Announcer: You’re listening to Real Estate Investing Talks, a SimplyDoIt podcast. Your journey to success in real estate investment starts right here, right now. Here’s Dani Beit-Or.
Dani Beit-Or: Happy Friday to you. Hi, everyone. Good to see you. Dani here from Southern California. Obviously, we’re going to talk about real estate investment.
We do this session every Friday or almost every Friday. The whole point of this session is to talk about real estate and to have an opportunity for you guys to ask questions. I bring my own topic every week. We do it Friday at 11:00 a.m. pacific time. I bring my own topic that I want to cover, different things.
Igal, Good to see you. Hope you had a good time at the ski, or maybe you’re still there. I’m mostly interested in having you bring questions in. That would be terrific.
I would really appreciate if you do some likes now throughout just because I understand it helps let other people know that there’s a live event going on, so likes will be appreciated. We are in the life of the likes, of course.
My topic for today is basically how to get started. It’s funny because I extensively talked about it last night in the lecture in Orange County.
I also want to mention that I put a link in the comments that I will be speaking live, as a sense in live in the room, physically in the room, in San Francisco on March 6th 7:00 p.m., in Sunnyvale, Silicon Valley on Wednesday March 7th.
Actually, we start on 6:15. We do an early session. We call it a power session for extensive Q&A, open room, open session for everybody. Then, we start around 7:00 with the content of the evening. You are most welcome to join me.
We will try to stream it. I don’t know if it will work. Last night, we did stream. Even Tuesday, we did live stream it on Facebook. Apparently, it only lets us stream up to one hour and 15 minutes, so that’s the majority of it. Let’s get started. Again, feel free to post your questions.
Thank you for joining me. Throughout, I’ll be more interested in getting your questions than delivering my own content for today. Nonetheless, I will. Feel free to post questions, and I’ll take them as I speak or when I’m done speaking.
The topic for today, I’m going to try and keep it simple, not going extensively like I did last night. It’s how to get started. The question of how to get started, it’s kind of interesting to me that I never thought this is the most asked question by investors for some reason. I’m talking about people that we work with.
Before we start working with them, we ask them to complete what we call an intake form. It’s called a pre-meeting intake form. They put a few points, a few questions, nothing too personal, no social security or anything like that. Then, we set up a meeting.
We have an intake form. Our intake form is many, many, many, many hundreds, beyond a thousand, lines of intakes from individuals. This is just something that we’ve done in recent years. We don’t have everybody that we work with in the intake, but we have well over a thousand lines of intake from investors.
It seems like we did an analysis on the intake, and we wanted to find out what are the top most asked questions by investors. Those are people who, for the most part, attended our lecture, attended events that we bring. We put a lot of information out there. They have seen us speak or got educated by us before even coming to meet with us.
We say, “Give us your question.” Part of the intake. We realized that the number one most asked question by investors is how to get started which is, on one hand, very trivial. On the other hand, I was surprised. I didn’t think that would be the number one asked question, so it was surprising for me and very good to realize.
How do you get started? Again, I’m not going to go extensive to all the details and what you need to do and checklist and all of that. Let’s keep it simple.
On the simplicity of it, I will say this, a lot of investors, when they get started, they are starting to run all over the place and start looking at this investment type. Let’s say they, one week, are looking at one investment type in one market, and then the next week they’re switching and going back and forth.
I think as an investor– Let’s say you’re a beginner. I know there are people here that are not, but let’s say you’re a beginner. You probably want to clarify what is it you want to accomplish first. This is what you want to accomplish long-term/short-term: more cash flow, less cash flow, how much money you have. It will probably help you decide where to put your energy.
Sometimes, people don’t really know how to strategize or decide what to sell or even know the answers for those questions that are a little bit more deep or extensive questions, or what do I want to accomplish? It’s a little bit vague.
If you’re not working with someone that can help you clarify that, maybe take a month or two or three or four and attend some events. Go to a meetup. Attend some real estate investments events. Start getting into the zone of real estate investing.
If you’re in a different country that doesn’t have meetup, find those other groups that meet regularly. Start being a sponge. Don’t decide. Be open-minded. Go see the guy who talks about flipping. Go see the guy who talks about mobile homes. Go see the wholesaler. It’s okay.
Spend some time seeing what’s available out there, but slowly, start consolidating your effort. Consolidate your mindset and your focus. Try to focus on the one investment that seems the more relevant for you.
If you can actually go and write down what it is you want to accomplish, it will help you decide before you start looking at attending events. It will help you decide which one is relevant for you.
