Blog | Real Estate

3 Definitive Steps To Get Started In Real Estate Investing

Say “Hello” to financial freedom - you just need to take the first step.

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Say “Hello” to financial freedom - you just need to take the first step.

Have you ever found yourself saying you’d like to try something — be it piano lessons, growing your own vegetables or learning a new language — only to immediately write it off once you find out how much time and energy you’d need to dedicate to achieving it? It can be so easy to say you want something, but taking action is a completely different story. It’s never as glamorous as we think it will be, it probably doesn’t come naturally or easily, and it’s competing with dozens of other things in your life that also require your time and attention.

The same can be said for achieving financial independence. It’s pretty great to sit around daydreaming about what financial freedom looks like, and all the things you could be doing with your life if you weren’t beholden to your job and mortgage (and maybe your husband) — but for most people, that’s where it ends. It remains a dream.

The thing is, there’s no magic fast-forward button you can hit to speed up the process of achieving a long-term goal. It takes dedication and hard work to get there. Of course, that won’t happen unless you’re willing to take the first step and go for it.

Something I hear a lot is, “Kim, I really do want to achieve my financial dreams, and I’m willing to put in the work, but I have absolutely no idea where to start.” Well, from my perspective, the answer is always the same: Real estate.

Stop Making Excuses and Learn How to Get Started in Real Estate

Great news: Multiple sources report that the outlook for the U.S housing market remains strong. We owe this to several factors—continued job growth, wage increases, and mortgage rates that have remained in a historically low range for quite some time (keeping housing payments affordable for homeowners). In fact, mortgage rates have just slipped to their lowest levels in almost two years.

Sounds like a pretty good time to get in on the real estate game (if you haven’t already done so), right? As the lottery motto goes, you can’t win if you don’t play. And that’s true in all investing. But unlike winning the lotto, real estate investing isn’t dumb luck—it’s an art form that requires you to do your due diligence, conduct research, run the numbers, get creative, and take calculated risks in order to succeed. If you’re up for the challenge, then it’s time to discover how to get started in real estate.

First, Debunk the Myths

I hear a lot of excuses from women who are contemplating investing in real estate. And I get it: over the years, you’ve been fed misinformation and brainwashed into thinking it’s not for you. Let’s explore and dispel the myths surrounding getting started in real estate investing:

“It’s not for me.”

So, you think real estate investments are just for rich couples or singletons who can take risks because they don’t have hungry mouths to feed? Think again. Women—single, divorced, married and single moms—are buying properties and profiting from this real estate boom.

Why?

Because contrary to popular belief, it doesn’t matter how much money you have. In fact, every successful real estate investor I know, male or female, started very small. And that’s actually for the best, because there’s a lot to learn and lots of mistakes to be made—it’s a lot easier to make mistakes on smaller properties with smaller amounts of money instead of jumping into a huge deal that could end with very costly mistakes.

For example, when my sister-in-law decided to begin investing in real estate, she gravitated toward an inexpensive option: mobile homes. She found that she could buy a used mobile home for about $3,000 and receive a positive cash flow of about $200 per month on it. That’s a pretty impressive return on her investment.

If she had made a mistake, it would have been much easier to bounce back from a $3,000 lesson than a $100,000 catastrophe. Never be ashamed to start small, you never know where it will take you.

Remember, you have the money; you simply choose to spend it on other things. Instead, you should look at your budget and reallocate the amount you feel comfortable spending on investments each month. Sure, you might have to cut back in other areas for a bit, but isn’t that going to help you reach your long-term goal?

“Only men are successful in real estate.”

Wrong! Before you dive in, start off by doing research—I suggest starting with a free workshop to educate yourself.

You’ll find that Women are more successful than men at real estate investing, with a return ratio of 2 to 1. Yet, just barely 30% of the real estate investors in America are women.

The best place to begin the process is by reading everything you can (start with my book It’s Rising Time to get the ultimate crash course in real estate investing, but also read the newspaper and industry blogs), seeking advice from credible sources, and then pushing past the “analysis paralysis” that so many of us suffer from — that’s right, you have to take action.

Ladies, it’s time to infiltrate this “old boys’ club” and stake our claim on their turf.

“I’m afraid of a volatile market.”

Maybe you disagree with economists and think the bubble is about to burst? Well, thankfully, once you learn how to get started in real estate, you’ll realize the market doesn’t really matter. Real estate investor Dean Graziosi says: “Real estate investment works in any area, in up, down or sideways markets, and for anyone who invests their time, energy and enthusiasm in getting started. America doesn’t play favorites by gender when it comes to energy, enthusiasm and the desire for success.” That means, it’s an even playing field.

To ease your confidence, here are a few tips:

  • Location, location, location: You’ll want to find the right first property to begin, and this takes patience and number crunching. Pick an area where vacancy rates are low and choose a property that offers the amenities people are looking for.

  • Timing is key: If you’re investing for cash flow (not for flipping), the market direction really doesn’t matter as much. You aren’t hoping to earn a quick profit by selling before your mortgage paperwork is even dry. This is a long game, not easily affected by the ups and downs of the market.

Live in Learning Mode

So, now that I’ve debunked all those lame excuses, what’s next? Successful investing will not happen overnight. There is no such thing as a get-rich-quick scheme that lasts. The most important tip I can provide you is to live in learning mode.

