There's a hard truth out there about getting rich and it's this; if you're already living as if you are rich, then you will never become rich. That means if your credit cards have a huge balance and you're drowning in debt, real estate investing is not going to rescue you.
I know... those guys on late night television introduced you to people who got out of debt and quit their jobs just 60 days after taking their real estate investing course. Let me tell you first hand that if those testimonials on t.v. are real, those people are the exception, not the rule.
Believe us- it is possible to make massive amounts of money through real estate investing. The key is to set your goals and, through plenty of research, find properties that meet those goals. Once you've purchased the property (or properties), hold onto them for at least 5 years or longer. Never lose faith that real estate investing is a highly effective way to make money. Look at the richest people in your city- of those that are self-made millionaires, I would bet that at least 25% of them made their fortunes through real estate. We often look at the list of the richest people in Canada as well as the Power List for Vancouver, Canada, and see that our estimate of real estate investors is correct.
The trick is to learn what you're doing, and then accelerate your investments after you have built a base of knowledge and equity. It's not the only way to make millions in real estate...but it's the way that requires less money, has the least amount of risk, and induces the least amount of panic attacks.
When Julie and I first started investing, we had only had $16,000. Unlike most people I knew, Julie liked to save money. After she graduated from college she continued to live as a student, that is to say, much below her means. Any extra pennies were used to pay off her student loans. Once those were paid, the extra money went to the savings. Her plan was to get her MBA without taking out more student loans.
When we met, I had a property with my Mom that we'd purchased years before, but didn't have much else. After years and years of being a student, I wanted to enjoy the money I was making. I drove a nice new financed Volkswagen and enjoyed my nights out in Victoria. I didn't spend money excessively, but I was carrying credit card debt and didn't have savings. Julie shared her visions of "retirement at 35" with me, and I got excited.
The first thing I had to do was pay off my credit card. That took time. Then I consistently socked away a few hundred dollars every month. Now that we had our finances in order, we began to look for our first piece of investment property.
Our first investment was a lot easier to do thanks to Julie's savings. But, you don't need money to buy your first property.
Many programs out there will tell you that you can get into real estate for no money down - and there are definitely plenty of ways to buy real estate with no money down, but they come with a lot of risk. As far as we're concerned, there are only 3 ways you should consider coming up with a down payment on a property, and the good news is that only one of them requires that you have money saved:
1. Cash out retirement and other savings, stocks, and GICs
2. Home equity
3. A partner that has money to invest.
Here's the hard reality that you won't like to hear though. Finding a partner will be next to impossible if your own finances are ugly. If you have no experience investing in real estate, you are deep in debt and you are trying to get rich on my money, what exactly is in it for me, as your potential partner? It just sounds risky to me.
But, if you come to me and say "Dave, I have found this property that I think is a great investment. I don't have any money because when I graduated from University two years ago, I had $30,000 in student loans. I only have $5,000 left to pay off, but I really want to get started real estate investing and I think this deal will be great," I will be more interested in working with you.
See what I am saying? This person has no money, but they have the right mindset about money. They are in debt for a good reason AND have been diligent about debt repayment.
So now you understand why controlling your finances also means controlling your destiny. Start spending less than what you make. If you're not sure if you do that, keep a spending journal for the next six months. Write down what you bought, the cost, when you bought it and then evaluate whether or not you really needed it. In no time at all, you'll have a pretty good idea of where your money is going and what you can cut out in order to save even more money.
Oh - I hear it already - "but, Dave, it's Christmas", or "it's Sally's birthday", or "we've been planning the trip to Disneyland for three years"! Well, if you've saved up for those things, great! Go for it! But, if you are going to go into debt for those things then you are a SPENDER, not a SAVER, and you're obviously not serious enough about growing your wealth and becoming a rich real estate investor.
I know... those guys on late night television introduced you to people who got out of debt and quit their jobs just 60 days after taking their real estate investing course. Let me tell you first hand that if those testimonials on t.v. are real, those people are the exception, not the rule.
Believe us- it is possible to make massive amounts of money through real estate investing. The key is to set your goals and, through plenty of research, find properties that meet those goals. Once you've purchased the property (or properties), hold onto them for at least 5 years or longer. Never lose faith that real estate investing is a highly effective way to make money. Look at the richest people in your city- of those that are self-made millionaires, I would bet that at least 25% of them made their fortunes through real estate. We often look at the list of the richest people in Canada as well as the Power List for Vancouver, Canada, and see that our estimate of real estate investors is correct.
The trick is to learn what you're doing, and then accelerate your investments after you have built a base of knowledge and equity. It's not the only way to make millions in real estate...but it's the way that requires less money, has the least amount of risk, and induces the least amount of panic attacks.
When Julie and I first started investing, we had only had $16,000. Unlike most people I knew, Julie liked to save money. After she graduated from college she continued to live as a student, that is to say, much below her means. Any extra pennies were used to pay off her student loans. Once those were paid, the extra money went to the savings. Her plan was to get her MBA without taking out more student loans.
When we met, I had a property with my Mom that we'd purchased years before, but didn't have much else. After years and years of being a student, I wanted to enjoy the money I was making. I drove a nice new financed Volkswagen and enjoyed my nights out in Victoria. I didn't spend money excessively, but I was carrying credit card debt and didn't have savings. Julie shared her visions of "retirement at 35" with me, and I got excited.
The first thing I had to do was pay off my credit card. That took time. Then I consistently socked away a few hundred dollars every month. Now that we had our finances in order, we began to look for our first piece of investment property.
Our first investment was a lot easier to do thanks to Julie's savings. But, you don't need money to buy your first property.
Many programs out there will tell you that you can get into real estate for no money down - and there are definitely plenty of ways to buy real estate with no money down, but they come with a lot of risk. As far as we're concerned, there are only 3 ways you should consider coming up with a down payment on a property, and the good news is that only one of them requires that you have money saved:
1. Cash out retirement and other savings, stocks, and GICs
2. Home equity
3. A partner that has money to invest.
Here's the hard reality that you won't like to hear though. Finding a partner will be next to impossible if your own finances are ugly. If you have no experience investing in real estate, you are deep in debt and you are trying to get rich on my money, what exactly is in it for me, as your potential partner? It just sounds risky to me.
But, if you come to me and say "Dave, I have found this property that I think is a great investment. I don't have any money because when I graduated from University two years ago, I had $30,000 in student loans. I only have $5,000 left to pay off, but I really want to get started real estate investing and I think this deal will be great," I will be more interested in working with you.
See what I am saying? This person has no money, but they have the right mindset about money. They are in debt for a good reason AND have been diligent about debt repayment.
So now you understand why controlling your finances also means controlling your destiny. Start spending less than what you make. If you're not sure if you do that, keep a spending journal for the next six months. Write down what you bought, the cost, when you bought it and then evaluate whether or not you really needed it. In no time at all, you'll have a pretty good idea of where your money is going and what you can cut out in order to save even more money.
Oh - I hear it already - "but, Dave, it's Christmas", or "it's Sally's birthday", or "we've been planning the trip to Disneyland for three years"! Well, if you've saved up for those things, great! Go for it! But, if you are going to go into debt for those things then you are a SPENDER, not a SAVER, and you're obviously not serious enough about growing your wealth and becoming a rich real estate investor.
About the Author:
Learn How to Retire with Real Estate with Dave's free Real Estate Investing Starter Tips Guide. Learn how to find money for real estate deals, create financial freedom, extra revenue and massive wealth with tips like: How to find quality investment properties, finding and keeping great tenants, and easy ways to make more money with real estate.
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