Your First Real Estate Investment
The time has come, and you’re finally ready to make the leap into your first real estate investment. This is an exciting time, but one that can be stressful AF! It has been about 6 years since I bought my first house, but I still remember the terror. I also remember calling my friend and asking him what I was going to do if I went broke, or worse, bankrupt. Obviously, this didn’t happen to me, and if you’ve been following along with me it won’t happen to you either. That is why I’m creating this content. I want to make it easier and faster for the next person to accomplish what I have.
If you’ve been following my material and taking action, you’re likely ready by this point, but there are pitfalls and emotional rollercoasters to manage along the way. Keep in mind that nothing is forever, most stuff is not as scary as it seems, and everything is fixable.
In this post, I’m going to walk you through setting realistic expectations, handling emotions throughout the process, and ensuring you make informed decisions.
If you want a more tactical step-by-step guide, I wrote a free e-book that you can get by going here. Let’s jump in!
Setting Realistic Expectations
Defining Your Goals
If you’ve been following along with me, you should have a solid mindset that you’re working to develop and strengthen daily. This will be necessary to keep you on track (and sane) during this process. You should have a vision for where you’re trying to go with your life and money and know how real estate fits into this vision. And you should have goals to keep you moving forward against that vision.
If you don’t take some time to go back through those articles and put these things together. It will make buying your first investment property much more defined and attainable.
Market Research
Understanding your local real estate market is key. Is it a buyer’s or seller’s market? What are the average property prices? For your first house, I strongly recommend using a real estate agent to locate the right property for you. It is critical that you get an experienced agent, and ideally, one that understands real estate investing and house hacking. If you don’t know anyone, you can find someone local by using the Bigger Pockets Agent Finder.
Share your vision and goals with them. They’ll be excited to help you as they understand your journey and can see clearly how they play into that. They’ll also be more impressed than your mom when you brought her that macaroni art. Most people are not that clear with themselves or others.
Budgeting and Financing
This cuts 2 ways. First, once you start looking at property (and who am I kidding, you’ve been scanning Zillow on your lunch break for 3 months) you’re going to be tempted to overspend on your budget. You did already talk to a lender and find out how much you’re approved for right? You also already have a financial plan in place for purchasing this property including budgeting for taxes, repairs, vacancy, CAPEX, and property management (if needed). Of course you do. Well, stick to that plan. Just like your first car, your first house should not be a luxury purchase.
The other way that this cuts is that it is scary. Unless you’re used to shelling out tens of thousands of dollars and taking on hundreds of thousands of dollars of debt, you’re likely going to feel like you’re faceplanting financially. Trust the plan!
Emotions in Real Estate Investing
Fear and Anxiety
It’s normal to feel anxious about your first investment. Fear of the unknown can be paralyzing. To combat this, educate yourself, seek advice, and remember that calculated risks are part of investing. Because I buy junk property and fix them up I buy investment properties with built-in equity. This helps if the market goes down. But for personal property, I’m putting the 5% down just like everyone else getting started.
So many questions pop up like: what if the tenant trashed my house, what if the market tanks, what if my house falls into a sinkhole that gets hit by an asteroid? Remember that everything is fixable and the worst-case scenario rarely happens. No matter what, you’ll be able to handle this. The fear is normal, but don’t let it hold you back. This is where mindset training comes into play.
Excitement and Overconfidence
While enthusiasm is a great motivator, don’t let it blind you to potential pitfalls. Overconfidence can lead to hasty decisions. Balance excitement with a healthy dose of caution.
This is where a good real estate agent is key. They’ll keep you from getting in over your head and build in escape plans if the deal goes south. Don’t feel obligated to buy a deal for any reason, even if it means that you may lose a little money in the short term. Paying $500 for an inspection doesn’t mean that you must buy the property. I’ve made this mistake and trust me, it is so not worth it. Stick to your guns.
Patience and Persistence
Remember that it is going to take a while to find the right property for you most likely. You may need to see dozens of properties over the course of several months and make 20 offers before getting the right property. When looking at things like a real estate investor there are many fewer properties than there are for normal buyers. Be patient and don’t lose hope. Others do this and you can to.
Making the Right Move
Due Diligence
Thoroughly research potential properties. Check for issues like property condition, local amenities, and neighborhood trends. Due diligence minimizes unpleasant surprises.
You should house-hack your first property, and this means that you’re going to be living there. It doesn’t have to be your favorite neighborhood as it is not your forever home, but it should be a place that is safe and fits into your lifestyle for the most part.
Seeking Professional Advice
Don’t hesitate to consult with professionals like real estate agents, attorneys, or inspectors. They can provide valuable insights and help you avoid costly mistakes. An ounce of cure is worth a pound of prevention. Spend the money now to avoid costly repairs. For instance, always get your sewer line scoped as part of your inspection.
Exit Strategy
Lastly, have a clear exit strategy from the start of your first investment property. Consider options like selling, renting, or refinancing if the market changes or your goals evolve. I’m an advocate of buying a house hack, living there for 1 year, and then moving out into the next house hack. Ideally on a 2, 3, or 4-unit building.
Conclusion
As you step into the world of real estate investing, remember that it’s a journey filled with opportunities and challenges. Keep your expectations realistic, manage your emotions, and make informed decisions. Each investment is a learning experience that brings you closer to your financial goals.
Don’t forget, there’s a wealth of resources available to help you on your journey, from books and websites to real estate experts who can provide guidance. Embrace the learning process, and don’t be afraid to seek support along the way.
Thank you for joining us on this adventure, and we wish you success in your first real estate investment! Please share your experiences and questions in the comments below.
About Tim
Hi, I’m Tim, and I’ve been navigating the world of real estate investing for 6 years and own over 7 figures of real estate. If you found this guide helpful, be sure to subscribe to our blog for more valuable insights and updates on real estate investing.
Additional Resources
- Check out my reading list of must reads for real estate investing and business.
- If you’d like to schedule a free call with me to review your real estate plans, click here.
