Real Estate Investing for Beginners
Real estate investing is a popular way to build wealth and achieve financial freedom.
With the rise of technology, real estate investing for beginners has become more accessible than ever before.
In this blog post, we will explore the different ways in which one can start investing in real estate with wholesaling, house hacking, house flipping, and the BRRRR method by using software tools such as PropStream.
We'll also talk about:
• Financial freedom
• Active vs. passive income
• Real estate investing strategies
• Finding investment properties
• How to find leads
• Ways to contact leads
• How to find cash buyers
• How to start your real estate investing journey today
Financial Freedom
Real estate investing can be a powerful tool for achieving financial freedom. By purchasing income-producing properties such as rental homes or apartment buildings, investors can generate a steady stream of passive income that can cover their living expenses and provide financial stability.
Real estate investing can also provide long-term wealth accumulation through property appreciation and equity buildup. By strategically acquiring and managing properties, investors can build a portfolio that provides a reliable source of income and long-term financial security.
However, it's important to note that real estate investing also carries risks and requires a thorough understanding of the market and investment strategies. Overall, real estate investing can be a viable path towards achieving financial freedom and building long-term wealth when done correctly.
Active vs. Passive Income
Passive income is a popular buzzword in the world of real estate investing. It refers to income that is earned without the need for active involvement in the day-to-day operations of the property. Rental properties are a common way to generate passive income in real estate. With the right investment strategy and management, investors can create a steady stream of passive income from their rental properties.
House hacking can also be seen as a passive method, along with having income from a rental portfolio. The other real estate investing methods are more active, including wholesaling and house flipping.
Real Estate Investment Strategies
Wholesaling
Wholesaling in real estate involves finding a property that is priced below market value and then selling it to an investor for a profit. This can be a great way for new investors to get started in real estate without the need for large amounts of capital. Wholesaling can be a challenging business, but with the right strategies and tools, such as PropStream, investors can identify the best properties to wholesale and maximize their profits.
Click here to get my free Wholesaling Deal Tracker.
House Hacking
Real estate investors can also use house hacking as a strategy to build wealth. House hacking involves purchasing a multi-unit property and living in one unit while renting out the other units. This can be a great way to generate passive income and build equity. With PropStream, investors can quickly find multi-unit properties in their desired location and assess their potential returns.
House Flipping
Finally, house flipping involves purchasing a property, renovating it, and then selling it for a profit. This can be a lucrative business, but it requires a significant amount of capital and expertise. With PropStream, investors can quickly identify potential properties to flip and assess their potential returns.
In conclusion, real estate investing can be a great way to build wealth and achieve financial independence. Whether you are interested in wholesaling, house hacking, generating passive income, or flipping houses, using tools such as PropStream can help you identify potential investment opportunities and make informed investment decisions. With the right strategy, hard work, and a little bit of luck, you can achieve success in the world of real estate investing.
Rental properties
The traditional buy and hold method involves putting 20% down to buy a property, and then renting it out to slowly make back that 20% investment in the form of monthly cash flow.
Instead, the BRRRR Method does things very differently to really supercharge your returns and supercharge your cash flow.
The BRRRR Method involves Buying, Renovate, Renting, and Refinancing properties, Repeatedly.
This involves you investing in distressed properties, putting them up for rent to collect passive income, and refinancing to pull out your initial investment capital so that you can repeat the process all over again with other properties.
Finding Investment Properties
PropStream is a powerful software tool that real estate investors can use to find potential investment opportunities. It provides real estate data, including information on properties, owners, and neighborhoods. With PropStream, investors can quickly analyze properties, assess their value, and identify potential deals.
If you want to dig even deeper to find the best part of town to get deals in, it's a great paid tool to use. To find those hot pockets in your market, you can use their analytics tool in the upper right hand corner of the maps and that's going to color code the map based on whatever you're selecting.
So, if I wanted to know the parts of Atlanta with the highest valued properties, I could see that they're clustered on the north side. But if I wanted to see what parts of the city had the most growth in the last year, I can kind of see that that's clustered on the south side.
They even have preset lists that you can look at. So if I wanted to know where most cash buyers were active, I could do that as well. I could also do even more specifically and look at Flippers, which means a property that was purchased for cash but then re-listed on the market sometime after that.
So just that quickly in a market that I'm not even investing in, I can see that while it's most expensive on the north side, it seems to be growing on the south side, and on the west side seems to have a lot of active cash buyers and Flippers. I could then even zoom in closer on the map to figure out what individual neighborhoods in those areas have the most activity.
