Tips on Getting Started in Real Estate

Recently on LinkedIn my friend Matt asked the question:

"Anyone have any good tips on how to get started in real estate investments? Myself and two friends are looking to get going, but aren't real sure where or how to start."

In less than a month he had more than 80 comments.

I found it amazing how many of those comments weren't tips, but instead were offers to sell him an investment opportunity.  I am including a few here (edited to remove last names, investing links and other information).

To his credit, James, the very first responder was at least selling education:
James  said,

"Hi Matt, I don't have all the answers but I do provide a real estate investing learning center on my website at http://www.proapod.com/LearningCenter.htm you might find helpful. Good luck."

I don't know if James' teaching is any good, I haven't checked out his site.  But at least he was offering to educate Matt before trying to convince him to throw tens or hundreds of thousands of dollars, or more, into real estate before being sure Matt would know the difference between an REO and an Oreo.  For that reason alone I left his link intact when I quoted him above.

Dylan, the very next posting, offered 

"I am a developer/contractor who puts together investment opportunities.... If you would like to be contacted when I have a project ready for review just send me your email."

Dylan didn't mention to Matt that development is the most risky form of real estate investing and is one of the quickest ways to lose everything.  Yes, there can be great rewards, but with the rewards there is risk - and if you don't understand the risks, then you are gambling.

Subranshu offered Matt several services and properties all in India. And then came back later to offer him more, and more properties.

Investing far from home is a recipe for disaster, even for experienced investors.  When you invest, there is always an element of chance or risk.  When you invest far from home, you are often totally unaware of the very local risks that abound.

When you invest close to home, you know the neighborhoods.  You know the local market.  You know the local ecomony.  You see it everyday when you go buy groceries or read the lcoal paper.

Unless you are going to go live in the far-away market for six months or a year before investing (in which case it now becomes a local market for you) then you are investing in ignorance and the education you get will be much more expensive than it needs be.

Manish came on looking like he was taking the moral highground, but advised Matt not to listen to anyone but him, which sounds like a dangerous avenue to me. 

"dont need any book/ any course/ or dont let any investor here take any of your profits or have them be equity partners. Depending on your criteria, and cities, states you want to invest, I will give you a free consultation on how to exactly invest whereabouts to get everything done A-Z. Developing is dangerous, as its not a buyers market, its a rental market. I am not trying to sell anything, I am a simple investor. A sole investor with portfolio of over 30 units. All acquired in one year. Not using any investors money. But I was able to leverage properties i bought to acquire more. I will be more than happy to show you the way. Stay out of other countries, do areas you know!!..msg me I will be more than happy to assist you or help you."

I suspect Manish is not being totally honest when he tells Matt not to buy any books or courses and instead just listen to him.  If Manish hasn't gotten any good education, then it is only a matter of time before his mistakes catch up with him and his whole real estate empire will go down in flames.       

I know from personal experience that there are many people offering real estate training that is actually worthless.  Most of the "gurus" are selling strategies that they used five years ago to get rich.  Then they quit buying real estate and started selling their program.  Five years later, the program doesn't work in today's market, but their sales pitch is perfected and they keep bilking people out of $2,000 to $5,000 a pop for their "bootcamp."

Even worse is when their "bootcamp" turns out to be a pitch-fest where they keep brining in other "gurus" to sell you on even better ways to make money in real estate.  Before you are done, the $5,000 course you attended has given you a $25,000 balance on your charge card that you will play hell trying to pay off, because you are spending all your time in course and don't have any time to implement what you learned.

In spite of all that, paying $5,000 to learn a srategy doesn't work, can be better than losing $100,000 on a house you bought and cannot sell because you didn't know the right strategy for today's market.

Antonio let Matt know he is

"looking for investors, buyers, funds for new projects. Excellent investment opportunity for development projects in ... Philippines."  

Then, he proceeded to make several posts offering a variety of investment opportunities.  He even make a very compelling argument citing several points about why it is a good idea to invest in his market.

See my comments above about Subranshu, 'nuff said.

Terry offered to sell Matt discounted bank notes.

Now, I have to say, I have worked for a home lender and am a Certified Cash Flow Consultant with the American Cash Flow Institute and I wouldn't dream of offering to sell someone a bank note without educating them first.  There are two very good reasons for this;

1. It is ILLEGAL.  Clearly Terry either is ignorant of Securities and Exchange Commission regulations or he doesn't care. A bank note is a security and is therefore a regulated investment.  To sell regulated investments you either have to be a licensed broker or be exempt from the securities laws.  If you don't know what it takes to be exempt, then you are certain to breaking those laws and a very unpleasant conversation with government agents is looming in your future.   
2. It is bad business to sell a bank note to someone who does not understand the risks.  If you buy a bank note, you better have a very good understanding the real estate that backs the note and the person who is paying the note, as well as the terms of the note.  If you don't know those things, you WILL get taken. 

It looks like Joe is trying to get Matt to buy properties for no money down in Canada.  I find that fascinating since so many Canadian investors are flocking to buy real estate in the US and they tell me that many of the most important real estate laws are very different in Canada than the US.  Offering to sell me real estate in Canada right now seems to be like swimming against the current.  My stock investing coach tells me "the trend is your friend until it ends."  Sounds like Joe is bucking the trend.

Owen wants to help Matt find properties.  Good for you Owen, but if Matt is just getting started then he probably doesn't have a clue about how to tell a bad deal from a good deal.  This sounds like a setup to me.

Cheryl said,

"Hi Matt! I have some places you can check out at your leisure! We have access to Investor Opportunities in Phoenix/Arizona, Chicago/Illinois, Atlanta/Georgia, and our 1st. International Local . . Seaside Mariana/Nicaragua! These Webinars are FREE and are on your time . . . any time! All you have to do is click on the provided Link and  . . then sit back and enjoy!"

