Over the last 10 years, many of my family, friends, and colleagues have asked, “how can I get started into the real estate game like you?” Depending on the environment the follow on conversation could have ranged anywhere from 5 minutes to 2 hours and a few beverages. I wanted to take a few minutes to put my thoughts and previous conversations to paper and shed some light on how anyone can get started investing in real estate and hit a few key talking points that always make their way into the conversation.
YOUR FINANCIAL FOUNDATION
Some of my friends who share the title with the best and most kind-hearted people on the planet also share some of the worst financial habits one could have. My first piece of advice is just like building a skyscraper, it all starts with the foundation. Building a base of good financial habits and understanding of the way money truly works will drastically increase the likelihood of success in real estate investing. This doesn’t mean you have to stack hundreds of thousands of dollars (that’s what banks are for).
Personal and financial goals are not something many people put any real thought into. Even fewer go a step further and write them down. They may talk about it, they may dream about it, rarely will they act on it. Many times you’ll hear young adults say “I want to be rich.” or like my 7-year-old son says “Daddy, I’m going to buy the fastest Porsche.” It’s very easy to say but difficult to put into a reason why we want these types of things. I always ask….Why! I want you to ask yourself the same thing. Why do you want to be rich, why do you want to drive the fastest Porsche? Many times it leads back to time and family. For me, I want to spend ALL OF MY TIME with my family on my terms when I want. ‘Time and Family’ is my WHY…What is yours?
A BURNING DESIRE
Once you have established your why, what are you willing to do, what lengths are willing to travel to ensure you will not be denied your dreams, your aspirations, ‘your why’ ? There must be a deep down burning desire to stop at anything shy of your potential and ‘your why’. In the book Think and Grow Rich, Napoleon Hill says, ‘There is one quality which one must absolutely possess to win. And that is the definiteness of purpose. The knowledge of what one truly wants and burning desire to possess it.” This isn’t something anyone can do for you, you have to manifest this type of thought and desire into your life.
ASSET CLASSES & TYPES OF REI
There are so many different ways to enter the real estate investing space. Many investors start by renting out a previous primary residence or house hacking an in-law suite they may have to offset the mortgage on their house. While others will jump into flipping a single-family residence or a BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat). Another great asset class and my personal favorite are multifamily apartment complexes. This asset class allows for massive scaling capability and a competitive arena.
Next, you have to determine how involved you want to be. Do you want to swing a hammer and be involved in demo day? Ok, bad question, because everybody wants to be involved in demo day destruction. If laying tile and painting rooms is not for you. Investing in real estate passively or a hands-off approach to real estate investing is also an option. “Hands off real estate investing”, they would say, “but, you said I didn’t have to stack hundreds of thousands of dollars”. That is true. Many folks don’t understand the power of the equity in their residence or that they can roll their retirement account into a self-directed IRA (SDIRA) and be more in control of their finances and use that capital to invest in large multi-family apartment complexes with great returns.
HOW MUCH CAN YOU INVEST
So far we have touched base on good financial literacy and building a foundation to build your empire. We hit the wave tops on personal and financial goals and ‘your why’ coupled with the mindset it takes to achieve your dreams and aspirations with a burning desire to achieve.
How much can you invest in a real estate transaction? This number should be based on your current situation in life and the foundation you established. Where are you in life? Are you a young professional with a high-paying job and no kids or an empty nester getting ready to retire and live the good life? These questions must be answered to establish the level of risk you are comfortable taking on at any given point in your life. With risk comes reward…the greater the risk the greater reward (or failure). A financial advisor once asked me, “What rung on a ladder are you willing to stand on to change a light bulb?” This question in the form of advice has helped me gauge the level of risk I am willing to accept in many aspects of my life not just real estate investing.
LETS TAKE A RIDE…THE CHOICE IS YOURS
Real estate investing is not for the faint of heart and like many investment vehicles it rides on a winding road. Your decision is what kind of vehicle will you decide to take the ride in? Will it be a vehicle that is built for comfort like a Lincoln or are you more geared towards a turbo-charged Porsche with race suspension and oversized brakes? The choice is yours, stick around and learn with us as we continue to grow our education material and help others see the amazing lifestyle and freedom you can build through real estate investing.
Written By: Joseph Biccum