PropStream to me is like a good Swiss Army knife. Like, it does so many different things, and when you don't have it, you just feel lost.
Finding Distressed Properties
If you're wondering where you can find distressed properties so that you can renovate them, I have you covered. As an investor, your focus is getting as much information on them as possible. And that's where PropStream really shines.
PropStream is an online tool and database, and I genuinely use it every single day in my real estate investing business, which is why I have no problem recommending it to you guys. I've used it when driving for dollars, like you saw in episode one of my wholesaling journey.
I use it to pull lists of distressed properties, and I even use it to find and build relationships with people who might end up funding my deals.
So if you haven't yet, you've got to use the link to get a free seven-day trial so you can start playing around in PropStream and really see how it could take your real estate investing business to the next level.
MLS data: Realtor relationships and non-disclosure states
A downside to PropStream, though, is that they no longer have MLS sold and failed listing data. This can be a bit of a bummer if you live in a non-disclosure state like Texas, which means when you pull up a property in one of those states on Redfin, you're going to see the last list price and not what the property actually sold for, and we all know that as the market gets hotter and hotter, properties are going for over their list price, sometimes by ten, twenty, $30,000 or more.
So you're kind of missing that information. Now, PropStream used to have this data until the National Association of Realtors, who owns the MLS, pretty much made it illegal to share MLS data with people who aren't licensed Realtors.
Now, this is a conversation for a whole other day, and there's a lot of people out there talking about this in terms of, should you get your real estate license, is it legal for the National Association of Realtors to have such a monopoly on the MLS, etc. I'm not going to get into that.
But what you'll see on PropStream is you no longer have the actual sold data, but you have an estimate of what that property sold for. So in this case, they are estimating that the property sold for quite a bit over listing, but that's not a 100% sure bet.
Now, if you don't live in one of those non-disclosure states, I believe there's like eleven non-disclosure states, something like that, but if you live in a state that does give disclosures, then even though you don't see that sold data on PropStream, you will be able to see what the property sold for just right through Redfin or Zillow.
So if you are in a non-disclosure state and you really feel like you're missing out on getting that true sold data, pretty much your options right now are to get your real estate license yourself, or to build a relationship with a Realtor who can run comps for you.
Now, I tried to do a little research to see if there are any other softwares out there that can give you that sold data if you're in a non-disclosure state. And it seems like the National Association of Realtors is cracking down on all data providers, and won't allow anyone to give that information to a person who's not licensed as a real estate agent.
It seems like we just hear more about it happening to PropStream because maybe they're one of the bigger players, but I wasn't able to see any data provider that can give that information in a non-disclosure state.
Finding ARV and running comps
So we've got a few good options so far, but let's keep going and jump to analyzing deals. This step is all about running your numbers. That's going to be finding your ARV, estimating rehab, and putting things into the Maximum Allowable Offer formula so that you know what to offer to the seller.
If we start off with ARV, which stands for the After Repair Value, there are a few tools that can help us with this. I like to use Redfin, which is free and helps us know what that property would be worth after the repair is done.
So this is where we need to look for a comp that is similar to this subject property but has already been repaired. So as I looked through Redfin, which properties in that same neighborhood have recently sold, I came across this property, which is one bedroom bigger but was completely renovated and sold for 227,000 just three months ago.
So this is a good start in seeing the possibility of what our subject property might be worth after it's renovated.
You can also do a very similar thing on PropStream by pulling up the property and hitting this Comps tab. You then do the same thing by looking in that neighborhood at recently sold homes, and you can see that I found the exact same property listed here.
A benefit to using PropStream over something like Redfin is they generally have a bit more data. Like, for example, on Redfin, we couldn't see any pictures of this renovated property, but on PropStream there's a ton. Also, Redfin wasn't able to show us the square footage of our subject property, but on PropStream, we're able to see it.
If you are gonna run comps on PropStream though, one thing I really like that you can't really do on Redfin is you can select the comps you want and then generate a comp report which puts all of those comps together in a very organized and professional looking PDF, which is going to make you seem more professional when you send that to your cash buyers and it's probably gonna help you create a better relationship with them.
One thing about PropStream is that as you select the different comps, it's going to average out the pricing for you. So to show you kind of what the average price per square foot, what was the average price sold for those comps that you selected and help you easily calculate the average so that you get your ARV.
So those are some good options to choose from but just remember that whatever tool or software you use, you still need to understand the fundamentals of comps because you want to be able to select properties that are similar enough to your subject property to give you an accurate understanding of what it might sell for after the renovation is done.