If you’re unable to do it at this point, just try to pick one that fits your personality, fits your budget, fits your comfort zone. It’s okay.
If you decide on a strategy, let’s say of buying self storage units, which is okay, you’re not marrying that strategy for life. You may do one or two investments like this or not even do any of them and decide that you need to switch. That’s okay, but start somewhere.
At one point or another, you probably want to stop attending real estate investment clubs and events. I do a lot of those events and I love it when you come in, but honestly, stop. Not for my sake, for your sake because you’re going to lose a focus here because what I see many times is investors going to–
I’ve been doing it for many years. I’ve done web events. Between webinars, Facebook lives, and stuff like this, well over 500 over the years. Live event in the room that I’m speaking in a room with people who are sitting in the room, well over 300, probably 350, maybe 400 events. I’ve been doing this for a long time, many years.
I see a lot of investors, the same people many times over the years and different people as well. What I see many times, someone goes to an event, and they spend time and they get excited by the speaker talking about, I don’t know, self storage. We started with this– or apartment building. There’s nothing wrong with it.
Then, they get fully excited. Then, they move on and decide that’s what they’re going to do. For the following week, this is exactly what they’re focusing about.
Then, the following week, they go to another event. This time, someone talks about mobile home parks, wholesaling, whatever. They just really excited and decide to do that. They follow that for another week.
Then, on the third week, this time there’s a guy with an accent who talks about out of state rentals and flips, and they decide this is what they want to do and pursue. So on and so on. All of a sudden, four months have gone by, and they have done absolutely nothing.
Put it like this. Take the time to determine what you want to accomplish. Map yourself first. What’s my comfort zone? How much money I have? Can I get a mortgage or not? Do I want to do it myself, like more involved in control or more actively involved because I have time or this is my personality?
Or on the contrary; Maybe I’m the guy who works so hard, has zero time to put into it or very minimal, and I rather shift that burden to someone else. I want to be a passive investor in a small or big fund that does investment. Someone who raises money and I’m putting whatever, 50/$100,000, and they do all the work.
It’s okay. There’s no right and wrong here. There’s only what is right for you at the stage you are in. You may be very busy right now and you rather let someone else handle most of the decisions and the noise, and maybe you feel that they are more comfortable and vice versa.
You can change those strategies as you move along, but the important thing is take the five minutes and decide what is relevant for you: budget, financing, time that you have available, comfort zone, experience. You’ve got to face those questions. Once you face those questions, it will really help you say, “Those strategies are not relevant for me, and those strategies are relevant for me.”
Now, you come down and say, “You know what? I’ve decided that I want to do-” I’ll shock you now- “rentals out of state because it makes perfect sense to me, and I want to buy it myself.”
Then, in that aspect, you’re going to say, “Okay. I’m going to do it with someone else that will help me,” like we do with investors, “that will walk me through the path that has processes and systems in place,” or, “I want to do it by myself. I don’t need any coach, any guidance, any network. I’ll find my own engine. I’ll find my own property managers. I’ll analyze my own property.”
It’s all okay. Decide what’s right for you and continue to the next step.
The next step will probably be setting up your finances. You need cash. How much? You go to qualify for a mortgage. Can you qualify for a mortgage? Do you know what the steps are in finding who to work with? Where to work? All of those things, you’ve got to start taking it one step at a time.
Now that you’ve decided on your strategy, you know your financial standing or starting position, financially. Now, you have to ask yourself, “Do I know how to look at deals, not just find deals, but really evaluate them and analyze them properly?”
If you do, great, then you’re ready to the next step. If you don’t, then spend some time on learning how to evaluate and analyze deals. It’s very, very important. Otherwise, what I see many investors are doing or beginners is they’re signing up to some mailing list, and they’re starting to get emails.
Now, how would you know if a property is excellent, good, or a poor investment if you don’t know how to evaluate and analyze the property. The next thing I suggest is, before even specifically analyzing financially or evaluating altogether, set your benchmark criteria, your baseline. Your baseline should be, for this type of an investment, this is the minimum what I’m looking for.
For example, if we’re looking at a single-family home investment as a rental, you probably want to say, “Okay. I’m looking for at least three bedrooms, two bathrooms, 1,200 square feet, purchase price up to 150, cash flow at least 100 bucks a month, whatever, 200, whatever you decide.
The ROI, at least 10 percent annually or higher. Maybe lot size, maybe garages, maybe age not older than 20 years or not older than 10 years or whatever. You set that baseline for yourself.
