BiggerPockets Real Estate Podcast - 11: The Ultimate Beginner’s Podcast For Real Estate Investors

Episode Date: March 28, 2013

Getting started with real estate investing can seem overwhelming, but on today’s episode of The BiggerPockets Podcast, we are going to walk you through the entire broad overview of how people actually make money in the real estate investing field – and how you can do the same. In this unique episode, Josh and Brandon will walk you through the steps to take before getting started, choosing your strategy, ideas for finding properties, tips for getting financing in order and much, much more. Grab a pen and paper and get ready to take notes – this episode is jam packed with over an hour of directly actionable and educational information. Read the transcript of Episode 11 with Josh and Brandon here. In Today’s Flipping Podcast, We Cover: The first “personal” decision you need to make before investing. Working full-time vs. part time in real estate investing. Josh Dorkin’s real thoughts on “gurus.” Investing when you are broke. Six steps to overcoming analysis paralysis Ten unique niches and three solid strategies you can invest in real estate with. Brandon’s favorite “team member” that helped cut 90% of his work out To partner or not to partner? Pros and Cons 13 ways to finance your real estate investments Links from the Show Ultimate Beginner’s Guide to Real Estate Investing BP Podcast 006: Investing While Holding a Full Time Job with Arthur Garcia The BiggerPockets Blog The BiggerPockets Forums BP 004: Commercial Real Estate Investing With Frank Gallinelli BP 009: Using Hard Money Lenders to Grow Your Business with Ann Bellamy Lease Options (Aka Lease Purchase AKA Rent-to-Own Homes) Books Mentioned in the Show Getting Things Done by David Allen The Book on Flipping Houses by J Scott The Book on Estimating Rehab Costs by J Scott Rich Dad Poor Dad by Robert Kiyosaki Four Hour Workweek by Tim Ferriss Tweetable Topics: “You don’t need to make real estate your career in order to build wealth in real estate.” (Tweet This!) “There has to be money involved when investing in real estate… but it doesn’t need to be yours.” (Tweet This!) “Real estate takes time, planning, and patience.” (Tweet This!) “People like to fall down… and people like to sue. Get good insurance.” (Tweet This!) “You’re not a complete puzzle – there are pieces you are missing. Find those pieces.” (Tweet This!) “A friendship founded on business is a good deal better than a business founded on friendship.” -John D. Rockefeller (Tweet This!) Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast, show 11. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online. Hey, everybody. My name is Josh Dorkin. I'm the host of the Bigger Pockets podcast here with my co-host.

Brandon Turner. What's going on, Brandon? Hey, not much, Josh. I'm just on a little road trip across the great state of California. I know, I know. It sounds like it's been a lot of fun. You've been doing some exciting stuff, seeing lots of cool pictures. So congrats on the great trip. Hey, thanks. Yeah, it's been fun. We actually had a meetup with a bunch of bigger pockets people from Southern California. So a little shout out to them. Thanks everyone for showing up to that. And those who couldn't make it, you missed out. Maybe next time.

Maybe next time. Yeah, that's cool. That's cool. Yeah, those meetups are great. And, you know, I think one of the coolest things about BP, and this will be my quick tip for the day is, you know, if you're a local person, there's no great real estate groups or anything, set your own up, make your own group,

set up keyword alerts on bigger pockets for your location and get together with those local people and do meetups and get together because there's nothing like one-on-one networking. What do you think? I would agree 100%. I've been meeting actually with a few people lately from my area. It's just fun to kind of bounce ideas off each other and learn more. Absolutely.

Absolutely. My other quick tip actually has to do with today's topic, which is the BiggerPockets Ultimate Beginners Guide, is this fantastic beginner's guide that we put together. Brandon and I worked for months on this thing. And you can find it at biggerpockets.com slash UBG. You'll also find a link to it on the show notes at biggerpockets.com slash show 11. Anyway, that's my beautiful segue to the topic of today's show, which is the ultimate beginners podcast.

Podcast. Podcast. Podcast. So today we're going to do something a little bit different. We're going to talk about this beginner's guide and getting started. So let's let's do something. So let's do it. And I just want to make a quick note. This is the beginner's podcast. However, if you are not a beginner, there's definitely going to be a lot of good actionable information in here that you can learn from. So definitely be sure to check it out.

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Amazon gift card. That's bill.com slash bigger pockets. And without further ado, I want to get started on this, the ultimate beginners podcast. So Brandon, everybody gets started somewhere, right? We all have a start. And ultimately, before we get started, the one thing that we really need to make a decision on is why why invest in real estate? So let's talk about a couple quick reasons why people tend to invest in real estate. Sure. So I know for me, you know, I wanted financial freedom. Like that was the

big thing. I thought that was great. I know some people do it for they want tax benefits. I know some people do it for leverage. They want appreciation, whatever. I mean, there's a lot of different reasons people invest. So definitely, yeah, I mean, what's your reason? I guess that's the first thing you need to figure out is what are you trying to accomplish because if you don't know what your end game looks like, you're not going to know how to even start. And of course, that decision is a personal one. I mean, that's the bottom line. I mean, there's no one reason that fits everybody and there's no one investing style that fits everyone. So of course, you need to go through and figure out why you're doing it, right? Correct. 100%. Yeah. And, you know, a lot of people

wonder, they see bigger pockets people who work full time in this and they wonder, you know, do I have to work full time? So what do you think, Josh? Do you have to work full-time in real estate? As an investor, well, no, I mean, you can either be a full-time real estate investor or you can definitely do it on the side. That's one of the big topics. And we actually did a podcast a couple of weeks ago with Arthur Garcia about investing while working a full-time job. And it was thus far as been our most popular show. So, you know, I know this is really a popular topic.

So, you know, you definitely don't. That was show six, as Brandon is popping it up on the screen here, letting me know. That was BiggerPockets.com slash show six. But no, listen, I mean, you don't need to make real estate your career in order to build wealth in real estate. There's lots of things you can do. You can invest on the side. There certainly are advantages and disadvantages to both. The advantages of investing while working, you know, if you're keeping.

your day job, you've got cash coming in from your job, so you can use that to reinvest into your investments and you can, of course, grow your portfolio more quickly. You've also got that stability of the job and you're not worrying where your next dollar is coming from. So, you know, there's definitely that peace of mind from having a job and the income that comes with having a job as well helps you expand your portfolio more quickly. Yeah, and definitely one thing that's been helpful for me over the time is whenever I have a job, you know, I've gone on and off a few times. Getting bank financing is so much easier when you have a job.

I mean, imagine walking to a bank and say, hey, I don't have any job or any income whatsoever. I need a loan. They're just going to laugh at you. But when you go in and say, hey, I got this income coming in every month, I mean, people underestimate that power. Absolutely. Yeah, bank financing at three and a half, four and a half percent is so much better than paying a hard money lender, 12%. We'll get the hard money later, but yeah. So definitely don't feel bad if you have to work a full-time job. I always tell people, do something you love to do. If your passion is flipping houses, then maybe flip

houses, but you don't have to go full-time. Yeah, yeah. And they are all going to laugh at you anyway, they are going to laugh at me anyway. That's all good. But, all right, so there's definitely a lot of different ways that you can invest in real estate while you keep your day job, including partnering on a piece of property. You can actually serve as a private or hard money lender. You can invest in notes. You can do buy and hold property and actually hire out property management. There's definitely lots of options, and we'll get into those a little bit more. But the bottom line is ultimately working a job is great, and it does give you the opportunity to invest and you do not have to be a full-time investor, as I think a lot of novices think you do.

