How To Get Into Real Estate Investing – A Step By Step Guide

When I first started to get into real estate investing, I did everything the hard way. Not only that, I did just about everything wrong. Because of this, I want to share with you what I would do differently now that I know how to get into real estate investing as a pro.

How to get into real estate investing is not as hard as you might think. Here are the major things you must do: 

1. Increase Your Income To Save More Money For Investing
2. Cut Your Expenses to Save More Money For Investing
3. Eliminate Debt
4. Save Enough For A Down Payment
5. Hire An Agent to find a property for you
6. Hire A Property Manager To Manage The Property
7. Make Money Every Month Without Working

If you are like most people though, there is the fear to actually getting started in real estate.

In reality, real estate investing only requires elementary school level math. As long as you can add and subtract, you absolutely learn how to get into real estate investing.

Listen to the Podcast

Now that I have bought 30+ rental properties and have a successful real estate investing business, I am past the fear and have the knowledge to do it all over again.

In this article, I share how I would start from scratch if I had everything taken away from me. This is the session that I share how I would create my business if I had no money, no properties, and no credit and build another successful real estate company.

If I Were to Start Over, I Would..

Get a job to increase your income to save for investing

Cash is the lifeblood of your business. The more cash you have, the easier it is to buy properties. Start saving money to buy a property. If you have a bad job, start looking for a new one.

Look to increase the money that comes in from your job. If you need to, get a second job to increase the amount of money you are making.

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Cut expenses and increase saving

Decrease expenses to increase your savings. The goal is to buy properties so you can buy what you want later. Now is the time to sacrifice!

Look at everything. Can you move to reduce your housing costs? How much could you save by cutting or reducing takeout coffee?

Work up to saving at least 10% of your income, and put this in a savings account every month.

Shoot to save more than this. If you work a second job, EVERY penny from that job should be saved. This is hard work, but it will get you in a place where you can retire or quit your job early.

It is all about putting more money in your pocket for future investing.

Stop spending and eliminate debt

If you have high interest credit card debt, you are wasting your money! You are giving your money to the bank, for the privilege of using their money, before you actually had it.

Even having student loan or a home loan prevents you from saving.

If you have a home that you live in and don’t rent out, it is bad debt because no money is going into your pocket.

Don’t overspend, don’t live paycheck to paycheck, and don’t go into debt. Get out of debt! You are throwing away money every time you pay interest. Get rid of debt as fast as possible.

“Good debt puts money into your pocket. Bad debt takes money out of your pocket.” –Robert Kiyosaki, author of Rich Dad Poor Dad

Start looking for properties, educate yourself, and learn the market where you want to invest

When getting started in real estate, I suggest you start to learn as much as you can.

Start reading books and blog posts and listen to every podcast you can find. Real estate has been around forever. This is not new information.

You can learn from other people, because it has all been done before. Once you learn more, you will be able to spot a good deal.

As you are learning, start looking for properties, whether in your local area or in another state. Educate yourself on how to build a team and how to build a business that is going to run automatically on its own.

You can look for properties on Zillow.com — pick a city and start narrowing your search. Get to know that city well and learn which areas are good and which areas are bad.

Learn the prices, how fast homes are selling, and everything you can about that market.

It is just like buying a car. Learn the market so you know what is a good price, because every city is different and every state is different.

Sometimes it doesn’t make sense to invest in the state where you live. Narrow your search to one specific state. Listen to my prior podcast episode about how to invest out of state and how to look for a new area to invest.

Educate yourself so you know a good deal when it comes up. The last thing you want to do is buy a property you will lose money on. Continue listening to this podcast, visit my blog, and check out the books and resources I have available on there.

If you sign up for my newsletter, you will get even more content and you will receive a free investing guide.

Where to Invest in Real Estate

Where to invest in real estate is a question I get all the time.

Almost every person I talk with who is looking to get into the business of passive income with rental properties ultimately is concerned about where to start investing for their rental property business.

So, where to start investing is really a matter of numbers for me. Right now I invest in five separate areas/cities in three states because the numbers work out well.

The price of the home vs. the amount of rent is what I look for. For all the areas I invest in, I use two key metrics.

1. Asking price =< actual value
2. Monthly rent amount >= .01 * Purchase price of the property + rehab.

Basically, I look for areas where homes that have greater appraised value than it is selling for and can rent for .01% or more of the purchase price + what it will take to fix up the property.

I explain it all out in this video I made on how to find properties to invest in.

The main thing to succeed in this business is knowledge. Knowledge about how to find properties to invest in and how to manage them once you own them, and knowledge about how to be successful in making passive income.

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Once you have found an area you would like to start investing, I suggest finding yourself a really good property manager who knows the area well. Take your time to research the area in these ways:

1. Price of homes
2. Amount of rent the average house would receive
3. Type of tenant who would apply and how long they stay in a home on average
4. Areas that have good school districts
5. Areas with low crime
6. Areas that have a more desirable location than the surrounding parts of the city

I personally suggest using a realtor and a property manager to find/invest in properties. I heavily lean on my PM's to find good properties.

As the Realtor finds me a property, I have my Realtor check all the above points with the property. If he gives me a good report on it, I proceed. Now, the question on where to invest in real estate can easily be answered.

I have shared many times that I already am investing in Akron OH right now. That could possibly be a good place to start looking for anyone.

