Get In The Game: How To Get Started In Real Estate Investing
There’s a story Jane Fonda tells about why she likes to support small businesses owned by women over those owned by men. In it, she says that in her experience, when you invest in a business run by women, they tend to take the profits they make and invest them back into the community, supporting things like schools and charities, thereby growing the local economy. When you invest in men, they’re more likely to take their profits and spend them on themselves, like by buying boats and new cars.
And she may be on to something. More and more studies are coming out that show women are actually better investors than men. They see higher returns on their investments, they’re better savers, and they invest for the long-term.
But then why is it, when we think of real estate, we still think of women as the real estate agents and men as the investors? If we know women make better investors than men, and make arguably better choices with the money they make from their investments, then maybe it’s time for that to change.
Actually, we know it’s time.
And we’re here to help.
The idea of investing in real estate can seem daunting- especially if the idea of even just owning a home still sounds like a pipe dream. Trust me, I was an under-employed college grad not too long ago. I get it.
But it doesn’t have to be.
Regardless of how much money you have, and whether you see yourself as an “investor,” there are dozens of ways you can jump into real estate investing and grow your portfolio and net worth to ultimately meet your financial goals.
Here’s how to get started:
1. Build your Knowledge Base
They say it takes 10,000 hours of “deliberate practice” in order to become an expert in something. While you don’t need to have 10,000 hours under your belt before you finally decide to take the leap into real estate investing, you do want to take a few months to learn as much as you can. Listen to a real estate investing podcast every morning on your commute to work. Learn the terminology. Attend monthly meetings at your local Real Estate Investment Association (REIA). Research your local real estate market. There are plenty of free resources that will help you learn and build your knowledge base so that when you want to take the next step, you know you’ll be ready. You can find some of these at BiggerPockets and The Balance.
2. Find your Specialty
While you’re building your knowledge base, actively think about the type of real estate you want to get involved in—and what works best in your local real estate market. One great tool to use when you’re thinking about this is a Strategic Plan. We show you how to create one here, but basically, it’s creating your list of ultimate real estate goals, and charting your path to reach them. (Ex: your goal is to own vacation rentals throughout the world, now you need to make a plan to get there.) From there, you can choose the type of investing you’re most interested in—rehabbing (a lot of times called fix and flipping), owning long-term rental properties, vacation rental ownership, and wholesaling are some of the most popular options, and once you’ve gotten a handle on one type of investing, you can add more types to your portfolio.
Let’s break them down:
This is basically every show we love on HGTV. Taking a distressed house, giving it a total makeover, then selling it to make thousands in profit. It’s both a ton of fun, and a ton of work. If you’re in charge of the project, you’re the one deciding the changes, setting the budget, creating the timeline (and making sure it’s followed), overseeing the contractors, and getting the house back on the market to make a profit. Just to name a few. One great advantage of rehabbing homes as a woman is that women are generally the ultimate decision-maker when their family is house-hunting. Doesn’t it make sense then that the people designing these houses for buyers should be women, too?
BUY AND HOLDS
So you want to be a landlord. This can be a great way to increase your wealth, especially if you live in a growing market. Let’s say you know a huge live-work-play development is set to be built near you in the next couple of years. You can pick up a few different properties in the area, hold onto them until the development is finished, and watch as home values grow. Then, when you’re ready to sell, you’ve made a great return on your investment. The main challenge with growing your portfolio of rentals is making sure you’ve got great tenants. You’re getting into real estate to make money, not headaches. Luckily, there are great resources for learning how to get the right tenants into your houses. You can find some here.
VACATION RENTAL OWNERSHIP
This is a great option if you live in a touristy town. Or if you want to have properties in multiple cities or states. With the surge in popularity of vacation and short-term rentals, there are plenty of ways you can make the most out of your investment. Plus, with the number of vacation rental management companies that have sprung up alongside this growth, you don’t have to worry about having to be a “landlord” like you do with traditional rental properties. You should know that management companies do charge a management fee of about 20-40% of your revenue. Also, some cities are starting to crack down on vacation rentals with stay length and location requirements. So, before you invest in this kind of real estate, you’ll want to make sure you know your local regulations.
Often, when a homeowner doesn’t think their house is in any shape to sell on the MLS, they’ll resort to turning it over to a wholesaler. This type of investing usually relies on bandit signs, door-knocking, and the ability to spot a vacant home just by driving past it. It takes tenacity and the ability to take rejection and just keep rolling. This isn’t the most glamorous side of real estate investing and it’s not going to bring you the most money. It’s a hustle. But it’s a path many successful investors take to get started. Plus, if you do other types of investing enough, you’re bound to pick up a few, so it’s great to understand the wholesaling process.
Based on the amount of capital you have, some of these are easier investments to make than others. A good idea once you’ve decided on a specialty is to assess where you are now, financially, and use that to help you decide what kind of investments to start with, and how to grow to meet your ultimate investing goal. Then, as your wealth grows, you can expand into more types of investments.
3. Make Money, No Matter Your Financial Stage
Chad Carson of the real estate investing site, coachcarson.com, has a great exercise for beginning investors. He asks you to start by pinpointing your current wealth stage—Survivor, Stability, Saver, Growth, and Income. You can find more on the specifics of each stage here. Once you’ve got this figured out, you can use specific strategies to invest that help you grow your wealth and reach the next stage.
Here’s the basic breakdown:
Stage 1 & 2: Survival and Stability
At these stages, your goal is to make some extra money, learn about the industry and stay away from anything too risky.
House Hack. Become the primary lessee of a residence and rent out the other bedrooms to lower your payment, or cover it altogether.
Rent your residence out as a vacation rental on weekends you’re not there (if your lease or HOA allows for it). For example, if you live in a college town, see about staying with friends or going back home on game day weekends and renting your apartment out.
Get your real estate salesperson license. You can do this in a class setting or online. Not only will you learn the rules, regulations and terminology, but once you get in to the real estate industry, you’ll be able to make great contacts, learn more about your local market, and learn about the sales and acquisition process. Plus, you’ll be able to earn commission on any real estate purchases you make by representing yourself.
Become a Bird Dog. Wholesalers and investors love to hire people looking to get their feet wet and learn first hand about the industry to act as “bird dogs” finding deals for them.
Stage 3: Saver
At this stage, you want to be able to create ways of drastically increasing your savings.
Any of the above
Flip the house you live in. Here, you buy a fixer-upper, renovate it while you’re living in it, and then sell it for profit.
Rent your residence. Live in a house for a couple years, then keep it to rent out when you move.
Wholesale. This will usually bring in smaller amounts of money, but can help you gain an intimate knowledge of your local market and build relationships with other investors in your area.
Stage 4: Growth
Expand your portfolio and make large gains in your net worth.
Rehab Houses. Fix and flip houses to make large amounts of profit. If you want to build your portfolio, a great rule of thumb is to buy 3 houses to flip and 1 as a buy-and-hold rental property. Once you sell the flips, repeat.
Invest your Retirement. New regulations let you use your self-directed IRA or 401k for private money loans (for ex: as a private money lender for a fix and flip project), buying rentals, or your own rehab projects.
Once you’ve expanded your knowledge base, decided on your niche and figured out how you want to start making your money, you’re on your way to the next steps- starting your business, securing funding, and finding the right properties to purchase.
Look out for our upcoming blog posts on how to do just that, send us your questions, and #LetsAllBeLadyBosses.
The Three Tall Girls