There's certainly opportunity, and I'm assuming we're totally in full agreement here, yeah. 100%, so. 100%. Yes. Well, go ahead, Brandon. Let's move on to a great topic here. Yeah, let's talk about gurus a little bit. They're a popular topic on Bigger Pockets.

They are indeed. So I actually got started. I mean, very, very early. The thing that got me like intrigued by real estate was actually watching late night TV, you know, trying to sleep. And you'd see the commercials, you'd see the flipping shows. And the gurus, they do motivate. I mean, they get you fired up when they're sitting in there convertible with two women beside them and driving down, you know, the fast lane to freedom or whatever they want to call it. Absolutely.

Yeah, it's motivating. And I know I would say 90% of people out there are probably we started by seeing that. image and thinking, well, that looks cool. I want that car. Yeah. No, definitely, definitely. And I think, look, bigger pockets got started. Partially, I will tell you that, you know, when I first started investing, I learned from, I didn't learn, but I was given a course from one of these guys. And I looked it through really quickly and was like, okay, got it, cool, that's great, moving on. And, you know, here's the thing.

A lot of people think I'm this deathly anti-gourou guy and bigger pockets is totally anti-gourou. And, you know, here's the deal. What we kind of stand for is that people can get through this and can help one another and succeed without paying somebody thousands and thousands of dollars and giving away, you know, their life, half their life and they're first born to some guru who is literally in the business of upselling them and upselling them to the next thing.

You know, most of these guys, I'm not going to say all of them, but these guys, their business is to sell you and to sell you more and more product and to get you into these funnels where you're just buying and buying and buying. And, you know, ultimately, I believe that instead of spending $10, $20, $30,000, $50,000 on some guru whose job is to... sell you products, you can take that money and actually invest it in real estate. And so, you know, that's kind of where the line is. We like people to know and understand that, you know, the gurus, their goal is to sell you. And we just want to make that clear. And really

quickly, you know, just going to talk about them and clubs and things like that. A lot of real estate clubs and websites and things like that who are promoting gurus, they may, you know, make money by selling these products as well. So you'll get approached by somebody and they'll say, hey, listen, I've got this great product. I'm going to sell to you and we'll give you 50% of everything where I've got a great boot camp and we'll give you 50%. Well, so you're incentivized by promoting that stuff and selling that stuff. There's a lot of real estate clubs and groups who make their money by just promoting and selling that. So even if the quality of the stuff isn't good, your incentive is, well, I can make a ton of money by pitching it and promoting it. And so that's why there's so many

people pushing this stuff. The quality, some of this stuff might be good and a lot of people do need that personal attention. So we're not saying it's not for everyone. It works for some people. It certainly does. And we just want people to be aware and be careful before they go and spend their money and do your research and do diligence because certainly folks can learn and be successful after spending a little bit of money on these gurus. But I truly believe that most people don't need it. There's other ways to go, and we'll talk a little bit more about that in education. Speaking of money, let's move real quick over to do you have to have money to invest in real estate? I mean, the gurus, the late night guys, I used to see. I mean, it was, you know, no money down

investing. So that's a question. A lot of people come because they don't have money. That's why they want to invest in real estate because they want to make money. So the question is, do you need money to invest in real estate? And, you know, my answer would just be you have to have, there has to be money involved to invest in real estate. That doesn't have to be your own money, though. No money down just means none of your own money down. So there are all different ways to do it. I mean, wholesaling uses little money.

You might use marketing dollars, but you can use partners. There's lease option strategies. You can use low-down things like an FHA loan, home equity loans, lines of credit, private, hard money. I mean, there's a lot of different ways you can go. USDA, VA loans, lots of guys. government insured loans and buy multi-family properties where you can live in the properties. There's lots of cool things that you can do with little money.

Yeah. And I mean, even more than that, even if you don't have money, you can go work in the real estate investing field. And you could be a real estate agent, you could be a construction worker. You could just be a temp working at a, you know, real estate company. There's a lot of different jobs that are in the field that can give you experience. They can give you the contacts you need. They help you teach the business and you're making money while doing it.

So you don't have to necessarily quit your job today and go. it would be a house flipper or go, it would be a wholesaler. There are ways, if you don't have any money, that you can start saving that money by having a job in the field. And the beauty of that is, of course, you're learning the trade while you're at it, right? So if you're an agent or a project manager

or a mortgage broker, you name it, you're getting firsthand experience in the industry. So you're learning what it's all about. You're building your contacts, as Brandon said, and you're really expanding your knowledge base. So ultimately you can start in balance. at some point thereafter. And that's a hard pill to swallow for people, I think, because you know, they want the get rich quick thing. They want to be making money right now. And I don't

want to have a job for two more years to learn the business. I want to be making, you know, six figures this month. And yeah, definitely real estate is not a get rich quick scheme. I mean, there are people who have done it. I mean, I'm not going to lie. There are people who have made millions of dollars, you know, a year. But that is not the rule. That's definitely the exception. Yeah, especially for the new people. I mean, the, you know, again, and I'll be done harping on this in a second here. I mean, the get rich quickie stuff, I mean, real estate takes time. It takes patience.

You know, you really, it takes planning in particular. You really, really want to plan and map stuff out. So, you know, don't get into real estate. If you think you're going to get rich tomorrow, you know, stop listing, close your account, on our site and go find something else to do because you're not going to get rich being a real estate investor in three months, six months. It's not going to happen. I don't care what any guru tells you. It's just not going to happen. On the other hand, if you do want to build a portfolio, if you want to build up long-term wealth, and if you want to do it slowly and methodically,

and you want to do it right, then it's absolutely a great way to make money, just like investing in the market. If you do it appropriately, you're going to do well. So, it's not again take your time do not rush it because doing that is just a quick way to get yourself in trouble real estate is not a get rich quick scheme let's say it together brandon however it doesn't necessarily either it's not like it's going to take you 50 60 70 years to make money in real estate so i mean if you're smart about it like i don't believe it takes it's not going to take you two or three decades to get into it. If you're smart, which is what we're talking about today, then you can get into it. I mean, I like to think, I don't want to throw numbers out

there necessarily, but in a shorter period of time, you should be able to find at least a career, if not financial freedom. So speaking of being smart, why don't we talk about education? Why don't we talk about education? How about that? Yeah, that is actually chapter two of the ultimate beginner's guide. So let's talk about your real estate investing education. Yeah, yeah, yeah. Well, so I guess the first and foremost thing is, you know, how do you learn? How do you get educated?

How do you find out about real estate investing? Well, for one, you keep listening to our podcast. Yeah, yeah. Yeah, yeah. Number two, ultimate beginners guide, check it out. Yep, UBG. UBG in the house. Of course, check out bigger pockets.

That's another source. Beyond that, there's the basics. You know, you got your books, bookstores, have tons of books. There's free e-books. There's things on the Kindle. Audible.com. You could listen to audiobooks.

Blogs are an incredible source for real estate investing in knowledge, the Bigger Pockets blog. And we'll have links to it. I think it's over 4,000 articles now. Yeah, it's crazy. To help you learn. There's tons of other great blogs,

and you could learn a ton from them. mentors is another great way to get an education. As I said before, podcasts. Ours is one that we definitely want you to listen to, but there are certainly others out there. If you go to iTunes, you can find other real estate podcasts to listen to. So there's definitely a lot of sources of information. Is there anything I'm forgetting here? I'm sure we are, but that's all right.

We got only an hour show. So how about we go to something that everyone loves, and that's math, because math is fun, right? I actually used to be the president or co-captain of my high school math league where we actually did math for fun. He's got a pocket protector, guys. He's wearing one right now. I'm watching him on the video. Brandon's got the geek protector. That's a cell phone.

