Real Estate Investing for Beginners: Action Plan
“On the sands of hesitation, lie the bones of countless millions. Who at the dawn of victory sat down waiting and waiting died. So always remember to keep moving no matter how small steps you take, one day you will achieve your destination.”
― Dr Bhawna Sokta
If you’ve read all the books on real estate investing, watched all the videos on YouTube but are still confused and paralyzed by too much information, the solution is following a detailed action plan and taking small steps towards your goal.
Years ago, when I first started in real estate, I was in the same situation.
I had taken all the classes, read all the books and still, I didn’t feel ready.
Thankfully a wiser friend of mine gave me some advice I still remember because it has made such a dramatic difference in my business.
His words were: ” Knowledge without Action has Zero Value”
Maybe because I was ready to act at that time, I took this to heart, created a plan of action, and never looked back.
I am sharing this action plan with you. Use it as a starting point just to get moving. Motion creates more energy, unstoppable momentum, and excitement.
After you make the first step, everything becomes easier.
Isaac Newton’s first law of motion states that:
An object either remains at rest or continues to move at a constant velocity, unless acted upon by an external force.
Maybe our natural state is procrastination. We need an external force to move us into action. That’s why I created this action plan and the 90 Days to Your First Deal Challenge. Join for free or subscribe to our YouTube channel and participate in the Saturday Q&A.
Here is the action plan I used to get moving to manage and acquire over 300 rental properties.
Step 1 -Create a Vision
Finding your Big why is what’s going to keep you moving when things get tough or when you don’t see immediate progress. Dr. Sokta said it very well: “On the sands of hesitation, lie the bones of countless millions” Most people give up before they reach their destination, they give up just before “the dawn of victory.”
Step 2 -Set Goals
Knowing exactly where you want to end up in 5-10 years, increases your motivation and self-confidence. If you haven’t had a chance yet, watch my Thanksgiving Visualization, it’s part of the 90 Days to Your First Deal Challenge Playlist. Also, watch the Setting Goals and Removing Fears video.
Step 3 – Write down your Abilities and Liabilities
Take stock of your current situation. What do you have and what do you need to get started. This should include financial resources, connections and everything else you can think of that may be helpful to your real estate investing.
Step 4 – Find Your Dream Team
Who are the people who are going to help you get to your destination? Use the worksheet below and list them.
Step 5- Develop Your Comfort Zone
Decide on the locations you will focus on and start learning more about them.
Step 6 – Determine Your Key Buying Criteria
What type of property you want to buy, where and what is your max price
Step 7 – Search for Properties
If you haven’t had a chance, watch How To Value Properties and Where to Find Good Deals. This will point you in the right direction.
Step 8 – Run the Numbers and Make Offers
After you find a property that looks promising, run the numbers. Based on your buying criteria, if the property makes sense, make an offer. Repeat this until you find a property that fits your buying criteria and your offer is accepted.
Step 9 – Inspection
After your offer is signed by all parties, it becomes a contract. You have a certain timeframe to conduct the inspection and remove the contingency.
Step 10 – Revise Estimates
Based on the findings of the inspection report. You can use our rehab estimator to calculate what your repairs would cost.
Step 11- Run the Numbers Again
Does this property still make sense?
Step 12 – Renegotiate or cancel the contract
After you have the new estimates and the inspection you can approach the sellers with facts and renegotiate a lower price. If they say no, you move on to the next property.
Here is a link to the 90 Days to Your First Deal Worksheets.
Watch the Action Plan Q&A Video
This video is part of the 90 Days to Your First Deal Challenge
Action Plan Q&A Transcript
I found a duplex and made an offer. The problem is that both sides are occupied on a one-year lease and my plan was to house hack. How do I vacate one of the units?
You can start by offering them both cash if they are willing to move out. Explain that you want to move into one of the units.
Look at the existing lease the seller has with the tenants. The lease may have a clause on what happens if the property is sold. You should be getting that anyway.
What is the best way to get started with minimum risk?
The best way is to either house hack: buy a duplex, triplex, large house and live in one of the units or one of the rooms and rent the others.
Another way is to buy a house, live in it, rent it, buy another one, and repeat the process. I heard someone refer to this as house hopping, it seems like a good name to me. That’s how most people become real estate investors. This is a great way to do it because as owner-occupant your rates will be lower and if you live in the house for at least two years, you will be able to exclude up to $250,000 of the tax gain.
I found a house that can be used as a duplex, the basement has a separate entrance and can be rented. However, our agent is advising us to offer $20,000 over the asking price. Is it worth it?
It’s hard for me to say if it’s worth it if I don’t know anything else about it.
Something to think about is the cash flow if you don’t live in the house and have to rent both the upstairs and downstairs. Would your cash flow be positive? When you do this calculation be very conservative on how you estimate rent prices. 1BR apartment in a basement is not the same as 1 BR apartment in a building with amenities etc. The same goes for the upstairs.
Do you think it’s worth getting a real estate license if I am not looking to sell properties?
Cons: You have to consider the costs associated with being a realtor. Yearly you are probably looking at $700-$900 for membership dues, access to MLS etc.
Also, the time commitment to renew your license every two years.
Pros: Access to the MLS, easier to pull comparable properties, access to stats.
When you buy you get to keep the commission if you buy from the MLS.
When you sell you have more control and you save on commission.
This saving is only good if you work for a brokerage with a generous commission split. Otherwise, after you pay for the buyer’s commission 3%, 1.5% to your broker, you are only saving 1.5%.
You may actually do some transactions just because of your network, and that’s extra cash.
I am a handyman and I found someone I can partner on a deal. What would be a good partnership percentage if I am doing all the work and my partner is just financing the deal?
I think 50/50 will be a good split. However, from personal experience, I know that using private money or hard money lender is cheaper than having a partner.
I am buying a house, the value is $245,000. The current tenant pays $1500 rent. The seller agreed to finance it and is waiting for an offer.
I was thinking of offering $200,000 with $20,000 down. What do you think?
I don’t have all the numbers but if you use the 1% rule if you buy this house at $200,000 you should be getting at least $2,000 rent.