Many people who consider real estate investing can find themselves at a loss, not knowing how to move forward. Then, they quit before they ever get started despite this being a wonderful time to begin real estate investing.
Did you know that the No. 1 reason people don’t begin investing in real estate is fear? And that fear comes from a lack of knowledge. That is why it is important that become educated on the subject so you can have the confidence to invest without fear.
This Isn’t Quite Like Riding a Bike
If you were learning to ride a bike, the best way to get the knowledge and experience to be successful would be to simply get on the bike and do what you’ve seen others do. After a few false starts and maybe a fall or two, you’d be riding. You can approach real estate this way, but it could cost you. False starts and falls can be very expensive, costing you thousands in potential profits or even eating into your start-up funds.
That is why seasoned real estate investors suggest you gain your knowledge by hiring a real estate investing mentor. A mentor is someone that can help you learn the right ways to invest so that you don’t lose money in the process.
- Want to know where your properties should be located? A mentor can help.
- Need to understand a good asking price for a property? A mentor can help.
- Having trouble calculating how much a rehab will cost? A mentor can help.
- Don’t understand how to negotiate a deal? A mentor can help.
No matter your questions or concerns, finding a good mentor can help you learn the ropes and become a successful investor without the fear that often accompanies a new venture.
Not All Mentors are Created Equal
Of course, this is only true if you find a good mentor, and like anything, not all people willing to help you are worth your time or money. Here are some good questions to ask as you try to find the right mentor for you:
- “Do you do real estate investments yourself?” You want to be sure that you get someone that is actually investing in real estate and not just someone who “knows” about it from reading books or has past knowledge but is no longer actively investing. Book knowledge is great, but it is not sufficient. Past knowledge is great, but rules, regulations and best practices change over time. Be sure to find someone who is currently investing and doing well at it.
- “Do you have any examples of investing you have done?” Someone who wants you to pay him or her to be a mentor should be more than willing to show you some past deals, the types of deals done, and the profits that have been made.
- “How long have you been investing, and how many investments have you made? What type of deals have you done?” There is no right or wrong answer to these questions, but if someone has only been investing for two years and has only completed three deals, then you know that that person is still new to the process. On the other hand, someone who has been investing for 10 years and has done more than 100 deals is more likely to have the experience you seek.
- “How long is the training?” Once again, there is no right or wrong answer, but you do want to be sure that your mentor is going to teach you the ins and outs of the process and be with you through at least one full project.
- “Do you offer houses for sale, too?” It’s perfectly acceptable that a company offering mentors also has houses for sale. However, you want to beware of companies that take your money for training but end up selling you a property it has already found, funded and rehabbed. If this is the company’s method, then you won’t learn how the process works.
It’s About Transferring Knowledge
The entire point of hiring a mentor is to have the knowledge that investor has about the process transferred to you. That is why you need someone who will pass on the following:
- Help you determine which type of real estate investing is for you. This can be residual income, fix and flip, wholesaling, liens and deeds and more.
- Help you identify your niche market.
- Help you evaluate properties including such things as the ARV (after repair value), rehab costs, exit strategies, cash flow projections, profit projections and more.
- Help you create your own team or network that includes such people as real estate agents, wholesalers, trades people, investors, bankers and others.
- Help you understand how to find, negotiate and fund a deal.
How Much Is This Knowledge Worth?
Of course, you will want to consider how much to pay for a mentor. It would be great if there were a set answer, but the truth is that it depends on the following factors:
- How much time will you get? Are the times set?
- Is the training one-on-one?
- What will you be learning?
Be sure that your contract lists these items and specifically states what you will receive for you money.
With that said, in general, most paid mentors cost around a few thousand dollars and some go as high as $40,000, but that seems excessive.
If you don’t like the idea of a flat fee, you might suggest that a mentor take a cut of the profits for a specific number of deals or a specific length of time. Paying a mentor 30 percent of net proceeds is a reasonable rate and often works better than a straight fee.
Where Can You Find the Right Mentor?
Unlike finding a lawyer or a real estate agent, you aren’t likely to look up “real estate investing mentor” in the yellow pages. However, this does not mean that finding a mentor has to be difficult. Here are three good suggestions for finding a mentor who meets your needs:
- Ask around your real estate investing club. If you haven’t already joined one, you should, because REI clubs are designed for the purpose of networking. REI clubs can be local or online, and they bring together people who can help you get started in your real estate investment journey. Generally, real estate investment club dues are between $25 and $200 a year. The best clubs are local, meet at least quarterly and have both new and experienced investors involved. A good place to find a REI club is through www.REIclub.com.
- Find a company that specializes in real estate investment mentors. One such company is Real Estate Knowledge Institute (www.REKI.com). These companies provide mentors who will guide you through the entire process.
- Use other networking sources. Ask friends, family, wealthy individuals or landlords who they would recommend as a real estate investing mentor. Be sure the person you choose has actually done investing and been successful doing it.
Whether you want to flip houses or find your niche in elite real estate, the mentor you choose should be able to help you approach your project with confidence. Put your fear in storage by hiring a mentor today and starting on the wonderful journey known as real estate investing.
About the Author
John Trautman is an author, entrepreneur, longtime real estate investor and founder and CEO of the Real Estate Knowledge Institute. Through REKI he teaches and inspires aspiring real estate investors who have an interest in everything from home flipping to buying and selling rental properties to earning passive income through various real estate investments. Contact him at firstname.lastname@example.org or 206-255-2858.