If I Started Real Estate in 2024, I'd Do This.
In today's episode we dive into a three step process for real estate investing success in 2024, including making an initial investment, gaining valuable experience over multiple purchases, and taking skills to the next level with systems and specialization in a niche market and more.
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Key Takeaways:
The importance of taking action and gaining hands-on experience through initial real estate property purchases.
Starting small and affordable with one's first investments to minimize risk while learning.
Aiming for at least an 8% cash-on-cash return from investments.
Improving real estate investing skills over time through additional purchases and focusing on areas like deal analysis, financing, and property management.
Treating real estate investments like a business by implementing systems, building a team, and focusing on cash flow, appreciation, and cost basis.
Specializing in a niche market by conducting research on opportunities and becoming an expert in a targeted area.
About Your Host:
Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors.
Episode Transcript:
0:02
If you can get these three steps, right, you could build a massive amount of passive income from your real estate portfolio and probably never work again. In this video, I'm going to take my last 10 years of real estate investing experience and turn it into an easy actionable three step gameplan. For those of you that who are looking to get started in real estate investing these tactics work, whether you are absolutely brand new to the industry, or if you already own a few properties. So let's get to it.
Okay, now there are three key steps to cover each step builds upon the last to ensure your real estate investing success. Let's jump on it. Step one is make your first investment. First read all of these books. Just kidding, it would probably help you out. And if you want a reading list, let me know in the comments below. I'd be happy to put that together for you. But don't do that. Education is very important. But we first have the JUST DO IT phase. I call this the get your feet wet stage for new real estate investors. No amount of reading or education can replace tangible experience. But I have read all those books. That's why if starting today, I would focus on completing my first one to three investment property purchases as soon as possible, ideally, within the next 12 months. I know it may seem crazy, but it's entirely possible. The goal is getting over the fear of buying your first property and gaining that firsthand experience. Now of course, you never want to get into a bad deal. But we're not aiming for a home run here. A simple base hit would be just fine. I would start small and affordable resist overcomplicating things early on, maybe you can go with a duplex a single family home or a small commercial building that fits your current budget. This first step is really about getting that experience but also about building your track record of successful deals. We'll get to that later. To find potential starter properties. I would just hop into real estate listing sites like Zillow and LoopNet. Drive promising neighborhoods to spot for sale sites and work with an experienced agent who can notify you of deals before they even hit the market. But you could also take matters into your own hands by knocking on doors, sending out mailers or cold calling property owners yourself. Have your agent provide access to critical info beyond just photos like detailed rental and expense history. If you find the right residential or commercial agent to work with, they'll be able to guide you through the whole process to ensure that you're buying a good deal. Use your inspection contingency period wisely to uncover any potential issues early and surround yourself with a team that can help you get this done the right way. For financing, tap into low downpayment mortgage options like FHA loans and VA loans if you're taking the residential route of commercial explore Portfolio loans from local banks or credit unions, which can offer more flexibility than larger national banks. In today's market, you may also want to explore seller finance options, meaning instead of a bank carrying the data on the property, the seller what could be a real win win for both of you. If you do it right, I would try to get seller financing on every single commercial deal I do. You need to be able to run numbers to see what the potential returns will be on your investment. So check out the rental calculators on bigger pockets website to help determine what kind of potential returns these deals could give you I like to aim for at least an 8% cash on cash return each year. And that's a pretty good number to aim for when you're first starting out then submit offers on the properties that you like at the price that works for you. This is a numbers game, don't be worried about making offers that are 5% to 10% less or even lower than what the seller is asking. You never know what someone might be willing to sell their property for. And it doesn't take much time at all to submit those offers. They expect this part of the process to take around two to three months as you navigate the learning curve. Now don't obsess over optimizing your first few deals, the market analysis and number crunching aren't as important for you right now as just taking action. Again, you'll want to make sure that the property you're buying is hopefully cash flow and 8% each year and if it checks those boxes you're in the clear for now we can get into more intense deal analysis later on. Once you've gotten some more real estate experience. Expect some hiccups at first finding the right property and actually purchasing it will take longer than expected it always does. But embrace the inevitable learning curve rather than avoiding it. The more you are now the better you'll be for it in the long run. Compared to what I know today. I knew nothing when I bought my first commercial building. Now that's not to say that I didn't understand how much I would be able to rent the property for based on comps and my knowledge of that type of real estate or what it would take to manage it. But I ran those numbers literally on the back of a napkin, nowhere near the analysis that I perform on potential investments today, so don't overthink it. Double check the value based on comparable properties in the area and get that first one across the finish line and After a year or two of owning your