​How to Start in Real Estate Investing

Ben Stoodley  |

With more Fix N Flip TV reality shows currently airing every day, and hundreds of thousands of people spending tens of thousands of dollars for a Fix N Flip “workshop,” it’s safe to say that real estate investing is a very popular and growing interest in America. People claim to be making millions of dollars investing in real estate, yet the people paying to learn the methods of investing are not seeing nearly the same returns. Why?

If there was one word to answer this question, it’d likely be “disconnect.” Although we hear it all the time, we forget that what we see on TV is not real, especially the “reality” tv shows. These are glamorized situations made to look much better when seen by millions of viewers. Real estate investing is an extremely involved process that requires not only education, but experience, large amounts of capital, risk assessment, real estate industry knowledge, legal competency, and laser-like focus. Whether one reads numerous books about investing, spends $40,000 on coaching or watches endless hours of TV shows, they’ll undoubtedly fail in real estate investing without serious hands on experience.

Getting started in real estate investing is likely the hardest part for any new investor. Taking the initiative to attend a 4-day workshop or hire a coach is great, but taking the first step and actually investing your money is a whole new ballgame. This is where the greatest disconnect lies. People seem to be able to gain the background knowledge necessary to understand the process, but then they don’t invest a dime for months, years, or all too often...never at all.

There are numerous ways to start investing in real estate, and no one way is better than the other, it all depends on your personal situation. Your financial goals and current financial status tend to be the biggest factors, coupled with your amount of risk tolerance for the investment. Although most people strive to be a big time player flipping houses on TV, they don’t understand that they can make much safer real estate investments first. A list of these might include:

  • Buying Shares in a Real Estate Investment Trust – This is similar to investing in stocks, where you invest in a portfolio of real estate that’s managed by a team of experts and therefore offers an extra level of security. However, due to lower levels of risk, there are also lower levels of profit or ROI.
  • Wholesaling – A method of acquiring a good investment property that you will then wholesale, or assign (find someone else to buy), to another investor prior to actually closing on the house. You will likely need some money down for this, typically 3-5% of the purchase price, but when you assign the property to another investor you make that back plus more. Benefits of not needing as much capital, negatives of being left with a property if you can’t find someone to assign it to.
  • REI Groups – Similar to REIT funds, typically a company will buy or build a set of apartment blocks and then allow investors to purchase them, joining their group, owning a portion of the development. Once again, this hands-off approach is typically deemed less risky then actually acquiring the property yourself.
  • Notes – This method of investing is less popular, as it does require more knowledge of real estate, financing, mortgages, laws, etc. Here, you would buy a note on a property or group of properties, typically very low LTV. Therefore, you collect interest payments from the borrower, but you are secured by a Trust Deed on the property.
The list goes on, but the bottom line is that there are numerous options that may fit better for you beginning in real estate investing. No matter which method you choose, be conservative in your approach and don’t try to hit a homerun on your first investment. Join a team of veteran investors and shadow them. To make a lot of money in real estate investing, begin by EARNING a little and LEARNING a lot.Ben Stoodley, Hard Money Lender & Realtor


(Photo by Philip Taylor)

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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