I have learned from over a decade of playing the early stage tech game is that tech money is boom and bust. One day it's there the next... maybe not. Intellectual property like code does not appreciate well either. As I get older I have made the decision to become a more responsible investor. It is time I start to diversify.
I love running my small businesses and I love being in control of my investments so real estate is a logical place to start. The real estate market might go up and down but it's not like tech and I don't plan on speculating in the short term. I am looking to buy and hold.
The thing is I have no experience with it and no one in my direct circles does either. This leads to the question: How does one become an expert on real estate investing?
I taught myself to program, run a business, do crazy handstand stuff, draw, play Macklemore's Same Love on the piano, write/self publish books, etc. Why couldn't I do the same with real estate investing? Using Tim Ferriss's Real World MBA as a model I devised a plan.
It is not going to happen overnight. I will be ecstatic if it comes to fruition in the next 5 years. I look forward to every second of learning and building my new investment up. Without further adue here is my personal blueprint to becoming a profitable real estate investor.
Phase 1 - Changing My Habits:
I wish I could say I have the raw willpower to just force myself to carry out this plan but I am not going to bank on it. Just in case I am going to use some behavioral science to push me in the right direction.
I need to dangle the carrot in front of myself. I start out by putting triggers in obvious places that I have to basically trip over on a daily basis.
My Map:
I bought a big map of Wisconsin and put it on my wall. It is hard to miss. Ideally it will be a constant reminder of my goal. I also plan to use it to plot out information on potential investments and markets in the state that I wish to get into.
My Facebook Feed:
I started joining Facebook groups that list property in Wisconsin for sale
Property For Sale or Rent! In Wisconsin. I could look for sites outside of Facebook to follow but the chances of me going there on a daily or even weekly point is slim. I am not mentally conditioned for it yet. It is not a habit. Checking Facebook is however and this will put these triggers right into my news feed ideally triggering me to take action.
Recruit People To Hold Me Accountable:
One of my tricks for getting things done is to tell my friends and family that I am doing something. That way I look like a fizzle if I don't do whatever it is I said I was going to do.
Yesterday I posted on Facebook announcing my journey. This way next time I see the friends/family that saw the post they will ask "So how is your the real estate investing going?" and I had better have a good answer.
Just in case you didn't realize that is what this article is and YOU are now one of the people that will help hold me accountable for it.
Phase 2 - Research:
Now that I am triggering action on a regular basis should I just go out with fists full of my hard earned cash trying to buy property? No, it is going to take a thousand hours or so of research before I am ready for that.
At first the research will be more general as I try and find strategies that I think will work for me.
Important Note:
Please note I am NOT endorsing these resources at this time. This is actually my list of things to research to in the upcoming months so I have not yet read/listen to most of this. I will and make note of the good resources and most likely remove the bad ones.
Here are some resources I have started to research:
Blogs:
I am an avid reader of blogs. I will try and keep this list up to date as I find more valuable posts. Here is the short beginning of that list:
- The Advantages and Disadvantages of Owning a Rental Property
- What I Wish I Knew Before Buying Rental Property
Podcasts:
I digest audio information much much faster than printed or text information. The only exception is math or number related, I need to see that for it to work for me. Some of the information I seek will be numerical but at this early stage I just need to wrap my mind around basic concepts so podcasts are a perfect medium for me. Here is a list of the podcasts I started subscribing to(Again I will try and update as I find new ones):
Good Podcast:
BiggerPockets Podcast
(UPDATE 10/12/15): Only two episodes in but I love it. Two regular guys, not pretending to be gurus, interviewing real people that have been through real problems. So far amazing. No fancy system(at least in the podcasts), no fluff. Its just like having a real conversation with someone in the industry.
Important Links(this is more notes for me):
Awful Podcasts:
Epic Real Estate Investing Podcast:
(UPDATE 10/12/15): I have now listened to this and it is awful. A bunch of fluff combined with some bad ethics. Guys like this are giving real estate investment education programs a bad name. I made it 15 episodes in before the taste of vomit in my mouth made me quit.
To Listen To:
Books:
My Audible wishlist is full of audio books to dig into. Here is a short list of what I am starting with:
This is a pretty short list right now so please if you have any recommendations let me know.
