We all have questions! Here’s our list of common thoughts that come to mind when accumulating passive income investing through real estate. These answers are meant to simply begin orienting your thoughts rather than an attempt to cover all bases.
PS. This is not to be considered legal or financial advice, strictly our personal opinion. Seek the help of an attorney or CPA of legal and tax advice. Do your own diligence before proceeding.
How do I get started in real estate investing?
In our view, the first step to getting started is writing down your vision and goal for investing. Be As Specific As Possible! This shall be your North Star, guiding you towards YOUR version of success. Here’s an example: I want to own 10 single family houses and have passive monthly income of $X,XXX dollars. Next, you should begin the phase of increasing your knowledge through education. To do this you should establish 3 lists:
- What I think I know,
- What I want to know, and
- People I might need to know to help me.
By doing this you’ll be off to an excellent start. Begin with your local library to find books and information for FREE, afterwards spend some time at local bookstores in the business and investing section. You don’t need to buy anything but pull titles that look interesting and beginning reading the table of contents, skimming chapters, and taking notes.
Should I become a real estate salesperson or realtor?
A lot of people who consider investing in real estate ask this question. You DO NOT need to hold a salesperson license to buy and sell real estate. Only when you plan to assist other people in sales transactions are you required to hold a license. That being said, the process of becoming a salesperson will teach you standard Real Estate Appraisal, Real Estate Law, Real Estate Finance and Real Estate Principles & Practices.
What skills do I need to be successful?
The following are some key skills, easily googleable to get you going: (In no particular order): Grit, Patience, Empathy, Communication, Leadership, Entrepreneurship, Imagination, Teamwork, Business, Sales, Marketing, Passion, Management, Customer Service, Discipline, Organization, Negotiation, Consistency, Focus, Integrity, Honesty, Listening, Ethic, Basic Accounting and Record Keeping, Sacrifice, Adaptability.
What books should I read?
We at LLP know the importance of books and believe in being life long readers and learners. We already compiled a pretty sweet book recommendation list here. This is an excellent start and check back as we add more reviews. If you don’t have to time read as much as you’d like also strongly consider audiobooks as a replacement to music or the radio.
What is a “good deal” and what does that look like?
The most common standard for a good deal is to buy low and sell high. Really, a good deal is what you’ve established as acceptable and preferable criteria for your investing goals and style. What might be a “good deal” for some isn’t the same for everyone; it varies based on product type, terms, timeframe etc. As you become a more seasoned investor, based on your own experience, you will determine what investments get you closer to your goals and meet your expectations for an investment.
Do I need a business plan to get started?
Simply put… YES! We started with one and so should you. Outside of writing down your vision and goal for investing the next step is the Plan. The business plan won’t have all the answers and won’t fully predict the future, however it will let you know that you’ve thought about most aspects of what you’re wanting to accomplish. This establishes your first benchmarks and milestones while clarifying your ideas on paper. Your SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) can help you identify your needs and your financial projections will help validate your goal. You don’t need to show others your plan but it definitely creates proud moments when looking back at your thoughts after you’ve gotten started.
Where do I get the money to start?
We definitely do not recommend credit cards, high interest rates or hard money loans as a way for beginners to get cash. To be honest, the best way is to start small. If you qualify for a traditional bank loan or mortgage, start there. There is NOTHING wrong with buying a small single family or duplex with a traditional 30-year mortgage. The reality is that the ability to acquire a property for as little as 3.5% or 5% down is a great advantage. You could occupy the property and start learning how to interact with tenants, manage a property and learn how to evaluate deals based on their income potential and expenses.
Accepting private investments, i.e. using OPM (other people’s money), shouldn’t really be used until you have real, tangible experience. Lose the idea of getting investors when you’re getting started. Maybe you can start a smaller money-making venture that will build the funds needed to invest. The best experience is gained from being creative. Having no money makes your think and hustle harder! This reminds us of the concepts that Robert Kiyosaki had in Rich Dad Poor Dad and Cash Flow Quadrant that ‘the rich don’t work for money.” Focus on the opportunity and money generating ideas will come.
Even partnerships, we DO NOT recommend them for beginners! Real Estate takes experience and fully understanding some of the unknown aspects. Investing should be done with disposable income only and as hard as it is to admit, you should really establish savings and a rainy day fund BEFORE getting started. The right time will come!
What should I look out for when investing?
Look out for… anything that will allow you to skip the hard work, lol we hope this is obvious, if not, WE SAID IT! There are no “overnight’ successes, just MANY NIGHTS! Real estate investing is definitely a way to get wealthy slooooooowly. There are plenty of businesses where cash money can be made faster! You should look out for trying to please everyone because it’s just not possible. Look out for fraud and deals that someone, anyone is getting cheated on! STAY AWAY. Look out for bad venders, contractors, professional services who might take advantage of your inexperience. Look out for people who may offer you a “hands off” quick return of your hard-earned money! Sometimes you’re going so fast because you’re so interested in the deal that the small details get overlooked. Every dollar counts so be aware that you may be able to capture a similar return with a smaller cash outlay. Purchasing power is key. Be wary of over-inflated values and complex financial models that only predict the best scenarios. Finally, don’t forget to put money aside to pay the tax man. A lot of times in real estate you can get hit with a huge tax bill if you’re not conscious of it. We advise paying your taxes quarterly, if you do not have a W2 income. That’s it for now…
What are the different roles in real estate?
“Real Estate” is easily used as a blank term for many vague or unstated roles. BE CLEAR and State Who You Are or Who You’re Going to Be! Here’s a quick list of roles: Investor, Landlord, Flipper, Wholesaler, Realtor, Real Estate Attorney, Real Estate Appraiser, Real Estate Marketer, Title Company, Escrow Agent, Financial Modeler, Developer, Builder, Syndicator, Value Investor, Bird Dogger, Sideline Spectator, Economist, Insurance Person, 3D Modeler, Property Manager, Leasing Agent, Private Equity, Tax Credit Person, Affordable Housing Provider, Wholesale Investor, Turnkey Investor, Retail Investor, Office Guy, REIT, and Guru each have their place!
Should I buy guru courses or systems?
We’re strong preachers of GET WHAT IS FREEEEE FIRST, SECOND, THIRD AND FIFTH! It can be hard to resist the pitch or the seminar, or the coaching offerings, please do not pass go. Save as much money as you can! This is truly the most important FACT! Do you really feel you need to have it? Have you checked eBay for it? Paying hundreds or even thousands of dollars on systems and tools before you’ve purchased an actually property can LIMIT your Success! MAX OUT FREE… Have you knocked on all the possible doors? How about all the windows as well? Seriously! Go take a potential mentor to coffee, than, lunch, then dinner… Repeat!