How I'd Invest in Real Estate From Scratch (in 2024)

Interest rates are at their highest point in decades and home prices are still going up. So you may be thinking, does it make sense to even get into real estate right now? As an investor, I've always talked about the benefits of real estate because I've personally seen my net worth grow significantly by buying properties. But times are different now compared to when I started. So what if I was in your shoes and had to start all over today? What would I do? So in today's video, I'm going to share with you my tips on exactly what I would do to start investing in real estate in 2023. If you guys are new to this channel, my name is Sean and I love real estate. My wife and I own 34 units spread across different states in California, Georgia, Texas, and Florida. And most of our properties are just simple buy and hold rentals, meaning we buy them and rent them out to tenants on a yearly basis, giving us a nice passive income without too much hassle. But like I mentioned, times have changed and the strategies that we use to build a portfolio might not work the same way for those of you who are just getting started. And the biggest reason for this is high interest rates. They make it much harder to make a profit because a large chunk of your monthly income will go straight towards your mortgage payments. But here's the good news. It's not game over for you. Real estate investing is still possible in this market. You just need to make some tweaks to your strategy. So let's get into it. Well, the first step is to make sure that your finances are in order so that when you come across investment opportunities, you're ready to qualify and buy rental properties. So let's say I was starting from scratch and I had no savings and no credit. The very first thing that I would do, even before considering real estate, is to set up my finances so that I can buy a property successfully. This means developing good budgeting and saving habits to gradually build a small nest egg that I can eventually use to buy real estate. And the truth is, real estate isn't necessarily cheap. For most people, buying even one home is the American dream. And to buy more properties at rentals is something that's even more out there and unthinkable. So you need to work really hard and save before you can get into real estate. So as an example, if you want to buy a property that's worth $150,000, the bank will typically require you to contribute 20% as a down payment, which would be $30,000. Also, to get a loan, you'll also need a good credit score. Most lenders need a minimum score of 620, but you'll be getting the best rates over 740. So with increased housing prices and increased interest rates, you need to do everything that you can to lower your interest rate. So do what you can to improve your score before even applying and trying to buy your first property. So my second step to start real estate investing would be to surround myself and fully integrate into a community of real estate investors. Real estate is not as common as simply investing in stocks or saving money, and there are fewer real estate investors compared to these other areas. So this can make it intimidating to handle everything alone. So I highly recommend taking the time to explore local meetup groups or trying to attend conferences available to you. So by doing so, you'll be able to fully immerse yourself in the community, and it helps normalize the unfamiliar aspects of real estate. Now a great starting point is just going to meetup.com, where you can search for local meetups. So even if there's some that you can't physically attend, there are numerous online meetup groups, and especially since the pandemic, which take place on platforms like Zoom. Now keep in mind that most of the bigger conferences are often in these larger metros and larger cities, so you may need to pay a few hundred dollars more to travel there, you know, pay for your stay, pay for your flight, and pay for your food while you're there as well. Some of my favorite real estate investing conferences have been SM Summit, hosted by Jay Martin, the Bigger Pockets Conference, hosted by Bigger Pockets, Rubicon, hosted by Dustin Heiner, and Limitless Expo, hosted by Target. If you're new to real estate investing, I think it's really worth your time to attend these kind of conferences because you're going to gain so much knowledge in such a compressed amount of time during these sessions, and you can take that knowledge home and use it to your advantage. Now that being said, you have to be very, very careful with choosing what meetups and groups and conferences to go to, because while many great groups exist, some only exist just to take your money. So in general, be careful of groups that feature high-profile celebrities who have nothing to do with real estate, since they're probably just there to sell expensive mastermind groups or courses that may cost tens of thousands of dollars. If you're just starting with real estate investing, I recommend not spending tens of thousands of dollars on these programs because it may be better to just take that money and invest it into actual real estate and learning all the lessons yourself. Step number three is to figure out your target market. Now, figuring out your target market is one of the most important steps for real estate investing. And there's a saying that goes, you know, you can change your home, but you can't change the neighborhood. So does that mean that you need to invest where you live? No. When I was first getting started, I was living in California, and I was making a very decent salary there, but there was no way that I was going to be able to buy another property near mine as a rental. Prices in the area were just so high