Self made millionaire at age 30, and semi-retired at age 31. It sounds pretty good doesn’t it? And since it is all thanks to real estate investing, why don’t I say it more often? Well, for two reasons. One, it makes me uncomfortable to tell everyone that my husband Dave and I are millionaires. I know many people that have made more in less time, and I don’t want to sound like I’m bragging. Two, sometimes I don’t have enough cash to buy a sandwich. I feel silly telling people I am worth over $1 million, but then brown bagging my lunch because I don’t have enough money to buy it.
But, I changed my mind this week. While recruiting a couple of copywriters to work on some projects for me, I received feedback from one that basically said “I went through your website and blog. Your articles are informative, interesting and full of great advice, but you haven’t spent any time painting a picture of what it’s like to be a real estate investor. Why would anyone WANT to learn what you’re teaching? What’s the benefit?” Then, Dave went through each and every reader survey from last month’s survey (there were nearly 150!) and pulled out common themes and key questions. And, the number 1 issue holding our Rev N You readers back from real estate investing is fear and an insecurity about where to start.
As I was walking the dog this morning, I was thinking about fear and about what the copywriter said. I thought of one of my favourite quotes:
“Obstacles are those frightful things you see when you take your eyes off your goal”. (Henry Ford).
It occurred to me that we spend so much time explaining the pitfalls and the mechanical processes behind investing in real estate that we often neglect to paint the picture of what life will be like once you put aside your fear and start investing, and build your wealth. So, I promise that we will continue to tell you the horror stories of what can go wrong so you know what to avoid, but I also promise that we will spend more time helping you overcome your fear with visions of freedom, financial security for you and your family, and comfort in retirement (at whatever age!).
How can I start real estate investing in my spare time?
The recurring theme in response to our query “What’s your single most important question about real estate investing?” was fear and insecurity about how to start. We received about a dozen different versions of this question, here’s a few:
- “It seems complicated and risky to me – question is how to make it less risky/scary?” –reader from Burlington, ON
- “How do I start? How do I feel good about that initial decision?” –reader from North Vancouver, BC
- “How do I get started in real estate investing?” –reader from Chicago, IL
- “How do I get started?” –reader from Esperance, NY.
Oversimplified, real estate investing for us happens in five steps:
- Set your investment goals
- Find and research a market to invest in
- Evaluate properties
- Buy it
- Make money from it.
When we’ve deviated from these steps, we’ve made mistakes. When we skipped the goal setting phase, we ended up with no money down deals that could have bankrupted us. When we skipped out on market research we ended up with a condo in an area of Toronto that grew by over 2,000 units of THE SAME SIZE condo in the five years after we bought it, and when we’ve been careless in our selection of property managers or tenants (in the make money from it phase) we’ve suffered the consequences with court fines and tenants that don’t pay rent.
Our real estate investing life has the plot of a great made for t.v. movie. But, don’t let that scare you! 90% of the drama we’ve experienced in our real estate investing career was COMPLETELY PREVENTABLE. A little more time spent on each step and we would only have a couple of good stories to tell…not dozens!
Dave hates it when I say that. He cringes when I write about some of the mistakes we’ve made, saying “It makes me (or us) look stupid when you tell people we did that!” Maybe it seems obvious what was going to go wrong after the fact, but to us, just starting out, some things just seemed like little short cuts or were not obvious errors at the time.
So, in response to all the readers who ask how to start and how to feel good about that first step… my answer is SET YOUR GOALS. We set goals for our health and our wealth. Just like losing weight…it’s too easy to say “I want to lose weight” and then do nothing go to. It’s also too easy to say “I am going to be rich” and then wallow in your sorrow when it just doesn’t happen. You will never get there just thinking those thoughts… You need to be specific about what you want, and then take action.
And with real estate it’s critical to know where you want to go before you start. In order to figure out what type of property you are looking for you will need to know what exactly you can put in (in terms of time, effort and money) and what you want to get from real estate investing.
Ask yourself some questions:
- Is it more important to you to find a property that doesn’t cost you much money or one that doesn’t cost you much time?
- Are you expecting to do a lot of work on the property yourself or do you prefer to not be involved much at all?
- Are you interested in investing for the long term or the short term?
- What is your risk tolerance?
- Do you want real estate to be your primary source of income after a certain period of time?
- How much money can you (or do you want to) dedicate to real estate investments versus other investments?
- What’s your current credit score?
- What’s your current financial situation?
Without a clear understanding of what you want to achieve, it’s very difficult to get started. It’s also very scary! So get clear on what you want to do, take some baby steps and soon you’ll feel confident and ready.
If you’re new to goal setting, here’s the simple steps we use:
- Start by listing everything you want to accomplish in your lifetime. We do this without judgment. We list everything from learning to play the drums, being fluent in Spanish to owning enough real estate to generate $25,000/month in net income each month. No judgement…just list it all.
- Review your long list, and find the ones that are most important to you to focus on in the next few years. We highlight them, and then proceed to break them down into the smaller steps that we need to take to move ourselves towards each of those goals in the next 3 years, in the next year and in the next month.
- Write it down, share it with someone that supports you (they will act as a push when you lose site of your goals or need a check in).
- Do something EVERY DAY that moves you towards one of your goals. For a new real estate investor this should be research related – learning everything you can about the market you want to invest in, tracking property values and rental rates, and becoming very comfortable with what is happening in one, two or even three markets you are thinking of investing in. This prepares you to spot opportunities and be confident when the time is right to move. The key to this is to commit yourself to spending at least 30 minutes per day moving towards your goal. NO EXCUSES! You can find 30 minutes on a lunch break, by waking up a little earlier or just by turning the T.V. off after dinner and working.
The act of writing your goals down is an important step – because you’re taking action. Each step you take, however small, moves you closer to your goal. But ACTION really is the key to success.
“When you take action -particularly bold action- the atoms in your brain vibrate at enormously high rates of speed, which often results in amazing and otherwise unexplainable “coincidences” happening in your life. I believe that the genius that erupts from action…produces a “telepathy” that brings a person in contact with the people, things, and circumstances he needs to accomplish his objectives.”
–Action! Nothing Happens until Something Moves, RobertRinger
Published December 1, 2008