The best real estate investment to get started with varies widely based on your goals, experience and financial position. What kind of real estate experience do you already have (if any)? Are you willing to risk your time, your money, or both? Is short-term or long-term income more important to you with your first real estate deals?
What kind of real estate deal is best for getting started?
Are you trying to supplement or replace your existing income? Set an intention for your first real estate deal based on which exit strategy will best match your goals and experience. There are really only 4 basic exit strategies in residential real estate investing:
- Wholesaling and assignments
- Resale, also known as flipping (with or without construction or rehab)
- Buying and holding (rentals)
- Seller financing (subject-tos, wraps, seller carry-backs)
New real estate investors should also take an honest assessment of their tolerance for risk, both mentally and financially. Renovations and construction are stressful, challenging and time-consuming for most people, but if that’s where you have the most experience, it might be the perfect starting block.
Wholesaling and contract assignments have a much shorter turnaround than renovations and very little risk. Wholesaling is ideal for a first real estate deal if you don’t have a lot of money. You’ll also meet experienced investors who can help you build your real estate business. The reasons that other investors don’t buy your property can be really interesting (and free!) guidance toward finding another real estate deal – one that you can sell quickly to almost anyone.
Partnering with an experienced real estate investor can be an excellent way to get your feet wet without shouldering all the risk. If you’re interested in this option, let us know. We’re happy to partner with new Austin investors who have the drive to find deals, but maybe not the experience, confidence or cash to carry them out on their own yet. If you don’t have much money, partnering might be the best route for your first real estate deal.
Regardless of what direction you take, finding a mentor is often the fastest way to success for any new venture. Meet people in the real estate investing business, be nice and make friends. You don’t have to pay a big fee to find a real estate mentor. Join local networking groups and make an effort to find people in the business that might be willing to let you take them to lunch or coffee and give you feedback on the deals you find.
I don’t know how to get started. What should I do first?
Get seller leads coming in. Talk to as many sellers as you can. Write letters, print flyers, make signs, knock on doors or buy print or online advertisements. Your ads should state clearly that you buy houses quickly for cash. You might consider getting a new or virtual phone number for this purpose, but it’s not necessary at first. You do want to be able to call people back if they don’t leave a message, so caller ID is a must. You might consider a virtual phone system with extensions (like Grasshopper or RingCentral) to help you manage your calls and project a professional image, especially if you have a full-time day job.
Letters and flyers can target homes in disrepair, vacant houses, people who’ve recently divorced, heirs who’ve recently received property, people who have historically bad credit or who are already behind on their mortgage. Be creative and think about the kind of problems that would make someone motivated to sell their property quickly. You can purchase lists or create your own, but your goal should be to reach potential motivated sellers in person, by phone, by mail and online.
Getting leads is the hard part, but the great thing is when you start getting leads you get to practice evaluating properties and negotiating with sellers. It will get easier as you go. Don’t worry if you drop the ball on the first few. Just get more leads coming in. If you talk to enough sellers, you’ll find someone you can provide a win-win solution for.
Once you find your first deal, the rest is easy. Be familiar with the Texas real estate contract so you can present it to your seller with confidence. Get a great deal under contract and you will have no trouble finding the help you need to get it closed. We can help by buying your deal from you, partnering with you on your deal, or providing hard money financing.
What’s the best way to find your first real estate deal?
Processing lots of real estate leads is the best way to land a deal in Austin or anywhere. If you talk to enough people who are interested in selling their property to you, you will find someone motivated enough to sell at a discount. The challenge is getting someone to sell at a deep enough discount that you can make a profit.
I don’t have any money. How can I finance my first real estate deal?
Partnering with a more experienced investor is a great option where you can learn a lot. Hard money is also an excellent option for funding your first real estate deal. If you’re getting a great deal, you can use this type of funding with no money out of pocket. If you qualify and have sufficient time from contract to closing, a conventional loan or bank line of credit can be excellent tools at much lower rates than hard money financing.
If you wholesale the property, you might not need any money at all besides earnest money and an option fee.
Landing your first real estate deal will take time. You might need to look at 100 or more leads before you land your first deal. The good news is that once you’ve talked to enough sellers to know what you’re looking for, the looking gets easier.