Real Estate Investing for Beginners
Sometimes real estate investing for beginners can seem a bit intimidating and it’s easy to get lost in the lights and sounds of all the blogs, books, magazines and television gurus. To help cut through the huge amount of information that’s out there I wanted to create a short list of tips you can use as you embark on your journey to find financial freedom through Toronto’s real estate.
No, this isn’t going to teach you everything you need to know. However, I hope this list will help point you in the right direction. It’s not exhaustive by any means, just a brief list of lessons I’ve learned along the way and hope will help propel you toward success.
1. Be Determined
Real estate is not something to do on a whim. Investing in real estate is a lifelong pursuit to take control of your financial future – not a get-rich quick scheme. As an investor – you will struggle. You will make mistakes. You will fail. The successful investors are the ones who can take those experiences and turn them into lessons to improve their skills.
2. You DO Need to Do Your Homework
On the opposite end of the spectrum are investors who heard about real estate being a great investment and jump in with both feet – unsure of where they are going to land. Sometimes these investors get lucky and make it big (and usually go on to be the next big guru) but the majority of the time these investors fall and fall hard. Don’t be like them. Do your homework. Study the niche you want to invest in and learn everything you can about that subject.
3. Read about Real Estate Investing
Books and magazines have so much information in them and it’s a shame so many individuals are losing their love of books.
4. As a Beginner, Connect with Local Investors
This doesn’t mean to spam them with requests – but simply reach out. Begin hanging out where they hang out. Ask them to show you some of their properties. Most investors love to show off their accomplishments, so allow them to and pick up on every tidbit of information they can give you. Local investors will have a much better grasp at what works in your community than any other online investor will know.
5. Learn the Terminology
If you don’t know the terminology – you are going to look like a fool. Plain and simple. Don’t start talking to an investor or a mortgage lender without using the correct terminology. You’ll just look ignorant and not trustworthy. Be honest if you don’t know something and start learning immediately.
6. Get Creative
One of my favorite lines in one of my favorite books, Rich Dad Poor Dad, says “The poor say ‘I can’t afford it.’ The rich say ‘How can I afford it?” I love this. Practice changing your thought patterns from “I can’t” to “how can I” in everyday life. This simple practice will change the way you view conflict in all areas, including your real estate business.
7. Learn to Sacrifice
How bad do you want financial freedom? If you want to use real estate to start living the life you’ve always dreamed you are going to have to sacrifice. You may need to forgo a vacation and use the money toward a down payment instead. You may need to move several times in order to build up enough capital to begin investing. You may need to learn how to use a paint brush and do your own work. Investing in real estate is the most rewarding thing I’ve ever done – but it’s not always been easy. There were years of sacrificing (time, money, and opportunities) to get financially free. If you are looking for a get-rich quick scheme – look elsewhere.
8. Learn (and Trust) Basic Math
The math involved in a real estate investment is not university calculus. It isn’t difficult to learn. Income minus expenses equals cash flow. A gallon of paint costs $30 but a painter is going to cost $200 for one room. That’s the kind of math you need to get good at. Don’t assume anything – but use your math to make sure a deal is solid. Use a basic spreadsheet to analyze a deal or call me for a financial analysis of real estate investment. Once you understand the math – don’t deviate from it. Trust it. Don’t let your emotions get involved. Real estate is a number’s game and the quickest way to fail is to forget that.
9. Make a Written Plan
You wouldn’t take a road trip across the country without a map, so why take your trip through financial freedom without a map? When I first began investing, I actually sat down and created a plan to get from where I was to where I wanted to be. While I didn’t follow the plan exactly (life never follows the ideal) I stuck by the principles of investing in real estate.
10. It’s Okay to Start Small
You don’t need to buy a 50 unit apartment building right out the gate. Perhaps your first investment will be your first home. Perhaps you’ll start with just a 50/50 partnership on a small flip. This is okay. It’s easy to get over impressed by the big deals that the internet gurus talk about but even they had to start somewhere.
11. Treat Your Business as a Business
Real estate is a business, so treat it that way. Keep it organized, build systems to manage your life, and seek to improve your efficiency. The reason so many landlords get burned out and hate the role is because they treat it as either a hobby or a job. It’s neither. You are a business owner and as such it is your job to manage the business to the standard which suits you best.
12. Start with Good Bookkeeping Now
This is extremely important. When I first began, the paperwork was just a small blip on my radar and as a result my bookwork was a mess. I was very fast untangling the mess and creating a system that works but had I started with a system from day one I would save significantly less stress (especially around tax time.) Meet with an accountant as well as a lawyer after your first purchase and begin plotting your bookkeeping, taxes, and legal holding status. Your future self will thank me.
13. Don’t Quit Your Day Job.
Investing has two faces: the career side and the investment side. It doesn’t need to be both. Let me explain – flipping houses is part of the “career side,” as is “wholesaling” and managing. However, by buying cash flowing properties, reinvesting that cash flow into bigger and better real estate, and setting up systems to manage that business, you are creating investments for your future. There is a principle I believe strongly in, which states that anyone, regardless of their salary, can become financially free if they invest smart and plan. If your ideal job is the “career side” of real estate, then make that your job and your investment. However, if your ideal job is teaching math at a local high school – do that and invest on the side. Find whatever job makes you the happiest and do that but use real estate as your investment vehicle to gain financial freedom.
For a Free Investment Consultation and/or Free Professional Analysis of Real Estate Investments, feel free to e-mail or give me a call anytime. No cost or obligation. I will also share with you my personal experience investing in: single family properties, multi families units, student rentals, boarding house rentals, commercial mixed use properties and custom new built homes.