Okay. Call it what you will. All right. So there's a few really simple math things we're going to go over. First of all, this is really basic. Income is the money that you get. So you rent a unit for $1,000 a month, and they pay $25 for the garage. That's $1,025.

Real simple. $1,025 is the income that you're making. Correct. That's the income. Next is expenses. Those are the things that cost you money. So if you've got a garbage bill for $50 a month, or if you've got a loan from the bank for $500, those are expenses. Electric bill, water bill, you name it, you know, tree maintenance, tree trimming, long, vacancy, property management.

lawyers. Yes. It all adds up and they're all expensive. Even evictions and the vacancies. I mean, the vacancies, a lot of newbies don't calculate. You got to put that into your formulas when you're figuring out your expenses. Definitely. So then here comes the complicated math.

We got cash flow. Cash flow is just how much money left over in your pocket when the month is over. So basically you take your total income minus your total expenses. And that's your cash flow. And remember, expenses aren't just the actual expenses that happen to occur. They could be the ones that you're planning for like vacancies. So we don't harp on that too much, but make sure you're keeping into account. If you're not keeping those into account, that's probably one of the biggest ways that newer investors find themselves in trouble.

They don't plan for capital expenses, a new roof or new boiler, water heaters, things like that. You definitely want to plan for that stuff ahead of time. For sure. Hey, I want to go back real quick. Something you mentioned earlier that we should touch on, that's real estate mentors. And we talked about gurus before, but mentors are a little bit different in the way that we refer to them on bigger pockets. I like to think of them as a guy that you could take out the coffee. They're local guys usually. I mean, you might not be able to find one, but maybe you haven't looked hard enough. I mean, I have a mentor. I would actually love to have him on the podcast sometime. He's an investor in my area. He taught me a ton of stuff. and just a really good guy. We sit down for coffee. We help each other out. We look after each other's properties when we're gone on vacation. It's really like a, it's a valuable relationship to have.

So definitely, definitely look into finding mentors. Yeah, and I think that's a good point. And we kind of skip through it really quickly. But, you know, I think the most important thing about a mentor is it's somebody who's local, who's successful, who has the time and interest to help you out. You know, they're going to help you out. They're going to hold your hand. when you need help. And frankly, you could go and sit down with them. And, you know, they may

charge you X amount of money or they may not. A lot of mentors will do it for free because they know that you're going to bring them value back at some point by potentially giving them deals, partnering, things like that. Yeah. And a lot of people actually, you know, they complain, oh, I can't find any mentor or anything like that. But, I mean, honestly, the bigger pockets forum is a mentor in itself. I mean, like, I mean, if you think about what a mentor does, I mean, what do they do? You sit down with them, you tell them your problems, you ask them, they answer your questions, yeah, you say, what do you think about this deal? They tell you what they think about it.

They, I mean, the forums is a mentor and it's the world's best mentor. So if you don't have one in your local area, I mean, dive into bigger pockets. There's investors there that just, they're hungry for somebody that they can just share their knowledge with. I mean, we've got some of the most, like, smartest people on the planet when it comes to real estate investing, and they are willing for free to just answer questions day and night on the forum. So definitely, definitely take advantage of that. BiggerPockets.com slash forums, and there'll be a link on the show notes.

And anyway, yeah, it's a great place to go. But let's get back to the numbers, man. We were talking about income expenses. Now, I think we're at return on investment. What's that, Brandon? Yeah, return on investment. That's a way of kind of comparing apples to apples instead of trying to compare apples to oranges. So if you talk to a stock person, they say, well, I made a 12% return on investment.

That's what return on investment is. And basically, you just figure out how much cash flow you ended up with over the course of a year and divide that into the amount of money you put into the deal. So if you ended up with, you know, if you made $1,000 this year in cash flow and you have $10,000 invested in the property, this is real preliminary. I mean, this is real simple. But you basically made a 10% return on investment. So, I mean, that's really the basic.

Again, it can get a lot more complicated than that. That's real basic. But just so you understand, that's how you calculate how much your return on investment is. It's what percentage you're going to make back on the amount of money that you put in. Yeah, simple as that. And for more details, definitely check out Chapter 2 of the Ultimate Beginners Guide. Yeah, and there's a lot of good stuff on all over bigger pockets for figuring that math stuff out. So don't worry too much.

In fact, don't be afraid of it. And speaking of fear, if you like that transition, the next section, actually, we're going to talk about it's fear. A lot of people are freaked out over jumping into real estate investing. I mean, people get afraid. They get overwhelmed. I mean, they go to bigger pockets and they see 500,000 forum posts, and they get overwhelmed, and they just don't do anything. So in the UBG, the Ultimate Beginners Guide, we talk about six steps to help you overcome fear. and we're just going to talk real quickly about them.

So Josh, step number one. Get off your duff. Very good. Just do something. Step number two is? Commit. Commit. Yeah. Stop buying crap you don't need.

I mean, just jump into it and do something. You said crap. Step number three. Start participating. Start participating. Yeah. I mean, don't complain you can't find a mentor. Like I said earlier.

If you're not jumping into the thing, stop complaining that you can't find it. Start participating. Start joining your local groups and clubs and hanging out. Call people. Yep. And as Brandon talked about before, get on those forums and ask questions, interact, introduce yourself to people. By doing that, you know, a lot of people are afraid to, but what you don't know, and they say, hey, I'm new and, you know, what do I know? Well, if you're not saying anything, nobody's seeing you.

So by engaging and being active and participating, particularly on bigger pockets on our site, you'll find that you're making a lot more contacts, meeting new people, building your network. So start participating. And with that, step number four is learn the lingo. Correct. It's not that complicated. You'll pick it up just hanging out in the forums. But definitely learn the lingo. Because if you start talking to somebody and you don't know what you're talking about, everyone's going to know it and you're just going to look like an idiot. So learn the lingo. All right, number five. Learn the concepts. All right, yeah. So that's what you're doing today. You're learning the beginner basic concepts of real estate. So, and number six?

Watch others. Very good. So we're going to watch how other investors do it, the successful ones. Yes, assimilation. You are kind of like the Borg, huh? Little Star Trek. Yeah, no, no. I don't follow your Truckee references.

All right, for all my Trekkies listening. You guys know the Borg. assimilation. You hear the silence? Okay, moving on. Analysis paralysis is a term that people use a lot of times. It basically means you're too afraid to move. The way that I overcome this and I like to talk about is from a book called

Getting Things Done by David Allen. We'll have that link to that in the show notes. Really, really good book on productivity. And the thing he talks about is always know what your next actionable step is. So figure out, I mean, if you feel like you're frozen, don't know what to move, you don't need to know how to do everything. Just figure out your next step. Does that mean picking up the phone? Does that mean creating a profile on bigger pockets?

Does that mean calling a real estate agent and asking to look at a house? Just figure out one step and just do one step at a time. Yeah. And I think a big part of getting over the paralysis analysis is to have a plan and we'll get into that in a little bit. Yeah. So definitely. All right. Let's go on to how about chapter three.

Chapter three. Which is one of my favorite chapters in the UBG because I really like the way that this kind of comes together. And I never thought about it in terms of this until we were, you and I, Josh, were putting together the UBG. Nitches and strategies. Life is like a box of chocolates. Life is like a box of chocolates. You never know what you're going to get. Wait, so the reason we talked about that is because, you know, when you open up a box of chocolates, there's like 50 amazing looking chocolate.

things in there, and you grab one and you're like, this looks really good and you bite into it. It's like that nasty raspberry one, which I don't know why they put in there. That's actually the best chocolate in the box, by the way. That and the coconut. That's the worst one in the box. Are you serious? Are you kidding me? No, man, the coconut and the raspberry are amazing.

