Who Are Investors?
Before the tips, just a reality check. Investors come in many different forms and types. Private money and hard money lenders are investors who make their income investing in other investors’ projects for a high interest rate. Other investors are growing their buy and hold portfolio with properties that are everything from turnkey to major rehabs. Some are flipping houses to both increase their cash flow and buy and hold for wealth. Wholesalers are investors who simply are creating cash flow by helping sellers find buyers. Builders are also investors who may simply build new construction, as well as perhaps buy land for subdivisions.
How Do Investors Get Started?
Some investors get into the business they learned from their parents. Contractors find deals on properties, then wisely buy and rehab those properties as an investment. With the onset of HGTV and other real estate television shows, more and more folks are intrigued by the opportunity to real estate investing, just like us. Some studied everything they could find, making their way to investing as independent learners. Others like us, found our start in real estate investing through a significant investment in a coaching program that offered curriculum, coaching, and systems.
Are you a Real Estate Investor or Not?
There is no right or wrong path to becoming a real estate investor. Find a plan that works for you, then get started. Seriously, after about six months of learning, property tours, repair estimates, creating comps, and preparing offers, we called one of our coaches, asking for advice on our next offer. The numbers were lower than the minimum profit margin we had agreed to for us, but it was a pretty straight forward flip, so we just wanted another set of eyes of the proposed offer.
Our coach agreed with our numbers, and I’ll never forget what he said. “At some point, you have to decide. Are you a real estate investor or not? If it’s a good deal, but lower than your minimum acceptable profit margin, an investor would go for it, if they felt safe.” Some investors are so ready to get started, they jump easily into their first deal without properly evaluating it. Other investors move slow, like we did, just to avoid making a big mistake. Here are some tips to get started properly.
1. Sacrifices Are Required
Most investors are initially working another business or job when they first get started. We both were running our own businesses, so we already understood both the time and financial sacrifices required to start any new business. Once we decided we wanted to be investors, we chose to start using the FortuneBuilders program. We understood the cost of that program, plus the time commitment to learn the business and practice our craft, as well as the start-up costs for the new business.
We were used to at least a couple nice vacations each year, sometimes more, but vacations, other than business trips, were put on hold until the business was thriving. House hacking was one of our strategies to reduce our expenses. Our goal was to reduce expenses, so we’d have the funds to invest in our growing business. Time and money are two sacrifices most investors make on their path to successful real estate investing.
2. Cash is King
Money is required to make money, so investors need their own money or the ability to raise money. One of the major issues some of our fellow investors had with coaching programs was the cost to join either chews up their savings or their credit, reducing their credit score. When they find their first deal, they struggle to find the down payment, closing costs, and repair costs to make it happen.
Additionally, lots of investors plan to just wholesale properties initially to raise capitol, without realizing wholesale properties are hard to find, difficult to sell, and require a lot of knowledge to do so successfully. Our biggest advice is not to spend all your money to get started. Tuck back some savings, find what loans you’ll qualify for, and make a plan to raise funds before you need them. Hard money is definitely a good starting point, and private money lenders are a great solution to using your own money.
3. The Key is Action
“The great aim of education is not knowledge, but action.” – Herbert Spencer
Seriously, we’re back to that question our coach asked us before we ever had our first property. Are you a real estate investor? Then act like one. Learn the business. Practice your craft. Real estate investors are always working the business. Our coaching program curriculum had action steps all along the way, so we did every one of those in order.
Continual action steps include learning the business, networking with others, consistent marketing, and touring properties. Investors grow their teams through networking, plus it makes others aware of your business, so it’s another marketing tool, as well. Once several marketing channels are created and utilized continually, investors work their numbers. How many leads do we need, in order to tour the number of properties required to find five we an make offers on each week.
Investors Get Stuck
Learning is part of every journey to a new career. Employees feel safe learning, because they’re earning a paycheck while learning. That doesn’t happen with investors, so lots of potential investors get stuck in the learning process, afraid to take action until they’ve learned everything.
These tips are one of the reasons our business thrived, while other investors who started the process never got their first deal. In our initial plan, we committed to some real sacrifices that we knew we help us succeed. We made sure we had access to our own money, plus some lenders who would supplement our savings for our first deal. Plus we reinvested our profits in the business, until we found private money lenders to finance our projects, while receiving an interest rate that made them smile. The biggest difference is we kept taking action to move our business forward.
Our business is thriving now, so we’re happy to help others. These blog posts are just a reminder that anyone can become a successful real estate investor, with tips for a fast start.