Now, if you just go to Redfin or to the Zillow estimate, you have no idea what their back algorithm is doing to select that number so those are not the numbers you want to use.
You want to use a tool or software that lets you look at all of the properties that meet the criteria, and then you can choose from those yourself to get your ARV.
If you want to an easy way practice running the numbers, you can subscribe to a monthly membership plan to get my Rehab, Wholesaling, and House Hacking calculators.
Estimating the Rehab Budget
Now, for finding the rehab budget, this can be a little more complicated for a beginner if you don't have past construction experience so I put together a Rehab Calculator that has some prices baked into it so that you can get an estimate of how much a roof should cost, how much it should cost to lay new flooring, et cetera, et cetera.
I'll say that my tool is like a wrench. You need it, use it. It also has a free trial. So what are you waiting for?
How to Find Leads
For finding leads, I again use PropStream most commonly to pull a list and so I can look at all of the vacant properties in my area or all of the properties that have some type of lien but I can also stack different criteria to create a more customized list.
So for example, I can select owner occupied properties that are single family, have been owned for 15 years or more and have at least 75% of equity. You can also stack using their quick list features so I could look at all of the vacant pre-foreclosures.
For example, a free way to find potential leads is to call up your local county and ask them for a specific list which would be properties that have had their water shut off for example, or properties that have outstanding fines for having junk in the yard or not cutting their grass.
These lists are usually free or maybe just a couple of cents for them to print them out for you, but they do take a lot of time and effort to find the right person at the county and build a relationship with them so that they give you the list.
But on that hand, anything that takes more time and effort for you to get means it also takes more time and effort for other people to get which means most people are not going to do it.
So if you do it, you've probably got a gold mine of good leads that you're the only person trying to reach. If using lists isn't something that interests you, you could also go driving for dollars which means you drive around your town and you identify properties that are likely in distress and likely have a reason for wanting to sell their property for cash.
Driving for Dollars
So to drive for dollars, I use both PropStream and Deal Machine. As you can tell, I'm already using PropStream a lot so it's just super nice that it has a built-in driving for dollars feature. And with Deal Machine, I really like the design of the app and I also like that I can send out Ballpoint Marketing direct mail letters directly through the Deal Machine app and finally, they're free.
The way that I started out finding all of my leads is to just look for distressed properties listed for sale on Redfin or Zillow. Finding these does take a lot more time than using those off-market methods that I discussed before, but on-market is free and it's how I got my first few deals.
Skip Tracing
I do my skip tracing through PropStream, which costs me ten cents per phone number. There are other skip tracing services out there, like Batch skip tracing, who I've never tried before, but they are definitely an option for me.
I try to use specific services that do multiple different things for me, rather than trying to piece together a bunch of different ones, which is why I stick with PropStream for a lot of the things that I use.
I also like PropStream skip tracing because they recently introduced Do Not Call list scanning. So whenever you skip trace a list for whatever numbers it returns, it will tell you if that number is on the national Do Not Call list.
So whenever that happens, I remove those numbers from my list so that we're not cold calling people who are on the Do Not Call Registry and we'd have to worry about them suing us. Also, we're no longer using just Google Voice to hand dial our cold calls.
Ways to Contact Leads
So regardless of how you decide to get the leads, once you've got them, you need to contact them and if you're doing on market just contact the listing agent. That's the person who's representing the seller, and you do all of your negotiations and offer making through them.
Direct Mail
If you've got a list of leads that aren't on market, you can do things like direct mail, which I mentioned I use Ballpoint Marketing letters for, and there's definitely less expensive options than that.
For direct mail, you can send out cheaper options both through PropStream and through Deal Machine. I will say it's important to keep in mind that cheaper is not always better.
With those less expensive, like yellow postcards, people just automatically assume they're spam and pretty much throw them away without ever reading them. I really like the Ballpoint Marketing letters because they come in an envelope rather than just being on a postcard.
So people are more likely to open that brightly colored envelope and then also the printed message that's on there looks like it's handwritten with a pen, so it just seems much more personalized and much less spammy than some of those cheaper options.
So that's something for you to decide based on how much you have to spend and how well you want those pieces of mail to perform. You'd likely have to send out a lot more of the cheaper ones to get a good response than likely fewer of the more expensive ones to get a response.
I also pair the direct mail that I use with Call Porter, which is an answering service, which basically means that when I send those letters out, people get them, and the number on those letters is not my cell phone number, it's the call porter number.
