Quote from @Lia Veit:

Paralysis by analysis.

Look, all you really need to know is that real estate is a proven investment over time. Buy a house (up to four units) right where you are and rent out all the spare units or rooms. You'll quickly learn how to be a landlord. After a couple ears, buy another property and rent out your space in the first property. By the time that's done, you'll know enough to start investing in distant lands.

Education is important, but you will never have all the answers, perfect formulas, or whatever it is you think you need. 30 years ago, people made money in real estate without any ROI calculations, hard money lenders, BP forums, podcasts, coaching courses, etc. They saved money, bought a home in a neighborhood they believed in, and held on. They "suddenly" look like geniuses 30 years later.

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 Turner or The Unofficial Guide to Real Estate Investing by Spencer Strauss.

2. Prioritize your financial stability. Eliminate debt, establish a budget, and save. Remember, the notion of amassing wealth without investing is a dangerous myth perpetuated by self-proclaimed experts. A prudent investor doesn't seek quick riches through shortcuts. To thrive in real estate investing, you must maintain a firm grip on your finances. Explore my personal favorites, Set For Life by Scott Trench or The Total Money Makeover by Dave Ramsey, for invaluable financial insights.

3. As you read these books, watch the BiggerPockets podcasts. This will 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. NETWORK!!! Get out of your comfort zone. Stop hanging out with your deadbeat buddies who spend all day drinking, talking sports, and otherwise wasting away. Go to BUILD YOUR TEAM at the top of the screen and look for local investors or meetups in your area. You can also find real estate investing groups through meetup.com, Facebook, or a Google search. Birds of a feather flock together!

5. Now, you need to figure out how to find deals and pay for them. Again, the BiggerPockets store has some books on this topic, or you can learn about it by watching podcasts, reading blogs, and interacting on the forum. A handy search bar in the upper right makes it easy to find previous discussions, blogs, podcasts, and other resources. BiggerPockets also has a calculator 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, recognizing a good deal will be much easier 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.

6. Study the market. You can learn to do this independently or get a rockstar REALTOR to lead the way. I highly recommend a well-qualified REALTOR who works with investors and knows how to help you best.

7. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. You could read 100 books and still need to learn more because certain things must be learned through trial and error. You don't need to know everything to get started; you 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 forgiving; the average person can still make money even with some big mistakes.