SIDE NOTE: For other good books I recommend checkout my other post Book recommendations for starting a business and staying sane while you do it
Software:
I have even started to look for some software to help manage my property. From what I can gather if I do vacation rentals then sites like AirBNB do a lot of that for you. If I end up doing longer term rentals then I will have to find another solution. Not sure which strategy I am going to go with quite yet.
Phase 3 - Get Connected:
Once I know enough that I can actually hold up a conversation on the topic I will need to get connected with people that have been there. There is only so much I can learn from books. I need some to spend some time with people that have done the deals to absorb what they know.
Go To Meetups:
It is similar to how I broke into the Madison startup scene by going to Capital Entrepreneurs. You have got to start hanging out where the action is. Here are some of the Real Estate Investor meetups I have found so far:
Hopefully I will be able to find a lot more.
Find Some Mentors:
Once I get to know the crowd ideally I will find some nice guys and gals with some experience that I can learn from. Interestingly enough I can learn pretty well from the unsuccessful ones too. I won't emulate the unsuccessful but there are plenty of important lessons I can learn from them.
If I am lucky maybe some of my mentors will let me follow them on a deal or two so I can gain first hand experience. That would be amazing.
Tap My Existing Network:
I don't have any direct connections with real estate investing pros but I do have an extensive network. For example reaching out to my attorney. She is an awesome wealth of knowledge and connections.
Phase 4 - Start Paper Trading:
Now it is time to have some fun with Monopoly Money. For those of you that don't know 'paper trading' is basically simulating the investment with fictional money. Going through all the motions.
I would put together a budget. Pick out a real property that I would fictitiously purchase. Do my homework on it. Print out and fill out the actual forms but not submit them. Call up real people to get quotes on real services, etc.
Once I had my simulation laid out I would ideally go back to my mentors and have them poke holes in it. They will probably find areas where I had underestimated costs or forgot about some zoning issue, etc.
Ideally once I have done a couple of these I would find one where the numbers worked and my mentors thought it was a good idea. Once I found that one it will be time to get my hands dirty.
SIDE NOTE: A software purchase simulate might be a cool web service to build...
Phase 5 - Get Your Hands Dirty:
In the previous step I ran simulations to try and find a good deal then picked the one that looked the best on paper and to my mentors. Now it's time to pull the trigger on my first investment.
Depending on the size of the deal I will most likely have to build up a little more cash. My plan is to pick a number I am comfortable losing. Yes, I said lose. This is money invested in learning the hard way. If all goes well then great. But chances are better than not that it won't. I need to be comfortable with suffering a little loss. If I am not then if the investment takes the slightest dip or some unexpected expenses pop up I might get panicked and try to bail prematurely.
Real estate takes time and I need to be patient while waiting for the returns. Setting specific numbers aside and getting comfortable with the potential loss will help keep me focused long enough to let the investment reach its full potential.
Phase 6 - Assess, Improve, Repeat:
At predetermined intervals, probably once a quarter, I will assess my progress. I will journal it and keep records of things like the following:
- Failures(Think of them as setbacks and learning experiences)
- Successes
- Things I wish I did or did not do earlier
- Things I need to accomplish in the future to improve the investment
- Expected ROI vs Actual ROI
- Financial projections for next quarter
- Etc
I will devise a way to do it better next time based on all of this information and then when I am ready and I have the next opportunity in my sights I will repeat. Then again and again.
Managing The Investments:
Lots of you might be out there saying "But owning and managing property is a lot of work". Of this I have no doubt but I intend to run this business the same way I have run my other businesses. The E-Myth way.
I intend to be real hands on my first few investments learning everything there is to know about managing the day to day:
- Tenant Selection
- Maintenance/Repairs
- Finances/The Books
- Etc
From there I will design and document easy to follow systems. I might design my own from scratch or adapt the ones I learn about from my research and mentors.
Finally I will find good people that want to be a part of what I am building and train them to execute the systems I have designed. I will start looking for these people today, actually I am always keeping my eyes open for great people I want to work with and I already have a short list of people I would love to help manage these investments.
They will be compensated well and taken good care of. In turn I will be freed to focus on finding the next deal and growing the investment. This is called building a business and I do love it.
Conclusion:
I have a lot of work to do and I look forward to every second of it. The ups, the downs, learning new skills, meeting new people, exploring new properties, and breaking into a new area of business. I will try and keep you posted as my journey into real estate unfolds.
Thanks for reading
~Matt