Coconut's disgusting. This guy has no taste clearly. No, the caramel or the caramel if you're in a state that says caramel. The caramel is the best. So anyway. Carlin is a city that you drove through, I think, on your way down. That is. Through SoCal.

It is also the name of the best chocolate. So basically you don't know, I mean, there's a ton of different types and not everyone clearly likes the same kind. Real estate's the same way. I mean, I really like small multifamily properties. I like landlord and I enjoy that part of things. But not everyone does. And that's my niche. I like small multifamily.

So really what it comes down to is choosing. a niche that you like and then choosing a strategy that'll go with that. So let's go over the niches real quick first and just list those off and then we'll go over the different strategies you can use. Absolutely. All right. So first niche, Brandon, is raw land. So raw land is basically nothing more than basic earth. It's raw land. It's raw land. It's raw land. Land is land. And you could do a lot of things with it. You could subdivide it. You can improve it in various ways to add value. You can lease it out. So raw land is our first. type. What's the next type, Brandon?

Single family homes. Single family homes are probably the most common investment out there for newer investors and our friends, the mutual funds are now starting to scoop those puppies up. But single family homes are, they're easy to rent, they're easy to sell,

they're easy to finance, and easy to rent out. So single family homes would be our next one. Number three is near and dear to my heart. duplex, triplex, and quads. Those are small multifamily properties. You know what those are. I mean, they're the duplexes, triplexes, and fourplexes. So brilliant. What's the benefit of a duplex,

triplex, and a quad brand? And why are they different than the next size up? Well, I like them because you can finance them easily. I mean, you can go to a bank and you can get them, I mean, a bank looks at them just like they're a regular house. A bank doesn't look at a fourplex any different really than a single family. So they're easy to finance. finance, they're pretty common in most areas. You can find them. And they're not real popular. So the competition, it usually isn't quite as fierce. However, if you move to that fiveplex all of a sudden or small apartments, which is our next type, now suddenly things change, correct? Correct. And I do, I love small apartments as well. I have a small apartment. I love it. But it is much more difficult

to find financing for it. But that also cuts out the competition. So, you know, small apartments can, I mean, there's really no definitive line, but I like to think of it around 50 units maybe. So you could have a five unit up to 50. Five to 50. Yeah, that's how I kind of define it. And you get bigger than... Oh, go ahead. I'm sorry.

Yeah, so bigger than that, you get the large apartments. Those are the ones that someday I would love to work in. Those are the big things. But the big thing about these small apartments and the large apartments and everything thereafter is instead of being priced based on comps, these things are valued based upon the income that they bring in. So we're not going to be talking apples to apples when you just compare sizes and locations and amenities. You're really going to judge the value and the price of these properties based upon the income that they bring in.

Yeah, which is why another reason I love them so much is because you can add some income. I mean, let's say there was a fourplex and you can turn into a fiveplex or there's a 20 unit and you can turn into 22 or you can rent up the garages. then you can yeah you can definitely increase the property value just by increasing the income or by decreasing the expenses if you find out that there's a water leak

that's been going for years so yeah it's a yeah and we actually talk about that a little bit in one of our previous podcast with Al Williams reducing your your expenses yes

okay and then the next category we're looking at beyond the large apartments are REITs REIT stand for real estate investment trusts. And if you want to think about a REIT, think of it like a mutual fund to a stock. Essentially, investors can buy shares of a REIT. And what REITs do is they go out and they buy properties of pretty much any type.

And the goal of the REIT is to create income and generate cash flow and appreciation. And the beauty of a REIT is they're mandated by law to pay out at least 90% of their pre-tax income, I believe it is. Oh, look at you. In the form of dividends. So, you know, it's nice because reits tend to pay out decent dividends. And ultimately, the good ones, you know, you'll start to see some appreciation as well. So reits are kind of an easy way to get into real estate while, you know, almost like investing in stocks and bonds and stocks and mutual funds. So those are reits.

Cool. All right. And the next one we want to touch on is commercial, which we dealt with a little bit. bit with Frank Gallinelli in podcast number two, I believe it was. It was one of those. Well, it's on there. All right. So commercial property is just, you know, it's the grocery store down the street or the Starbucks building, not the business itself, but the building that it's in. Office buildings, commercial, industrial, you name it.

Yeah, exactly. So that's definitely a huge area. I generally don't recommend that beginners get started in commercial unless they've got a lot of money. It's not something that you want to play around with like you might mobile homes, which we'll talk about here in a second. Right. Mobile homes. Mobile homes, you can get into with little money out of pocket. You can either buy the home itself or you can buy the home attached to the land as well. But mobile homes tend to be much less expensive. I'd say they're probably the least expensive class of real estate outside of potentially rural land. Yeah, it's kind of a toss-up, I guess.

It depends on what you're looking at here. But mobile homes are, you know, they're found all over the place. You can find them. In Malibu, even, Brandon, on your road trip, you'll pass actually the, I believe it's the most valuable mobile home park in the country. I think it is. I might be wrong. But there's a mobile home park right off of the PCH in Malibu overlooking the water.

it's gorgeous and it's yeah it's a mobile home park. Well, I know where I'm retiring now. All right, so the next one is this is the one that you might see on late night TV a lot and that is tax liens. What are tax liens, Brandon? Tax liens are, when people don't pay their taxes, the government is going to come down hard on them and you're going to take their property. And then the government is going to sell a lien on their property for the amount that the taxes are owed. That's why you see on TV sometimes they say you can buy houses for pennies on the dollar. Pennies, pennies on the dollar. And I bought this house for $132.17. That's usually what they're talking about

is tax lien sales. There's definitely his money to be made and we're definitely going to do a podcast on it sometime, I hope. So we'll get more into that someday in the future. But there are some smart guys on bigger pockets that do just tax liens and they're really smart. So check them out. Yes, speaking of smart notes is another way to make money in real estate. And what exactly is a note? Okay, well, I will give an example. So when I bought my apartment complex, I bought it using seller financing, which means the sellers, they actually carried the note.

They created, instead of me paying a bank, I pay them every month. So we created a note. We signed a piece of paper saying, I owe them this much money over this many years. Now that piece of paper, that note, some people invest in those. They buy and sell them just like they sell and buy houses. So definitely check out. Lately, there's been a lot of really good articles on the Bigger Pockets blog, all about buying and selling notes.

Really, really fascinating stuff that I actually don't know much about. But I really enjoy reading those things because I think that's a way to passively invest in real estate is by investing in notes. Absolutely. We'll put a link to a few of those in the show notes as well at biggerpockets.com slash show 11. Excellent. Excellent. So we've now looked at various ways, various property types and things that you can invest in. Now let's talk a little bit about now that we've covered these different vehicles. Let's look at some of the niches are the investment niches. And the first, and I'd say the most popular one is buy and hold. And buy and hold is pretty much, you know, you're buying property, you're holding on and you're collecting. You're collecting revenue from it, whether it's commercial, residential. You can do it small apartments, big apartments.

Those are all buy and hold. And that's, it's probably the most common strategy that I think people are familiar with. And of course. And probably the most secure too. You know, like, you can just hold it forever. And eventually it'll probably be good. I mean, like, most people don't lose big if you buy smart and buy and hold. Well, the key is to buy smart and to know your entry point and to understand and

and have a grasp on how to manage a property, how to handle it, and how to take care of it. Because if you do that wrong, you actually could lose a lot of money. Yes, you could. And people do. If they buy in the wrong time in the market, when the market's down, you can lose a lot. So one of the more fun ways to invest in real estate that we see on TV a lot is that's flipping real estate. I love flipping. Flipping doesn't always love me because my neighborhood is not the world's best for flipping.

