Advice For REI Newbies

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We put together a roundup-style article offering advice for new investors, or for any real estate professionals that are thinking of getting started in investing. REI (real estate investing) has seemingly never been more popular, and especially when paired with the ability to list a home on the MLS, it becomes a “best of both worlds” scenario: allowing you to provide multiple options to homeowners in different situations. 

 

However, like any entrepreneurial venture, it’s got a high failure rate, and it carries significantly more risk and cost than other ventures.  Therefore it makes sense to glean from other investors who have started, closed deals, or grown successful businesses so you can learn what to do, what to avoid, and what to focus on.

 

We asked investors, “what advice would you give to someone just starting out in investing, or who's interested in getting started?” Here’s what they said…

Learn to “leverage” your time, knowledge, or money.

This tip comes from Dara, who co-runs Properties ATL and has been featured on HGTV’s “Flipping Virgins”, “Some valuable advice to anyone interested in investing in real estate is to learn leverage. There is a very low barrier to entry in this field, which makes it possible for someone with little to no formal education or real estate or finance background and someone with little to no money succeeds. Leverage other people's knowledge and experience by getting a mentor or partnering with others who have done or are doing what you want to do; leverage your money by lending it to experienced investors in order to make your money make more money for you without having to struggle through the learning curve; leverage your time by working for someone who is doing what you want to do in order to learn systems and processes. After learning the art of leverage, marketing is the next most essential skill to becoming a successful real estate investor.”

The concept of finding a mentor who you can work with, invest with, shadow, and learn from is really powerful. Not only do you get their expertise, but you won’t have to reinvent the wheel. You’ll be able to learn what worked well for them, how they conduct themselves with homeowners, how they handle negotiations or objections, and so much more.

Network, network, network!

Connecting, helping, and staying in touch with other real estate professionals is crucial. Imagine, for example, that you connected with a real estate agent in your area and set up a partnership where you would send any homeowner that was a candidate for the MLS to them, and they referred any good candidate for a short sale to you. Or maybe you just want to have more knowledge of professionals in the area, so you can better serve your own clients.

Either way, networking is crucial. Conrad, the purchasing manager at Home Sold Speedy, says that when it comes to having a successful business or career in real estate, “networking with people from all aspects of Real Estate is so important.  Real Estate Agents, Wholesalers, other investors, and even subcontractors have such a wealth of experience you can benefit from. Go into all networking opportunities with the mindset that every business relationship you form has the opportunity to bring value to your business and goals.  If you work with people in such a way that strives to see everyone succeed you will find great success for your business. One of my favorite quotes from the great Zig Ziglar is, “You will get all you want in life if you help enough other people get what they want.

 

So even if you haven’t started your business yet, get started networking.

Educate yourself.

This is probably the most important piece of advice you can get. When we read investors talking about the greatest causes of profit loss or failure, it’s ultimately (at least in part) due to lack of education: not understanding the numbers you should know, not knowing the common problem areas to look for, etc.

 

Yes, there comes a time when you need to actually take action and jump in, but you can avoid so much headache if you learn more before jumping in.

 

“Get some education first before jumping in,” advises Matt, who runs Omaha Homes for Cash,  “there is an unlimited supply of free and/or very inexpensive education out there just waiting to teach you everything you need to know. The real estate world is vast and full of hundreds of different paths. Figure out what area you want to focus on and target that. Early on, you need to be laser focused and not try to target too many different things at once. Once you know what area of real estate you want to pursue, the quickest way to learn is by following someone who is already doing it. If you know someone who is currently doing what is that you want to do, then find a way that you can add value to them and their business. That alone will pay off 10 fold for the future of your business.”

 

A really crucial takeaway here is to be “laser focused” and focus in on a handful of teachers, methods, books, etc. You can quickly become overwhelmed with all there is to know, and all the different approaches. Just do a quick YouTube search and you’ll see for yourself.

Focus on helping the homeowner, building trust, and the rest will follow.

This is one of the most important pieces of advice you could receive. As Seth Godin says, you only need 2 things as a business owner: 1) for people to know you exist, and 2) for people to trust you.

 

Why does any homeowner ultimately work with any Realtor, Wholesaler, or Investor? Trust. They believe you’ll pay the most. They believe you’re the best out of everyone who reached out to them. Sure, if some homeowners get flooded with mailers, they may pick one and go with it. But that’s not a theory or framework to build a business around.

 

So one of the best things you could do is to simply focus on helping the homeowner. Not buying. Helping. When you walk up and first meet the homeowner, your plan should be to learn what their goal is, learn about their situation, and then help them meet that goal. Be personal. Get to know them. This is the advice that Todd Stelnick, the owner of We Buy Houses Los Angeles, gives: “to be successful, really get to know the homeowner; start to build rapport and gain their trust. Once someone trusts you, they’ll work with you.”

Have a clear purpose as to why you’re doing this.

In all things worth doing, there is always a valley you have to persevere through. REI is no different. It won’t come easy, and your first flip or two may not go like you hope it will.

 

In those times, it’ll be really tempting to write it off or give up. That’s why Mike, who runs SellMyHomeCleveland, tells new investors “the advice I would give to someone starting out in real estate investing is for them is to have a clear purpose for their investing. Because real estate investing is filled with difficulties and unknowns, having a clear "why" for investing is important. Are you investing to leave a legacy for your kids? Are you investing to achieve a financial goal? Are you hoping to give yourself a better future? What's your "why?" A person will tend to quit without a clear purpose for real estate investing.”

 

So if you’re new to investing, or just considering it, you should be thinking through why you’re doing this. “Money” may not be a good enough answer, because at some point, you may feel it’s not worth all the hassle and headache.

 

Watch out for "profit killers".

In this industry, there are a lot of them. These include buying a home for too high of a cost; poorly estimated the renovation costs; working with a bad contractor or getting behind on a timeline; and more. David has run Philly Home Investor for years, and he warns that the biggest profit killers to watch out for are: "Investors being completely wrong on the cost of renovation, and the other is that most investors always believe they will get the high-end of the ARV spectrum. Another potential profit killer is for those who wholesale commercial properties: having multiple people involved on the deal. In that case there is usually 1 person who is demanding more money on their end than originally agreed upon."

 

Further resources…

Besides the above tips, here are a few other ideas for anyone just getting started:

 

  • Attend a local meetup in your area, where you can get to know other real estate professionals, ask questions, and learn from them

  • Engage in online communities or subreddits

  • Find a successful local investor in your area, and reach out to see if you can do free work to shadow or learn from them

 

We wish you the best as you begin your journey!

 

 

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Rainmaker
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Emcee M. Arah
Remax Excellence - Silver Spring, MD - Silver Spring, MD
Realtor w/Architectural Dimension, AHWD CRS B-Arch

Wow! This is quite a bit of extremely helpful information! Great article. My biggest takeaway would be having a good reason to get into investing. So many people just think they can make some money, but that's not a good reason. It takes time and effort.

May 20, 2019 10:03 AM #1
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Rainer
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