A common question among new real estate investors is “How to Start Real Estate Investing when you don’t have enough capital?”
It’s understandable because I had the exact same question when I was starting out 10 years ago back in 2003.
My name is Ronald Cagape. If you’re interested to learn how to start real estate investing, let me share my experience on how I started.
How To Start Real Estate Investing – The Beginning
My journey to real estate investing began when I closed our first business venture, the Cashflow Center.
Closing down a business is painful.
We were 6 partners who pooled our money to make it happen. One was even an experienced businessman with multiple businesses.
I thought partnering with someone of that pedigree would guarantee our success but I learned as we closed that there are no guarantees in the business.
I realized later that the only guarantee that you can get is to see deals to the very end.
As we closed the doors on that business, I set my eyes to look for another opportunity to make some extra cash.
Poor Kid Just Wanting A Better Life
I needed extra money because I was not born rich. My father was a security guard and my mother was a public school teacher. They would have fights over money because money was always short.
To show how poor we really were, growing up, there were times that we’d just share a can of Ligo sardines or a pack of Lucky Me noodles. Sometimes, it’s just raw egg over rice or worse, just toyo and rice.
So I obsessed with knowing how to make more money but all I knew was to study hard so I can get a good job after graduation. That was the only advice I ever heard about money.
I studied hard and got the opportunity to study Chemical Engineering in UP.
But just like many other young men, I did not know what career I wanted. Midway through my course, I changed my mind and set my eyes to pursue a career in IT because that was the “in-demand career” in the 1990’s. Translation – that’s the career with the most job opportunities.
Get A Job, Any Job
I did not shift courses while I was finishing my engineering course. I took some odd jobs – I worked as a pager operator, data encoder, and COBOL Programming instructor. I also tried to sell encyclopedias, insurance, healthcare products, and even beauty products!
Eventually, I got a job as a contractual programmer so that I can gain experience in IT. I didn’t know any better so I had to make do with the salary of Php6,000 per month.
I was good at programming so I saw my salary increase to Php10,000 per month in a short period of time.
But even though I was good, the company did not have a permanent job offer so I left the company to get a better, more stable job.
Got A Job, Got Married, Got Into Debt
When I got a job at one of the top banks, I thought I already had a stable job and so I got this romantic idea to marry my girlfriend.
While I do not regret marrying my wife, I wish I could have done a better job of preparing for it because we spent our savings for the wedding and then got into debt when I made the stupid mistake of buying a resort membership that I couldn’t afford through my credit card.
I kept that a secret from my wife and we had a fight when she found out.
In short, happily ever after did not start on a good note.
So if you’re a single guy now, please prepare for married life!
I needed to fix my finances and I was lucky to stumble on the book Rich Dad, Poor Dad.
Read The Book, Play The Game, and Look For Deals
When I read that book, a fire was lit. I knew I wanted to move to the entrepreneur/investor side. I wanted to learn how to start real estate investing. My IT career was suddenly irrelevant.
I was so excited I looked for people who played Cashflow 101, the game that Robert Kiyosaki made to teach people about money, business, and investing.
Playing Cashflow 101 was an eye-opening experience. It shattered many of the myths that I believed about wealth. I thought you needed to work hard and work long hours to get more money. I thought to be rich you needed to have a great job like a doctor, lawyer or airplane pilot. I thought all you needed was a high income and you’ll be rich.
Reading Rich Dad Poor Dad and playing Cashflow 101 introduced me to the concept of passive income and why it’s the key to true financial freedom. I learned about real estate investing, stock market investing, business, and even accounting.
So I immediately dived into looking for opportunities to make money. I opened up to everything – stocks, network marketing, forex, real estate, business and whatever else came along the way.
That’s how I got into our first venture, the Cashflow Center. We were 6 people who believed in the game and thought there was an opportunity to make a business out of it.
While the idea may be sound, our execution was crappy so we ended up losing money.
But it wasn’t all that bad with the business. It was in the Cashflow Center that I met my real estate mentor.
Unlikely Mentor
My search for opportunities eventually led me to meet Dr. Larry Gamboa. I met him at the Cashflow Center where I facilitated a game for him and his friends.
He was not yet a real estate investor and the book Think Rich Pinoy was not yet written.
A few months after closing down the Cashflow Center, we met again and I asked him how he was doing.
“Great. I just bought a 5-door apartment in San Pedro, Laguna with a $20,000 downpayment. I fixed it up and already sold in 1 month,” said Larry with a proud grin to his face.
Wow.
We talked some more because I was eager to learn more about how to start real estate investing. But we didn’t have enough time so we just promised to keep in touch.
A few months later, I bumped into him again and this time I made sure not to let him go without spilling some of his secrets but he just said, “Meet me at Powerbooks Pasay Road on Wednesday. We can talk more there.”
That was the first of many meetings. We had a small group of investors playing Cashflow 101 and talking about real estate.
Every week we would present properties and have the group analyze the investment if it looks good or not.
If it was good, investors would pitch in to make it happen. If not, we just pass and look at the next deal.