But I love flipping. It's a super fun. it's when you take an ugly house and you make it look good and then you sell it. And flipping, you know, you see all those shows on television about flipping houses

and things like that. The key to flipping a house is really understanding your acquisition costs, your rehab costs, your renovation costs, and having that exit strategy ready to get out of the house.

But since we're talking about flipping, I'm going to have to give a plug here, bigger pockets, just recently released Our first book, in fact, we actually released two books. The book on flipping houses is the title of one book, and the other is the book on estimating rehab costs. And these books are really, really incredible.

They are probably the best books that you can find on the topics, and you can find them at BiggerPockets.com slash flipping book. But if you want to know anything from soup to nuts on flipping houses, these things are are insanely valuable. And again, BiggerPockets.com slash flipping book. Check them out.

Soup to nuts. Is that a phrase? That is a phrase if you live somewhere out of the boonies, Brandon. All right. Well,

let's go on soup to nuts. Maybe it's a Seinfeld thing, man. Soup to nuts, man. Maybe. That's funny. I'd never heard that before. No,

I'm sure everyone at home is laughing right now thinking, I say that all the time. Yeah. Yes. All right. Let's go on. Okay.

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Wholesaling real estate, that is a very popular thing, especially for new beginners. That is the process of finding these amazing deals, putting them under contract, and then selling that contract to usually a house flipper or a landlord, and they end up buying it. So really, you just become the middleman.

And you can make anywhere between, I mean, 500 to 5,000 is probably average, but really it's whatever you make it. You find a better deal and you're going to make more money. And there's a lot of different ways to do that, and we're going to talk more about that in the upcoming podcast. And really quickly, you know, the flipping and the wholesaling,

these are two strategies that are fairly difficult to do while you're working a full-time job, since we mentioned that earlier. They really are more of a job in themselves. I mean, if you're going to make money wholesale and you really need to kind of commit to it and I'd say the same with flipping. Would you agree with that?

I would. I mean, you could definitely, you might be able to flip one house or two houses, you know, with a job. You know, if you have a really good system set up and that's one thing Jay Scott talked about last week on the podcast,

or was it two weeks ago. And whenever it was. Whenever it was. Anyway, Yeah, it was last week. Yeah, I think so. So that's one thing Jay talked about was how he's,

automating his business so that he can flip, I mean, several houses every month. And he's got a system down. And I know Brian Burke talked about that as well. And episode three, I think it was. And so it definitely can be done. If you have a job, you can maybe flip a house or two, but you're not going to create a real busy business if you've got a job. So definitely. And we do cover the system is systemization of a flipping business in the flipping book. So the book on flipping houses. So definitely check that out. Well, let's move on, man, because we are quickly running out of time, unbelievable.

Let's jump to chapter four here. Jump to four, chapter four is creating your investing business plan. So let's start with creating your plan. Basically, your business plan is going to be your roadmap for your business. And it needs to include a couple important things. Your mission statement, which is, you know, what do you do? What's your company all about and why you're in real estate, really? Your goals, which is where do you want to go?

What do you want real estate to do to help you to achieve, whether it's making X amount of dollars a month and passive income or to retire in four years or whatever it is, those will be your goals. After that, we've got your strategy. Correct. You've got to know how you're actually going to make the money in real estate. and we talked about that a little bit earlier. Is it going to be wholesaling, flipping, whatever? Next, you've got time frame. How long do you want until you reach your goal?

Are you going to buy in sell houses every 10 years, or are you going to buy in sell house every month? You really got to know that. Next, you've got to know your market. You've got to know what kind of area, you high-income, low-income, commercial area, whatever. So know your market. Yes, of course.

And then there's your criteria, which are going to be, you know, your cash flow requirements, your purchase amounts, how much cash flow you need to get out of it. Essentially, you need to set your purchase criteria, and you've got to stick to it. It's essentially, you know, if you've watched these auction shows on television,

you see them, you know, always whispering before the whole storage wars and all that stuff. You know, they're like, well, I don't go above $1,000 because, you know, we'll probably not come out of it ahead of it. So it's the same thing. When you buy a property, you need to get in with your purchase criteria and you do not want to get emotionally attached. And you don't want to start jumping above the price that you set beforehand because if you do that, you can very quickly find yourself in trouble thereafter. Which brings me to the next thing, which is your marketing plan, which is how are you going to find your deals?

How are you going to get these discounted opportunities, which you could then. rent out, which you can then flip wholesale, you name it. So having a marketing plan is extremely important. It is. And also equally important is how are you actually going to pay for it? So if you don't have the money sitting in a checking account, you need to know what do you plan on doing. So next, how are you going to actually do your deals? You define the steps like step one, I'm going to do this, step two, I'm going to do this, and have several exit strategies in place. So that way, if something goes wrong, you're covered. I mean, that's one of the things that hard many lenders are going want to know or any lender, really. If you don't have multiple exit strategies, you're in trouble.

Which brings us to teams and systems, which we pretty much covered earlier. If you can automate and build out systems to help you manage your deal flow and your business, it's going to be extremely important. Of course, having a strong team, having CPAs, attorneys, and agents and whoever else you need on your team is going to be extremely important. We'll get into that in a little bit. Brandon already talked about exit strategies. So when you go in, you want to go in with an exit in mind. That's really, really important. And you always want to have these backup plans. If A fails, then B fails, then C. If you don't do that, you can find yourself in a lot of trouble. And we've kind of talked about that in other shows as well. So after that, we've got

illustrate example deals. And what's that all about, Brandon? Well, basically, if you're making a business plan, you want to explain. to whoever you're going to show this business plan to, even if it's just to yourself or your spouse, you want to explain exactly what you're doing. So give an example. I mean, I'm going to buy this house at 1, 2, 3, Main Street for this much. I'm going to do this to it. I'm going to sell it for this much. I mean, you want to walk people through the entire process because most people will not understand what you're talking about until you give them an example. So, and then finally, financials, you have to record in your business plan. Where are you today? And what do you bring

to the table. Do you have any equity? Are you starting with nothing? Do you just have education? I mean, do you have, what are you bringing to the table? What's your financial outlook look like? So that's really important, not just for a bank, but for a private lender, for partners, for whatever. Cool. All right. So let's move on to assembling your team. We talked about it briefly, but there's a lot of important people that you want to have on your team. Mentor is definitely a good person to have. We've talked about that already. A mortgage broker, loan broker, and that could be traditional, hard money. You want to actually have relationships with a lot of lenders and money folks, private money people, because as you start to grow your business, you're going to need more

cash to expand. Real estate attorney, you've got to have a lawyer. I mean, I'd say that's probably probably one of the most important people you want to have on your team is a real estate attorney. A good escrow officer, title reps. You want to have a really good accountant who's going to help you through all those accounting questions, tax questions. that IRS book is getting thicker and thicker every year. So you want to have a good accountant who understands real estate investing. That's a big thing. There's not a lot of them do.

So you definitely want to have that. Insurance agents. And why is an insurance agent so important, Brendan? Because people like to fall down and people like to sue. There you go. Contractors, these are contractors are a real pain point for a lot of investors and homeowners. So finding a good one is really, really key. But when you find one, man, hold on to those contractors.

