Real Estate Investing
Lately I have begun teaching a real estate investing 101 class to real estate agents. I have been testing the curriculum so I can build an online course around the subject that will be available to the public. I started the program geared towards agents for a few reasons. Mainly, I did so to help agents create multiple streams of income for themselves, as well as I figured I would get some pretty solid feedback in building out the course since they already have experience around real estate.
As I continue to refine the information, and flesh out the program, 3 key takeaways keep popping up. So let’s jump in and get started on each one.
1) You Need Both The Right Mindset, As Well As Knowledge To Be Profitable:
So what kind of mindset is necessary to be successful as a real estate investor?
I will give you a hint, it’s not the “get rich quick,” mindset. If that is your thinking, you’re looking down the wrong end of a shotgun if you are considering investing in real estate.
The mindset you need is “I am going to create passive income, and reinvest that passive income so that I can create wealth.”
You have to start looking at investing as a vehicle for wealth creation. Which means you may need to reevaluate your relationship with money, and specifically what money means to you.
Are you carrying a lot of consumer debt right now? Let’s be conservative, and say you are paying 15% interest a year on $25,000 worth of credit card debt. That equates to $3750.00 a year, and you aren’t even touching the principal! If you paid that debt off, and didn’t re-accumulate it again, you would automatically increase your passive income by $3750.00 a year. That is over $300.00 a month, and all you have to do to maintain it is not spend foolishly. These are the first building blocks to creating wealth.
Before you start buying houses, you need to treat real estate investing like a business. In fact, not LIKE a business, but as a business, because that is exactly what you are building. Just like you wouldn’t go and buy a pizzeria, without knowing how to operate it, don’t start buying property without first understanding the fundamentals, doing your research and due diligence, and finding a coach, or mentor. Actually, you should start with a mentor and build your way up to hiring a coach.
But here is the catch 22…Do not get so wrapped up in learning that you forget to apply what you are learning and never do a deal. Here is where having a mentor can be especially beneficial, as well as having a strong accountability partner or group.
2) Most People, Even Agents, Don’t Clearly Know The Difference Between Speculation And Investing:
Let’s get clear on the difference between speculating, and investing. People hear the word “speculate,” and automatically think high risk. They hear ”investing” and think moderate to lower risk. Well both thoughts are accurate, and the opposite, is also true. Speculating can be low risk, and investing can be high risk. What you need to understand is the difference.
Let’s start with speculating. In regards to real estate, speculating would be things like wholesaling, or fix and flipping. You are either buying or in some way taking control or ownership in a property, and assuming you can sell it for a higher price. Sometimes by doing work to the home, other times, by not doing anything. The end result though is (when it goes right) a one time CHUNK of income. If you don’t repeat the process with another property, you no longer receive any income.
Investing on the other hand is either buying, or in some way taking control or ownership of a property, and having it generate consistent income over time, typically monthly. That income comes in each and every month, regardless if you are working, or sipping a Mai Tai on the beach. The income itself is passive. Passive income builds wealth.
3) Most People Don’t Get Involved In Real Estate Investing Because They Think You Have To Be Landlord:
This one was very interesting to me, especially since some of the agents had this mindset. The nightmare stories of tenants calling you at 2:00 AM because little Susie flushed her Barbie down the toilet and now there is water everywhere. Or, having to go over on the first of every month and basically beg for your rent to get paid.
Sure, these things happen.
However, you don’t have to be the one fielding the calls, or driving to the properties, playing bag man or bag woman. You can be part of a joint venture, where you put up the cash and/or credit, and your partner does the heavy lifting.
Don’t like partners?
No problem, hire a property management company.
Don’t trust property management companies?
Shame on you. There are some great property management companies out there!
But I will indulge your excuses a little more.
There are so many other, non intensive ways to invest in real estate including, buying notes, buying tax liens, being a private lender, and even investing in REIT’s (real estate investment trusts). There are plenty of options, you just have to be willing to learn about them, and pick the one that best suits your needs, risk tolerance, and personality.
So tell me, what’s stopping you from beginning to invest in real estate?