Real estate investing is the worst-kept secret in the wealth-building handbook. If you want to grow your money and generate serious cash flow that works for you, real estate is the way to go. But if you’re still young and don’t quite have the financial resources or experience to invest today, what can you do to prepare for investing tomorrow? It’s a question worth exploring in more detail.
The Virtue of Waiting Until You’re Ready
There will always be people who say you’re never too young to do something. And while there is certainly some truth to this idea, it’s important that you’re pragmatic about something as serious as real estate investing. Investing when you lack money and experience is a surefire way to hurt your finances and stunt your potential before you ever have a chance to be successful.
Let’s say, for example, that you’re 22 years old and have $40,000 in student loan debt with just $5,000 in the bank. Should you be investing in real estate? Probably not. But who’s to say you can’t set yourself up in such a way that you’ll be ready to dive in by the age of 25 or 27?
By waiting until you’re ready – financially and skill-wise – you can make sure your first few investments are smart and strategic. So, the question becomes, what steps do you take to get yourself ready for investing in three to five years?
5 Ways to Prepare in Advance
There’s no playbook for real estate investing. Anyone who tries to tell you they have all the answers is either lying or misinformed. Every situation is unique, and your circumstances will dictate how and when you move.
Having said that, here are five specific things you can do over the next five years to prepare yourself to build a real estate investing empire.
Build Your Career
The most important thing you can do right now is work on your career. Whether you’re in marketing, law, medicine, retail, or engineering, your number one priority is to get your income up. The more money you can make now, the more investment options you’ll have in the years to come.
If you’re young and single, you’ll never have fewer distractions and commitments than you have now. Dig your heels in. Work overtime, pick up a second job, or start a side hustle. Make it a goal to increase your income by at least 20 percent each year. That means doubling your income over the next five years.
Every time you get a raise, you’ll have to resist the temptation to scale up your lifestyle. Instead, use this extra income to begin stockpiling as much cash as you possibly can. In addition to your normal income, you can find extra cash in:
- Bonuses. Do you get performance bonuses at the end of each year? Rather than wasting it on lazy purchases that you’ll grow disinterested within a matter of months, try putting it in your cash savings fund.
- Tax refunds. Instead of blowing your tax refund money that you get every April, you could apply it to your cash savings and give yourself a healthy little boost.
- Gift money. If you’re lucky enough to get birthday money, Christmas money, or other financial gifts from loved ones, this money should go directly into savings.
Every little bit of extra cash goes a long way. You’ll be amazed at how a few hundred dollars here and there can turn into tens of thousands of dollars over a period of five years.
Find a Mentor
Don’t wait until you’re ready to buy your first property to learn the ropes. Even if you don’t plan to invest on your own for another few years, you can spend the next 60-ish months observing how others do it. Find a mentor who has the heart of a teacher and who is willing to let you tag along and ask questions.
Read, Watch, and Listen
In addition to getting hooked up with a mentor, you should become a voracious consumer of knowledge using as many mediums as possible. Good options include:
- YouTube videos
- Social media profiles
- Online courses
- Message boards and forums
- Email newsletters
The key is to gather advice from different people with unique perspectives. It’s perfectly fine – even encouraged – to learn from people with conflicting opinions. In many cases, you’ll find the truth lies somewhere in the middle.
If you spend one hour per day consuming real estate investing content – whether through reading or listening to podcasts – that’s 365 hours of education per year (or nine whole work weeks). Think about how much you could learn over this time.
Build a Network
Real estate investing isn’t something you want to do on your own. It’s challenging, demanding, and requires extensive knowledge in a variety of areas – including real estate, marketing, finance, negotiations, law, taxes, etc.
To increase your chances of being successful in real estate investing, you should build a network of people who you can rely on for support, assistance, and expertise. Now’s the perfect time to meet people and start cultivating these relationships. This gives you ample opportunity to add value to others before you ever ask for help in return.
Local real estate investment clubs are a great place to find people. However, you can also make connections in the most informal of places. Anywhere you spend time – like work, church, school, or the gym – can be used as a place to network and build relationships. Don’t be shy!
Partner With Green Residential
At Green Residential, we live and breathe real estate investing. We’ve made it our primary mission over the past 30-plus years to help Houston-area real estate investors find and manage highly profitable rental properties. As you build your network, consider learning more about our comprehensive property management services. We’d be proud to be a part of your growing network. Contact us today to learn more!