Cheryl gets a trifecta. 

1. She offers investments to someone who is new. 
2. She offers investments in far away places to someone who is new.  And,
3. She offers to educate the new investor on why doing these foolish things is actually a good idea.

Well, I could go on an on, but hopefully you can clearly see why I felt strongly enough to write this column.  What I pulled out was representative of a large percentage of what Matt was told.

If you have waded through those few select comments, I hope you have gotten the same feeling I did that for a new investor to through out a question like Matt did is like throwing out chum for sharks.  You will soon have more interest from hungry predators than you know what to do with.

In all fairness, a few people offered Matt some good advice.  Some experienced investors recommended programs that they have found to be good investments.  Some recommended Larry Goins, others touted Robert Kiyosaki's group.

Having spent in excess of $200,000 on real estate education, some of it wasted and some not, I recommended to Matt that he reach out to Phill Grove at Love American Homes.

I told Matt,

"I encourage you to look at what Phill Grove provides. He gives you a good understanding of a variety of proven strategies instead of just beating on one horse (that might be dead in today's market). And his training is a very good value.

Once you have gone through his materials, like Charles suggests, pick one and do it until you master it before worrying about adding on to your toolbelt.

The gurus will keep tempting you with "earn $10,000 a month do this" and next month it will be "earn $10,000 a month doing something else." Focus is key."

If you are wanting to get started in real estate here is the best advice I pulled from all those responses to Matt.  I say it is the best based on my own experience of more than a decade of investing in real estate and being personally acquainted with many of the leading "gurus" of the real estate today.

• Set realistic goals:  Greed kills.  Setting goals that are too high makes you an easy mark for every get-rich-quick real estate scam out there, including gurus and grifters.
• Start part time: if you cannot make money investing in real estate part-time, then you won't make enough to live on doing it full-time.
• Invest in a good education.  Find a real estate training program that someone who you know is successful recommends.  Of all the courses I have taken, I recommend Phill Grove's Training.
• Take that education and follow the program exactly.  Adapting it to your own understanding will almost certainly result in failure.
• Do it immediately.  Don't wait for more education.  Take that first program and start doing it right away.
• After you have mastered one or two related strategies, then feel free to continue purusing your professional education with other training.
• Implement before learning more.  Don't sign up for any other courses until you have spent three to six months implementing and mastering what you learned in the first course.
• Invest close to home.  Some of the most successful real estate investors I know have made all their money buying and selling single family homes within 50 miles of where they live. And considering that some of those are in Ohio, then you know I am not talking about people living in real estate "hot spots."  Many people will try to convince investors to buy far from home.  In most cases this will result in a very expensive educational experience that will leave you poorer and wiser.  I know.  I have been there and done that.
• Get a good coach or mentoring program.  The best one I know is www.TopOneCoaching.com.  They are focused on your success instead of just trying to upsell you some additional training. They operate all over the US and have coaches with a wide variety of skills to help you learn real estate and business.  They require that their coaches spend 90% of their time actually doing what they are coaching.  That way you don't get someone coaching you from a manual - they are coaching you from what they know is working today.  In the interest of full disclosure, I was recently appointed Chairman of the Board of Directors of Top One Coaching.
• Network with other successful investors and learn from them.  Your local real estate investment association (REIA) is one source.  However the quality of investors you find in your REIA is highly variable.  Some of the folks there are sharks looking to make you their next meal, others are talkalots - they talk about real estate but don't do any actual deals.  If you want to connect with one of the best networking events for serious and successful investors and bussiness people in the US, you cannot get any better than Mega Partnering. JT Foxx is the mastermind behind these events and he is launching his fifth event right now.  I have attended all four previous events and they are AMAZING.  If you attend and make any effort at all, you will find yourself networking with millionaires.

If you want to invest in real estate, right now is one of the best opportunities in more than eighty years.  With home values down, and unemployment beginning to falter, the window of opportunity is starting to close.

Working with an experienced investor as a partner is one of the safest ways to learn the realities of investing in your market.  If you are looking to get into real estate investing, contact me.  I have a network of successful and experienced investors that reaches across the whole country and even to places on the far side of the world (like New Zealand, Australia, and China).  I will be more than happy to introduce you to one or more of them so that you can have a chance to work with the best instead of getting taken like the rest.

Tom S.

PS: For all those who were eagerly throwing investment opportunities at Matt:

In the US, real estate is considered a security and selling investments in real estate is a regulated activity.  To stay inside the law, no one who isn't a licensed securities broker can legally offer you an investment in real estate if you are not one of their friends, family, or associates who they have known for more than 30 days and had at least 3 conversations that did not involve investment offerings.  All these folks who were eagerly throwing "money making opportunities" at Matt were breaking the securities laws.

Exceptions are if they are doing a private placement (which requires a private placement memorandum) and they know that you are a "sophisticated investor" or a "qualified investor."  Both are terms with specific meanings defined by the SEC.

For all of you who were ready to give Matt a "deal" and take his money, I recommend that you go to www.acowgill.com and sign up for Alan Cowgill's bootcamp on Finding Private Money.  He teaches you how to do it while staying inside the boundaries of US law.

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Tom Sheppard has been successfully investing in real estate since 2001 while working part time. In 2008 he left a six-figure job as an enterprise project manager with a major national bank to manage his real estate business full-time. His goal is to help 100,000 people find peace of mind by finding quality, affordable homes. Why pay retail when you can buy a home at below market prices? www.buybelowmarket.com. He is currently looking to expand his network of funding partners who are helping him achieve this goal. If you would like to know more about how you can do well by doing good, contact Tom at TSheppard@CharlotteWealthPartners.com