Strategy, Property Type, Education and Network
This is Part 2 of a series on how to get started in real estate. Each new installment will be a bite-sized tutorial gleaned from 30 years of investing experience. The goal is to remove as much doubt and fear as possible, so you’ll begin, or continue, the process of creating enough passive income to change your life. If you missed previous posts, you may access them at www.richdoctor.com
In the last section we talked about discovering and internalizing WHY you want to become a real estate investor.
We learned about time and persistence.
So, now you have a WHY and you’re ready to jump into the real estate game.
The first thing to do is to make a plan that you can follow. If you don’t know what you want, you won’t know what to look for.
Your Strategy
Making money in real estate comes in two flavors: 1) consistent passive income, and 2) large infrequent capital gains. Sometimes you get the best of both worlds! Your job is to decide what strategy you would like to use.
You can buy your own or invest in other people’s projects. This series will assume you are buying your own property. We’ll discuss syndication in another program.
You can play the capital gains game by purchasing low and selling high. This will provide income on a sporadic basis, but hopefully with significant numbers each time. With this mindset, you’ll look for deals that fit the “buy low, sell high” strategy.
An example would be flipping houses. That will create income that arrives in sporadic chunks. Many people have used this strategy to create their freedom. I have one friend who started as a flipper. Now he buys entire neighborhoods from developers, so don’t think flipping is “small time!”
Alternatively, you can invest for passive income and steady, predictable cash flow. This is the route I chose. That doesn’t mean it’s better, it’s just what worked for me while I was practicing medicine. With this strategy, you’ll focus on holding property long-term to reap the consistent cash flow.
In contrast to the example above, instead of flipping a house, you’ll buy it and rent to someone, either short-term or long-term. You can also do this with a storage facility, apartment complex, industrial building, a retail center, or a Walgreens, to name a few.
The asset often doesn’t matter if you know your strategy, and you focus on it.
These two broad categories will help guide you to the investment vehicles that fit your plan. This guidance will provide focus. Focus helps you become an expert quicker, and often allows you to learn faster, make more money, and reach your goals sooner.
Become an Expert
Once you determine your main strategy, it would serve you well to pick one or two product types. This is contrary to the diversified portfolio theory you might encounter from your financial planner. Diversification is good, but in real estate it often pays to be an expert.
There are two schools of thought: 1) Diversify across a range of products to buffer against volatility, and 2) Focus on a niche or product type so you can become an expert.
Both are valid. In my experience, I found that focus made me a better investor. If I knew a market or product type like the back of my hand, I could make quick, confident decisions. This strategy became very profitable because I was able to move faster than other buyers. I once bought a property sight unseen and it’s been profitable ever since!
Pick Your Property Type
There are plenty of options in the real estate world. Though it’s not a complete list, some are listed below:
- Buy and hold single-family rentals
- Turnkey single-family rentals
- Flipping single-family homes
- BRRRR method (Buy, renovate, rent, refinance, repeat)
- Buy and hold multifamily
- Storage facilities
- Manufactured homes
- Warehouses
- Triple net buildings
- Land (hold or entitle)
- Short-term rentals
You can get overwhelmed by looking at this list, but something will likely pique your interest. What usually comes next is the realization that you’ve been trained for something else, and you don’t know the real estate industry.
At least that’s what happened to me. I was an orthopedic surgeon and had never had a business or real estate class in my life. I was in school or training until I was 32 years old!
If I can do it, you can do better.
How to Get Educated
I was once at a talk given by a SEAL Team Six member. One of his quotes was, “We all have a first day.”
I hope that gives you hope and confidence.
At one point in your life, you couldn’t walk or ride a bike. I suspect most of you have mastered that by now. There was also a time when you didn’t know how to perform your current job. You’ve obviously overcome that obstacle.
The same will be true for becoming a real estate investor. You will overcome. The simplest way to accomplish that is through education.
Books
The quickest start is to read books – and there are plenty. You can read about the basics of real estate or dig into your chosen niche. It’s a way to start immediately and it’s cost-effective.