I learned a lot in those group sessions. I learned how to look at real estate deals and see which ones are profitable and worth pursuing. I learned not to waste my time on deals that don’t make sense.
Search For A Diamond In The Rough
My own search took a long time.
Weekend after weekend, I would pore over bank-foreclosed listings and newspaper ads, looking for a promising property and visiting every weekend. I would take pictures, make estimates and push the numbers. If it looks good, I would present it on Wednesday.
I looked at a property in Canumay, Malabon where the property was so run down only the walls were left.
I looked at a property in Karuhatan, Valenzuela but the wooden apartment had a convoluted design, I couldn’t make sense of how to subdivide and sell it.
I looked at a property in Dela Paz, Marikina. Actually, I didn’t find it because I had to go through a dark alley and I just told myself not to bother.
I went all the way to Tagapo, Sta. Rosa where we looked at houses whose developers ran away from their buyers.
I went all the way north to Malinta, Valenzuela looking at a 16-door apartment in an industrial compound near factories and warehouses.
I almost bought an 8-door apartment in Galas, Quezon City but the former owner who was already foreclosed would not bring down his price.
It was property after property, challenge after challenge, week in and week out. I was getting discouraged, depressed and desperate to find my first deal.
Until one day I chanced upon a 6-door townhouse in Alabang from a bank-foreclosed listing. I finally found a diamond in the rough!
We bought the property for $3.5M and then sold it for $5.4M via rent-to-own. Up to this day, that property is giving us passive income and we can still enjoy a couple of years of passive income before we turn it over to the tenant-buyers.
Next Deals After The First
After that first deal, we were able to buy 3 condo units with a downpayment of only Php15,000.
We sold a house & lot in Cavite without seeing it.
We sold a condo in Ortigas in less than 10 days.
We even sold office units in Alabang, Ortigas, Taguig and Mandaluyong.
Once we learned the techniques, we could apply them over and over again.
And the techniques worked whether the property was located in Quezon City or Alabang; residential or commercial; bank-foreclosed or from a motivated seller.
3 Misconceptions On Real Estate Investing Broken
My experiences in this first deal broke 3 misconceptions that I had about real estate investing.
“You need a lot of money to start”
I thought you personally needed to have a lot of money to start because real estate costs a lot of money to buy. It’s the most expensive purchase an average person could ever make.
I never considered real estate because I didn’t have money at that time. Now, I learned that you don’t need a lot of money to start because when you need the capital, just use other people’s money.
“Real Estate is only for the rich”
Because I thought that real estate needs a lot of money, I’ve always believed it was an investment only for the rich. I’m not rich therefore real estate is not for me.
Now I believe you should invest in real estate if you’re not rich so you can become rich.
“To be good in Real Estate, you have to be a good salesman.”
In the beginning, I thought that the only way to make in real estate is to sell it. I didn’t realize there were other ways that real estate makes money for the investor.
That’s why I thought you have to be good in sales. Which is bad news for me because I don’t talk a lot and I failed in all my attempts to become a salesperson.
Luckily, Larry told me that in real estate investing, you make money when you buy.
I didn’t understand at first. How do you make money when you buy when you spend money to buy it?
Well, it turns out you do make money when you buy real estate at the right price. Buy it right, you can resell it right away or realize a very good profit later. Buy it too high then you don’t make money.
Buy it right and you don’t have to be a good salesman because you can offer the property at a good price to buyers.
How To Start Real Estate Investing
My own journey is a template that you can take to answer the question, “How to start real estate investing ?”
I did not have capital when I was starting out. I had nothing but a curious mind, a dream and a desire to make it happen. What I needed I found along the way.
So what should you do now?
Find A Real Estate Investing Model
First, find a real estate investing model to follow. The model may come from a book, a seminar or a mentor. It’s just important to have a guide or a blueprint that you can start working on as you invest in real estate.
Don’t reinvent the wheel.
Many deals have already been done and all you need to do is copy.
Look For Deals
Once you have a model, start to look at properties and push the numbers.
An investment is only as good as the numbers show. This is where most investors fail. They just buy and hope the property will appreciate in price or can be rented out at their desired price. They don’t factor in what’s actually happening in the market.
Nor do they make estimates on when they can get their money back.
Don’t hope to make money. Instead, execute a model that will make money for you.
Network
There are two important reasons for expanding your network.
First, you need other people’s money if you don’t have enough of it so start connecting with people who have the resources that can help you.
Second, you need other partners to deal with. You will need to work with agents, rehabbers, developers, contractors, lawyers and other professionals.
If you don’t know a lot of people who have these skills, start getting to know people who do.
Grow your network before you need them. It’s better to know them already by the time you have a good deal so you can move quickly.
Persist
Finally, like any legitimate business, you will need to persist until you succeed. This is not a get-rich-quick scheme.
While real estate can provide you with massive windfalls of money, these deals take time. Some deals you can close in just two weeks while others may take months to complete.
So keep your day job, look for deals on weekends, study and network at night and keep going until you get your first deal.
The next deals will be easier once you get the first one, out of the way.
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