Not saying it is the best area but is the best area I know of for my business model right now.

Start talking to family and friends and let them know you are now a real estate investor

You are no longer Bob who works at the laundromat. You are now a real estate business owner, an investor, even if you don’t own any properties yet.

Even if you are still working a full-time job, you want to be known as an investor with a side job, while you are building your business. A regular job should not stop you from getting started in real estate.

Shift your mindset from being an employee to being a business owner where you are calling the shots. You are the one who is making all of the money and benefiting from the company.

Start talking about it to everybody in casual conversation. Whenever anyone asks you what you do, tell them you invest in real estate and rental properties. If they ask how many properties you have, tell them you are currently building your portfolio. Be honest but, at the same time, let them know you are an investor.

The friends and family you talk to could potentially become passive investors who lend you money for deals. You find the properties and lock down the deals and they lend you the money to buy the properties.

They get a portion of the equity and a portion of the rent that comes in, you are still the lead, but you are a team where you are using their money and paying them back. This business is all about networking and building a team around you. If you tell people you are an investor, word will be out and they will come to you if they have a deal.

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Start talking to local banks, credit unions, and mortgage brokers and establish relationships

Talk to your local banks or credit unions about how you want to build a real estate business, and find out what they need from you to get a loan. Most national banks have set policies and procedures that come from a corporate office and they can’t bend the rules. Talk to a local banks or credit unions face-to-face and establish business relationships.

Talk to the people that actually approve the loans. The local banks tend to be a little more lenient if they understand you. They are giving you, the person, a loan and they are banking on you being trustworthy and honest. A big bank won’t necessarily do that.

Talk to mortgage brokers in the state you will be investing. Get to know what they need from you in order to get pre-qualified for a loan.

When you get pre-qualified, it basically says you are pre-qualified to get a loan from them, they’ve already screened you and know how much you will be able to borrow if you get a deal.

You will be able to tell the seller that you have the ability to buy the property and you can prove you already have financing set up.

You want to have as many options as you can to buy a property. You need to be networking to get people on your team.

Talk to realtors and wholesalers to help you find a property

Find realtors that understand cash flow, rental properties, and how to rent properties. You don’t want a realtor who is focused on the drapes and paint colors.

You want someone who knows how to work with investors and knows how to get them cash flow positive every month from the rent.

Look for wholesalers. They are basically realtors, but they lock down the deal. They find the seller, get the seller to agree to a contract, and then sell the contract to somebody else. They are out there finding deals, not just looking on the MLS.

A wholesaler will present you with a deal, tell you how much is needed to fix it up, and can estimate how much you could charge in rent. Wholesalers do all the work and charge you a fee for getting the deal.

TIP: Wholesalers advertise using signs on telephone poles and in the grass that say things like “I buy houses” and “I’ll buy your ugly house”. They want to find leads for properties, but they also want a buyers list.

They want to find people who are ready to buy properties, so call the number on those signs. Ask to be put on their buyers list.

Get realtors and wholesalers on your team and run the numbers. Educate yourself and be prepared. Use this rental property calculator to help you determine the amount of passive income you could earn from a single-family home.

Make offers with seller financing

If you want to make an offer on a property, but you don’t have the money, you can offer a little more than asking price, include a small down payment, assign an interest rate a little higher than going rate, and pay the seller directly.

You can offer a 20- or 30-year note. This is a great option if you don’t have great credit. Seller financing isn’t as stringent and doesn’t have as many requirements as a bank.

Asking for seller financing is not an insult and could actually benefit the seller. They may need to get out of the property and they may prefer a monthly income.

If you are afraid the seller will say no, think of it as you already have a no if you don’t ask – the worst you can do is get a no on your offer.

The seller could give a counter offer on the down payment, interest, or the length of loan. If they say no, then move on. Since you have been doing your research, by the time you put an offer on a property, you know it is a good deal.

Continue to make offers

Every no is one closer to a yes. If you don’t put any offers out there, you won’t get any properties. The more offers you make, the better your chance of a yes.

It’s a numbers game.

If you get one deal, all those other offers were worth it. Keep repeating this process!

BONUS TIP

Now that you have your first property, save EVERY penny and put it in a savings account.

Do not spend that passive income. It is tempting to use it to buy a car or vacation, but use it to buy another property.

Then, save every penny from your second property to use for your third property. Do this over and over and it snowballs.

Before you know it, you will have ten properties and you can’t help but buy another property.

By the time I bought my 19th property, I could buy a property every month, because there was so much passive income each month. I didn’t need to worry about it anymore.

The sooner you get more properties, the sooner you can quit your job and live the dream life. I hope you jump into investing and real estate!

Business is About Solving Problems

If you have no property, cash, or credit, how do you get started investing in real estate? Let’s logically look at what you need to get started and what plan you need to put in place.

Let’s look at the obstacles that are in your way and what you need to do to solve those problems. Being an entrepreneur is all about solving problems!

Solve Problems in Ways that Helps Yourself and Others

Recently, there were three, single-family homes and a duplex that an investor was selling. I didn’t want to pay with all cash, so I needed to figure out a way to buy them.

The investor absolutely needed $25,000 in cash, so I offered to pay the cash, along with seller financing. The investor agreed and now I pay the investor like he is the bank AND I make $1,500 off these properties each month.

Find the problem and fix it!

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