first investment you have gained valuable insight into tenant relations maintenance issues financing regulations in your area lessons no amount of reading can teach. Then after your first purchase or two, you face a pivotal moment to determine whether real estate investing will be a casual endeavor or a serious focus for you. Casual means buying sporadically, whenever the mood strikes serious signifies a strategic effort to acquire at least one property per year. This decision is key because real estate rewards a consistently proactive business mindset. Casual dabbling just won't produce the returns that are possible with high level planning and commitment for me going the serious route was crucial to growing my wealth substantially over time. In fact, after I bought that first commercial property, I ended up buying three more commercial buildings that year. Once I closed on my first investment, I realized how easy it can be to pull these deals together. Once I'd actually been through it. That's step number one. Step two is to gain real estate investing experience. Here you'll complete your next three to five property acquisitions. The goal here is really honing your real estate investment skills across the board. This is when it gets really exciting. Learn to efficiently spot profitable deals before others snatch them up, become an expert at accurately analyzing deals and determining fair pricing. This is when you'll start learning and practicing your more in depth deal analysis skills, which is called underwriting. I have several videos on underwriting real estate deals and determining their returns and it's a fairly significant portion of my online course. But you'll want to underwrite a deal a day for 30 days doesn't matter if you think it's something you're going to buy. Just find a property and underwriting going through that process will give you the reps and skills that you need to quickly look at and analyze potential deals master how to secure financing even in changing markets, build relationships with lenders and start your list of potential Capital Partners for your deals. The deeper This bench is, the easier it will be for you to get the cash you need to do that next project strategize how you can add value or even force appreciation through renovations and by operating your properties better on renovations focus on high return cosmetic fixes like new kitchens and bathrooms or an exterior paint job and a new sign instead of any major overhauls. Paint flooring and updated lighting fixtures go a long way for both commercial and residential tenants got a patio or a garage, add square footage or divide these spaces up to boost your rents keep the property management tasks on your plate so you can get firsthand experience screening tenants filling vacancies quickly and maintaining high occupancy. Learning how to handle maintenance issues, legal challenges or regulatory hurdles on smaller projects will set you up the right way to deal with bigger issues later on. Once you have a management team actually in place doing everything for you. You'll also be able to record out the processes that work for you so that they can be replicated by this team later on. Treat your property's like a business, understand your numbers, intimately, your expenses, your reserves, cashflow set processes for collecting rent, addressing issues and maintaining the asset and constantly work on improving these systems. So they're always getting better. There are plenty of property management apps that you can use that will help automate a lot of your operations. Know your operations inside and out. Essentially, use this stage to expand your capabilities across the many facets of successful real estate investing. You're really building the foundation here. The more you know about this industry, the more people you know, and that know you The taller you can build your real estate investing career in the long run. At this point, I wouldn't worry about picking a niche quite yet focus on improving your skills across different property types single family homes small multifamily, perhaps even your first commercial investment experiment across promising asset classes to hone your versatility as an investor you'll naturally start to think about which direction you think you'll take at this time. And feel free to begin listening to podcasts, reading books, or having conversations with successful investors in those sectors
so that you can begin preparing yourself now expect setbacks, make occasional mistakes and learn critical lessons from each deal. They're gonna make a mistake now on a smaller project that to skip ahead a few steps and make that mistake when the stakes are a lot higher. Real estate investing is a marathon not a sprint. So set yourself up to run this race for the long haul. After about five to eight total purchases between step one and step two, you'll reach another critical juncture. Keep the phone Focus on learning and exploring or pivot to a systematic business approach. The focus of the systematic business approach is on implementing high level systems surrounding yourself with a team and running your properties like a CEO. Or of course, you could hire a CEO to run your assets for you. It's equally vital to build your team of specialized professionals. At this stage, your attorney, your CPA, your contractor, lenders and other experts. Surround yourself with talent that understands exactly how you like to operate, so you can move quickly on any opportunities even if you still have a day job. implement systems that allow you to operate at scale automate your rent collection, your maintenance requests, your operations outsource to proven vendors again, run your portfolio efficiently like a true business, not a new job. This unlocks your ability to achieve financial freedom through real estate by generating sustainable passive income. The more properties you acquire, the easier it is for you to treat this like a business because you get economies of scale, you'll have cash flow coming in from several different investments will be able to negotiate better terms from a property management company and you can justify hiring a bookkeeper and other roles that will take you out of the day to day and limit your time commitment to a weekly or even every other weekly basis. If you want to maximize your potential embracing real estate as a business is an absolute must when you reach this stage. Okay, so having made that mental and organizational shift, we're ready for the final step. Step