Once you have that baseline set, every property that comes into your inbox, you’ll take your baseline here, “Hello, baseline.” Then, your property. You look at them like this and say, “This is my baseline. This is the property. Is there a match, or is the property exceeding my baseline, matching my baseline, or worse than my baseline?”
If it’s worse, forget about this property. If it’s matching, consider it. If it’s exceeding, absolutely consider it at least to move to the next level of making offers.
Most investors that I work with or know don’t even take five minutes to set their baseline. If you don’t have your baseline, how would you know if a property is good or bad? For you, not for me.
By the way, you and I can look at the same property and have a different conclusion about it, but I know my baseline. Do you know yours? Can you really take a property and say, “Okay, it is good, or it is bad.” How are you going to make a decision? By the photos or by some information that someone sent you that it could be more accurate or less accurate?
You’ve got to compare it to your baseline and see if that baseline makes sense. It’s really important. In my mind, before you start setting up the databases or mailing lists and start looking at markets and start kind of running all over the place, take the time to actually prep yourself.
Map your position. Set up the criteria. Decide on a strategy. Decide on your baseline. Only then it makes more sense to start actually looking at properties.
Everything I told you so far has nothing to do with a specific property. We haven’t talked about a single property just yet. It’s all about the preparation.
Remember, even if you decide to go on out of state rental properties right now, maybe in two years you say, “You know what? It’s working okay, but I want to do something else now. I actually want to move to the next level which is being a developer who builds new construction properties.” I’m just making it up. Maybe. Or investing in an apartment building. It’s okay. There’s nothing wrong with it, nothing wrong with changing strategy.
The biggest challenge I see for investors, they don’t take the time to prepare themselves, then they’re running around like crazy. I see investors like, “What do you think about Philadelphia? What do you think about Atlanta? What do you think about–” Who knows? Who knows?
Then, six months/a year later I meet with them, and they’re exactly in the same position. What have you done? Nothing. Why? They can’t focus. They’re letting the noise or the lack of focus dictate their ability to actually execute.
If you are someone who is attending all those meetings such as meetups again and again and again, there is nothing wrong with it, at some point or another, you probably want to stop. That creates more noise.
If you’re attending meetings and executing and investing, good for you. Go on. But if you’re not executing, this is all talk.
Let me tell you something, you are not a real estate investor or you’re not investing in real estate just by attending meetings. Even if a speaker tells you, “You’re here. You’re real estate investors.” You ain’t. You want to be investors? You want to invest in real estate? You actually have to pull the trigger. Do something about it.
Try not to run around like crazy and actually focus. That’s very, very important, especially at the beginning.
You know what? One other thing. Sometimes, I speak to beginners, and they’re already talking to me on house number four. How many houses have you purchased? None. Why are we having a discussion on the fifth mortgage when you don’t even had a single mortgage? How is this relevant?
I know it’s is a concern. I know you want to scale, but you know what? Put that noise aside. Focus on house number one. Obviously, it’s the most difficult one for most investors. You’ve crossed that bridge? Perfect.
Let me tell you a story from today. From an hour and a half ago, I spoke to one of my investors. He’s actually a very good friend. He lives in the Bay Area. He did multiple investments in his life passively, not a lot of them, but he worked with someone, another friend of ours, who did the investments for him. Every investment he did for a few years, real estate ones, they didn’t work well for him. They were okay, but he was always disappointed from the results.
By the way, I didn’t really approve the investments he did, but that was their decision. What can I do about it? They’re not asking me what to do. I give them my opinion.
A year and a half, actually almost two years ago, a little bit over a year and a half ago, he called me up. He said, “Okay, Dani. I saw you speaking several months ago.” He’s a good friend. We know each other well. He says, “I’m ready. Let’s do it, but I got to tell you something. Before we do anything, I have such a bad experience and disappointment. It’s like I feel that every time I make an investment, I bring the jinx into the investment.”
I told him, “Listen. If you will listen to me, it’s not going to be a smooth sail. There are going to be some bumps on the road. They’re going to be a little bit rocky road but not catastrophic.
Please listen to me. I will guide you through. I know it will be okay.” I told him, “What isn’t okay for you? What points of time would you say you could look back after owning a property and say ‘everything is fine. It went well?'”
He said, “I need at least one year of owning that property to make sure nothing is catastrophic in terms of vacancies and repairs and all of those things. If this will work for at least one year with relatively no noise- I know there’s going to be some- then I know it’s okay.”
On the one, he followed my advice. We bought a first house for him. We went through all the steps. No red flags whatsoever. He did have some vacancies. The first renter came in at about $75 below what we were planning on the analysis when we were doing the deal.
