Hi friend, welcome back. Today we’re going to be talking about how to buy your first house, or get started in real estate, as a complete beginner.
I personally got into real estate with my first house when I was 24 years old, single as a pringle, and making only $16/hour.
And I would 10/10 recommend. So if you are thinking that your age, your wage, or your relationship status are holding you back, you’re wrong and we’re going to talk about all of it today.
I’m not trying to be rude. I want to encourage you and give you the low down on how you can do the same thing that I did, all the tips and tricks, and set yourself up for success.
Now, real estate is one of those things that can make you or break you, so we’re also going to be going over some important do’s and don’ts to make sure that when you get started in real estate, it is going to wildly benefit you, and not harm you.
A lot of people are also asking if they should get started in real estate in today’s economy, with the interest rates being high.
I will tell you right now that if I was starting over today, I would absolutely make a purchase in today’s economy, with the existing interest rates.
But we’re going to get into all the details on why I would do so, and how to do that correctly as we get into today’s post. So if you’re interested in any of that, stay tuned.
But if you’re new here, name is Rebecca and here we focus on building wealth and living our dreams without being tied down to a traditional job. There are a lot of aspects to that, and today we are discussing real estate, which I personally think is pretty important in building wealth.
As a quick disclaimer, I am not an expert or professional on these things. This content is meant for educational and entertainment purposes only. Please be sure to reach out to a professional if you need serious advice.
Ok, with that out of the way, let’s go ahead and jump right into how to get started in real estate as a complete beginner.
1. Do get started as soon as possible.
Get started in real estate as soon as you meet the criteria which I am going to be giving throughout these do’s and don’ts. The reason I’m saying this is because time is truly of the essence with real estate. You don’t want to wait around. And that brings me to point #2.
2. Don’t wait for everything to be perfect.
Don’t wait around until everything seems perfect in your life, or until the economy seems perfect, or the housing market is perfect, etc. Things will never be perfect.
I can tell you that if you were in a decent position to buy at any point in time and you chose not to because you were waiting for things to be perfect, you will most likely regret that later. I bet most people who have made that mistake now regret not buying when they had the chance.
That's because, like I said before, time is of the essence with real estate. The prices will most likely always keep going up, and the sooner you get into your first house, the sooner you’ll start building equity and be able to play the game of real estate better.
The key to this, though, is still to make sure that you meet the healthy criteria we’re going over, before purchasing. But that doesn’t mean things will be perfect. And that’s totally ok.
3. Do give yourself a goal and push yourself to reach it.
Getting started as a beginner in real estate is the hardest step. It’s so important that you understand this!
Once you get past the starting point, everything else will most likely be easier moving forward, as long as you set yourself up for success, which is what we’re going over right now.
So you need to realize that this is not going to be an easy process, for the average Joe at least, and you need to give yourself a financial goal, and push yourself to get there.
You need to realize that once you hit that goal, it’s going to get a lot easier, and it will all be worth it.
4. Don’t purchase anything outside of your price range.
This may sound super obvious, but it’s tempting. I promise, the temptation will arise. Just don’t do it.
You want to make sure that you are not going to have a monthly mortgage payment that is more than 25% of your monthly take-home pay. That’s your monthly income after taxes have been taken out. It’s the actual amount that enters your bank account every month.
I’m going to be doing a part 2 to this post within the next few weeks, to take you through a step-by-step guide. And that guide will walk you through exactly how to figure out how big of a house you can afford according to this criteria, as well as some other factors.
But for now, it’s important that you understand that purchasing outside of your price range can easily set you up for failure. Remember how earlier I said that real estate can make or break you? It really can.
If you purchase outside of your healthy price range, you are setting yourself up for a higher risk of foreclosure or short sale, which will really mess with your financial wellbeing overall. It can even mess with your mental and emotional wellbeing, because those are pretty traumatic events to go through.
We don’t want to do anything that will set us up for failure, short sale, or foreclosure, and that means we’re going to stick to our healthy price range. Which is, once again, 25% of your monthly take-home pay.
While I would never suggest that anyone go above this percentage, it is especially true for a first home, as a first-time buyer. You want to really make sure to set yourself up for success, and that will lay the foundation for a lifetime of success.
Real estate is really something that you can build on and grow with over time, but it’s better to start conservatively and ensure your success.
5. Don’t count yourself out of the game because of age, wage, relationship status, or any other setback or excuse.
That’s right, I went there. Please hear my heart on this, I am not trying to invalidate anybody’s problems or struggles.
But I know so many people who want to get started in real estate but keep pushing it off because of these challenges that they have. Again, don’t get me wrong, they are valid reasons that would slow you down.
But I want those people to be able to start building wealth with real estate, and I want that for you too, friend, so I’m going to tell you the truth.
