How Can You Replace a 100k Income with Real Estate? Ask the Experts Part 2

Today I have part 2 of our Ask the Experts Series Business Building Tips, and here's the million dollar question; How can you replace a 100k income with real estate?

I have another awesome group of real estate investors for this second roundup post. Once again they are some of the most respected people in the real estate investing arena today.

These folks were kind enough to share their expertise and their top business building tips. The reason I love roundup posts is that you are able to clearly see that there is no “one way” to do this business.   Everyone does things a little bit differently and that’s one thing that makes this business so interesting.

This series is especially helpful if you are just starting out. However if you’ve gotten started but you’ve been dragging your feet or have just been “limping along”, you’re in the right place too.

How Can You Replace a 100k Income with Real Estate? Ask the Experts Part 2

Here’s What I Asked Our Experts.

• What advice would you give someone that is a new investor trying to replace a 6 figure income he 1st 12 months they are in business?   I am assuming that they have a nest egg saved of $12.000 to use in their business that first year.
• What investing strategies would you recommend?
• What marketing strategies and tips do you have for someone brand new?
• What other tips do you have?

Did You Miss Part 1 of My Series?

If you missed part one you can read it here.

Let's Get Started

Here's what the experts have to say. First up is Trevor Mauch.

Trevor Mauch

Most of you know Trevor.  He is the founder of Carrot which is a favorite of mine. You can reach Trevor at Carrot.com 

First off, I'd suggest the new investor get really intentional with WHY they're making this move in the first place. If the “why” is mainly tied to increasing their income, they need to really think hard about if that move will really make them happier.

I've found that over about $125k (maybe even less) happiness really doesn't go up a whole heck of a lot more. There are diminishing returns on a higher income if that higher income isn't tied to a larger and more meaningful “why”. Now, let’s get down to the real answer, don't tackle that $100k in 12 months goal at once. Break that goal down into very bite sized chunks so you have very clear and easy to achieve goals each month and week. If you choose to tackle that goal with rental properties… decide on the profit per door per month you want to make… lets go with $200 per door per month as a conservative number. We'll figure out how many doors it'll take to make up $100k/yr in profit… which is $8,333.  So that is 41 doors.

Now work backwards from there and make goals for each quarter, then work it back for each month in those quarters… and each week. You can acquire 41 doors in a year with just 3.5 a month. That's not much. You could do 3 months worth with a 10 unit building. Then work it backwards to how many sellers you need to talk with to close a deal. Let's say 10… then work that backwards to how many sellers you need to reach out to and talk with each week to close the number of doors you need that year. You can do the same thing with wholesaling, flipping, land, etc.

Then get to work taking those small bites each week!

What investing strategies would you recommend?

I can't say I'd recommend wholesaling over rental houses over apartments… etc. Mainly because I feel they're all completely different business models… and all can get you to that $100k/yr income in that first year if you hustle.

Mike Hambright

You all know Mike as the “Flip Nerd Guy”. You can reach out to mike at FlipNerd.com

Know that you will constantly be tested emotionally.  The first year is the hardest, and while it never gets “easy”, you learn to tolerate the ups and downs.  There are a lot of people that have found great success in this business, but far more that have failed.  Very few that stayed focused and were committed have failed.  Most of the failure stories are from people that didn't give it their all, or just gave up too easy.

I'd recommend finding a great mentor to not only help answer questions that will help you build confidence, but truly help frame a goal that fits what YOU are looking for, not a boiler plate “bigger is better” universal goal.

What investing strategies would you recommend?

There's a lot of attention on wholesaling for new investors, but I think a balanced approach the most common exit strategies is important.  You'll come across deals that will be hard to monetize if you wholesale, but could be great profit deals if you rehab.  You'll also come across some great rental opportunities.  One of the biggest challenges in this business is finding deals, and you'll reach your goals faster if you have multiple tools in your tool belt (exit strategies).

What marketing strategies and tips do you have for someone brand new?

Be consistent and patient.

What other tips do you have?

Networking is critical.  Get to know anyone and everyone in your market that is doing deals, financing deals, etc.  It's impossible to be too well connected, and only good things can come from it.

Seth Williams

Seth has gone from a part-time investor to full time investos this past year. He finally “escaped the 9 to 5”.  You can reach Seth at RETipster.com

1. Before you spend a dime of your money to build your business, you need to understand what specific types of properties you're looking for. Whether your goal is to purchase single family houses, multi-family units, commercial properties or vacant land – there needs to be zero confusion about what types of opportunities you're targeting.

2. Once you know what you're looking for, you need to obtain a high quality list from a reputable source (this can come directly from the county, or from a more user-friendly service like ListSource, Melissa Data or AgentPro247). When you have your list, it's important to make sure it is filtered with a fine-toothed comb (i.e. – make every effort to ensure the right recipients are ON your list, and the people you'll never do business with are OFF of it).