that even if I was able to buy a property, it would not positively cash flow. I would be losing money every single month. So I started looking out of state. Now, again, unfortunately, many of the markets that I started investing in have matured, which means that I can't go back and buy properties in those areas because the prices have increased so quickly that the numbers don't make sense anymore. So if I had to start over, I'd need to redo all my research and find a new market that makes sense to me. So to just simplify things and just get started, I would go to meetups and just listen to where other investors are investing. Pay attention to locations that are commonly mentioned. Now, again, the downside to this kind of strategy is that since everyone is talking about it, you're probably going to be entering a more competitive market. So that means that other people like you, who potentially have more money, may be looking at the same deals as you. Now, alternatively, you can do your own research. However, this requires more time and effort, but it's well worth it because in the future, you'll be able to get deals without having to go through a lot of competition. And then these deals can possibly give you good returns. So what we like to do is visit websites like citydata.com and search for cities that we're interested in. We look at different metrics, such as the population growth over the last 20 years, income growth over the last 20 years, current home prices, average rents, and crime rates. We then compile all this information into a giant spreadsheet. And then from there, we look at all the different cities that we're interested in and we decide which markets to take a deeper look into. Another thing that you can do is take advantage of your local market knowledge. So for example, there are people that invest in areas that aren't doing so well overall, but because you know the markets so well, they're aware of which streets to invest in and which ones to avoid. So they're also up to date with any developments that are coming their way. Now it's very crucial to do your research and find a market that works for you. Since interest rates are high right now, you need to make sure that the properties can at least break even or be cashflow positive. If you guys need any help with analyzing deals, you can check out this video that I made where I go over how to do market research and how to use a property analysis calculator to determine if a deal is good or bad. Next step is to start assembling your team. And when I say team, I mean you need to find a reliable source of deals. So this can be either a local real estate agent or it can be another real estate investor who can provide you with deals such as a wholesaler. You also need to find a good property manager who could take care of your properties if you plan on holding onto them in the long-term. These property managers will assist you with tenant management, providing insights on rental-friendly neighborhoods, and handle any maintenance issues that may arise, saving you the hassle as a landlord. Lastly, you need to establish a connection with a lender who can provide you with a loan in your target market. So as an example, if you're based in California, but you want to buy properties in Georgia, you can't just use any lender you want, right? You can't just use your favorite lender that got you your home here in California. You need to find a lender who is licensed in Georgia. So talk to them, determine the affordability based on your income and savings, ask about their rates and types of fees they charge, and then compare apples and apples and choose the one who has the best terms, best costs, and the best services. So once your team is in place, you can start looking for deals. Now it's crucial to follow this sequence because if you find deals first before having a team in place, you may end up with a bad deal or you may end up in a situation where you can't even buy the property in the first place. But make sure you have your team set up before you start looking for deals. So it's true that investing in real estate in today's market may seem very daunting. Now while interest rates may be high and home prices are going up, there are still ways for you to start your journey. Of course, the game has changed and the strategies of the past may not work as well today, but that's the beauty of it. You have the opportunity to adapt, innovate, and find new ways to make real estate work for you. In our case, we started buying properties with more cash upfront compared to before. This allows us to get lower interest rates on our loans and ultimately pay less in mortgage because we're putting down a larger down payment. We're also changing our real estate investing strategy where we're going more into furnished rentals instead of just long-term rental properties. This way we're getting more cash flow, which means we can pay off more of our debt. There's always going to be ups and downs on your journey, but remember that every successful real estate investor started somewhere. They've all faced setbacks, they've all made mistakes, but they never gave up. Success in real estate is not a matter of luck, it's a result of hard work, dedication, and a burning desire to create a better future. So if you got to this point and you still don't know what to do next, then you're in luck because we're hosting a free rental property masterclass. We go over the fundamentals of buying your first rental property and we'll talk about why real estate beats other investments, the steps to take when investing, and the blueprint to grow your wealth. You can register for the free class with the link down in the description. Thanks for watching. I appreciate you and I'll see you next video. Take care.