Real Estate Investing Advice: My Top 3 Tips For Complete Beginners
I’ve been in real estate for almost 13 years. I’ve had success and I’ve made some mistakes. I want to share with you my three most important pieces of advice to help you avoid making the mistakes I made as a beginner real estate investor and help you get started on the right foot.
1. Begin With the End Goal in Mind.
Think about where you want to be in 10 years. What do you want your life to look like? What do you want your portfolio to look like? My goal in 10 years is going to be different than your goal. Your goal is going to be different than your friend’s goal.
Everybody’s goal is unique. I once had a guest on my podcast whose goal was to run his real estate portfolio from a pub in Ireland. He wants to be sitting in that pub drinking his Guinness and be able to do everything off of his cell phone.
Obviously, he’s going to structure everything he does with that end goal in mind. Whereas somebody who wants to be more hands-on and busier as their portfolio grows will make a totally different decision, based on their end goal.
When I first started investing, I was selling the residential product. I was a real estate broker and I just started acquiring houses — single-family homes, duplexes, etc. — because that’s the product I knew best.
Was it the right asset for me to acquire, based on my goals? No, it wasn’t. If I had actually sat down and thought about what I wanted my life to look like in 10 years, I would not have even considered buying single-family homes. Why?
I figured out, much later obviously, that I would have to acquire 1,000 houses to hit my real estate goal — a thousand houses! That is absolutely crazy, but that’s because I didn’t start with the end result in mind. That wasn’t even in the picture. I just started buying houses.
What I should have done — and what I’m now suggesting you do — is sit down and really think about your end goal. Take two weeks — a month even. Think about what is important to you as an investor. What is important in your future lifestyle? How do you want things structured?
When you do that, you’ll be able to make better decisions. You’ll structure things differently. The types of deals you do will be structured differently. You’ll set things up based on where you want to be, not just haphazardly like how I started out.
If I could go back in time and change anything, I would put in the time to really think about where I wanted to go. Then, I’d probably be 10 years ahead of where I am right now.
2. Partner Up With More Experienced People.
Many beginners think they have to do everything on their own — the management, the deals, etc. But nothing could be further from the truth.
Back when I started, I also thought small: What can I do on my own? What can I accomplish? I wanted to control everything. That was the worst decision I could have made. On the other hand, partnering up opens up many opportunities to you — some you haven’t even considered.
As a beginner real estate investor, you don’t yet have the experience nor the track record. By partnering up with somebody more experienced, you can leverage their experience, their connections, and their past performance on investments.
You can also learn from them. Of course, you can always watch YouTube videos and read books about multi-family real estate. That’s fine, but that’s theoretical knowledge. But when you’re actually doing it in person, “getting your hands dirty,” that’s learning on another level.
So figure out what that experienced person is lacking. Maybe they lack marketing? Maybe they lack somebody who can underwrite deals? Maybe they’re so busy that they need somebody to go out and actually visit properties? Think about what you can bring to them and partner up. Leverage their experience and learn from it. This will skyrocket your results.
Try to partner up with somebody with complementary skills. Let’s say you have an underwriter who is really into numbers and spreadsheets. If you have somebody else who is really good with numbers and spreadsheets, there’s no point in them working together because they’re both bringing the same skill set to the table.
The person who’s really good at underwriting might not necessarily be strong at raising capital and meeting people. So when you’re thinking about potential partnerships, you really have to think about the skills each person brings to the equation.
When you have two opposites — and opposites do attract in real estate, like a good underwriter and a good capital raiser — it has an exponential effect on the returns of that partnership. In other words, one plus one doesn’t equal two, but three (or even more). That’s called synergy.
So if you’re a beginner just starting out, don’t think small. Don’t think you have to wear all the different hats that come with investing in real estate. Partner up with somebody. It’s going to free up more of your time to focus on the skill set that you bring to the table — what you do best.
I wish I could go back in time and partner up sooner with more experienced people. I would have learned so much faster and so much more, and I would be so much further ahead now than when I was trying to do everything all on my own.
3. Use Other People’s Money (Capital).
Many beginner investors — me included — believe you have to use only your own resources in the deal. So you do one deal, and then another. Then you leverage those two deals to acquire a third deal, using your own funds and resources. Well, nothing could be further from the truth.
The truth is, there’s so much capital out there, looking for solid real estate investments. There are people who wake up in the morning with money to invest. And they want to invest in real estate but they don’t have the experience, the time, or the confidence.
So they’re looking for somebody qualified to invest their money and put it to work. There are so many people out there looking for good deals and they have the capital to invest. So leverage that capital as a beginner.
Partner up with somebody who is more experienced, then raise the capital. It will scale up your business so much faster and you’ll be doing good by your investors by putting their money to work in good solid deals. Remember, we’re not in the real estate business — we’re in the capital-raising business. Real estate just happens to be the vehicle to put the capital to work.
That’s one big mistake I made starting out. I could have scaled so much faster if I just opened up my mind and thought about using other people’s money and worked with investors who want to realize all the benefits that come along with investing in real estate: the depreciation, the stability, the strong cash flow, and the forced appreciation that you can do on these properties.
If I could go back in time and have a talk with my younger self, I would tell myself this: “Use other people’s money. Start raising a capital network. Don’t only partner, but partner with other investors. Do more and bigger deals. You will expedite the growth of your company, you will scale so much faster, and you will build your network of investors who will be with you for your investing lifetime.”
The Bottom Line
If I could go back in time, those are the three pieces of advice I would give my former self:
- Think with the end result in mind and plan accordingly.
- Partner up.
- Raise capital.
