03 Aug Real Estate Investing 101: The Basics and a Formula to Get Started
For the month of August, we’re going to be focusing on real estate. Real Estate investing is one of my favorite topics. And I believe that you can make an investment income that will replace your employment income. This is financial freedom.
One of the biggest barriers to reaching any goal is not knowing how to get started. It’s been said that the hardest step is always the first step. In other words, maybe you want to get started in the real estate business but have no clue where to begin.
3 Things You Need to Get Started in Real Estate Investing:
1. Specific Knowledge
This might seem basic, but don’t allow yourself to skip this critical step! Learn about real estate before starting a real estate business. Do some research so you’ll have knowledge to apply to your understanding, which you will gain from experience.
There are books, podcasts, and blogs about real estate. There are also conferences all over the world. One of the absolute best resources for gaining specific knowledge is my upcoming Real Estate Mastery Workshop in Denver, CO.
2. A Knowledgeable & Caring Team
Make sure you have a group of people around you who will keep you from losing money! This can be handful of people or a large group. Basically, you want to surround yourself with a knowledgable and resourceful team.
The roles might be the following: a property manager, a home inspector, a home stager, a realtor, a construction crew and/or contractor, an accountant, and more.
With their care and knowledge/understanding/wisdom, they will help you make wise decisions.
If you’re serious about growing your investment income through real estate, you need to do some saving. I once told a student to bring me $10,000 and I’d show him what to do next. A year later he called me and I showed him. He’s well established in real estate now!
You can’t get started without capital, but don’t let this key component keep you at the beginning stages forever. Set goals. Have a plan. Save rigorously.
With these three things in your pocket, you can really excel at this plan.
So, how did I help that student after he brought me his $10,000? I’m glad you asked!
Here is a map/plan for starting out in real estate:
Take $10,000 and put it down to acquire a $100,000 house.
With this first house you’ll learn how to purchase, successfully rent, manage, and to show income to bankers and establish yourself with a bank. You’ll use the specific knowledge that you gained in the very first step to do this. You’ll start deepening your knowledge and sprinkling in understanding. This will eventually put you at a place where you’ll have real wisdom about real estate investing.
So, you’ve purchased your first property.
Next, take the $10,000 out through a refinance loan.
Then, make your next purchase using the same $10,000 (or $50k or $100k, as it adds up over time) every time until you have 30 houses.
Now, all of this is great. But if you don’t learn to invest your money with great care, your real estate castle will come crashing down. You must take caution and common-sense with you into every real estate encounter.
Finally, always invest with a formula.
One way to use caution and common sense is to invest with a formula. What if I could show you – using a simple formula – how to make $100,000 tax free? Well, with the 30 single-family homes I purchased using the $10,000, I get an average positive cash flow per month (after principal interest, taxes, management fees, etc.) of $300 per unit. And my depreciation per unit is $3000 annually.
If I’m making $300 a month in positive cash flow, I multiply that by the 30 houses I own to get $9000 a month or $108,000 annually. If my depreciation is $3000 per property and I have 30 properties, then that’s $90,000 in depreciation.
What does all that mean? My tax bill is zero. Even though I put $100,000 in my pocket, I didn’t have to pay any taxes because of the depreciation. This is yet another reason why I love real estate as investment income!
With this article, I’ve given you Real Estate Investing 101. These are the basics, and they should lay a foundation for the specific knowledge you are going to be building in order to get started.
If you have questions, leave them in the comments section below. And also consider coming to my Real Estate Mastery Workshop at the end of next month! Over the course of the weekend, you’ll learn…
- How to become a millionaire BUYING and HOLDING Real Estate
- Why & how to create money that works without you
- How to analyze any real estate deal in THREE simple steps
- and SO MUCH MORE!