What steps should I take to get into real estate investing?

[Colin Yang]

I’m a young and ambitious 22 year old fresh out of college. I’ve been wanting to get into real estate since high school but never took the initiative to take classes. I’m currently working full time at a tech company but want to transition into real estate when I’m older. My situation in different as I have the capital to begin purchasing properties but I do not have the experience of guidance needed to do this properly.

Would it be in my best interest to save as much as I can and learn as much as I can until I’m older? Or should I start as young as I can to get ahead of the curve? I’ve also been made aware that it is not the best time to buy since we’ve been on an upward trend for the last 10 years and a correction seems in sight. I would greatly appreciate all personal and professional advice and insights on my situation. Thank you!

[Kevin Dean]

Hey @Colin Yang congrats on making the decision that you want to get into real estate, but don't let your age be an excuse or a hinderance. If you can help investors make money nobody will care how old you are.

I have seen individuals work there way into multifamily deals in the following ways.

1. Help raise capital

2. Bring the net worth and liquidity needed to qualify for the financing

3. Source, underwrite, perform due diligence and help busy operators close deals

4. Bring operational experience to the deal and help operate and manage the deal

In regards to whether or not it is a good time to buy, just like investing in the stock market, it is very hard to time the market. Yes, we have been on a long bull run since recovering from the financial crisis, but that doesn't mean that multifamily has no more room to grow. There are strong fundamentals (depending on the market) which support continued growth of multifamily in the United States. Here are a few....

1. As debt per capita has risen, as a result of the cost of college for example, it has become harder for recent graduates first to qualify for a mortgage and second to put a down payment on a personal residence.

2. The job market has remained tight, meaning businesses are unable to find qualified talent, which should continue to fuel a growing economy as this is usually a sign that demand for goods is outpacing our capacity to produce them. This supports at worst a flat economy, and at best a growing economy. 

3. Due to the rise in cost of labor, and as a result the cost of new construction, it is not as attractive to build new multifamily properties. Meaning demand (in certain markets) may outpace supply in the long run.

4. With the run up in all asset classes over the last 10 years, individuals across the united states and the globe have more capital than they know what to do with it. Multifamily has become an attractive spot for those investors to park that capital. This has reduced cap rates, increasing values tremendously, and with the continual influx of capital out of "less safe" investments into "safer" investments such as multifamily, cap rates should continue to compress, only lifting valuations higher.

All this is to say, that in my opinion, Multifamily is still a great asset to invest in. My analysis however does not take into consideration the effect of an unforseen global shock or tragic event which could shake all markets, but that is the case at all times regardless of what the last ten years have looked like. 

Yes, you do want to be more conservative in your underwriting than you may have been four years ago, but odds are that if everyone says that a crash is coming, the opposite is most likely true. 

If I were you, I would do everything you can to get going on reaching your real estate investing goals. Worst case scenario, you get nowhere but learn a lot in the process. Best case scenario, you grow a large portfolio and also learn a lot in the process.