Contractors are really key. Supportive friends and family, you know, it's hard to go when everybody's telling you you're going to fail. It's hard to move on. If your family's not supporting you, it's going to be a tough time being a real estate investor. So definitely make sure you've got support from your family and friends. A realtor, having a great realtor is going to help you find good deals. They're going to be out there hunting for. for opportunities for you because they're going to make money.

So get a realtor. Property manager. Property manager is going to help you manage your property. Finding a good one is really difficult. And not only that, but like Brian, I think Brian Burke said, a property manager actually brought him his deal that made him $800,000. So property managers can not only manage your property, but they can bring you deals as well. They've got a good handle on what's going on in the market.

So that's huge. And then lastly, but definitely not least. is a great handyman. Is that a real thing? Is that like soup to nuts? I just made that up right here on the spot. And I'm patenting it right now. So.

Trademarking. Yes. Yes. Oh, you get the idea. All right. So a great handyman. Because, I mean, a contractor is important. We talked about that.

But a handyman that can go over and just change a light bulb for you. I mean, I have a handyman that deals with 90% of my handyman work right now. And it was the greatest decision I ever made. Is that because you can't change light bulbs? Because I don't want to change light bulbs. I like podcasting. This is more fun. There you go. Nice.

Yeah, so definitely a good handyman. So yeah, definitely. Let's go on to using partners. We talked about that before. It's definitely part of your business plan, which is why we're talking about in this section. So should you use a partner, should you not? I mean, there's a lot of pros and cons. And you can look in the UBG to read all of them.

But just real quickly, some of the pros are obviously you get the best. benefit of having somebody to bounce your ideas off of. You get their money, you know, pool it together. Somebody else can look at your deals and analyze them. You know, you don't have everything in the world. You're, you're not a complete puzzle. There's things that you're missing. And if you're missing a puzzle piece, maybe that other person's got it. So those are just a few of the things you can do. There's also a lot of, I guess, downsides of it too. Like, well, downsides, personality conflicts. You may not get along with your partner. You guys might have differences and opinions.

Trust issues potentially can come up. If you have to rely on somebody else to make decisions, it can delay your decision making. So smaller profits, of course, because you're splitting your deals with somebody else. Sometimes it could be dangerous to potentially split mixed friendship and business, so you want to be careful of that.

Expectations, responsibilities, and, of course, complexity of taxes are all kind of downside. So here's really, quick four tips for successfully partnering. Tip one is don't be a jerk. Don't be a jerk. Yes. Don't be a jerk.

Learn to compromise. Yes. Yes. Talk daily. Every day. Every day. Every day. And to plan ahead. Yep. And one more thing I want to add. A partnership doesn't have to be a partner and shouldn't be, I would say,

shouldn't be a partnership for your whole company. I think partnerships should be deal by deal. You know, if you do a good deal with one partner, do another deal. Do another deal. do another deal. You don't have to give away half of your entire life to a partner. You can just do one at a time. So that's pretty big. So definitely. Which reminds me of something really quickly on, we had talked about mentors and gurus and stuff. And there are some gurus out there who ask for half of your deals, speaking of half of deals. And I've actually heard some craziness where some of these guys are asking for half your deals until you get to hundreds of thousands of dollars in profits. And, you know, Be careful when you do that, guys. I mean, you know, I think it's okay if you, you know, do split deals with a mentor or a couple deals. But don't sign any, don't sign, you know, with blood and give away, you know, your profits until you're broke.

I mean, you know, definitely be sure that you're, you know, doing it on a limited basis. So it's just something that kind of popped in my head, but be careful. Yeah, definitely. And then last thing before we move on to the next chapter, I just want to share a quote that was in the Ultimate Beginners Guide that I love. about partnerships. And we talked about family and friends, maybe not making good partnerships. The quote is this is from John D. Rockefeller.

A friendship founded on business is a good deal better than a business founded on friendship. I love that quote. Is that the John D. Rockefeller, the guy on Bigger Pockets, or is that the John D. Rockefeller, the billionaire, the billionaire who's been dead for a while? I think that's the billionaire who's been dead for a while. Gotcha.

So, yeah. Gotcha, gotcha, gotcha. All right. Well, let's move on to Chapter 5. how to find investment properties. And of course, we're going to look at how to profit when you buy your investment property. So what is that all about? I mean, you make your money when you buy, right?

Correct. You make your money when you buy. And that basically means if you don't have a good deal going in, no amount of improvement to the property is going to suddenly make it a good deal. You can't just, if you overpay, you might just be scared and you can't do anything about it. So definitely you make your money when you go in. Don't ever forget that. Okay.

So when you go in, you want to actually have a set of a selection criteria set up. You want to know what exactly, you know, your criteria are, right? So things that are going to be important could include things like the town, the neighborhood, the size of the property, the lot size, property conditions, bedrooms, bathrooms, number of units, cap rate, cash flow, potential for appreciations. things like that. There's no one set of criteria that works for everybody. You need to determine what's important for you.

It's kind of like that box of chocolates and the nasty raspberry. No. They were bringing it all around. Ah, the yummy, yummy coconut. Yes, I know. Let's move on to one of the most important things, I think, in all of this entire guide, and that is the rules of investment property. Now, these are not rules as then you have to follow them

or you're going to be put into attention. These are rules of thumb, meaning these are quick, easy ways to analyze a property. Is that a real saying, rules of thumb? I don't know. I'm making that up too right now. Apparently. They are a rule of thumb, plural.

So the first one that you might, you'll see these a lot all over bigger pockets. We talk about them a lot. There's a lot of debate. You can look into them. But real quick, the 2% rule basically states that your monthly rent should be approximately 2% of the purchase price. In other words, if you rent, I mean, if you buy a home for $100,000, it should rent for $2,000 per month.

If you buy a home for $50,000, it should rent for $1,000 a month. Awesome, awesome. 2% rule is a great rule followed by the 50% rule, probably the most debated thing on bigger pockets. The 50% rule says that 50% of your income will be spent on expenses. This is when we're talking about rental properties, of course. not including your mortgage payment. Early in the podcast here, we were talking about things like vacancies, property management, things like that.

You want to account for everything. And so when you do and when you account for everything, you're ultimately over the long, over the long haul over a period of time, you're going to end up approximating about 50% of your income being spent on your expenses. So when those CAPEX come up, when the new roof needs to be replaced and the boiler and when you're not accounting for property management, your numbers might get a little jazzed up. So if you use the 50% rule, essentially, you're going to be able, you're going to be assured that you're going to find a property that'll cash flow. Now, not all areas will meet the

50% rule. Again, it's a rule of thumb, but it's something that will help you find deals that are pretty guaranteed to cash flow, but of course, nothing is guaranteed in real estate. That's True. All right. The next rule is one that's very popular with house flippers, and that's the 70% rule. It basically says that you should only pay 70% of what the after repair value is minus the repair costs. So let's just say that you find a house that you know can sell for $100,000. You should only pay 70% of that, which is $70,000 minus whatever it's going to cost to fix up. So it's going to take $20,000 to fix up. Just take 70% of $100,000. $700,000, minus the $20,000, you got $50,000.

That's what you should probably pay for the property. Again, don't make your offer based entirely on this. That's just a quick way of a quick rule of thumb. All right. Where do we find investments, Brandon? I know we've got the MLS, the multiple listing service, which you'll need an agent to help you with or where you can get kind of less details on websites like a realtor.com. You've got the newspaper, word of mouth from networking, things like that,

sites like Craigslist from outbound marketing. Commercially, you could find things on LoopNet. So there's lots of places where you could find deal. And let's kind of get into the entire buying process. So what would be the first steps in this buying process? All right. So the first thing you do is you decide on what kind of property you want. Number two, you decide on what criteria you want.

