The most common questions I get from would-be investors time and time again are about how to get started in real estate investing, or some derivative of that question.
Then a reader named Telly recently asked about how I got started. Specifically, Telly asked:
“I am curious about your first time buying a home. Was it easy? Were you nervous? And how did you do it?”
Two things struck me about Telly’s query:
1. First of all, it suddenly dawned on me that telling my story might be a more useful way to help people get started rather than giving them more theory about techniques they can use.
2. Secondly, I think the questions “Was it easy?” and “Were you nervous?” highlight that the thing stopping most of us from getting started are more emotional obstacles rather than knowledge obstacles. We tend to convince ourselves we need more and more information before we can get started. In some cases this is right but the reality is that someone who has made the decision and mental commitment to do their first deal will find the information they require as they go. It’s a given.
In other words:
– If I’m going to buy a property I need to know how to analyze the deal to ensure it will be profitable. So I go and find out how to do that.
– Likewise, I will need to finance the deal. So what are my options there, how do I choose the best one for me and then how do I set it up?
My First Deal
Was it easy?
Yes and no. Nothing about the transaction or the process afterwards is particularly difficult. For me the hardest part was simply making the decision to do that first deal and I suspect that’s what is holding back most people.
Was I nervous?
I can tell you I was extremely nervous. I was a relatively young 26 year old which surely contributed to the nerves but I’m sure that buying your first house carries enough uncertainty to make the average person pretty anxious. But those nerves were overcome by commitment to a goal.
It all began with a goal…
After attending an evening seminar by John Burley in June or July one year, I set a goal to buy my first property by the end of that year. But for some reason this was not a fluffy goal like I had set before. I had committed to it mentally and knew that things had to happen ahead of time if I were to hit that goal. I needed to start with a basic education including how to analyze and finance a deal. So I signed up for John’s bootcamp in Phoenix.
I spent in excess of $6,000 going to that bootcamp which I think is more than I’d spent on any other single purchase in my life at that point. That motivated me! REALLY motivated me. I needed to make that money and some so I bought my first house within 2 weeks of the bootcamp and decided to figure it out as I went along. The biggest hurdle I had with that deal was trying to find a tenant. It sat vacant for a few weeks before I decided to hire a management company. I still had little idea what I was doing but as I had “planned” I figured it out as I went along.
And I encourage others to do the same. Don’t be stupid about it, but find the courage, believe in your ability to solve issues as they arise and commit to that first deal.
The one proviso I’ll add relates to my comment about not being stupid. DO YOUR NUMBERS. Make sure you invest based on a solid analysis rather than just going and buying a property on gut feel or bad numbers. If you don’t know how to do an analysis, start with a spreadsheet of all your expected income and expenses and start figuring it out. And always include some margin for error.
Well, I think this highlights some of the more important issues involved with getting started in real estate investing; issues that often get glossed over. And I hope that you can find it within you to make the commitment required. If you can, I have little doubt that everything else you need will follow.