The hardest transaction is always the ‘first’ one. The reason for that is there’s a learning curve. It’s popular saying that knowledge is power and it’s so true. Once a multi-millionaire was asked, “If you have lost everything you have, how long it will take you to get it back?” He said, “Well, probably a couple of years because I know how to do it this time.” He’s sort of gone through the learning curve and he already had that power. It’s often said the first million is the hardest to make. The second million is a lot easier because you already know how to do it. The same thing is true when it comes to becoming a real estate investor. Buying the first real estate investment property is going to be the hardest.
But what makes it hard? A prospective real estate investor has these three major questions in mind
- Where do I begin buying my first real estate investment property?
- What real estate investment property should I buy?
- How can I make sure I don’t fail?
Where do I begin buying my first real estate investment property?
As far as taking your first step is concerned, you can start by doing your research. You need to talk to few experts, read stories and educate yourself. This is extremely important. You can’t just wake up one day, thinking you are going to buy your first investment property today. It needs some prepping up. You might come across a lot of people or self-proclaimed “gurus” asking you to invest in their learning programs. You need to be aware of them. There are many who will keep enrolling you to one program after another. In the end, you’ll be left with so much educational material but no experience or no one to guide you. Few things that you can do are:
- Find referrals from friends and family who are actually buying real estate investment property.
- Look for people who are ready to guide you or walk you through your first investment.
- One of the things that you can do is contact your local Realtor association. They offer different classes where you can pay to go in the non-member class that talks about the contract – “understanding your Real Estate purchase contract” in your local area. Someone’s going to spend half a day or full day going through line by line what everything means and how that can affect you and everything else.
- Most importantly, once you have enough education, you need to take some action i.e. buying your first real estate investment property.
What real estate investment property should I buy?
While buying your first property, you need to ensure that you aren’t investing in something which is out of your league. By that, I mean you should buy something that you can manage easily. You might have funds available to invest in a commercial property but it’s better to take baby steps. An ideal first investment property could be a single family residence or a duplex.
With turnkey real estate investment, you have the opportunity to buy a property in any state or city. It could be a high-income or low-income area, a new home or a rehabbed one. But again, you’ll have to do some work to figure out whether it’s a good deal or not.
How can I make sure I don’t fail?
You don’t have to be an expert but you do need to do your homework. I have seen a lot of investors who jump into real estate investment business without any prior knowledge. Occasionally, they do get lucky in a fluke but most of the times, they fall hard. Mostly, these are the ones who become pessimistic about the investment business and keep telling others to stay away from it. If you will do your homework right and find good enough people to work with, chances of your failure will be minimized considerably.
To be honest, it’s better not to expect making money with their first property. You might just break-even but it would be your first step towards being a real estate investor. Real estate investment business needs people who are willing to take risks and willing to go for it. In every business out there, what you are trying to do is mitigate those risks as much as possible to ensure that it is going to be a wise decision and it’s going to be the one that have the highest probability of success.
The fact of the matter is we want to make the most amount of money with the least amount of work with the most amount of control. When it comes to real estate investing, control is very important because you want to ensure that you’re making an educated decision with low risks. But it is also a fact that you are always taking a lot of risk and the bottom line is: You are taking risk for the reward of making money. The risk you’re taking on is liability of getting a loan, liability of doing the homework and all those types of things. You are doing all this because you’re trying to mitigate those risks – making those risks small as possible.