Getting Started in Real Estate for the Penniless - Part One
There's a hard truth out there about getting rich and it's this; if you're already living as if you are rich, then you will never become rich. That means if your credit cards have a huge balance and you're drowning in debt, real estate investing is not going to rescue you.
"But wait," you say, "those people on TV got out of debt and quit their jobs a couple of months after taking a course on real estate investing." I've seen those commercials too, but I tell you one thing- if those people on TV are real, then they are the very rare exception. It simply does not work that way.
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.
The trick is to learn what you're doing, and then accelerate your investments after you have built a base of knowledge and equity. It's not the only way to make millions in real estate...but it's the way that requires less money, has the least amount of risk, and induces the least amount of panic attacks.
I've always referred to my wife Julie as a saver. When we started out we only had $16,000. But that didn't bother Julie; she had just graduated from college and continued to live like a student. With all the extra money she saved, she paid off her student loans and continued to save any extra money. She wanted to go back to school for her MBA and she wanted to do it without getting into debt again.
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 took a lot of work on my part to pay off my credit card debt, but I did it. I then started to save a few hundred dollars every month. But the reward was worth the work, and we started to shop for our first investment property.
Thankfully, we had Julie's savings to help us with our first purchase, but if you don't have enough in savings, don't worry. There are ways to buy property without money.
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. Cash out retirement and other savings, stocks, and GICs
2. Equity in your home
3. A partner with cash.
Here's the brutal truth; if you can't handle your own finances, no partner with money will want to do business with you. After all, why should such a partner trust you? If he/she feels that you're inexperienced and drowning in debt, then your partner feels you just want to take his/her money and does not see any potential benefit to investing with you.
However, if you're in 'good debt' (like the kind that comes from student loans that you have been diligently paying down) and if you've done your research on real estate investing, then a partner starts to think differently about your debt. After all, you know how to control your money, so you won't waste his/her money. The potential partner feels that you can be trusted and that any risk to investing with you is slight.
You'll notice the difference; one person is full of 'bad debt' due to poor decision-making and the other person has 'good debt' and has shown that they make sound financial decisions.
So now you understand why controlling your finances also means controlling your destiny. Start spending less than what you make. If you're not sure if you do that, keep a spending journal for the next six months. Write down what you bought, the cost, when you bought it and then evaluate whether or not you really needed it. In no time at all, you'll have a pretty good idea of where your money is going and what you can cut out in order to save even more money.
I can imagine what you might be thinking - "but, Dave, I always spend a lot during the holiday season", or "we've been planning the trip to Europe for two years"! Don't fret- if you've saved up for those things, you deserve to do them. But, if you are going to end up going into debt for those things, you may have just discovered that you are a SPENDER, not a SAVER. If that is the case, you may not be ready to start growing your wealth and becoming a rich real estate investor. - 23223
"But wait," you say, "those people on TV got out of debt and quit their jobs a couple of months after taking a course on real estate investing." I've seen those commercials too, but I tell you one thing- if those people on TV are real, then they are the very rare exception. It simply does not work that way.
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.
The trick is to learn what you're doing, and then accelerate your investments after you have built a base of knowledge and equity. It's not the only way to make millions in real estate...but it's the way that requires less money, has the least amount of risk, and induces the least amount of panic attacks.
I've always referred to my wife Julie as a saver. When we started out we only had $16,000. But that didn't bother Julie; she had just graduated from college and continued to live like a student. With all the extra money she saved, she paid off her student loans and continued to save any extra money. She wanted to go back to school for her MBA and she wanted to do it without getting into debt again.
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 took a lot of work on my part to pay off my credit card debt, but I did it. I then started to save a few hundred dollars every month. But the reward was worth the work, and we started to shop for our first investment property.
Thankfully, we had Julie's savings to help us with our first purchase, but if you don't have enough in savings, don't worry. There are ways to buy property without money.
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. Cash out retirement and other savings, stocks, and GICs
2. Equity in your home
3. A partner with cash.
Here's the brutal truth; if you can't handle your own finances, no partner with money will want to do business with you. After all, why should such a partner trust you? If he/she feels that you're inexperienced and drowning in debt, then your partner feels you just want to take his/her money and does not see any potential benefit to investing with you.
However, if you're in 'good debt' (like the kind that comes from student loans that you have been diligently paying down) and if you've done your research on real estate investing, then a partner starts to think differently about your debt. After all, you know how to control your money, so you won't waste his/her money. The potential partner feels that you can be trusted and that any risk to investing with you is slight.
You'll notice the difference; one person is full of 'bad debt' due to poor decision-making and the other person has 'good debt' and has shown that they make sound financial decisions.
So now you understand why controlling your finances also means controlling your destiny. Start spending less than what you make. If you're not sure if you do that, keep a spending journal for the next six months. Write down what you bought, the cost, when you bought it and then evaluate whether or not you really needed it. In no time at all, you'll have a pretty good idea of where your money is going and what you can cut out in order to save even more money.
I can imagine what you might be thinking - "but, Dave, I always spend a lot during the holiday season", or "we've been planning the trip to Europe for two years"! Don't fret- if you've saved up for those things, you deserve to do them. But, if you are going to end up going into debt for those things, you may have just discovered that you are a SPENDER, not a SAVER. If that is the case, you may not be ready to start growing your wealth and becoming a rich real estate investor. - 23223
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, positive cashflow and massive wealth with tips like: How to find quality rental properties, finding and keeping great tenants, and easy ways to make more money with real estate.
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