Getting started with a minimal budget.
People watch the TV shows and read the magazines to sell all the rich and famous real estate investors: The Trumps, the Hiltons, the Winns. . . there are a lot of them. The main reason is that real estate investing creates a lot of very wealthy people. Then people think, “I can’t do that, I don’t have enough money.” But the wealthy didn’t start at the top, they may have had more than most when they got started, but many didn’t have much in the way of money. But they educated themselves, surrounded themselves with knowledgeable people and sought out tools to help them succeed.
There are things you need to have when you get started investing in real estate investing and a large chunk of cash is not necessarily one of them. In fact, many of the most successful real estate investors I know do not use any of their own cash in their real estate investing. You think the Trumps, the Hiltons, or the Winns use all their own money, not likely, they pool funds from a lot of different sources to buy and sell Hotels those Hotels. You and I can do the same thing to buy houses and apartments and work our way up to Hotels in the future – ok maybe not Hotels, but some of us might.
Today we want to talk about the things you need to have to get started, that don’t cost a huge pile of money:
- An Education
- Support Groups
- Your Real Estate Investing Team
- Your Real Estate Investing Plan
- Your Marketing Plan
- And Last Your Action
Real Estate Investing Education
Getting started, you do need to invest in your education. Start cheap, you don’t have to spend $1000s to learn and you shouldn’t when you are just getting started. At this point you are working on finding out all the options you have in real estate investing, finding out how they work, and which one might be best for you. You are building your foundation if you will. And as you have the funds, you might invest a bit more in specific training programs.
One of the best ways to learn for free is to go to the internet. You can find 100’s of web sites that offer 1000’s of articles, teleseminars, webinars, ebooks and more for the cost of an email address. So one tip here is to set up a special email address to sign up for all of these free items to be sent to you, then if you get bombarded with too much marketing, you can just discard the email and start over.
Next you can go to your local bookstore and buy a book for $10 to $20. Many of these so called gurus who offer live training and charge $1000’s for their training have taken the time to write a basic how to book that costs $10 to $20. Turn to the more expensive training if you want a more done for you approach where they provide the how to of the book, plus the forms and contracts and documents, and hand-holding.
I personally think that a new person spend at least a year educating themselves before actually trying to do a transaction. Unless of course you already have some of that education from another place in your life and as I you are taking action of networking, building teams and starting your marketing as we will talk about, just for practice, it could be that a good deal might just come your way early.
Costs for education: $100 for a few books and your time.
Most people already belong to a group. Your circle of influence that you are around on a daily basis: family, friends, co-workers, etc. This is the group that can do one of two things: (1) be supportive and encouraging (2) be negative and tell you that you can’t do it. If your personal sphere of influence is supportive, great. But if they are negative, then you must work on finding new people to associate with you are positive and who can help you succeed in your new real estate investing dream. Surround yourself with positive people who are successful and learn from them.
The second group that you need to find and join as soon as possible is a local Real Estate Investor Association (REIA) or a local Landlord Group that you can work with, learn from and build relationships. You can learn a lot for a very low cost with the training these groups offer. You can network with people that are just getting started like you, who have done few deals, and even with people that have a ton of real estate experience. You will also find many of the tools and team members you need for your real estate investing business.
Cost for a Group: friends (maybe), building relationships (time) REIA Group Membership $100
Your Real Estate Investing Team
While you are working your way through your year of education, you have ample time to build your team to help you get started in real estate investing. Consider that you can’t do everything alone, so focus on finding key team players to help you investing. It is quite possible you could find a team member for every aspect and you can be the team leader directing traffic.
So who do you need on your team:
- Mentor: someone you can learn from and model yourself after. This might also be a person who is local who is already investing and will take you under their wing so to speak and teach you certain aspects of their business so you can be one of their team players. Example, they might have a well oiled machine and all the funding they need, they just need more deals. They might train you to bring them deals.
- Legal Adviser: look for these at your local REIA group. You may want several different legal advisers:
- Real Estate Lawyer: to review contracts and documents
- Eviction Attorney: at some point you may have to evict someone
- Tax Attorney and/ or CPA: to help you set up your real estate investing business
- Title Company: here you want one that is familiar with creative real estate deals and has experience working with real estate investors.
- Contractors / Handymen: To help you determine repair costs, and actually make repairs when needed.
- Banker / Lender: they may or may not be lending to you, but develop relationships so they can fund your buyers.