Ben Leybovich

Be is a commercial investor that is known to have solutions to complex problems.  You can reach Ben at JustAskBenWhy.com

I would like to offer some thoughts. This, perhaps, will be different from how most people will answer, or what you might expect my answer to be, but I think the forthcoming is a valid point of view…

The question you ask is – how to replace a 6-figure income with REI income? This, in my opinion, is the wring question – the real question is why would you want to?

Let's think about what you are asking:

Someone has a 6-figure income, and yet you are assuming a meager $12,000 of savings. If this were true, then the subject's issue is not lack of income, but over-spending. So, replacing the income will not create a solution for this person.

Further, you are asking about how to replace this income within 12 months. Sharon, since you and I both know that 6 figure income cannot be replaced with passive cash flow with a short time such as 12 months, and with seed of only $12,000, then I am presuming that you are suggesting wholesaling, or some other type of marketing of RE business.

This, however, also does not really solve any problems, because the income, even if it were replaced, would still be considered earned, which leaves 2 issues unsolved. Namely, that the subject would be doing nothing more than trading one job for another, and that the income would be extremely highly taxed, leaving the subject with high burn ratios upon their top-line revenues.

So – what does all of this mean…? Simple – real estate investing is for one of two classes of people:

1. People with a lot of money or very high income – they can become passive investors.
2. People, such as I was, without money nor income – they become extremely efficient operators.

As such, for someone who has $100,000 income, my recommendation would be  to stay in that job, control burn rate, save up money for down-payments, and buy 1 good investment every year or two. They will retire well if they chose those investments smartly.

No magic in this this business, or any other. One cannot replace $100,000 doing what I do in 12 months, nor can they do what you do. Intellectual worth takes time…more time than 12 months 🙂

Jimmy Moncrief

Jimmy has an awesome blog. You can reach him at Real Estate Finance HQ. 

Step 1) Get Private Funding

Step 2) Flip a house using Private Funding

Step 3) Flip another house using Private Funding

Do this your first year – while you have a six-figure job to prove to yourself and other that you can do it. If you can do it with a job, it will be easy without a job.

What investing strategies would you recommend?

I'm a huge fan of boring is profitable.

I just buy long-term single family rentals using 100% financing strategies.  All my properties are scheduled to be paid-off in 10 years or less using strictly rental income.  This isn't sexy, but it's proven.

What marketing strategies and tips do you have for someone brand new?

I focus on 2 strategies that yield a low number of prospects, but they are very high quality motivated sellers:

1) Tax-data – I'm a huge fan of using lists where the owner is behind on their property taxes by more than 2 years.  It's not arguable on how they are struggling if they can't pay the property taxes

2) Eviction court – you will find a ton of tired landlords simply by sitting in eviction court – this is the best time to approach a real estate investor – when they are dealing with a major problem

The best part about these 2 strategies – THEY ARE COMPLETELY FREE!

Mark Ferguson

Mark is an investor and a real estate agent. He is on a mission to educaste folks on how they can successfully combine those two worlds. You  can find mark at InvestFourMore.com

Wow, that is quite a task to replace a six figure income in one year with real estate and only $12,000. The first advice I would give, is do not assume you will make six figures that first year, have a backup plan. Then you would need to figure out what your niche will be: agent, wholesaler, flipper, rentals.

You can take rentals off the list first, because they won't make that much money the first year. It will be tough with flips having no experience and that little capital. Maybe if you found a great partner. That leaves being an agent or wholesaling, which both take time to cultivate. I have a couple agents on my team who made $100,000 in their first year, but that is not typical.

The nest egg would be used to live on, while the agent gets licensed, and builds business the first few months. Wholesaling may be another option, but it takes time to develop a marketing campaign, learn to talk to sellers and find buyers.

I wish I had better advice, but being an agent could be the best route, even though it is not really real estate investing.

What investing strategies would you recommend?

I think I already answered that!

What marketing strategies and tips do you have for someone brand new?

Focus on one aspect of real estate, do not try to do it all at once. Focus on just a couple of marketing techniques in the beginning as well. One of the biggest mistakes I see, is a new investor trying to do everything at once. They do a lot of things poorly, which produces bad results.

As a wholesaler focus on direct marketing. Either direct mail campaign, or direct mail mixed with driving for dollars to maximize the results.

As an agent, focus on talking to as many people as you possibly can, building a good solid website, Facebook, and follow up marketing using a database.

What other tips do you have?

Real estate investing is not a get rich quick scheme. It takes time to build a marketing plan and implement it. It takes time to learn where to spend your money and what will give you the best results. Don't expect miracles overnight.

Focus on getting financing first!  This is slightly counter-intuitive, but it actually makes sense.  Most real estate investors spend 95% of their time getting a deal and only 5% of the time focused on getting financing.  The problem is that deals fall apart all the time because investors can't get financing.  What is worse is that you don't know what kind of deals and the size of the deals you can actually do, until you get the financing.

By focusing on getting financing first, you will actually grow your real estate business faster.

Pay These Experts a Visit

Thanks again to our experts: Trevor Mauch, Mike Hambright, Seth Williams, Ben Leybovich, Jimmy Moncrief and Mark Ferguson.  Be sure to stop by and say hi.

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