How to Invest in Real Estate in 5 Steps
At this point, it's no secret that real estate is the most tried and true way to wealth. It's a fact, real estate has created more millionaires than any other asset class. Although it's common knowledge that real estate needs to be a part of everyone's investment portfolio, there is still a significant lack of clarity around it. There is a lack of transparency in what type of real estate, when to invest, and how to invest.
There have been thousands if not millions of books written about real estate investing. If someone is intending on creating a career in real estate investing, we suggest going and reading as many of those as possible. However, if you're looking to diversify your portfolio, increase cash flow, and pay less in taxes, without all of the hustle and bustle, then you can follow these five easy steps.
1. Educate yourself
The first step in paving a path to financial freedom is self-education. Learning the basics of real estate investing is crucial to understanding how this asset creates wealth. Lucky for you, we have a list of resources that will get you started.
Volcan Captial Knowledge Bank - Click Here
Rich Dad Poor Dad - Robert Kiyosaki
Passive Investing Made Simple - Anthony Vicino and Dan Kruger
2. Go to local REI meetups
Once you learn the basics of real estate investing, it's time to attend the local real estate investing meetups. Every city has REI meetings to attend and most of them are free. (Beware of highly-priced meetings or gurus). These meetings are invaluable because they involve a community of other investors that are like-minded and demonstrate proof of concept. Most importantly these meetings are where you will meet new friends and potential sponsors that will bring you on as an investor in their deals.
We (Volcan Capital) host a local meetup every month in Pennslyvania (fourth Tuesday except holidays) called the Multifamily Mastery Meetup. We interview successful investors and industry professionals as well as provide workshops that are beneficial for investors at all stages. Click Here to check it out.
3. Meet a sponsor
After you attended a local REI meetup, you should have been able to meet a reputable sponsor that is working on deals to invest in. If not, now is the time to start asking around further for referrals. A good referral is someone that is spoken of in high regard, has a track record, is knowledgeable, communicates well, and most importantly is trustworthy.
The sponsor is the make or break of an investment. A great sponsor can turn lemons into lemonade and a bad sponsor can make lemonade into poison. It's essential to have numerous conversations with the sponsor and understand their personality, goals, and purpose. You as an investor must align with them as a sponsor.
4. Evaluate the property, market, and plan
Once you find a reputable sponsor that you feel comfortable with, you should begin hearing about opportunities they are working on. These opportunities may be advertised to the public in some cases and in other cases, they may only be available to people within a small circle.
After you receive an opportunity from the sponsor, it's time to do your own due diligence. You must evaluate the property, the market, and the business plan. Now, your goal is to determine if everything looks up to snuff and to make sure it seems reasonable and accurate. If you're not sure whether the property, market or business plan is attainable, you can either ask someone experienced to check it out (someone you met at the meetup) or educate yourself further.
At this point, you're educated, have a network, met and vetted a reputable sponsor, and have evaluated an opportunity. The final step is to jump on board with the sponsor and commit to the deal. If the deal is currently in process, this means talking with the sponsor, signing the necessary paperwork, and wiring the funds over. If there is not currently an opportunity on the table, this means talking with the sponsor and being ready for the next opportunity that comes up.
There are other ways to invest in real estate besides multifamily syndications, however, we believe these are the most effective way to attain financial freedom. Other methods of real estate investing involve becoming a landlord and having to deal with tenants, maintenance, leasing, contractors, and much more. Investing in syndication with a sponsorship team will get you to your financial goals while allowing you the time to do what you want.