He said, “That’s okay. I understand that could happen. I’m still positive cash flow nicely, so it’s okay. I’m not at 425. I’m 350. live with it comfortably. No harm.
I was expecting the house would be rented within a month. It took a month and a half. It’s all good. When a tenant move out, there’s a new tenant came in. It took another month. It had some repairs. No drama. I mean, a little bit, but everything I expected to happen that you told us, did happen. We’re good.”
On the one year mark, I put a note to myself to call him up and say, “Are you ready for the next one?” He says, “Honestly, everything is well. I’m just not ready right now because I’m busy with my life. My company is going IPO.” Blah, blah, blah.
Okay, that’s fine. “I’m not going to deal with it at the moment, but everything is fine. I no longer think I’m jinxing my own investment.”
Today, about an hour and a half ago, we spoke. He said, “That’s it. I’m ready financially. I have the money. I’m ready mentally. All of it. I’m buying two more. Let’s move on.”
We talked about fine-tuning what should he do next, where, what etc., ironing those things. He completely changed his mindset thinking, “I’m always jinxing my investment.” Now, he’s just saying, “No, everything is fine.” He said, “Things were not smooth exactly like you told us, and we expected.” Be ready for that. That’s okay. Just make smart decisions along the way.
I want to give you maybe one last suggestion that I see that works very well for some of my investors when it comes to, especially, starting. Every once in a while, I get to meet two investors, like two friends. I’m not talking about a husband and wife or spouses. I’m talking two friends.
They met each other. Either they’re long time friends or just met recently, but they decided that it will be beneficial to them to walk the path of investing, at least the first step, together.
Every time I see two, not more than two- three is too noisy- friends coming together saying, “We want to walk the path together–“
Let me be very clear. They’re not looking to buy together a property. They’re just saying, “We are going to walk the path of buying each our own property, but the path we’ll do with you together.” This is a recipe for success because that means they have someone to talk to. They have someone that holds themselves accountable.
They may meet on a weekly basis to discuss, evaluate or do something. There’s a progression of their comfort level. They’re already walking the path together, helping each other and then making decisions, basically making the decision together but each for his own property.
Every time I see that recipe, I know it’s going to be a success. If you have that person in your life, at least know that you’re starting that can help you walk the path– and it doesn’t have to be someone you know well.
It needs to be someone that really wants to accomplish what you’re trying to do at the same time, around now. Grab that person. Say, “Hey, let’s do it together. Let’s walk the path together.” We will help you with that if you want, of course. We will be happy to help you.
But I see that increases the success of completing the deal. Finding a partner- or I call it an investment buddy, not a partner- will really help, especially for a beginner. That will be my suggestion.
The second suggestion I talked about earlier is set your baseline of criteria for the property so you can evaluate it properly and analyze properly. You’ll be much more prepared to pull the trigger.
If you have questions, by all means, I’ll be happy to take them, of course. If I wrap it up, here’s a couple of things. Take the time to decide what is it you want to accomplish. Map yourself. Where are you financially? Can you get a mortgage? How much time you have? What’s your comfort level? What’s your experience? Try to get those abstract questions answered in order to match the investment strategy. That would be number one.
Number two, decide on a strategy. At some point, sooner or later, stop attending meetings that are just making noise in your life or you’re losing focus. Don’t attend meetings all the time. Real estate clubs, meetings, at some point, stop going. it will help you. It actually will benefit you. Maybe not at the beginning, later. Number two, stop going to the meetings. Decide on a strategy.
Find an investment buddy. Not more than one. Three is going to be noise. Two is excellent.
Set your baseline. When you sign up to a database and you start getting properties coming your way, you want to be able to evaluate them and know if it’s a good match for what you’re trying to accomplish, and you want to be able to do it quickly too.
Today’s market, most metros, things are moving fast. If you’re slow, you’re just going to miss on another property and another property. That will just fill your frustration. Hopefully, that helps.
I am done with what I wanted to cover. Of course, there is more to it. I see the first question coming in. I’ll be happy to take more questions of course.
I’m just reminding you that I put a link. Before I take your question, Gabriella. I put a link to our events that we are having live in the room.
The term live is always very confusing now. Live in the room in San Francisco on Tuesday March 6th and live in the room in Sunnyvale. We could actually touch each other, see each other in the room on Wednesday March 7th.
We start at 6:15 with a pre-session. We call it the power meeting which is just a fancy word for an extensive Q&A.
If you cannot make it at 6:15, don’t worry about it. Show up at 7:00, and at 7:00 we’re going to start with the actual content.
