Best First Time Investor, Investment Ever

[Henry Clark]

Response to another post.  Thought it might be useful for first time investors.

To re-state your audience are people who want to start in REI.

Your next question is what is the most under appreciated REI investment.

The underlying question is where “they” can do the best.

Here is how I address this question with new investors.

1. How much money; or collateral at 65% do you have?

2. What financing mechanism will you use? Cash, sba 10%, sba 15%, conventional 25%, conventional 40%, etc

3. The combination of the above two determines your investment limit. This will narrow down your efforts to look for an investment  Example:  $20,000 with a conventional 25% loan= $80,000 investment.

4. Define failure. Most of your friends and others will never invest not so much because of what they can gain, but because they don’t know what they might lose. So how much can they lose that doesn’t cause: kids can’t go to college, have to sell their house, no more dinners out, etc Determine their failure level or risk tolerance

5. Their first investment should not be about how much they might gain. They will gain a ton of experience. They should only lose x amount. Pick an easy flip. SFH that needs some landscaping and some painting. Sell it for break even. Maybe take a loss on the commission. Not that SFH is the top investment. It is the easiest and most frequent type and they can relate to it.

Pick a non REI friend or a mirror that is interested in REI. Give them the following two options

A. Greatest loss potential $10,000. Maybe breakeven. You will learn a lot about REI. Best thing is you will get started.

B. Have a great investment you might make $30,000. Can't tell you how much you might lose. You will learn a lot about REI. If you don't do this you will probably never get started in REI.

We all have our stories. Just like gamblers about their big wins and not their losses. I've had issues on every deal I've done and love it. New REI folks just need to get started.

Start small and Make Your Big Mistakes Early.