We already covered all those. Third, you want to decide on how you're going to finance the deal. Four, then you begin actually looking for the property. people try to do step four first. They try to start looking and then they just get confused and overwhelmed and irritated because it's not going their way. So you got the first three down, then you find your property, whether that's on the MLS or whatever. Step number five is you're going to run the property through a list of criteria filters to screen out all the duds, meaning you look at 100 properties and you're probably only going to find one or two that actually is a good deal.

Step number six, you make your offer on the property and you make sure you're shopping smart and you negotiate that, which is step number seven. And then step number eight, you perform your due diligence, which means you have an inspector look at over, you get your financing arranged, I mean, like finalized. And step number nine, you sign the papers, either at an attorney's office or title and escrow, and you get the keys and you own the property.

So that's pretty much it for finding investment properties. Let's go on to how to pay for it. Okay, so real estate financing is really important because, of course, if you don't know how you're going to pay for it, then how are you going to pay for it? Right? So you're not going to have any means to acquire, pick up deals. So ultimately, there's various ways by which you can finance your deals.

Okay, so the first way to finance your property is through all cash. That's pretty obvious. You're using cash to purchase the property. And in most cases, you're not actually carrying wads of cash. You're bringing a check or certified funds. it's money that you've got. The next means of financing is a conventional mortgage, and that's kind of the typical mortgage that you hear about.

Beyond that, the next one would be something called portfolio lenders. What are those? Yeah, those are, I'm a big fan of portfolio lenders. They're like smaller, usually community banks, and they don't necessarily sell their loans up to big mortgage companies, like Fannie Mae, Freddie Mac. Basically, they lend their own money, so they have the gold, they make the rules.

And so they, yeah, they can be a little bit more clever with their financing. So number four, FHA is a way that a lot of people, especially newbies, get involved. Basically, the FHA is a government-backed loan. They insure it, and you can get a property with just three and a half percent down right now, meaning you don't need 20 percent. 203K loans, they're part of FHA. Basically, that means you can actually actually. borrow the money to fix up a property, which is really helpful if you want to add some value.

You can use... Sorry, I catch you off, but you can use HomePath mortgages. It's another government-backed loan introduced by Fannie Mae. You guys can find out more about that on the UBG. Owner financing. I believe Brandon talked about that earlier on the show, so we'll just skip past that. Hard money. Hard money is financing found through private businesses or individuals for the purpose of investing

in real estate. We did a whole podcast on that with Anne Bellamy. And Bellamy. Yeah, that was awesome. So definitely check that show out and you'll learn everything you need to know about hard money. Was that show nine, I believe? That might have been show nine. You are pointing out every darn show we've done, aren't you?

I think so. Private money is another option. Fairly similar to hard money. Essentially, you're getting money from lenders who are not banks or anything like that, but they're typically individuals, people you know, things like that, who've got cash to lend out for deals and opportunities. Home equity loans and lines of credit are other ways of doing it. And partnerships, which we've already, I believe, covered.

So we'll kind of skip past that. Commercial loans are typically loans for commercial properties. They could also be, they cost to be a loan for your business. business as well, which you can then use to invest in, you know, like if you have a flipping business, you might be able to get a commercial loan for your company, and then you can use that money to flip houses. So that's definitely an option. Yeah, business lines of credit and things like that. And then there's a bunch of other ways like EIULs, life insurance, Roth IRAs. There's a lot of different fancy ways to invest, which we don't really have time to get into,

but they are pretty great. So if that's something that you're interested in, definitely search bigger pockets for that. All right. Yeah, cool. All right, let's go on to chapter seven, which is marketing. That's a big thing, especially today. It's not always easy to find deals. So sometimes you have to actually go out and actually hunt them down. This chapter's on that. So first of all, your greatest real estate marketing tool is yourself.

I mean, you need to be an honest investor. You need to have integrity. You need to be professional. This is a big, big, big thing for me. And I know we're running, but really late, but, you know, I think I have to harp on this thing. I find so many people who go to real estate clubs come on our side, bigger pockets, all over the web, who will straight out of lie about their experience, lie about their background because they think it's going to boost them and make them look better.

Do not lie, period. It is not cool to lie. You will get caught. You will get found out and you will look dumb and you do not want to look dumb because you will kill your business before you even start. So don't lie about who you are. Don't lie about what you're doing. don't tell people that you got deals in all 50 states.

I mean, don't BS people. Seriously, tell them the truth. Be honest. Be straightforward. It's okay to be a novice. Be honest. There are some people, some of the gurus who are telling people to, you know, kind of brush up upon the truth a little bit.

Don't do that. Do not listen to that. Your reputation is everything and lying is a bad way to go. Your integrity is so key. And that's kind of the next thing is integrity. have it. It is. It's important because, yeah, I mean, you could do all the marketing you want in the world, but if people don't, you know, like who you are, you're not going to succeed. I mean, you've got to market yourself first. So that's definitely huge. Networking is huge, huge in this

business. It's who you know. It really is who you know. And so, so establish yourself as somebody, you know, that's good to know. And a good way to do that. Be professional. Be professional, yeah. A good way to do that is through bigger pockets. That's the first way to interact with people who are, making deals happen every day. I mean, begin building your network here. You can have a website. Make sure you have social media, obviously, Facebook, Twitter. Go to real estate clubs, right?

Yeah, go to real estate clubs. Yeah, just start networking yourself. Maybe you start a blog. That's how I, I mean, not how I started, but I blog. I love blogging. That's why I write all the time for bigger pockets. I love this stuff. And it helps you to kind of establish yourself as an authority.

So let's go on to marketing funnel, Josh. I don't want you touch on that. Sure. So a funnel is, think of it like a funnel, right? I mean, so it's really big at the top and gets more narrow at the bottom. So you're going to send out information to a broad swath of people and eventually only a small amount of people are going to be responsive to that information. And that's kind of the broad stroke of what a funnel is. But there's different ways to market, whether you're sending out postcards to people who are passed through on their mortgage. You're setting up 800 numbers for people who need help with their in four calls. closure, things like that. So you could send out all this information and basically only a few people are going to call you and then your job is then to close on those leads and to basically attract those people to work with you as an investor to help them out. So you're going to do various forms of marketing.

And let's talk about those. I guess the first one is direct mail. So direct mail is mailing. letters, sending postcards, putting things in the mail to people, and you're giving them a message that's going to attract them to call you to help them with their situation, whether they're in probate or some of the other examples I gave earlier. And essentially, the key is you're trying to build awareness of your product and your service. You're going to repeat, you're going to send stuff out over and over to these people, and

eventually you're going to become familiar to them, and they're going to come to trust you, and they're going to want to contact you. And direct mail, you know, that's all direct mail. It's a huge area. But you can also take that into the kind of the online world, the same concept. And you could advertise on Facebook or Google. I mean, those are kind of the modern day direct mail. So definitely don't neglect that. That's a huge part. Just advertising online. Some people think it works great. I love it. So definitely look into that. And there's a couple ways to do it. There's paper click advertising. There's there's CPU. There's all sorts of different ways to advertise. And the ultimate beginner's guide really goes. into it. We talk about creating online ads. We talk about setting up websites and landing pages. So definitely

jump back on Chapter 7 of the Ultimate Beginners Guide and we've got a whole lot more information about marketing through sites and through direct mail and things like that. But marketing is definitely key to getting deals and opportunities, which brings us to the last

and final chapter, the last and final that's a little bit redundant, but chapter 8, which is real estate exit strategies. And, you know, man, so many beginner investors just don't realize how important it is to have an exit strategy. I mean, it's so, so key, isn't it? It is. And again, when I started, I didn't understand this and it got me into a lot. A lot of stressful situations and I got lucky and I worked my way out of them, but don't put yourself in that situation. So let's talk about a few of those. So first of all, you can sell with a traditional, the old

fashion way. You get a real estate agent, you put it on the MLS, your agent sells the property, that's it. I mean, it's really the number one way people sell properties. You can also sell for sale by owner. That means you stick a sign in the yard and you hope it sells. And you save your commission by doing that, but, you know, of course, you're limited to your access of the MLS, other agents and things like that. So there's pros and pros and cons. Yeah, they debated all the time. Yeah. Cellar financing, which I believe we've talked about already. Yeah, It just means you own the property free and clear and you sell it and they pay you every month instead of the bank. So it's a good way to get some passive income.

