How We Started Real Estate Investing

How We Started Our Real Estate Investing Career

There’s a tremendous amount of interest in real estate investing. I personally think everyone should own at least a few rental properties to provide passive retirement income. Of course, owning real estate can also be used to generate income before retirement.

Because investing in real estate is something we do full-time, I receive a lot of questions about how to get started in this business. There are so many possible answers to that question, but what I can share with great confidence is the story of how and why we got started.

To begin with, I wanted to find a way to generate income for our retirement. Our savings was “low” (to non-existent) and I certainly never want to count on Social Security or Medicare. So I began researching. Over and over I read about having monthly income from owning rental properties. As I’d owned two homes in my adult lifetime, I knew something about owning houses and thought this was a doable venture worth pursuing. So, we did.

My first goal was to own five rental properties for passive retirement income. It seemed to me that, by the time we retired, we should have all five paid off and that they could each be generating about $1000 per month rental income. That would mean and additional $5000 per month income whether we worked or not. How sweet is that?!?

And so we began. We acquired those first five properties the traditional way, either talking to for-sale-by-owners or finding properties and making offers through real estate agents, then working with banks to obtain 30 year financing.

Our goal at the time was that each property could rent for enough to have at least $200 per month additional cash flow after ALL of our expenses on that property were covered. We calculated $200 extra to be break even – necessary to cover things like a new water heater, carpet replacement, painting when tenants moved out, etc.

We both had Sundays off, so we’d scour the Sunday newspaper (pre-internet obsession) for for-sale-by owners and/or properties in neighborhoods we knew. Then we’d drive by and, with our best evaluation completed, make offers – often to the owner or, if listed, through a real estate agent.

It took us three years to buy five rental properties and we financed them all with traditional 30 year loans through financial institutions (banks). Those five properties worked so well that we decided more of a good thing would be even better. Not too many properties later, our first major roadblock – the banks laughed when we applied for financing (our debt to income ratio was way off) so we then had to learn creative financing strategies and began studying real estate investing as a full-time profession.

Truly, our first goals were to (1) financially secure our retirement and (2) do something more with our time than we could in a w2 job. Our retirement was basically secure after only two years. Beating our w2 job happened from the beginning. How? To begin with, we loved what we were doing and couldn’t wait to get up and get started every morning. Beyond that, the lives we were touching, the people we were helping and, ultimately, the income we were creating all blew our w2 jobs out of the water.

So tell me, how did you enter the real estate investing game and when? And if you haven’t started yet, what are you waiting for?

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20 Comments

  1. Sheena
    Sep 11th, 2015 / 10:28 am

    Thank you for all the info Karen, I really appreciate it!

  2. Karen
    Sep 11th, 2015 / 10:05 am

    Sheena:
    We always use an attorney. If a client ever comes back to you unhappy about anything in the transaction, you definitely want legal counsel to protect you.

  3. Sheena
    Sep 11th, 2015 / 9:45 am

    Hi Karen,
    Thanks for the reply. I am not too familiar with wholesaling. When you found a seller did you do the paperwork yourself or did you use an attorney?

    Thank you!

  4. Karen
    Sep 10th, 2015 / 4:03 pm

    Hi Sheena:
    What we did in the beginning was very different from the way we coach now. After doing this full time for 11 years, we have found that the easiest way to start our and acquire the cashflow you need to own real estate is to buy and sell wholesale properties. Those are the severely distressed properties that you can mark up a small amount and sell to an investor who has the funds necessary to renovate and sell retail.

    We started out buying as many as we were allowed to acquire the traditional way – bank lending. When the banks stopped loaning to us, we had experience and a track record to approach private lenders – co-workers, business associates, those who knew us and our successes.

    We are not real estate agents and did not use them for many years. We found that most agents were not interested in submitting all our low offers in the hopes of eventually getting a deal to closing. Starting out, you make a lot of offers to get one to stick.

    Hope this helps and I wish you tremendous real estate investing success!

  5. Sheena
    Sep 10th, 2015 / 3:54 pm

    Hi Karen,

    Thanks for a great post. I have listened to your podcast on Bigger Pockets several times and it has been very inspirational. I began getting started with REI in May and have seen over 40 properties and made 10 offers, currently I have a few that are pending so hopefully something will come along soon.

    I had a questions regarding how you acquired properties when you decided to do it full time. Did you do lease to own or owner financing? Can you please expand a bit on creative financing you used? Also, you had mentioned in the podcast that you did marketing and followed up with people to help them get out of various situation and in the process acquire properties. Were you a real estate agent at the time or did you have a realtor who helped in the process? Sorry for all the questions =) You are an inspiration! Thanks in advance!

  6. Karen
    Mar 21st, 2015 / 6:01 pm

    Thanks, Jessica!

  7. Jessica Sala
    Mar 21st, 2015 / 10:25 am

    Great post! People start is so many different ways in this industry. neat to hear how someone else got going!

  8. Karen
    Mar 18th, 2015 / 6:14 pm

    Hi Claude:
    First thing you do is… move to Greensboro!

    I have no idea how to help you where you are. I own a lot of properties, all within a nine mile radius from my home. The median housing price point here in Greensboro is $148,000. $700,000 will get you a 4,000-5,000 sq.ft. really nice home.

    I appreciate you asking, but I have no idea how to help. You can buy outside of California, but you need cash and a partner wherever you buy.

    Good luck, and please let me know what you do (especially if you move here. Then I CAN help!!!).

  9. Claude
    Mar 18th, 2015 / 1:53 pm

    Hi Karen,

    My wife and I have started researching how to get to the similar five homes as you did about six months ago. We have one condo prior to the two of us being married. I started doing research and stumbled across bigger pockets and then your podcast which was like watching our life in a mirror as we are in the same age level as you two were and savings dilemma.

    I feel stuck on how to move forward. Everyone says buy where you know like you did, but we live in California in the Bay Area where the average price of homes in our neighborhood for a 3/2 with garage ranch style house of 1400sq ft is $700k plus. We feel stuck on how to take that first step with our limited savings..not enough for 20% down in our area and we are a cheaper part of the Bay Area. Looking for recommendations on how to start? Do we look outside of California?

    Thank you,
    Claude

  10. Karen
    Feb 17th, 2015 / 1:02 pm

    Thank you, Micheal, for reading and for taking the time to comment!

  11. Micheal Giorgianni
    Feb 17th, 2015 / 2:16 am

    Thanks for the great article! Always nice to see how others got started and how far they’ve come :)

  12. Karen
    Feb 12th, 2015 / 11:58 am

    Thank you so much, Renier, for listening to my podcast. I’m so glad you enjoyed it!

    Yes, we were buying the traditional way in the beginning and didn’t know there was anything different than 20% down and bank financing. What a difference 10 years can make!

    To your success.

  13. Renier
    Feb 12th, 2015 / 2:13 am

    Thanks for this inspirational article Karen. Heard your podcast on Bigger Pockets today and thoroughly enjoyed the content there as well. Just curious, were you putting down 20% on your first 5 homes you financed traditionally through the bank?

  14. Jim Williams
    Feb 7th, 2015 / 12:29 pm

    So exciting to look back to see where we started and where are today! As of today, we are now a top 10 HomeVestor Franchisee of over 550 franchises in the U.S, in sales and buy closings and loving it! Come join us in the Carolinas…

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