how do you know when you're ready to invest in real estate

Question

I have been reading the books, listening to podcasts, and trying to get myself familiar with the market. But I'm still left with this uneasy feeling that I'm not ready to buy my first property. How did you guys reach the point to "just do it"? How long did it take you to get there and what steps did you take?

Steve Vaughan · Answer

When you have a solid why, you will make the leap. Vague ideas of FIRE or earning $x per month passively is not enough to sustain us on our journey.

While you're learning and deciding how or if to move forward with REI, focus on your mission, vision and purpose. A strong why involves more than just running from something. A strong why is the result after asking yourself why (am I doing this) 7 times. Good wishes be with you!

Tom Shallcross · Answer

"Don't wait for the perfect time, take the moment and make it perfect." - Zoey Sayward

I don't think there is a "set moment." Focus every single day on moving forward; whether that's making connections, evaluating properties, making offers....etc. You become great daily, not in a day. Every day you take action towards your ultimate goal and some of these actions involve stepping out of your comfort zone and into the unknown.

Frank Wong · Answer

I picked out my worst-case scenario. At the time I was 21 in college waiting tables. I said my worst-case scenario is that I buy this property it doesn't work out the tenants move out and I lose it to foreclosure. I still have my health, I am 21 and I have time to make it up. I also had this planned out I had my down payment saved and I had 12 months of reserves.

When you plan out your worst-case scenario and realize it's not that bad the fear really goes away. Yes, you need to have a well thought out plan and most importantly savings to withstand anything. Even though that was my worst case I already knew in my mind I wasn't going to fail. That was just my mindset.

Jim K. · Answer

@Austin Cooke

There is a very short story by Franz Kafka that has always helped me with this.

A Message from the Emperor

The emperor—it is said—sent to you, the one apart, the wretched subject, the tiny shadow that fled far, far from the imperial sun, precisely to you he sent a message from his deathbed. He bade the messenger kneel by his bed, and whispered the message in his ear. So greatly did he cherish it that he had him repeat it into his ear. With a nod of his head he confirmed the accuracy of the messenger’s words. And before the entire spectatorship of his death—all obstructing walls have been torn down and the great figures of the empire stand in a ring upon the broad, soaring exterior stairways—before all these he dispatched the messenger. The messenger set out at once; a strong, an indefatigable man; thrusting forward now this arm, now the other, he cleared a path though the crowd; every time he meets resistance he points to his breast, which bears the sign of the sun; and he moves forward easily, like no other. But the crowds are so vast; their dwellings know no bounds. If open country stretched before him, how he would fly, and indeed you might soon hear the magnificent knocking of his fists on your door. But instead, how uselessly he toils; he is still forcing his way through the chambers of the innermost palace; never will he overcome them; and were he to succeed at this, nothing would be gained: he would have to fight his way down the steps; and were he to succeed at this, nothing would be gained: he would have to cross the courtyard and, after the courtyard, the second enclosing outer palace, and again stairways and courtyards, and again a palace, and so on through thousands of years; and if he were to burst out at last through the outermost gate—but it can never, never happen—before him still lies the royal capital, the middle of the world, piled high in its sediment. Nobody reaches through here, least of all with a message from one who is dead. You, however, sit at your window and dream of the message when evening comes.

Jonathan Bombaci · Answer

Just get out there and start. The first hurdles are free so why not try to jump them? Go to a few meetups, talk to a lender about financing options, go to a couple open houses, interview a couple agents, go see some properties with a real estate agent. You won’t know if your ready until you see what ready looks like. By talking to other newbie investors and testing your knowledge in the real world you’d be able to better assess where you stand.

Its very easy to get analysis paralysis the only way to get over the inaction is to start taking action. We’ve all been there and yeah at your 10th deal you’ll look back and wish you knew what you know then back at deal 1, but you’ll never get to the 10th without taking that first step.

Bill F. · Answer

This probably isn't the answer you want, but it reminds me of a story that Charlie Munger tells about Mozart.