three, take it to the next level, it's time to really play ball. Now at this point, we need to actually understand the real estate investing game on a deeper level and our first 10 properties or so we've just been trying to buy deals that seem profitable, but to really grow in expansive rental portfolio that can change your financial life, you need to grasp the key factors that make an investment property succeed or fail. There are basically three core elements and only three that make a property a solid investment, get these right and your real estate business will take off these three crucial factors are cashflow, appreciation, and cost basis. First cashflow a property's monthly cash flow is the rental income minus any expenses like the mortgage taxes, maintenance, etc. Maximizing cash flow means your holdings provide positive monthly income. So your properties are not only covering their expenses and paying down your mortgage, but you're also making a profit. Next is appreciation. You want assets and areas poised for strong value growth over time, appreciation builds equity that can be tapped into later on or profit when you sell properties appreciating value when they're in growing desirable areas where the demand for real estate is high. This could be within an emerging neighborhood on a major corridor near downtown or simply in the path of growth of a city. Finally, cost basis. This is the price you pay for a property compared to its actual market value. The lower your cost basis, the higher your potential profits. There are many ways to find properties that are below market value. If you understand how to really analyze these deals, I bought a 2200 square foot commercial building for about $430,000 That ended up appraising for $650,000 because we were able to get a lease signed with a tenant prior to closing you can also find discounted properties from sellers that just want to exit the market or maybe the property is selling for today's value. But as a higher and better use because of zoning seek out deals that allow you to optimize and balance these three elements based on current conditions and your investing strategy. Always run the numbers through this three pronged lens. But identifying the right properties takes proper market research you need to pinpoint where the most lucrative investment opportunities exist now and in the foreseeable future. Study factors like demographics, job growth, transportation projects, permanent volume and overall housing demand. Become an expert on neighborhoods showing signs of upward mobility drive potential target areas extensively and absorb the details of those neighborhoods. Combine your market analysis with your own passions skills and portfolio makeup to identify your niche. specialization is key to consistent success. For instance, you may decide to focus on fixing flip homes in emerging neighborhoods. Or maybe you're gonna go with self storage facilities near apartment complexes or maybe you're more into classy apartment buildings near universities laser in on the niche that's best aligned to your strengths and your competitive advantage become the absolute authority in that market. When I first started investing, I decided to focus on a neighborhood East Nashville there weren't many commercial real estate brokers or serious investors focused on this side of town which gave me my blue ocean to start getting deals done. Everyone knows that I'm the East Nash guy because I talk about it all the time. And that has brought me a lot of deals you can do the same with any niche that you choose. You also need an angle for security deals before the competition. leverage relationships with brokers deal directly with sellers close on your properties quickly get creative with the financing, find what makes you shine and gives you that edge on any other investors that you may be competing against. At this point, you should already have your team of specialized professionals pulled together that can help you evaluate these deals quickly so you can move fast. When I find a potential deal. I run it past my brokerage team that determine how much the property could lease for and how quickly it can be rented my CPA to get her input on the financials by property management team for their input on the day to day operations and my project management team if there's any build out or construction that needs to happen, all of this can be knocked out in a single day. If your team is set up properly. Getting smart in these ways is how next level investors consistently profit while amateurs spin their wheels chasing deals, think big picture, but act on the small details. And if you're serious about accelerating your commercial real estate portfolio, I have an in depth online course that teaches you my systems, the exact same systems and processes that I've used to acquire over $50 million in real estate so you can scale like a pro. The average student buys their first commercial property in about nine months. Despite having little to no commercial real estate experience. Click the link in the description below to learn more. Okay, let's do a quick recap of what I would do if I was getting started in real estate today. Step one, just get going and make that first investment. Step two gain first hand experience and improve my skills and step three, take it to the next level will Systems team and niche master these three phases while making the two critical mindset shifts and you'll be primed for real estate investing success even in today's changing landscape. So there you have it a start to finish roadmap for real estate investing success in 2024 I've got hundreds of videos on real estate investing on my channel as well as my real estate investing course and one on one coaching Be sure to check those out as well. If you want to go much deeper on your journey don't forget to smash that like button if this video brought you value and now that you know the three steps to take to get started investing in real estate in 2024. You need the knowledge to actually pull these deals together. The first skill you need to have is the ability to find solid deals. So watch this video next
In this episode, we'll discuss best practices for structuring real estate partnerships, including the importance of defining roles, negotiating equity splits based on each partner's value, and considering alternatives like debt financing to avoid unnecessary partnerships and keep more upside for yourself. Common pitfalls like failing to properly vet partners are also highlighted.