The Only Options for Getting Started in Real Estate

The Only Options for Getting Started in Real Estate

If you're looking to get started in real estate, you have one decision that will significantly affect the most important results of your efforts. This one decision is a natural first step as you're working toward acquiring your first property, but it also carries with it a weight of importance because it influences such significant outcomes, like:

• Speed - time it takes to get your first property
• Money - the money you put into that property
• Risk Exposure - the amount of risk you assume

Each method has its benefits and tradeoffs with correlating risks and reward. There's not a one-size-fits-all method for everyone. You have to decide what's best for you and will help you move toward your goals most effectively. For the new investor looking to get started, you need to choose your method of learning. 

There are Two Methods for Learning Real Estate

After you've determined that real estate is the strategy you want to use for moving toward financial freedom, building passive income, or simply adding an additional income stream, you need to pick which learning method you'll adopt. Most people default into a decision because they don't really know there's one needing to be made. In order to help you through the decision, I'm going to lay out the two learning methods, what they are, and the risk/reward with each. 

Do It Yourself (DIY)

The DIY method for learning is common (or "School of Hard Knocks", as I affectionately call it) with today's proliferation of technology. If you want to learn a something new, YouTube, books, and podcasts are popular forms of learning. This method is highly effective for learning things that are low-complexity or low-criticality, but can also be an effective way to learn real estate. The DIY method consists of reading lots of books, watching YouTube videos, attending webinars, listening to podcasts, and any other way to supplement your real estate knowledge on your own. 

Coach / Mentor 

The Coach / Mentor model used to be more focused on seminars (as recently as the late 90's) or week-long in-person courses, but have also benefitted from the proliferation of technology. With FaceTime, Zoom, Google Hangouts, and other technology, coaches and mentors are accessible in person much more simply. The Coach / Mentor model is highly effective for learning high-complexity, highly nuanced skills, and often skills of high criticality. This method consists of learning from an individual who has the skills/knowledge you need, having them walk you through the process in a more kinesthetic manner, and being able to collaborate with them to learn nuanced aspects of the skill.  

DIY  vs.  Coach/Mentor

Neither of these models is completely without risk. Unfortunately for all of us, life doesn't allow you to avoid risk - you have to understand the risk and determine if it's worth the reward. Each of these models comes with their own risks and rewards. 

DIY

Reward

• Lower Up-Front Cost

The main benefit for the DIY method is the low barrier to entry. Other than the price of the books you purchase, most of the other material is free. You have free reign to all that the internet has to offer, podcasts, YouTube videos, books (physical & digital), and online communities like Facebook groups or BiggerPockets. 

Risks

• Slower, Higher Risk Exposure, Higher Total Cost

Because of the need to search out the educational material, curate it to ensure it aligns with the strategy being chosen, and then putting the content in the appropriate order for consumption, DIY'ers move more slowly. The need to find, curate, and order content is not often recognized, which leads to a less efficient learning process. Adult learning research shows adults learn most effectively when the subject matter is what they need at the moment they need it. DIY'ers also find that there are hidden risks not often noticed on the front end. This results in higher costs long term from things like rehab costs and timeframe being underestimated, buying bad deals without having someone to protect them, or simply unknowingly having a bad (or worse - dishonest) property manager or contractor (my first contractor walked off with $12,000 - a complete gut-punch for a newbie). DIY usually takes 2+ years to get to your first house. 

Coach / Mentor

Risks 

• Picking the Wrong Person, Up-Front Cost

The most significant risk in the Coach / Mentor model is that of the selection of the coach you choose. There are three distinct qualities you should look for in a coach or mentor (a topic I cover in a separate post). The Up-Front Cost for a Coach / Mentor will come in the form of either time or money. The monetary cost can be avoided if you already know someone who has the three qualities needed for a Coach / Mentor and agrees to guide you at no cost. In that case, you'd be giving your time and efforts (usually for free). If you don't know someone with these qualities, your best bet is a course or coaching program.  

Reward

• Faster Results, Lower Total Cost, Lower Risk Exposure (Deal Curation)

 The benefit of a Coach / Mentor comes in a few forms. The best coaching programs offer you access to someone who is a practitioner, that is, they're doing what they're teaching. When you have access to this person and can ask them questions, you're able to avoid costly mistakes while also protecting yourself from unknown risks as the Coach / Mentor helps point out future issues ahead for you to avoid. One of the most differentiating values of the Coach / Mentor model is that you have access to someone who can curate your deals so 1) you don't step into a bad deal and 2) you can learn the process of analyzing deals through real deal analysis. These two things result in faster learning and lower costs over the long term. The other hidden value is the added courage given to you through having someone curate your deals. The deal you're analyzing feels less risky when you have someone with years (and lots of units) of experience saying, "Those are great numbers. If you don't go get it, I think I will!" While DIY takes longer to get your first successful property, having the right Coach / Mentor could get you to your first property in 60-90 days.

The Takeaway

Neither method is perfect all the way around. You have to determine your personal priorities, your risk tolerance, and the speed at which you want to move.

If you're someone who likes things done 'my way or the highway', has lots of resilience, a high tolerance for risk, and doesn't mind the process to your first house taking more time, the DIY method may be a valuable method for you to employ.

If you're someone who wants to protect your downside by learning from someone's proven process, wants curated guidance, and to get your first house faster, investing in finding a Coach / Mentor could be the right choice for you.