Q:"I'm in my 30s, with a wife, kids, and a job. What is the best way to get into real estate?"
Recently, someone asked me for advice on how to get into real estate. This person was in their 30s, had a family with three kids, and was transitioning from a career in the military.
Although I love real estate and believe it's the best wealth-creation tool, my advice was not to go into real estate directly.
From everything I've seen and experienced, it's too slow to generate enough cash to support a family for someone with an immediate need.
Instead, I suggested that this individual start a construction service business that isn't limited by one's ability to raise capital.
[BUT first, learn to sell/bring in business for one of these]
By getting into a "service" business, such as construction, one can quickly grow by focusing on sales/marketing and doing the job relatively well.
You don’t even need to be great; just doing the job when you say you’re going to do it in construction will put you into the top 1%.
This construction service business will then provide the cash to support the family.
Then this person can start investing in real estate without looking for an outside contractor, which could be a bottleneck in and of itself.
For this particular individual that I spoke with, his experience running teams in the military could easily transfer to managing construction crews.
Construction is about doing ordinary, simple tasks relatively well. You can learn anything from youtube these days.
Whereas doing real estate deals involves raising outside capital. With each deal, you're like a startup. You are selling yourself and your track record to investors.
Raising money can be easy for someone with connections, like those who attended private schools or play golf at exclusive country clubs, etc.
However, for most middle/lower-class people without a track record of executing real estate deals, raising money can be difficult. Their sphere of influence may not have the liquid capital to support their real estate ventures.
The saying "If you have a deal, the money will be there" is true, but it might not be there for you. The money is there, but it very well could be out of your reach in the quantities needed to build a business to provide for your family.
People often leave out the part about needing experience for others to trust you with their hard-earned capital.
Why should someone risk their capital in order for you to attempt your dream when you’ve never done anything like that before?
The bets on people who lack experience are usually made by friends and family, not professional investors.
Professional investors want you to have a track record of doing what you are raising capital to do.
Building a track record in real estate takes time. Learning the business and recognizing good deals can take years.
Commercial real estate development deals can take 3-5 years (if not more).
We're selling two deals this week that we started 5 years ago!
In my personal opinion, for someone who needs to pay their bills now, getting directly into real estate is the wrong move, especially in a competitive market like Southern California.
A service business is the way to go, in my opinion.
Construction has a low bar. Most people in the industry fell into it and aren't true pros.
If you show up and do what you say you will do, you'll quickly rise to the top.
With marketing/sales skills, a construction coach, and a strong work ethic, you could become a top-income earner and build a multimillion-dollar construction business within a few years.
In Los Angeles, I've seen many Israeli, Iranian, and Mexican immigrants start with nothing and make a great living running construction companies. They gain experience and eventually transition into developing their own projects.
Getting into a service business allows one to replace their existing income quickly and support their family immediately without having to wait years that a real estate investment might take to come to fruition.
I've personally mentored someone who is now a good friend who started in construction and used it to generate cash flow for his family.
With my advice, he gradually got into flipping houses, mastered that, and slowly started building a portfolio of 2-4 unit rental properties he built from the ground up (added units in the back of existing houses). He generates a monthly positive cash flow of $30,000 a month just from his rentals; that’s not even counting his house flips.
He's building his multimillion-dollar dream home, and it was all thanks to starting in construction.
Going directly into real estate investing/development isn't the easiest path, particularly for someone with a family to support.
Starting a service business is a faster way to generate cash flow, which can then be used to purchase and develop real estate assets.
If you're interested in starting a construction service business, I recommend beginning by doing sales part-time for an existing successful business.
The idea is to start slowly while still having the old job, work part-time nights/weekends for a small general contractor selling exterior painting, roofing, flooring, or bathroom/kitchen remodels, unit-turns for apartment owners, landscaping, etc.
IMO, the key is learning to sell/market, which will generate extra income and prepare you to bring in business when you start your own company.
You're learning to sell and observing and learning operations; you're there not for a career but on a short 1-3 year reconnaissance mission to learn how the business operates and move from being a pawn in someone else's chess game to starting your own game.
Don't worry if you're not a natural salesperson. I’m an extreme introvert, but to provide for my future family, I learned to knock on strangers’ doors and pick up the phone can call strangers to generate business.
We're all in sales in one way or another.
If you want to stop being a wage slave and work for yourself, you must learn to sell/market and bring in business.
Once you have the business, you can organize the labor of those who don't see themselves as salespeople.
The alternative is to continue being a cog in someone else's machine, getting paid about the same as they could pay someone else to do your job, relative as well as you can do it.
Remember, if your job can be done remotely, it can be done remotely from Mexico, Columbia, India etc. Now you’re competing with the whole world!
My suggestion if you go this path and choose to become a business owner: turn off all the news, turn off social media, replace your driving time with nothing but sales books/tapes, and reprogram your brain to make yourself into a salesperson, even if you are not naturally one, then go and get business.
Why? Because the life of your kids, and your family, depends on you convincing strangers to do business with you.
Look for mentors or coaches. I’ve personally had a construction coach for years [Karan - thecontractorscoach.com], and I’ve seen him provide years of shortcuts to people.
I can't coach anyone in construction because we've always had just one client: us. I’ve seen Karan take a guy from $1m to $50m of yearly revenue ($5+ in yearly profits).
Again, this is just my opinion; I could be wrong. I often am, and I would give completely different advice to someone who is 18 years old with no family and no kids.
But for what it's worth, this is what I think is the right move for someone wanting a career change and financial freedom in their 30s with others depending on them.
If you think I'm wrong, ask your favorite real estate investor how their "early" years were and how they made it through. Everyone I know who started directly in real estate struggled; it's a HARD business to make money in real estate when going off on your own and starting with nothing.
I think this is a better, faster path.
Service Business (construction or another) > use cashflow to hire telemarketers or do direct response marketing (direct mail) to source your own off-market value-add real estate deals.
Use your own crews to fix/build them.
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P.S. Learning how to bring in business and starting any business can work, and then investing the cash flow into real estate.
My point is to start a service business where raising vast amounts of capital will not be a barrier to entry and get great at sales/marketing/digital marketing to promote/sell your services.