How Do I Get Started?
Over the next few weeks I will be writing about different techniques to get started if you have chosen to follow this real estate investing path. There are so many ways to get moving with your first deal. This is the biggest hurdle but the first deal starts forward movement and that builds momentum. As I have said again and again, the first one is the hardest-by far!
What are your goals?
Before we get too far, it is going to be helpful to think about your goals, your tolerance for debt, and how active you want to be. Think about sources of capital you might have available to you. And think about how your personal finances look. I don’t think someone who is having money problems should pursue real estate to solve the money problems. I believe they should address the money problems and then invest in real estate. To be clear, by “invest” I mean buy-and-hold or creating notes etc. Wholesaling might be a good tool to work out of a financial problem if you have extreme focus and are hungry enough to go find deals but you should also be addressing your budget with extreme focus. The difference being that it is transactional in nature and hustle can be substituted for cash but it takes a ton of hustle if you don’t have a marketing budget. By and large, I suggest other methods for getting finances in order while learning the real estate game.
How To Not Be a Slumlord
The reason for not recommending investing to those with money problems is that buying one rental will provide a little cash flow but if you need it for your next money shortage, you’ll spend it and deplete your reserves. The next time you have a repair needed at your rental, you won’t have the funds set aside and you’ll have to dip into your personal budget or you will not make the repair. This leads to dumpy properties that are going down in value and unsatisfied tenants who will move out at the first opportunity to do so. Now you will have a vacancy with a sub-par rental and you’ll have a hard time renting it and may have to lower rental rates etc. On the flip side of this, if you have been putting that cash flow aside for a rainy day, you will not be stressed when the tenant reports the air conditioner isn’t cooling. You’ll calmly call you trusty air conditioning repair person to make the repair. The tenant will be happy and will likely want to stay in this great home much longer. You’ll have fewer vacancies and when they do occur they won’t last long because people will want your house over the other less maintained ones.
I really believe most of those stories of nightmare tenants that I hate (the stories, not the tenants), result from this kind of neglect of properties due to greed or inability to afford repairs on the landlord’s part. The tenant quits caring for the property because the landlord isn’t caring for it. Now they move out and a lower quality tenant moves in because the better tenants wont accept this run-down house. It is also where the tenant’s stories of nightmare landlords or “slumlords” comes from.
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And it is deserved. It is shortsighted to say the least. But if your personal finances are a mess, this could be your reality. You may not have a choice. It won’t be greed as much as having no money available to do the right thing. Things, you may begin to see, can spiral out of control. This rental thing is a business and should be treated as such. Good money management is part of this.
The Tenant is The Customer
Good customer service is part of this as well. While we don’t coddle our tenants, we are responsive to repair requests and hope they want to stay for many years (and many have). This is also to keep our investment (the property) in good shape. Think of the businesses that have accepted a return item from you without hassle. They didn’t fight you over the five dollars they may be out by taking the return back. They knew you’d keep coming back because they provided excellent customer service. If you distrust the tenants and think they are trying to get your money by frivolous requests, you are starting out on the wrong foot. Think of them as your customer and repair what needs fixing. You will know if the requests are getting excessive. But with a new (to you) home there will be things that will come up with the first tenant that you were unaware of because you probably never lived in the home (unless you use one of the owner occupied methods I will outline in upcoming posts). This is normal. The tenant is actually helping you find these things that need repair by their daily use of the home. The frequency will slow down as you work out the little issues in the property.
Get Your Finances In Order
Now if you are struggling to get your finances in order, see this POST
Real estate will still be here after you get the finances in order. Make the task of getting your finances in order your first step while you learn more about real estate and read this motivating, inspirational, and thought-provoking blog. Kidding. Kinda. Just making sure you are still with me. The journey to financial order from disorder is so rewarding in and of itself. Then when you begin to build the structure of your business on this solid foundation you will have much more confidence and security. You won’t be stressed any time the phone rings or a text request for repair comes in.
In the next few weeks I will be writing about several methods to get YOU started. You may be surprised how close you could already be to getting started. I hope you see some options here that you haven’t thought about before. If you have questions about a method, please leave a comment so that I can answer it. The point of this is to help you see how doable this stuff is.
Abundance. Bring Someone Else Along With You
I appreciate those of you who have given me feedback that this blog is helpful to you. That is why I write it. I hope I convert a couple of you into nerds like me who wake up at 5am to work on your business. It is exciting to watch it build and to bring people along with you. So if you are finding success already, be sure to bring some people along with you. It just feels good to help others find success. There are plenty of deals for everyone. Also, I haven’t gotten to the posts about the power of networking but this has been the most important part of our business. There are so many ways to network virtually and in real life. We have found the majority of our deals through the power of networking. I’ll expound on this more in the future but start now.
Invite for March 2019
If you are reading this in March of 2019, we will be speaking at the Alamo REIA (Real Estate Investor’s Association) Focus Group on Monday March 25th at 6:00PM about how we built our business and what we have learned. We’d love to have you come out if you are interested in this. We’ll be at the Atrium Building at 84 NE Loop 410 in the Space on the Fly offices. This class is approved for CE credit for realtors as well through the support of our wonderful investor-friendly brokerage; StepStone Realty. This REIA is the exact network that we have bought several deal through; including our most recent one. We have also borrowed money from members of this group. I strongly suggest getting involved in a network whether this one or another one.
I just returned from a week in Colorado with my family. They are my main thing. All the things I do are in support of me keeping my main thing the main thing. I feel refreshed and renewed and ready to take on the next challenge after returning. Through the journey to financial independence I have found that the things that make me happy are less and less often material things. The joys of my life are primarily experiences with these humans that allow me to share my life with them. I am focused on working hard when I work and being present when I am present. I am trying to put away my phone when I am not working and be completely present for the spectacular magic of childhood. I hope that you are connecting with your “main thing” in a conscious and intentional way and, as always, “keep the main thing the main thing!”