They answer the call for me and if the person is interested, they qualify the lead. Then they will make an appointment with that person and put it on my calendar so that I can then go out to the property and make them an offer.
A cheaper option, and this isn't something that I do personally, is to hire a VA to answer those phone calls and schedule appointments for you. And a free option is you can just put your number on all of those direct mail pieces and have people call you directly.
Now one thing I will suggest is to get a free Google Voice number if you're going to do that, which, I mean that's a lot, that's a lot of people depending on how much mail you're sending out.
I'm sending out 5,000 pieces right now, that’s a lot of people with their cell phone number and a lot of potential calls coming in. But I'm giving you all the options, free and paid in addition to direct mail.
Cold Calling
Another way you can contact leads is through cold calling. Again, some people hire VA’s for this to cold call for them and some people use Google Voice, which is literally how I started.
I was just using Google Voice on my cell phone and typing in each of the numbers I was cold calling one by one, which is very slow, but it was a great way for me to get started and just like prove to myself I can pick up the phone and call someone and if somebody cuts me out, I won't cry and give up, I will keep going.
That was just like without spending any money, what can I do today? I can sit down, download this Google Voice number and make it happen. So regardless of who's making the calls, in order to get the phone number of the people on your list, you're going to need to skip trace it.
I cold call through ReSimpli, which is a CRM, which we'll talk about in a moment, but they also have a single line dialer, which lets you just work through your leads one at a time and call them directly through the ReSimpli desktop app or through your phone app.
There are other dialers out there which can do single line dialing or triple line dialing, and triple line just means that three different leads get called all at once. I believe it works in the way that when one person answers, the other two lines just hang up. I think that's how it works.
I haven't tried any of these out, but I know that Batch has a dialer that you can use and I know that Mojo Dialer has one. I've heard good things about both of those but I haven't personally tried them out.
Free/Cheap Ways to Contact Leads
A free way to contact your leads is through door knocking. This isn't something I've tried out. It's not really something I recommend, but it is free and it works for some people.
You can also put out bandit signs which are relatively inexpensive. They're the ones that you see at intersections that say "we buy houses" or whatever, but just know a lot of cities actually make bandit signs illegal, so you do want to check your local county laws or whatnot to make sure, you know, if they're actually allowed.
Click here to get my Offer Sheet Template for your leads.
How to Find Cash Buyers
Once you've found a good property and gotten in touch with the owner, you have to negotiate a deal with them to get the property under contract.
From there, you have to make a list of potential cash buyers for your property. What would be ideal is that some of those buyers want to come out and see the properties that you have.
But even if they don't, you just want to make the relationship, connect with them, and get them onto your buyers list in case they might be interested in future deals that you get.
Using PropStream for cash buyers
So the first thing i'm going to do is i'm going to open up PropStream. If you guys don't have PropStream, definitely use my link to get a free seven-day trial and you'll also get a little bit of a discount off of the monthly price.
It's something I use literally every single day, not necessarily to find properties, but to research properties that i get under contract as well as to find cash buyers.
So you're gonna draw on the map of the area that you're interested in, and then search. With PropStream you'll see all of the details of all of the properties within the green highlighted area.
What you're interested in are the cash buyers, but i'm actually not just going to straight away click on that because there's so many cash buyers that have purchased properties in that area for cash. So that's not what you want.
You want to go up to filter, then quick list choices, and then go down to Flippers.
This shows you properties that were purchased for cash, and less than two years later were then re-sold on the MLS. So that would be a cash buyer or an investor who purchased a property for cash, fixed it up, and then resold it on the MLS for a profit.
Those are the exact cash buyers you're looking for, not just people who are purchasing properties for cash, but those that are reselling them on the MLS. Those are the flippers, not just cash buyers.
The reason that's important in this example is because both of the properties that I currently have under contract right now are not great rental properties, but they could be really great flips since the price point is high and the margin is high. But if somebody was to fix it up and rent it out, the rent value wouldn't cover what they needed to for it to be a good deal.
So you want to look specifically for flippers, because both of these deals are great for flippers.
So a couple of the things that I want to add in here is that I want to say that the property type is a single family house, and I want to have a minimum price point. So go to ownership info, and find last sale price.
We can see the properties that were purchased for the minimum price point and then are now either being resold or recently resold on the MLS.
So i'm gonna take this list, and i'm going to name it, and i'm going to save that list, close it, and then i'm going to come over here to skip tracing.