Eventually, you will settle on something that fits your style. Then you can concentrate your book reading on that subject.
However, I suggest you continue to read about a broad range of subjects as your career progresses. Many things in life are interconnected.
I have provided a list of books at www.richdoctor.com/tools.
Podcasts
Podcasts are a great way to learn about real estate, and they’re free. There are currently over 2 million to choose from. Thousands of these focus on real estate. Some are for brokers, and many are for investors.
Most will have excellent guests who are experts in their fields. Eventually you’ll find something or someone that you resonate with. You must pick and choose the ones that give you the information you need.
Here are some of my favorites:
Real Estate Guys Radio Show, Robert Helms/Russell Gray
- Admittedly, Robert Helms and Russell Gray are friends of mine, but this is one of the longest running real estate podcasts in existence, and the most downloaded. Experts from around the world are interviewed about their niche. Russ and Robert are masters of looking at the big picture to help you manage your resources.
Cash Flow Connections, Hunter Thompson
- Hunter Thompson is an excellent interviewer. I have been on his podcast and was impressed with his ability to organize and analyze information. His podcast centers on real estate and it is a good start for those who want to create cash flow from their real estate.
Real Estate Strategies, Ken McElroy
- Ken McElroy has owned and managed over 10,000 apartment units and partners with the big investment banks in New York. He didn’t start out that way, but now he has deep experience in the apartment market. He also has a quick financial brain and can explain creative financing in a simple way. I have known Ken for years and he is a quality person with quality information.
Bigger Pockets, Brandon Turner/David Greene
- This is one of the biggest real estate podcasts out there and somewhat geared for beginners. Brandon Turner and David Green are fun to listen to and they have a huge following. I also read their blog posts and they’re packed with quality information, especially if you are just starting out.
Wheelbarrow Profits, Jake Stenziano and Gino Barbaro
- These guys are down to earth. They have created their own passive income and they’re passing it on to others. I had a great time with these guys on their podcast.
This is only a drop in the podcast ocean, but hopefully it will give you a start. New podcasts are popping up every day, so there is no lack of information. A short search will start the ball rolling.
Seminars
Seminars will help you grow your business and your wealth. There you will get information direct from the people who have succeeded in your chosen area of focus.
More importantly, you will be surrounded by like-minded, action-oriented people. It costs money and time to go to a seminar. Thus, the people there are generally more committed to their goals than someone who just talks about success.
Here you will learn advanced information, form friendships, find partners, and receive motivation to keep chasing your goals. It is here that you will form your network.
Rather than list the seminars here, I will make real-time announcements when a good one is available.
Meetup Groups
There are free meetup groups in almost every city. You can typically find them just by asking around. If you don’t know anyone, search Facebook and Google for “Real Estate Meetup Groups” in your city. My city (Austin) has several free meetups weekly.
Form the Seeds of Your Network
Jim Rohn said, “You are the average of the five people you spend the most time with.” Your new network will help you “up your average.”
You need to get around people who want what you want or are already there. I can’t emphasize this enough. Your network is vital to your success.
From your network, you will get information, motivation, opportunities, partners, team members, employees, and mentorship.
It is here that you will create the team that shares your vision and will execute the strategy that you’ve chosen. You will go farther and succeed faster with a team in place. We’ll discuss team formation in depth in a separate article.
Your network will develop slowly and will change as you progress. As it evolves, treat it like the valuable asset that it is.
What’s next?
After reading two posts, it might feel like you haven’t accomplished anything yet. But you’re already more experienced than most people because they often skip this step, and it hurts them later.
Creating a vision and a rough business plan will guide your subsequent actions. Things will change as you progress, but a concrete investment philosophy will eliminate indecision. This will help you avoid the tendency to spread yourself to thin and dilute your effectiveness.
You know why you want to succeed in real estate, and you’ve picked a strategy. Now you need to decide where you’re going to set up shop. That might seem obvious, but that’s not always the case.
A friend of mine, Russell Gray, says, “Live where you want to live and invest where the numbers make sense.” That’s sound advice.
In the next article, we’re going to discuss how and why to pick a market to invest in.