No one here has lost that uneasy feeling, all investors have it; it is fear, doubt, uncertainty, lack of of control. They don't go away with experience or money, but in fact get more pronounced the larger/more complex your deals or portfolio becomes.

If those feelings hold you back, then maybe investing isn't for you in this season of your life.

Best of luck to you.

Brent Paul · Answer

Let me ask you this. Do you like your job? Can you picture yourself traveling for a month while passive income comes in? If you lost your job tomorrow could you make ends meet for 6 months?

Do you have a dollar amount per month you would like to make? Sit down and make a list. I literally sat down with a piece of paper and figured out I would need 16 houses with 250 per month cash flow to reach my goal. Now I have it in my head that I need to work toward getting 16 houses. This number can always go down as I find properties that generate more cash flow. However as I start acquiring more properties the cash flow will allow me to start either paying down properties or paying cash for new ones. Which will increase not only my cash flow, but opportunity to leverage the equity to buy another property.

My driving force has been that I don't want to be at my job another 10 years. Almost 3 years ago I decided I am throwing away money each month by giving my rent to someone else. The market was hot and it took me 9 months to find a house in my target area. The intention was to fix up this house and sell it in 5 years or rent it out. Almost 3 years in and I not only don't have the money I feel a little burnt out based on all the repairs I have had to do already. My home has appreciated a lot since I have owned it and my realtor thinks I will be making 35k at a minimum. Which will be a nice down payment on something else. I will live in the next house a few years, rent it out and buy another. My goal is to have 4k in cash flow each month. I can live on less, but I think it's a good number for me.

Aaron Gordy · Answer

@Austin Cooke 21 years ago, I bought my first duplex. It was a really easy decision for me. The cost of living in Austin was high. I could get a VA loan as I had been in the Army serving honorably in Germany. I was in grad school at the University of Texas. I was working at the library and as a tutor and any odd job (including carpentry and basic construction) that I could find to make ends meet. It was stressful.

Austin rent was high. So, after reading a book at the library about buying income producing properties and studying the pros and cons, I went for it. My wife and I found an agent that was familiar with duplex deals. We chatted with several mortgage lenders. Found out that I could use 75% of the rents from the other side as income. My wife worked in the Section 8 department of the Austin Housing Authority and didn't really make any money. I figured that the only way to survive in the city was to buy a duplex and live in one side and rent out the other side. I found a duplex with my agent. It was dilapidated with foundation issues. It had a section 8 tenant in it. I bought it with zero money down for 80k.

We lived in that little duplex for many years. It was a very good decision. Our cost of living went down significantly. I learned how to maintain it properly. I learned about tenant laws and so forth. I treated the section 8 tenant with respect and she remained there for many years. I recently saw the tenant at a bbq restaurant and we exchanged pleasantries. Its worth easily $340k and provides a nice income for my now ex...lol. It happens.

It was a necessity for me at the time and it laid the groundwork to where I am at presently. Hope that helps.

Angelo Mart · Answer

It like having a baby, you are never actually "Ready" but if you have:

1. Money ready and have a goal (i.e. flip, rent etc)

2. Studied the living sh*t out of 1 specific market obsessively yes obsessively (this is not a hobby)

3. Numbers for that market are verified and correct

4. Construction estimates are in line

5. Boom Pull the trigger

Pat L. · Answer

.... dragging yourself into a JOB every day & putting up with all the BS & inter office drama & attending meetings that resolve nothing, Then watching incompetence float like sh&% to the top. I pulled the plug early & never looked back.

I'm amused during the rare occasion when I'm driving in peak hour traffic. All these crazy people rushing to a JOB they hate & then rushing to get home on-time to enjoy a few minutes of quality time with their families. I have friends that take a 2-3 hour commute to the JOB. My traffic jams are pictured below....

how do you know when you're ready to invest in real estate

how do you know when you're ready to invest in real estate

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