Getting Started in Real Estate for the Penniless - Part One
Let me be brutally honest with you, if you're living above your means or even just right at your means, then you have zero chance of ever becoming rich. Investing in real estate, or anything else for that matter, won't save you from a lifetime of debt if you don't already know how to handle money.
I know... those guys on late night television introduced you to people who got out of debt and quit their jobs just 60 days after taking their real estate investing course. Let me tell you first hand that if those testimonials on t.v. are real, those people are the exception, not the rule.
Real estate investing is a solid way to make a lot of money. The best way is to set your goals and find properties that meet those goals (and then keep them for at least 5 years). If you look at the richest people in in Canada and in your city, at least 25% of them probably made their fortunes by investing in real estate. We believe that this estimate will hold true based on who we see on the list of Canada's richest people as well as the Power List for Vancouver.
However, if you're serious about real estate investing, there are ways with less risk, less money and less anxiety. Essentially, you have to know what you're doing, take some time, take some classes, read some books and talk to people. Once you know what you're doing, you can increase your investments to match your knowledge and equity.
We started out with $16,000. Thankfully my wife Julie was a saver. When she graduated from University and started working as a sales rep, she continued to live like a student. And, she put every extra penny she had into paying down her student loan. When that was paid off, she proceeded to save any extra money that she had. Her plan was to go back to school for her MBA so she wanted to have as much cash in the bank as possible to pay for school.
When I first met Julie, we had very different lifestyles. I was enjoying the money I was currently making. I went out a lot, drove a brand-new Volkswagen with financing, and had some credit card debt. I also had a piece of property that I owned with my mom. But when I met Julie she talked about retiring at 35. She spoke of it so clearly and had such a good plan, that I knew it could happen if I worked at it too.
It didn't happen overnight, but it only took a few months to change my situation. I quickly paid off my credit card debt and started putting a few hundred dollars away each month in savings. And then we started shopping for our first investment property.
Our first investment was a lot easier to do thanks to Julie's savings. But, you don't need money to buy your first property.
I'm sure you've heard of those no money down programs. I'm not saying it can be done; it can be, but no money down is one of the riskiest ways to buy property. There are only three low-risk ways to buy property, and 2 of them don't require that you have money saved:
1. Cashing out your savings, including stocks, retirement and GICs
2. Home equity
3. A partner with cash.
A partner with money to invest is essential if you have no money. However, a partner won't want to work with you if your own finances are in terrible shape. You have to fix your finances before any partner would be willing to work with you. When a partner sees that you have a lot of debt, he/she sees a person that can't be trusted with money- either your own or someone else's. You haven't proven yourself as a trustworthy partner, and investing with you would be too much of a risk.
But, if you come to me and say "Dave, I have found this property that I think is a great investment. I don't have any money because when I graduated from University two years ago, I had $30,000 in student loans. I only have $5,000 left to pay off, but I really want to get started real estate investing and I think this deal will be great," I will be more interested in working with you.
Did you notice the difference? In the first instance, the person is in debt with no plan, no experience, and no way to get out. In the second instance, the person is in debt, but has a plan - so you know their debt will be over soon and they will be not be depending on your money forever.
Before you can buy a single piece of property, you have to be able to control your own finances. This gives you control of your destiny. Living beneath your means is the only way to do that. If you're unsure about what you make versus what you spend, try this: for the next six months, keep track of every penny you spend. Once it's there in black and white you'll be able to see how you're living and where you can make changes.
Oh - I hear it already - "but, Dave, it's Christmas", or "it's Sally's birthday", or "we've been planning the trip to Disneyland for three years"! Well, if you've saved up for those things, great! Go for it! But, if you are going to go into debt for those things then you are a SPENDER, not a SAVER, and you're obviously not serious enough about growing your wealth and becoming a rich real estate investor. - 23218
I know... those guys on late night television introduced you to people who got out of debt and quit their jobs just 60 days after taking their real estate investing course. Let me tell you first hand that if those testimonials on t.v. are real, those people are the exception, not the rule.
Real estate investing is a solid way to make a lot of money. The best way is to set your goals and find properties that meet those goals (and then keep them for at least 5 years). If you look at the richest people in in Canada and in your city, at least 25% of them probably made their fortunes by investing in real estate. We believe that this estimate will hold true based on who we see on the list of Canada's richest people as well as the Power List for Vancouver.
However, if you're serious about real estate investing, there are ways with less risk, less money and less anxiety. Essentially, you have to know what you're doing, take some time, take some classes, read some books and talk to people. Once you know what you're doing, you can increase your investments to match your knowledge and equity.
We started out with $16,000. Thankfully my wife Julie was a saver. When she graduated from University and started working as a sales rep, she continued to live like a student. And, she put every extra penny she had into paying down her student loan. When that was paid off, she proceeded to save any extra money that she had. Her plan was to go back to school for her MBA so she wanted to have as much cash in the bank as possible to pay for school.
When I first met Julie, we had very different lifestyles. I was enjoying the money I was currently making. I went out a lot, drove a brand-new Volkswagen with financing, and had some credit card debt. I also had a piece of property that I owned with my mom. But when I met Julie she talked about retiring at 35. She spoke of it so clearly and had such a good plan, that I knew it could happen if I worked at it too.
It didn't happen overnight, but it only took a few months to change my situation. I quickly paid off my credit card debt and started putting a few hundred dollars away each month in savings. And then we started shopping for our first investment property.
Our first investment was a lot easier to do thanks to Julie's savings. But, you don't need money to buy your first property.
I'm sure you've heard of those no money down programs. I'm not saying it can be done; it can be, but no money down is one of the riskiest ways to buy property. There are only three low-risk ways to buy property, and 2 of them don't require that you have money saved:
1. Cashing out your savings, including stocks, retirement and GICs
2. Home equity
3. A partner with cash.
A partner with money to invest is essential if you have no money. However, a partner won't want to work with you if your own finances are in terrible shape. You have to fix your finances before any partner would be willing to work with you. When a partner sees that you have a lot of debt, he/she sees a person that can't be trusted with money- either your own or someone else's. You haven't proven yourself as a trustworthy partner, and investing with you would be too much of a risk.
But, if you come to me and say "Dave, I have found this property that I think is a great investment. I don't have any money because when I graduated from University two years ago, I had $30,000 in student loans. I only have $5,000 left to pay off, but I really want to get started real estate investing and I think this deal will be great," I will be more interested in working with you.
Did you notice the difference? In the first instance, the person is in debt with no plan, no experience, and no way to get out. In the second instance, the person is in debt, but has a plan - so you know their debt will be over soon and they will be not be depending on your money forever.
Before you can buy a single piece of property, you have to be able to control your own finances. This gives you control of your destiny. Living beneath your means is the only way to do that. If you're unsure about what you make versus what you spend, try this: for the next six months, keep track of every penny you spend. Once it's there in black and white you'll be able to see how you're living and where you can make changes.
Oh - I hear it already - "but, Dave, it's Christmas", or "it's Sally's birthday", or "we've been planning the trip to Disneyland for three years"! Well, if you've saved up for those things, great! Go for it! But, if you are going to go into debt for those things then you are a SPENDER, not a SAVER, and you're obviously not serious enough about growing your wealth and becoming a rich real estate investor. - 23218
About the Author:
Learn How to Retire with Real Estate with Dave's free Real Estate Investing Starter Tips Guide. Learn how to find money for real estate deals, create financial freedom, extra revenue and massive wealth with tips like: How to find quality investment properties, finding and keeping great tenants, and easy ways to make more money with real estate.
posted by X - Men @ 4:18 AM
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