132: 3 Steps to Your First Deal – Friday Fundamentals

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Imagine this scenario. You are going to climb Mt. Kilimanjaro, the highest mountain in Africa. Standing at the base looking up, you can’t see the summit above the clouds, although you know it’s up there somewhere. Suddenly you realize just how daunting this climb will be. Your mind is racing with thoughts about how you’ll accomplish this feat, what supplies you have, and what dangers lurk ahead.

Real estate investing is a lot like climbing Mt. Kilimanjaro. But before you ever take that first step, there are things you can and should to to prepare yourself. We’ll lay these three simple things out, and dive into each in detail.

  1. Education
  2. Network
  3. Analyze deals & make offers

Education is far and away the most important thing when setting out to invest in real estate. If you want to invest, start with yourself. It is bar non the best investment you can make. In today’s world, there are so many ways in which you can gain education. Not so long ago are the days where MBA school was your only legitimate option to learn the world of business. Now days we have an arsenal of platforms at our disposal, from books, to audio books, podcasts, online communities and forums, networking events, conferences, online training programs, and coaching and mentoring.

Education is a fundamental basic requirement for being successful. But alone, it’s not enough. You’ve heard the saying, “It’s not what you know, it’s who you know.”. That phrase rings true in most things I’ve come across, and certainly in the world of real estate investing. Investing successfully takes a team of skilled professionals, from brokers/agents, to CPAs, attorneys, property managers, investors, general contractors, etc. Without a solid team behind you, you will limit yourself. You’ll need to start identifying these team members early on. Two vital team members I’ve found are the property manager and a CPA. You’ll need these people immediately, whereas the others you can add when the appropriate time comes.

The next step is where the rubber meets the road. This is where you start putting it all together. All the education and networking in the world won’t do you anything if you don’t put it to action. We’ll look at this step working backwards. If you want to buy an investment property, you have to make an offer on that property. In order to make an offer, you must have analyzed the numbers. Unfortunately not every property you analyze is going to work for you. That means you’ll have to analyse a lot more properties than you make offers on. Not every offer will get accepted, which means you have to make a lot of offers to get that one deal. This whole process can best be summarized as a funnel. You may have to look at 50 deals, analyze 25 of them, make offers on 10, and may only get 1 offer accepted. Hey, if it were easy, everyone would do it!

These three steps are all you need to get started buying your first investment property. Educate yourself, surround yourself with people who are doing what you want to do, and start taking action by analyzing deals and making offers.

Some people get bogged down in the details and never close their first deal. Some people want to figure out every minute detail before ever getting started. They’ll create complex business entities to protect assets they don’t have, design logos for businesses that don’t yet exist, write business plans for projects that haven’t materialized, and deliberate over the pros and cons of S Corps and LLCs. While all of these things are important, they shouldn’t stop you from getting started. It’s impossible to know everything. If you wait until you know everything and have everything planned out, you’ll never get started.

So educate yourself, meet people who are doing what you want to do, and start looking for deals. Soon enough you’ll have bought that first investment property, then another, and another. You’ll develop systems and processes and automate tasks. Your business will snowball, and your portfolio with grow exponentially. Soon enough you’ll reach financial freedom and well on your way to building legacy wealth. The rest of your journey is up to you.

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