Read This Before You Quit Your Job!

Many real estate investors come into the business with dreams of doing 4-10 deals per month, quitting their jobs, and making big money for a few years before retiring to the beach.

In my experience coaching hundreds of real estate entrepreneurs, I have found that real estate can be a very good long term investment, or it can be a full-time business, but it’s not a get-rich-quick plan by any means.

Like many other recent investors, I got started with my investing after learning from the gurus out there who teach folks like us what to do to make money with no cash and no credit.

Emily Starts in Real Estate…

As a college graduate working a $10-an-hour part time job, I certainly fit that description of low-income investor and I followed the directions and began acquiring property "no money down" using Lease Options and Subject To financing. 

I have to say, it worked!  It was harder than I thought it would be to find and acquire houses with good numbers, but as I built up my portfolio of rental homes, I gained a ton of business experience and learned that just because you CAN buy a property doesn’t mean you SHOULD.

I bought a number of skinny deals that didn’t end up working out, as well as some great deals that have done very well and made me lots of money over the years.

The biggest challenges to this business model are:

1. You need to find motivated sellers, that takes a lot of time, a lot of money, or both.  Most big-time investors I know spend at least $500/month on their marketing.
2. If you are going to hold the property long-term, it helps if it cash flows.  This can be hard to find in the expensive markets.
3. If you are going to "flip" property, with or without rehabbing it, you have to find properties with a lot of equity… through negotiating with the owner of a home with equity, or through creating that equity by negotiating with a bank on an REO or short sale.  With all the refinancing going on lately, and the low appreciation rates in the areas I was working in, this was relatively harder to do, for me.

Building Speed in Real Estate

As I increased my real estate holdings, my relative success brought me to the attention of one of my mentors and I began working for his company, teaching other students to replicate my success.

As my contacts and experience grew, I began working on bigger and bigger projects.  My first commercial deal was a single-tenant office building that my partners and I bought with owner financing.  We got 95% financing from the owner, and our accountant chipped in the remaining 5% down in the form of a 2nd mortgage, so we were 100% financed.

From there we bought 2-acres with a car repair shop on it, apartment buildings, raw land and a giant 950-acre parcel with office and manufacturing space on it.

All of this reflected quite nicely on my balance sheet, but I quickly realized that it wasn’t bringing in the cash flow that I would have liked.  I was building wealth, but not taking home grocery money from my properties on a regular basis.

The Ah-Ha Moment!

This cash flow crisis was a huge revelation.  That’s when I started to put together the pieces of the puzzle.  The big thing I realized was that it’s hard to pull a lot of cash flow out of property that’s 100% financed, no matter how big the property is.  Rather than attempting to solve my cash flow needs by buying bigger and bigger properties, I needed to do something to produce INCOME with my time.  This would allow me:

• to have a regular source of income and
• to have bigger chunks of cash available to invest in real estate. 

Properties bought with a little money down can and do produce excellent cash flow!  I just needed to build up more cash.

I Needed To Add "Business" to my Business Plan

That’s when I took inventory of what I was doing that was generating cash on a regular basis.

1. I had a web site about dogs that was generating several hundred dollars per month that I had spent very little time maintaining in the last few years.
2. I was doing some coaching on a regular basis for students who were getting started with real estate and
3. I was speaking from stage.

Of these activities, it was hard for me to summon up the gumption to keep working on the dog web site, since I didn’t have a dog any longer.

I really enjoyed coaching and speaking from stage, so I wrote a book – Keep the Change: 25 Tips That Make "Cents" for  Your Financial Future – and began sharing the message of financial fluency, real estate investing and other fundamental principles with other people eager to get a leg up on their finances.  My partners and I created a web site for this purpose called www.TheREALWealthCompany.com and sold over $100,000 worth of coaching through that company in its first year.

I also have decided to get my realtor’s license (something new!) so that I could work with others in a consultative basis who are looking to buy and sell real estate.  I love the topic, and I am eager to learn the business systems that the pro’s use to make deals happen on a regular basis.

The Wrap-Up

If you are considering getting started in real estate, do so!  Just make sure you have realistic expectations about its role in your portfolio.  If you want to get started "flipping" property – it can make a lot of money if you have time to devote to hunting down the deals (maybe 1 in 20 or 30 that you make offers on will work) and getting them resold.

If you have a day job, keep it, learn to live on less, and invest the excess in real estate.  With an equity position in good real estate deals, and a little appreciation over time, you should be able to see the type of return in 10-20 years that will make early retirement a possibility.

Thanks for being here!

Emily

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