- Realtor: probably several Realtors who have experience working with real estate investors who possibly have already invested themselves and who attend the local REIA meetings. You may also want to cultivate realtors all over the area that might bring you a deal.
Cost for team building: time spent networking, making phone calls, going for coffee.
Real Estate Investing Plan
Up to this point you have been studying and networking. Now you need to figure out what it is you want to do. You need to select your niche of real estate investing. Then write out what you plan on doing in that niche and the steps you will follow to accomplish your goals. So take the time to write out your goals and then break them down in to the specific steps you will take to get there. Be sure to put monetary markers and time frames into your plan and review your plan regularly.
Your real estate investing plan is for you to use as a guide as you invest. It is not a big huge drawn out business plan.
For example, let’s say you decide your niche will be wholesaling houses. No money needed to buy or sell. Your goal for the year is to earn $12,000. Your plan is to locate very motivated sellers and get properties under contract that you can assign to local real estate investors and make $2,000 in assignment fee. You need to do 6 houses a year to reach your goal. Then you map out the steps you will take to (1) find the investors to assign houses to and (2) to find motivated sellers to buy from.
Cost for a plan: time spent
Your Marketing Plan:
Getting started on a shoestring does not involve a lot of money spent, but you do need to spend some money on marketing. Your real estate investing success is going to depend on finding the absolute best deals, and to do that you are going to need to market in some way.
Free Marketing: This one takes the most time as you will be spending it networking anywhere and everywhere and letting people know that you are buying houses, selling houses, or looking for private money – your message will depend on the person you are with. You will want to have business cards to hand out and you can print them up for next to nothing at home or order them from an online business card site and get them for the cost of shipping. Network on social networking sites. Place ads on online classified sites. Let anyone and everyone you know what you are doing – talk to neighbors, tell the doctor when you visit, the dental hygienist, the bar tender, the waiter, the paperboy, the mail man, your priest . . . everyone. And I would suggest a small web site that you can create for next to nothing on sites like: Facebook, Google Sites, or WordPress.
Very Low Cost: Next you can order some bandit signs – you’ve seen them at the side of the road. They say “I Buy Houses” and have your phone number. You may even find they are offered for free in some places. Get some more business cards and hand them out, post them on bulletin boards in neighborhoods. Print up mini flyers and go door to door and tape them to the front door with your message that you buy houses. Talk to a lot of people to find that first deal. And spend $10 to $20 getting that web site to have your very own “.com” name.
Moderate Costs: just double your efforts we mentioned in #1 & #2. And take it a step further. Spend $20 to $30 a month mailing letters to a targeted group of people letting them know you buy houses. For example, as you put flyers on houses in a neighborhood, take the time to write down the addresses of vacant or run down houses. Look up the owner information in the tax records and mail them a post card.
Aside about Web Sties: You do not need to spend $1000’s on fancy web sites, although a basic one is a must so that potential buyers and sellers can find out more about you. I strongly recommend getting a good name and starting at least a free web site as you are learning as when you really get into investing you will have a seasoned web site and name that might draw more traffic than if you wait and create it in a year. You can see my web site that we have been working on for many years at www.kcmoHomeBuyer.com, cost for this site $100 a year on for hosting of WordPress and $20a year to Godaddy for the name. We do also have a bunch of websites and squeeze pages through RealeFlow that offers a lot of real estate investors tools that is a part of this web site that we pay $47 a month and you can get a very light version of this through MAREI for $7. And every member of MAREI gets a free website with their membership.
Marketing Costs: FREE, $100 to $300, plus maybe $50 a month
This is the hardest part.
Turn off the TV and do it.
What happens if you when you actually go look at a house . . . nothing, you have not spent anything to go look at a house and talk to a seller, so practice and do it. You are getting warmed up.
Go to the REIA and network and meet people and start connecting with more experienced investors. Find out exactly what they want to buy. That way when you find a motivated seller and a good deal, you will know it’s a good deal and you just might be able to go to the investor and have him or her hold your hand and pay you a fee. This gets through the first deal with less fear.
Or take the plunge, you have the education, you just have to put together the deal.
And remember it does not have to be a huge killer deal. Start small and work your way up. You might find that killer deal . . . I did my first killer deal this year . . . I have been investing for 10 years.
Article provided by Kim Tucker a full time real estate investor in the Kansas City Market specializing in wholesale and rehab /retail flips using funding from Private Lenders utilizing online marketing and direct mail.