I want to get phone numbers, since I skip traced emails before and I didn't feel like the emails were working. Maybe just because I didn't get any responses, but it's just hard to know if your email is being sent off into the abyss or if it's going into a spam folder or if it's the wrong email address, so i don't want to do emails.
I want to do phone numbers. In the conversations that I have with people over the phone, I'll get their emails through that if they're actually interested cash buyers.
So then i'm going to hit select contacts and I'm going to come up here to select groups.
We need to go into contacts and we can see that the skip tracing is processing. So let's go in and just see what's going on with one of these properties. On Zillow, I can see this property is pending at a high sales price, and has been meticulously restored.
So this is definitely a flipper, and I want to see how much they purchased this house for. If i could see complete price history, in 2019 it was purchased for $740,000 and they flipped it for $1.5 million. So this is a high-end flipper, like i definitely want to get this person on my list, so that's hopefully someone that will be able to reach today. Exactly what we're looking for.
One issue that I think we might be running into with why we only got a few numbers from the list of properties that we skip traced, is because a lot of them are probably purchased through LLCs and it's really hard to find LLC phone numbers.
I don't think that for the most part LLC phone numbers show up when you're skip tracing, I think only individual phone numbers show up. So that might be why our list got knocked down so much.
I'll probably look up those LLCs on facebook or online and find their numbers.
But there is something that we could do for the one that was a super nice flip. I'm gonna copy and paste the address, and what I can do is look and see who the listing agent was.
I can call this person say "Hey, I see that you sold a house for a flipper over on Hazel Boulevard. I've got a property that i'm looking to pass off that'll be a great candidate for a flip. Can you put me in touch with your investor?"
So i could do that for all of those, but in some ways I do want to build the individual relationship with the investors. So the ones that aren't under an LLC, I can call them and have that personal conversation. And for the ones that are under LLCs, I can try to reach them through their real estate agent.
Click here to get my phone script for contacting real estate agents.
Using the ReSimpli CRM for cash buyers
So I'm gonna go back to PropStream and hit export. Then I'm gonna open up a CRM like ReSimpli.
I'm going to organize all of this info and then I'll get started calling.
One good thing about cold calling buyers is that they are nowhere near as hostile as when you cold call homeowners and ask them if they want to sell.
That's because with buyers, you're bringing them a deal and even if they're not interested they know the game. I've had much more pleasant conversations with buyers than I have with homeowners.
This example is showing me that the serious buyers are already buying homes under their LLC or buying properties in their LLC's name, and it's going to be difficult to find them using this method.
Part of the reason is because it's such a high price point. For my other cash buyer list, I got way more phone numbers and I just went through and cold called, but that was because the purchase price was way lower.
This list this is a much different type of buyer, and so the vast majority of them stopped buying in their personal name started buying in their LLC's name.
So I'm gonna look and see who was the listing agent. I can come down to the sale and there's the seller's agent.
I'm gonna give them a call, but first let me look at the pictures and make sure that this was actually a flip. So it's staged, and I would say this is definitely staged and flipped. But sometimes it's probably not staged if you see that there's a bunch of clothes in there.
Now you might be wondering why I didn't just like blast text out those investors that I cold called, and there's two reasons:
1) I do want to try to make the relationship by getting on the phone and talking with them. I think that's better than texting.
2) Google Voice, which is what I use to make the phone calls and send texts and to have a local number. If you send out too many texts in a row that say the same thing, they will ban you and you'll lose your number forever. I don't want that to happen because that's my business number.
So that's why I'm just very careful with the texts I send and make sure that they don't all look the same, going out back to back like that.
Hopefully now you have an understanding of how to find the buyers both using PropStream and by calling agents for other listings that have been flipped.
It doesn't always work out. You gotta understand that when you're sitting down to make these calls, you might get all voicemails, you might have wrong numbers, and you might have agents who don't want to talk to you.
Or, you might get people who just don't know what you're talking about because you're investing and they aren't investors, they're just people who happened to purchase the house for cash.
But at least now you know exactly how to find those properties.
START YOUR REAL ESTATE INVESTING JOURNEY TODAY!
So, now that you've gotten an intro to real estate investing, are you ready to start?
If so, you can use my Free Resource Pack to help get your real estate investing journey off the ground. It includes:
- My Offer Sheet Template
- My Phone Scripts for Calling Real Estate Agents
- The Wholesaling Deal Tracker
So what are you waiting for?
Start your real estate investing journey towards financial freedom today!
