How to Invest in Real Estate (with no experience)

Well, I guess you found the first video interesting enough that you've made it now to the second video. What I want to do now is talk about what are the beginner steps for investing in real estate. I'm going to treat this video as if you've never thought of investing in real estate or invested in real estate. If you have, I'd still like you to listen to what I have to say because I find when I talk to investors, they do a lot of things based on what I find to be not the best way to do it. Let's say it that way, okay? I find that a lot of investment philosophy that you find online or in books tends to be very focused on equity and not on cash flow, and I'll define that in a second. I find that the math used, the projections used are really poorly designed, and so that'll be a future video. I want you to really learn what I have to say and hopefully you can apply it to your investment business. What are the first steps? Well, the first video asks you to identify your monthly expenses, your core monthly expenses. Remember, we're not looking to change our lifestyles, we're looking to offset our current lifestyle. What I want you to do is first take that number. What is it that you want to offset every month and have that over here on one side. Next, what I want you to do is I want you to find a reputable mortgage broker or a mortgage lender in your area and get pre-approved for a loan. Even if you cannot get pre-approved for a property that you want right now, it's still a good step to have that going. Now, once you go talk to the mortgage broker, mortgage banker, lender, whatever about the loan, I want you to get a good sense of where you stand. If you're going to buy a property right now, great, we skipped a step to it, right? If you can't, let's talk about what we need to do. What's the issue that's preventing you from getting the loan that you want? Is it credit? Is it income? Is it assets? Whichever one of those three or multiples of those three, let's work on solving them. Do you need better credit? Great. I'm not a credit repair guy. There are plenty of people who do that for you, but obviously good credit is foundational for buying real estate because as I mentioned, a lot of what we're doing is based on access to other people's money, access to the mortgage market. If you can't get good loans at volume, you cannot do what I'm talking about. Number two, income. Well, obviously you're going to need income for two reasons. Income helps you generate assets, that is cash to invest, and income helps you qualify for mortgages to buy properties. I do want to say one thing to be really extra clear about when I talk about assets. When we talk about investing in real estate, understand there is no way to invest in real estate with no money. Anyone selling you that product or that plan is just not correct. It's called investing for a reason. You are investing your own money and you are investing a lot of your own money. You're not going to accomplish what I'm talking about, investing $1,000 or $5,000 or your sweat equity. I promise you that. For step two, I recommend that you talk to a real estate broker in your area who is familiar with investments. I would really, really, really recommend finding one that owns and operates their own properties. I own and operate my own properties. I only sell what I would buy myself. Every time I sell one of my clients, a lot of whom are also my friends, a property, it's a property I would myself purchase. I would never sell something I don't stand behind. Find a broker in your area that does the same. If you're a broker, you're probably then also a broker in your area and hopefully you have some experience. Go out and start looking at those properties. But if you're not experienced in income producing properties, you may want to hire someone who can help you. I am not a fan of going out of area for properties. I know that there's always a lure of going somewhere else for properties. I've made my money investing in properties in the Los Angeles area, which is one of the most expensive markets in the country. You can do that in Los Angeles or whatever market you're in, but I really recommend buying what you know. I think it's very hard to go out of state, out of area, out of country, anything like that to buy a property because you don't have market knowledge there and you're not going to be able to make the best decisions. Now, I mentioned earlier I'm not a huge fan of a lot of what we'll call conventional wisdom on real estate. A lot of the conventional wisdom is based on equity. A lot of people talking about flipping homes. I am not a fan of flipping homes. I think that flipping homes is highly risky, highly effort driven, highly capital intensive, and it's very binary. You flip a home, you can only flip so many homes. I have clients that flip homes that spend a year waiting for a flip to find one to do and then the whole time they're waiting, they're sitting on money, not investing it. I know from my experience and my client's experience, you're better over the long run buying, flipping a property to yourself that is fixing it up, renting it or re-renting it at a higher rent, and then holding onto it, then fixing it, flipping it, selling it, taking a heavy tax burden on the cash that you make profit from it, and then having to start over again. Buy property for cash flow income. That's how you're going to offset your lifestyle expenses. Where can I find the best cash flow? Ask your real estate broker or research in your own market where's the best cash flow. Typically, the better cash flow will be at lower price points, which is great for you because with lower price points means you need less money down to buy a property. We're looking for properties that cash flow. We're looking at lower price properties. We're looking at properties that are maybe in areas that we wouldn't live in ourselves or maybe a little bit further out from where we currently live, but they're still in our local market and maybe there's some upside there. Maybe a train station's coming by, maybe there's a new development coming in nearby. We're looking for upside. Upside means the rent will go up over time. Next step, third and final step of the first part of your real estate process, understand the market. What's the market doing right now in your area? Is it going up? Is it going down? Is it going sideways? Where are the opportunities? Maybe condos are selling worse than multifamily, maybe the opposite. Learn in your neighborhood, in your market, what's happening and how you can find the best property for yourself. Learn the rental market. Great place to look for rental comps, go on Craigslist. What are things renting for? Are there a lot of things for rent or not? Are there a lot of properties for sale or not? Figure out what's going to be the easiest property to rent for the highest amount of money. When you put all that together, you have a plan in place. You know how much you need, you know how you're going to pay for it, and you know what you're going to spend it on. Now we just need to find out what kind of property you want to buy.