We are actually teaching. It’s a class. It’s not a networking event. It’s not a hyped event. We’re not going to sell you boot camp, and we’re not going to sell you a coaching program.
We’re just going to talk about real estate and teach you and share with you the experience that we have had over the years which is a quite extensive one.
Questions. Thank you for the first one, for breaking the ice. How do you narrow down a market area to start investing in? Excellent question.
I would say when I work with investors on tackling this point, what I try to do is this. There’s, first of all, the budget, how much you can afford.
For example, if you have only $30,000 with a mortgage, some of the markets we are in, you are not going to be able to execute because they are a little bit more expensive, not a lot more. Just, let’s say, they’re $200,000 and, that $30,000 one will not take you all the way to a $200,000 home. Right there, there’s elimination.
Then, I try to see what are your concerns in terms of vacancy and growth and kind of surface all those points. I’m actually coming to a conversation of the market, not by determining across the board, but I’m actually trying to determine based on what is relevant for you for your budget, for your concerns, for what is it you want to accomplish.
When we talk about markets, we’re actually talking about your plans as well. That’s the only time I’m going to talk to you and see what is it you’re trying to accomplish altogether because that will also help to decide which market.
The answer is not “there is a clear path how to go about deciding which market”. I don’t have a clear path. I have a clear conversation, a discussion with you.
You’re different, Gabriella, than someone else who’s here budget-wise, concern-wise, bigger plan-wise. I want to reveal, surface, those points with you, and based on that, try to provide you my best recommendation for you. I don’t come with an answer because I don’t know the answer. I want to discuss them with you. For me, there’s never a clear-cut answer.
I have markets that I like for one reason or another. That doesn’t mean they’re relevant for you. It’s a very good question because one of the things–
I think we even had another session about it two or three weeks ago. I see people that are behaving like herd. They are just following the herd.
They’re going to Atlanta. Why are they going to Atlanta? Because their friends went to Atlanta. it may have been that their friends went to Atlanta and invested there three years ago. It’s a different market today.
You know what? Honestly, don’t tell my Atlanta people because I have a few people in Atlanta that I work with, we are leaving Atlanta. We’re not going to Atlanta. We are exiting Atlanta.
It’s probably been the most nightmare market in terms of tenants and quality of people than anything I’ve ever seen.
I have already sold. I have investors that are selling, and they’re not selling because they want to liquidate. They’re selling because they’re shifting their money to another market because we have all had it with Atlanta in terms of the amount of–
Just to give you an example. You’re following the herd and you’re just saying, “Oh, my friend. He knows. He went to Houston four years ago.” It’s a different market. Who says it’s relevant for you? Maybe, yes. I’m not saying it’s not. But maybe not.
That’s what I’m trying to work with investors and actually not come up with– I don’t have a blank answer. It’s a discussion. It’s different. I have investors. Their objective is actually to buy cheaper properties because they want to buy many.
On the other hand, some of the markets we are in, such as maybe Tampa, is not relevant for them.
On the other hand, I have investors say, No, no, no. I rather buy more expensive properties in a smaller number instead of many properties.” Then, maybe we won’t go to Indianapolis, but we’ll go to Nashville or Tampa. It’s all different.
If you have taken the time to sit down and decide on those points even in a very general, vague term, but at least you’ve been through a little bit of a mental exercise, it will help you tremendously.
Thank you for the question. Let’s see if we have any other questions coming in. I’ll wait for 30 seconds or so. Usually, it takes time for the questions to pop up.
If there are no other questions– Hello Igal. Thanks for joining. A little bit late. We’re almost done, but good to see you.
Wow. I’m looking at the names. I’m honored. There’s people that I haven’t seen or talked to for a long time. Good to see you guys. I’m not going to go through the entire list, but I see people that– Wow. Sahi is still here. Good to see you, my friend. It’s been a very, very long time.
I don’t see other questions coming in. I hope you benefited from today. I hope to see you in one our future live events or live in the room events coming up in the Bay Area.
Have a terrific weekend, restful weekend. If you want to contact us, by all means, do so however you feel comfortable: email [firstname.lastname@example.org], Facebook [facebook.com/reinvesting], Skype, whatever. We don’t really care.
Thank you for taking the time. Have a great, great weekend, everyone. Bye-bye.
Announcer: Congratulations. You are one step closer to success in real estate investment. You’ve been listening to Real Estate Investing Talks with Dani Beit-Or. To learn how SimplyDoIt can guide you through the real estate investment process and achieve nationwide success, visit us on the web at simplydoit.net. Thanks for listening.