Investing in Real Estate For Beginners: What You Need To Know
Investing is one of those things that you may find sexy, or totally terrifying.
I started investing five months ago - mainly in ETFs and stocks. But there are many different investments besides these two. Real estate is one of them.
For most people, their home is their biggest investment. Yet, I think real estate is a lot more complicated than investing in stocks, ETFs, bonds or index funds because of the huge financial, legal and other large requirements involved (property taxes, insurance, maintenance fees…).
So if you’re thinking of investing in real estate, you’ll find there’s A LOT to learn. That’s why is a good idea to familiarize yourself with the fundamentals.
With that in mind, I asked real estate professional Eric Bowlin (who achieved financial independence at the age of 30!) his tips for beginner real estate investors.
Let’s dive in!
1. There’s a real connection between real estate investment and financial independence. You’re a living proof of that. How has this changed your life?
Passive income through real estate has completely changed my life. I was on track to work a normal job with great benefits - I was studying for my PhD and most likely would have been a researcher or professor. While I was on track for an amazing career, real estate has given me freedom.
For example, because we have enough passive income we didn’t have to choose between career and family. A lot of women (and men too!) are stuck choosing between raising children and having a career and it’s really unfortunate.
Because we have passive income, my wife and I have been able to raise our daughters ourselves and still run our business and grow our investments. We were able to choose when we thought it was best for our daughter to go to school based on her development, not because we needed to go to work and needed someone to babysit her.
2. Looking back, what would you do differently in your career as a real estate professional?
I would have started networking and building relationships sooner.
For the first 5 or 6 years of investing I always focused on money and real estate. I’m good at finding deals and making money, so I was successful, but over the last year or two I’ve started to build professional relationships and things have begun to explode for me.
My new saying is that real estate is NOT about location, it’s about relationships.
Also, I got started and didn’t have much of a plan. I just did a lot of different things until I figured it all out. I was fortunate and everything worked out, but I would probably be a lot further along if I mapped it out.
3. What things a beginner should consider before investing in real estate?
Most people think about investing in two ways - flipping a single family home or buying a single family residence and renting it out. These are both very active ways to invest and cross the line from “passive income” and are more like a job.
So, a beginner should explore all the different ways to invest, from investing in a crowdfunded real estate deal online, doing private lending, buying small multifamily, or being a limited partner in a syndication.
4. In your opinion, what are the best types of real estate investments?
I think this has changed as my perspective has changed. So, it depends.
It depends on your current position in life and your income. If you don’t earn a lot currently, then an investment that requires a lot of time and energy is great because you can earn “sweat equity” and really earn a lot. This includes single family or small multifamily rentals.
If you currently have a great job with great income, it’s better to find a more passive investment that still beats out the stock market, but allows you to continue earning money at your job. I’d focus on private lending or being an equity partner in a larger deal.
5. What are the most common real estate investing mistakes a beginner can make?
Beginners often spend so much time trying to not lose money that they never earn any money. I know a couple who spent 6-figures on real estate education. Yes, over $100,000 paying all the "gurus" to teach them how to invest.
If they had just spent that $100,000 and bought a single family home somewhere in the country and lost HALF, they would have learned more than all the education and still had $50,000 left over.
Instead, spend a reasonable amount of time and money on education - then don’t be afraid to buy.
6. Do you recommend new investors get a mentor?
I think everyone needs a mentor, but people often think this means spending $30,000+ on a "guru". While this might work for some people, it doesn’t work for most people.
Instead, focus on finding someone local to you and trying to add value to what they are doing. If you have money, offer to invest it at a very low interest rate in exchange for knowledge. If you have computer skills, offer to build out their online lead generation platform. etc.
It’s important to remember that there are so many different investors with different styles of investing. One woman told me it’s so difficult for her because I’d tell her one piece of information then another investor would tell her literally the exact opposite.
So, focus on finding someone successful who also shares your values and philosophy and copy that person. Once you are being successful and earning passive income, you can branch out and learn other techniques.
7. Which are your favorite personal finance books?
Robert Kiyosaki’s Rich Dad, Poor Dad has really changed my perspective and my life. If you haven’t read it, you need to!
I also liked The Psychology of Selling by Brian Tracy. In the book, he explains that you will only earn plus or minus 10% of what you believe you should earn. So, changing your perception of your worth is the fastest way to grow your income.
Bringing it all together
Investing in real estate might sound overwhelming - it still does for me.
However, you may be about to take the first step towards financial independence (aka wealth, freedom, and happiness). Like Erin Bowlin did.
To recap, here are the best tips and tricks first-time investors can use to be a good player in the real estate game:
- Real estate is not about location, it’s about relationships.
- Explore all the different ways to invest: investing in a crowdfunded real estate deal online, doing private lending, buying small multifamily, or being a limited partner in a syndication.
- Spend a reasonable amount of time and money on education - then don’t be afraid to buy.
- If you're looking for a mentor, try focusing on finding someone local to you and trying to add value to what they are doing.
- Read personal finance books! Rich Dad, Poor Dad and The Psychology of Selling are a great way to get started.
Real estate investing has the ability, if done correctly, to change your life.
And I believe that learning from professional investors is the most efficient way of becoming a pro yourself.
If you’re ready: do your homework, listen to those who have come before you, and go for it!