Step by Step Process on Getting Started

[Tommy Keay]

I am writing this as a new investor, to draw out my steps for action. Some I have already completed/are completing and others are what the near future looks like. Comments, tips and advice are welcome!

1. Start analyzing deals.

This step involves a lot of moving parts. For one, you have to understand all of the terms. Familiarize yourself with what to specifically look for (what makes a good deal) and more importantly, understand WHY it is a good deal. Understanding the WHY behind things is what makes everything tough at first but creates a solid foundation for you moving forward. This involves a lot of upfront education and patience. For Example...in my market rent prices are almost always below the 1% rule of thumb. When I run the numbers on condos, I realize they are almost impossible to produce positive cash flow for long-term rentals. HOA fees that all condos have is what puts it in the red. I now know WHY I am looking for single-family house opposed to condos. This is an easy example but there are a million other why's you need to answer when analyzing deals.

2. Connect with people 

Once you know what you are looking for and know why you are looking for it, reach out and make connections. Go on your market's REIA website and call every member you can. Go to meetups. Get yourself out there. Everyone hears this, but I can say from example, until you pick up that phone and actually make 20 calls, you're going to be stuck running your same own thoughts over and over again! The power of one conversation (especially with someone who has experience) can produce so much value to you.

3. Connect with more people

Step #2 is more for mentorship, advice and just to have a connection with other investors in the industry. This step is to reach out and connect with people who you want to possibly do business with. Lenders, agents, Pm's, contractors, attorneys, etc. Having genuine conversations with these people to share your goals, and ask if this would be of any value to them as well, is an important step. Here is where you will actually learn about mortgages and what you will qualify for (pre-approval). You will learn how much a PM will charge you and exactly what they will do. You will learn how different contractors communicate and do business. This is another stepping stone for more knowledge! 

4. Putting in offers

For steps 1-3 hopefully you are saving money and learning a lot. Once you successfully understand what you want, how to analyze it, connect with people who have experience, and connect with people you want to possibly do business with, then you throw out your offers. From here you have all of the pieces in line and it is time to dive in. There is only so much you can do before you have to start taking action. 

Right now I am on step 3 so I am not exactly sure on what is to come next! When an offer gets accepted, its going to be real hands-on experience an knowledge from then on out. 

So far I have: 

1. Realized I want to buy a property with an FHA loan to renovate while I live there (gain instant equity to pull out later)

2. Connected with a good real estate agent. 

3. Connected with a new investor in the process of buying his first deal. Luckily I am going to shadow his experience while I save for my first deal.

Next steps are: 

1. Connecting with lenders, contractors, attorneys and PMs.

2. Throwing out offers. 

[Joseph Cacciapaglia]

It seems to me that you are overthinking this a bit. If it's just because you want to feel productive while you're saving, then I get it. Otherwise, it seems to be an awful lot of "preparation". I think a lot of people will get distracted and end up doing something else if they follow this recipe though. Assuming you've read 1 or 2 real estate books or watched some podcasts as step #0 (I don't know how you would make your way here otherwise), I would suggest finding a good agent as step #1 (use the search on BP, and if that doesn't work, use the google). Step #2, start analyzing those deals. If the agent is half way decent, they're going to save you a ton of time sifting through areas and properties that will never work for you. If they're not decent, find a new one. Step #3, make offers. You don't need a ton of education and a mentor before you buy your first property, especially not if you're going  live in it while fixing it up.

In general I believe that most new or would-be investors fail or never get started, because they are trying to learn everything before they make their first move. This is a business that favors action. Of course, you should do your due diligence on each property, and on the members of your team. But until you're out looking at actual properties and making offers, it doesn't really get you anywhere. I've worked with a ton of new investors over the years, and in general, the ones that succeed tend to value action over preparation. Your time is valuable. If it's really just a matter of saving for the first down payment, you'd be better off getting a part-time job to save faster, than to spend an inordinate amount of time preparing.