As an investor and real estate agent in Louisville, KY, I work with a ton of new or aspiring investors. New investors and out of state investors tend to be my bread and butter. I have personally done over 100 deals in my 4 years of investing (Flips, wholesaling, MTR's, LTR's, BRRRR's, realtor transactions) and helped other investors with plenty more. Saying that, here are a few nuggets I think new investors need to hear. I know not everyone will agree, but this is what I've learned after 4 years and counting in this business:
1. You need a job in the beginning. Whether you're working hourly at Costco or you have a nice W2 job. Having income is crucial when starting out. I have had multiple people come to me wanting to get started in real estate, but the problem is, they have no job and no money. Having a job will hopefully fix the “no money” issue or at least give you a way to start saving up. It will be very difficult to get Banks (and hard money lenders) to work with you if you have never done a deal and have no job and no money. Even if you don’t have a fat savings account, banks will be willing to work with you on the right deal if you have income to show. I was selling insurance when I first started in real estate and didn’t leave my job until I had completed a few flips. (In retrospect, I still left my job too soon, but I am lucky to have a wife with stable income so I could take a bigger risk)
2. Wholesaling cost money. I will agree, wholesaling can be a great way to get started in real estate with little money. You may get lucky and find a deal through FB marketplace or by driving 4 dollars, but go ask any successful wholesaler who consistently does at least 2 deals a month and they will tell you they are spending thousands of dollars each month on marketing, lists, virtual assistants, etc. So if you have zero dollars to spend, you better be ready to work your *** off to find that first deal and then be ready to re-invest that first check back into marketing. Wholesaling is a sales job and should be like you are running a business.
3. Building a rental portfolio is not a get rich quick scheme. In my opinion, buying rental properties is the best investment out there for long term investing. The average Long Term Rental (LTR) here in Louisville, will only provide about $150 net cash flow each month, assuming you bought with financing. I hear so many new investors say how they can’t wait to quit their jobs. If buying LTR’s is your only strategy, that will take years before you can replace your income with your rental income. This strategy requires patience and the ability to hold your rentals for many years. If you are looking to leave a job sooner, than make sure you supplement your rental portfolio with flips, short term rentals, or other active income. This is exactly why I still flip houses, wholesale, and am a very active Realtor. My active income (flips, wholesaling, realtor commissions) fund my life while my rentals will eventually fund my retirement.
4. Network, Network, and Network some more! Networking is important in any industry, but it’s particularly crucial in real estate investing. Build relationships with real estate agents, contractors, property managers, and other investors. They can provide valuable insights and opportunities. I credit networking as a big reason I was able to scale my business so quickly. I was able to meet other newbies who inspired me to keep pushing, experienced investors who helped me understand the market, and lenders who were willing to take a chance on me with my first couple deals. I’ve met a ton of people directly from BiggerPockets. Search your local market and see how many other investors are active in your town and on this site. I spent months just meeting local investors before I did my first deal. If you are more of a nature introvert, like me, start off by treating people to coffee or lunch a few times a week. Large investor meetups can be intimidating at first. To this day I still prefer 1-on-1 networking instead of the large meetups, it just fits my personally better. Choose which way works best for you and talk to everyone who is willing to give you the time of day. Don’t forget, people’s time is very valuable and try to offer some value in return. Lastly, once you start doing some deals, make sure you are telling everyone in your world what you are doing. Post on social media and tell all your friends. You’d be surprised who comes out of the woodwork with money ready to invest in a deal.
Always happy to jump on a call or meet locally for coffee!
Happy Investing!