Think of investing as learning a new language — you simply can’t become fluent in one day. You start by learning a few words and phrases, and then keep expanding your vocabulary. After continuous practice and effort, you’ll make less and less mistakes. Eventually, if you stick with it, you’ll become fluent. Investing is no different.

Nobody likes making mistakes or being embarrassed, I get it. But if you’re observant, each time you make a mistake when investing, you’ll learn from it. And hopefully you won’t repeat it.

Because nothing in life stays static, your goal should be to stay ahead of the game. You’ll do this by closely watching market trends and absorbing industry news, so that you know when the rules change and are ready to react immediately. Here are 3 golden learning opportunities to ensure you get a well-rounded ongoing education:

Real estate classes

Workshops are not only a great place for beginners to start, but they are equally valuable for seasoned professionals. Classes will help open your eyes to opportunities you may not have considered before, maintain your edge, and introduce you to other like-minded individuals who could someday serve as partners or mentors.

Reading

You should be reading the newspaper or trusted industry blogs each day to find out the latest news in the world of real estate investing — market conditions can turn, tax laws can change, and industry outlooks can shift. You certainly don’t want to be in the unfortunate position of being the only one who’s not in the loop. Another great resource is my book, Rich Woman, which was written specifically for female investors.

Jumping in

You can read and attend classes until the cows come home, but at some point you need to take the plunge and make a small investment. Doing is truly the best way to learn anything! Yes, you’ll make a few mistakes and yes, you’ll probably lose a little sleep in the beginning — but with time (and continuing education), you’ll gain confidence, experience success, and grow your portfolio.

Now, It’s Time to Get Started

Now all that’s left is for you to take the first step. Often, this is the hardest step on any new path, so here are three ways to get started.

  1. Invest for cash flow

    When I speak of real estate, I’m talking about rental real estate that produces a positive cash flow. If you’re investing for cash flow, the market’s direction is no longer important, nor do you need to worry about liquidity. Your goal is to collect monthly rent for profit—and any gain in value of the property itself is a bonus. This long-term play is much less risky than the pundits want investors to believe.

    Once you own a property, you become the landlord of your future tenants and are responsible for paying the mortgage, taxes and maintenance costs (and possibly a property manager, if you don’t want calls about broken appliances at midnight). Ideally, you’ll want to be able to charge more than your monthly costs, so that you earn a profit. This is your cash flow—your paycheck for filling the property with a quality tenant. For instance, I now own thousands of apartment units across multiple states—but I didn’t start there. I started with one single-family house. And I’d recommend the same for you.

    On the flip side, investing for house-flipping purposes is much more market-driven — you could end up spending quite a bit of cash to renovate a property and then find yourself unable to sell it (or being forced to sell for a loss). That’s just not a gamble I’m interested in making.

  2. Be open to unexpected opportunities

    It’s important not to be limited in your terminology. When people ask me how to get started in real estate, I always encourage them to be open to a wide range of properties, such as single-family houses, duplexes, triplexes, apartment buildings, single office buildings, multiple office buildings, retail stores, retail shopping centers, big box stores, self-storage facilities, industrial warehouses, and so on.

    Real estate investment groups are another option. If you want to own a rental property, but don’t want the effort associated with being a landlord, this option may be the right solution for you. Akin to small mutual funds for rental properties, a company will buy or build a set of apartment blocks or condos and then allow investors to buy them through the company, thus joining the group. The company operating the investment group manages all the units, handles maintenance, advertising vacancies and interviews possible tenants in exchange for a percentage of the monthly rent.

    As you can see, there is a ton of variety in real estate, so choose the property that best suits your interest and budget.

  3. Harness the power of OPM

    One of my favorite things about real estate investing is using Other People’s Money (OPM) to invest.

    On a typical real estate investment, you’ll put down around 20% of the value of the investment while the bank puts down the other 80%. But if you’re really savvy, you can find investors to cover much of the 20% down payment, limiting your cash expenditure, while collecting fees for brokering the deal. This allows you to have the potential for a much greater return on investment (ROI).

    You could also look into real estate investment trusts (REITs). An REIT is created when a corporation (or trust) uses investors’ money to purchase and operate income properties (residential and commercial). REITs are bought and sold on the major exchanges, just like any other stock. According to Investopedia, a corporation must pay out 90% of its taxable profits in the form of dividends to keep its status as an REIT. By doing this, REITs avoid paying corporate income tax, whereas a regular company would be taxed its profits and then have to decide whether or not to distribute its after-tax profits as dividends. Since the 1960s, REITs have been a popular choice for income investors due to their reliable payouts and massive capital appreciation potential.

Take Your First Step to Invest in Real Estate

Please understand, Robert and I started our real estate investing careers through small, single-family homes back in the late 1980's. When we were ready to move on to bigger properties, we purchased a six-unit apartment building. Today, we own over 1,000 apartment units.

And for you, it’s only a matter of time. Once you’ve dipped your toe in the water, you’ll become so much more comfortable with the entire process. You’ll become knowledgeable about the industry lingo, find some trusted advisers, learn how to choose the right investment opportunities (and which ones to turn down), and start seeing that almighty cash flowing into your bank account. Can you think of anything more empowering than knowing you’re building a future of financial freedom?

Download your copy of Rich Dad’s eBook, How to Buy Your First Investment Property for free to get started.

How will your story begin?

Original publish date: August 10, 2017

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