The truth is that, even with the odds stacked against you, you can do it, just like I did when they were stacked against me. There are strategies that you can use to make it work.
And so in #7, we’re going to talk about what to do when you feel like the odds are stacked against you.
6. Do push yourself to your limits for the short term.
This section is not for everybody, some of you may feel that it will be easy enough for you to buy real estate. That’s wonderful, and we’re happy for you, but this section isn’t for you. You can skip to number 7.
Now for the rest of us, this is for the people who feel like the odds are stacked against you, like they were for me. Maybe you think you have too many kids or not enough income, you’re not married, you’re too young, too old, you have a disability, or any other thing that’s stopping you from buying real estate.
This one's for you.
When the odds are stacked against you, you have to push yourself to your limits for a season of time, but not long-term.
The strategy to use in this situation is to get a bigger down payment together by scratching and clawing and doing whatever it takes. And that will allow you to buy a house even when you have a low income and other factors holding you back.
So how do you get a bigger down payment scratched together, you’re asking? Well, you might not like the answer, but it works.
Piling up tons of money by working tons of overtime and cutting back to the bare bones of what you need to spend money on day to day, will help you to make a larger down payment.
And again, this is going to allow you to buy more house with a smaller long-term mortgage payment. And that is the strategy that I used to get into real estate at 24 years old, single as a pringle and making only $16 an hour.
So let me break that down one more time: you’ve got to make as much money as humanly possible for you. You’ve got to get side hustles, work as much over time as you can, and spend as little money as humanly possible, for a short time. Get roommates for a season of life, do whatever it takes to save as much money as humanly possible for you.
NOT AS MUCH AS IS COMFORTABLE! As much as POSSIBLE! Only for a short season you are doing this, and you need to push hard.
So what exactly is a "short season" that you should push hard?
When I say a short time, personally, I’m thinking around 6 months to 2 years max, but that’s up to you.
When I did this, I was working so much overtime that I don’t remember that year of my life. I also cut back on so much spending. The nails had to go, the hair color had to go, the yoga studio had to go, extra clothing, shoes, eating out too much – it all had to go.
I wanted to have a place to myself, but I chose to live in an uncomfortable environment with others for that limited season, in order to save enough money.
I still gave myself a certain budget to spend on myself, but it was a lot smaller than it had been before.
And yeah, it was a sacrifice, but I don’t regret it at all because I set my future self up for success. And now I'm reaping the benefits of that.
A Quick Caveat
Before we leave this point, I need to give a quick caveat: this is also why you have to know your price range. People may be tempted to buy more house than they can afford because they’ve been pushing themselves and making more money.
Example: If you typically make $4k/mo and now with your overtime and side hustles you’re making $6-7k, the loan officer will most likely offer you more house, with a higher monthly mortgage payment.
Potentially, they could offer you a mortgage payment as much as 36% or even more of your new take-home pay of $6-7k per month.
So that could mean you get approved for a $2,500 monthly mortgage payment, but that is not the goal here. You still need to calculate how much house you can afford on a month to month basis, on your normal salary.
You don’t want to lock yourself into a 15-year or 30-year mortgage that relies upon you working 70 hours a week. That’s just not realistic or healthy.
Even if you think you could push yourself to your limits long term, I think you’d be setting yourself up for failure or even health problems.
So you want to keep this to a short-term process like I said – maybe 1-2 years max, and that means that your monthly mortgage payment that you sign up for needs to fit within your normal budget appropriately.
But you CAN push yourself to your limits in the short term to make the initial purchase of the house.
7. Don’t try to time the market; time your finances instead.
A) Prices
Don’t wait for prices to come down. They probably won’t.
Now I want to be careful with this. There could be a housing bubble in your particular area, and you want to talk to a professional real estate agent in your area about that.
But, from my own research and what I believe to be true, America as a whole is not in a housing bubble, the prices are not going to come down, and the longer you wait, the more you’re just going to hurt yourself.
Once again, this is just my own opinion and research, and you really should do your own research on that and ask a professional. But generally speaking, don’t wait for the prices to come down because they probably won’t.
Jumping in now is going to help you by building equity. But we’ll talk more about that in #10.
B) Interest Rates
Secondly, don’t wait for interest rates to come down. Now, I already know this opinion will be more controversial. But regardless, it is my opinion. Lol
And it is what I would do if I was starting over in real estate today. I would buy when I’m ready, not when I think the market is prime. And then I would refinance whenever the interest rates do go down.
In fact, that is exactly what I did, when I bought my first house. I bought my house when I was ready to, not when the market seemed ideal. And then when the interest rates went down, I refinanced to get a better rate.