Lease options, we don't, I mean, we could spend a whole episode on lease options. But basically it's like a lease. Somebody rents a property. That's the best way to look at it. It's renting to own a property. Just like you rent to own furniture, don't do that. But same concept. Unless you're staging, rent to own furniture for staging is great.

there you go. If you're going to rent to own a couch, you're going to pay like $3,000 for that couch that cost $300 to buy. There you go. Yeah, that's a loan shark kind of business. Yep, yep, yep. And I think the final exit strategy is looking at a 1031 exchange, and that's, it's an IRS thing, the whole 1031 exchange.

Essentially, the bottom line is you're selling one property, you're acquiring another property, and the government has rules about how you do this, and essentially you can save on taxation if you do it following the 1031 rules, and there's tons of information on bigger pockets about it. And we are obviously not lawyers or accountants, so this is our legal disclaimer that definitely talk with your person,

talk with your accountant and your lawyer, and make that work, so we're not telling you to necessarily do it. And that is pretty much it. I mean, that should give you everything you need to know to get started. Is there anything we're forgetting, Josh? You know, we've kind of flown through it. We jammed a heck of a lot of stuff in there. This is eight chapters and I think 30,000 plus words of the Ultimate Beginners Guide

that we just crammed into about an hour. So we definitely have skipped a lot. We've left a lot out. But here's, I'd say the bottom line. Let's kind of summarize. you know, essentially you want to focus on education. You want to get out there and become knowledgeable. You want to choose your niches and strategies.

You want to get out there and then start creating your business plan. Then you want to go out and start seeking your properties. You want to understand how to find properties, understand how to finance your investments. You need to get a grasp on marketing and, of course, your exit strategies. And once you do and you've got that plan, then you can go out and take action, right? Action, action, take action and get the ball moving and start to get your business going. I do want to make another disclaimer. This is really an outline, guys.

So, you know, this beginner's guide should be really helpful to people. But again, the bottom line is you've got to just, you know, be smart. Don't go out and listen to somebody who's going to tell you that they're going to make you rich. be smart about how you do it, be methodical about it, but don't get caught up in the whole trap of paralysis by analysis and overanalyze things. Bigger pockets, we built the site. I built the site. It's over eight years now.

The goal of this site was to help people to build their real estate business and to help them find help, to help, you know, have a community of people to assist you. And that's what we're here for. So if you're new or if you're experienced, you know, come on the site. interact, get involved, and there's no stupid question. And that's a beautiful, beautiful thing about it. All right, cool. Well, that's probably much. Josh, we've never, I'm going to ask you the four questions real quick that we always ask everyone else. Oh, don't even do that. Yeah, you did not expect this. All right. Question number one, what is your favorite real estate book?

Holy smokes. My favorite real estate book is the Bigger Pocket It's ultimate beginners guy. Okay, I'll give that one to you. Is that a fair answer? I will give that one to you, even though I don't let most people. But I'm going to throw in rich dead, poor dad, because everyone says that. All right, question number two, what is your favorite non-real estate business book? I don't read.

I haven't read a book in so many years. It's not even funny. I'd say probably, it's probably, it's probably, a magazine. I would say it's like the Forbes billionaire issue that comes out every year. I mean, I, you know, since I was like 17, I've been reading that thing, and

it's always inspired me to hear success stories of entrepreneurs and things like that. So, you know, it's not necessarily a book, but it's kind of those little snippets that Forbes puts out all the time on the billionaires. It's pretty inspiring to see how people built and expanded their businesses.

That's good. Josh, what's your hobby? Bigger pockets. I love skiing. I love windsurfing. I love spending time with my kids. I don't do enough of any of my hobbies. So unfortunately, but getting outside, doing fun stuff. I like all sports. I like watching sports, doing sports. Hanging out with my wife. Hanging out with my family is probably my best hobby. Cool. All right. And last question. You know what it is. What sets apart the successful investors from the non-successful investors? Well, Brandon, let me think about that for a moment. You know, I've watched so many thousands of people. We get half a million people a month coming through bigger pockets. In the eight plus years, we've had countless millions of people come through the site. And I've gotten emails and read on the forums. I mean, so many different.

different stories. I think the successful people have a couple traits. I think one is, you know, obviously they're going to go out and spend time and energy educating themselves. These are people who don't let setbacks kick them down. These are people who will fight, who hustle, who are methodical and smart in their planning, who try and build out and systematize their businesses. These are people who aren't afraid to work. Everybody talks about the four-hour work week and hey how do I cut back on the amount of time that I want to work and it's funny you know look there's there's there's great stuff in there but but the bottom line is successful people work hard and whether it's real estate or any other business you know there's

no overnight successes the people who are overnight successes have busted their butts and have worked their backsides off to to get there so hard I think really hard work is there man I mean it's got to be probably one of the most important traits of a successful person is that hard work. Great. Don't take shortcuts. Yeah, that was good. All right, well, you want to close us up? Sure. Well, that was the Bigger Pockets Podcast Show 11. Thank you for listening. We know this was kind of a different way of doing things, but we really wanted to go over

this ultimate beginner's guide. And I think a lot of people find it helpful. This is Show 11. You can find our show notes at BiggerPockets.com slash show 11. 11. If you haven't already created an account on BiggerPockets, you can do that at BiggerPockets.com. Definitely jump in and get involved. We've got a great page at Biggerpockets.com slash start here. That'll get you started and tell you lots of cool stuff about the site and how to use it. And finally, if you're not following us on Facebook, definitely make sure to do that. We share lots of cool information, have cool conversations. And actually, one more thing, we're getting tons of great feedback on the podcast. People are really enjoying it and are getting a ton of value out of it. If you are one of those people, maybe you don't like this show or maybe you didn't like episode two or whatever, but overall you find the show to be really great and valuable, which it is. Hint, you want to please do us a favor. Jump on iTunes and leave us a rating. Be honest, leave us an honest rating and leave us feedback. Tell people who go and check us.

out what you thought about the podcast. What do you think about the podcast? Do you think we're providing a great service to people? Let them know that. And of course, finally, make sure to subscribe to the podcast on iTunes. It's really important. It helps us get a lot more visibility, helps us grow and get out there and educate more people. We're, you know, Brandon and I really, we love doing this. We love the show. And we love to hear back from people about what they thought. So leave your comments in the show notes, too. That's great. It makes us feel good and it makes our guests really feel good and they love to answer questions that you've got for them. So I think that's it. Have I covered it all? I think you're good. So close us out, buddy.

All right. Well, this is Josh Dorkin. And Brandon Turner, sign it off. Okay, I'm Josh Dorkin. Sign it off. No, but seriously, I am, I am Josh Dorkin, aren't I? No, I'm Josh Dorkin. No, I am. Sorry. All right, guys, take it easy. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place.

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