And I would do that exact same process again, as long as I could still afford the monthly mortgage payment within my 25% range!
8. Do get a conventional mortgage; no weird stuff!
This might mean that you may have to work a little harder to get into real estate as a beginner, but it is definitely worth it. My dad, who is an experienced realtor who has been in the business for about 20 years, taught me that you always want to go with a conventional mortgage with a fixed-rate.
And while it did mean more work for me getting started, I’m very grateful in the end for his advice because it saved me a lot of potential headache in the end.
I don’t have time to go over all of these types of mortgage loans today, but if you’re interested in hearing more about them, and why I don’t recommend them, please let me know in the comments below and I will try to get a video made on that for you.
Like I said, you want to get a conventional loan with a fixed-rate, and not any of these other types of loans I’m showing here. That is going to greatly mitigate your risk and increase your chances of success.
This is because each of the other types of loans do have various risk factors, such as unpredictability, not being insured, and having less equity starting out – equity is in itself like a built-in insurance.
9. Don’t get a fixer-upper for your first house.
I was really tempted to buy a fixer-upper for my first house, but I didn’t, and I am so glad looking back that I didn’t.
I see now, and I believe most experienced people will agree with me on this, that you should get your feet wet in real estate first with a “normal” and generally decent house before ever trying to flip or fix a house.
There’s just so much risk involved in a fixer-upper and also knowledge and expertise that is needed, that you could easily be setting yourself up for failure.
And there’s so much to learn about owning a house, that it’s really helpful to just get used to that first before you decide to take on a massive project like a fixer-upper.
Now I’m not trying to say that you should never try to get into flipping houses. I’m not saying that at all. I’m just saying that as a beginner trying to get into the real estate market for the very first time, I wouldn’t recommend a fixer-upper.
If you start with a fixer-upper for your very first house, you’re piling a whole lot of extra risk and responsibility onto yourself that’s not necessary, and I think it’s better to get started one step at a time.
However, when I say that you shouldn’t get the worst house in the world and try to fix it up, there is also a flipside to that (no pun intended), and that is:
10. Don’t wait for your dream house or the perfect rental property.
Here’s the key that a lot of people are overlooking and underestimating: As I said in #1, you need to get in the game as soon as possible, and that will give you a leg up to be able to grow from there with time.
Real estate is really a long-term play, and you have to play your cards right. But if you do it right, it can make you very wealthy in the long-term.
The majority of people are never going to be able to afford their dream house ultimate rental property if they don’t get started in real estate first with a starter house, and that is because of the edge that building equity gives you.
Whatever you can safely and comfortably afford, is what you should get started with, as soon as possible.
That’s because equity is going to start building for you, and in a few years, you will most likely be able to turn around and sell that starter house, and upgrade, by utilizing the equity that has been built.
But if you wait around for those few years, and instead of buying a starter house you’re just waiting for your dream house, then your money is not going to be building equity for you. It’s just going to be sitting in the bank, so it will be a lot harder to afford your dream house than if you had started with a starter house.
And trust me, equity-building can be exponential. It can be a huge game changer.
Now, one last caveat in this section is that obviously the market does fluctuate, and so that’s why it’s so important to buy something that is safe and comfortable in your budget.
You need to be able to comfortably hold your real estate until the time is right. That’s why I stress so much not to go above your price range.
11. Do get your finances in order first before trying to buy.
This one also sounds obvious. So much so that I didn’t include it in the first 10! But then I realized that a lot of people do try to skimp on this rule, so let’s go ahead and talk about it.
Here are some basics that you should get in line before going to buy your first house.
Budget. Develop a budget so you’re aware of where your money is going and you can take control of it.
Emergency Fund. Set aside an emergency fund that is totally separate from your down payment. Having this in place before buying, will set you up for success so you’re ready for the unexpected when you get your new house.
One thing you can always expect with homeownership is the unexpected! So this could really make or break your success as a homeowner.
Get your credit score up and try not to rely on debt.
>>I’m also going to be going into more detail on these financial topics in the near future, as well as doing a Part 2 to this post with a full Step-by-Step guide to getting started in real estate. So if you’re interested in that please consider signing up for my email list.<<
So that’s gonna do it for today guys, but as I mentioned above, I will be doing a second part to this post in the near future to go over a step-by-step guide to getting started in real estate.
I just knew that this post was already getting really long, so I had to split it up. And at the same time, all of these do’s and don’ts are even more important than the step-by-step guide, so that you can set yourself up for success and avoid failure.
But let me know in the comments if you have any questions that you want me to cover as this series continues.
And if you made it to the end of this post, I’m so honored that you would take your time to be with me and I truly hope this was helpful. Until next time, just remember that you are loved, you are not alone, and you’ve got this! Bye guys.