Here’s something I hear all the time…

“Billy, I want to invest in real estate, but I don’t know the first thing about how to get started!”

If that’s you, I have good news.

In this article – the first in a fun 4-part series – I take you through the steps in my PLTO system.

You see, success in real estate investing has everything to do with deciding who you are as an investor. That’s your very first step. When I coach people in how to get started in real estate investing, I take them through my PLTO system. That’s the first thing I do anyway. Then we get into the math and negotiations parts, but that first part is incredibly important. Without understanding who you are as an investor, you will likely have greater challenges. Nothing beats a good self-assessment, so don’t fear it.

You see, success in real estate investing has everything to do with deciding who you are as an investor.  – Tweet  

By the end of our time together, my coaching clients understand not just how to get involved in real estate investing, but they also know how to grow their business to be successful investors who earn great returns. Plus, they know I’ll be here to hold their hand in their first couple of deals. (That’s pretty helpful when you’re new to this field.)

If you want to get into it right now, go watch the first video:

What is PLTO and Why Should You Care?

The “P” in my PLTO system stands for the “Person.”

Simply, that means you must understand who YOU are, what type of properties are you most interested in and why you want to invest in that type of property, and finally whom you want to serve. In other words, think about your ideal tenant.

Further, you need to sit down with yourself and decide if you want to be a passive investor or active investor. The differences can be huge.

An active investor is someone like me who wants to invest in properties and either run them myself or hire property management and maintenance to handle any issues that come to pass. For me, property management is the only option. I have no interest in collecting rents and managing the day-to-day stuff that can pop up in my properties. I’m still actively involved, because I pay for management, maintenance and repairs. That means I am also the one making the big decisions. It is, after all, my livelihood we’re talking about here, so of course I’ll make the big decisions!

A passive investor, on the other hand, is typically the money person… the individual who funds the active investor in he/her deals in exchange for an agreed return (interest rate or percentage of the cashflow, appreciation and/or depreciation in the property).

If you like the idea of letting active investors use your money in their deals, that’s excellent. I love working with people like you. That’s how I get bigger deals done faster.

In the beginning I used my own money and invested in small multifamily properties, but soon I learned that using other people’s money enables me to buy bigger, more profitable properties like a recently purchased mobile home park. It has been incredibly well-maintained, so there weren’t any big problems to fix or repairs to be made. Of course, I will pretty it up more, but that’s all in my plan.

The passive investors I work with are the private lenders of the world… those who like to get interest payments on their money. Let me break it down for you a little more.

Let’s say you have $100,000 sitting in your savings, 401K or retirement account where it’s earning something like .40% or maybe a little more than 1% interest. (Maybe you are earning more, but it’s not great.) Basically, your money is just sitting there. By the time you go to use it, the cost of living has gone up and, let’s be realistic, it won’t be worth much more than it is today. Sadly, it may be worth even less. In that case, your golden years won’t be so golden, will they?

So you think about it and you agree to let an active investor use your money so you earn a higher interest rate. You aren’t just earning more in interest; rather you are creating returns that generate real money that will end of in your bank account.  Plus you get the full amount you are lending back at the end of the agreed term.

Being a private lender is not the only way to go.

As a passive investor you can also be an equity partner.

Again, you are agreeing to let an active investor use your money in their deals, and you do none of the work. You don’t lift a finger. Yet every month you could begin to increase your payment amount.

Instead of an interest rate you agree to receive a percentage of the NET profits monthly. You are taking the ride with the active investor. A good month for him/her means a good check for you; conversely, a bad month for the active investor means your check may not be great.

As an equity investor you are in it for an agreed term. The length of that term is up to you and the active investor to decide! I see a lot of these deals with five-year terms. By then the property should be doing well for everyone involved. As the passive investor you should be back in the black, having your original investment back plus way more. You can even decide to reinvest with the active investor! This happens all the time.

The cool thing about real estate investing is that there are so many ways to invest that it can make your head spin. For me it’s investing in large multifamily properties.

  1. I am an active investor. That’s who I am.
  2. I like serving tenants in the “B” classification of real estate, which means hard-working families who pay their rent on time and who don’t typically damage properties.
  3. I don’t like the idea of single-family properties. That’s why I choose multifamily… ideally apartment buildings with lots of doors. (I’m looking for one in Charlotte, NC, right now.)

You just have to understand that’s who you are as an investor and that’s who you want to serve as tenants in your rental properties.  – Tweet  

While I know plenty of people who like to invest in “C” class properties, that’s not who I am in my PLTO system. There are also plenty of people who want to invest only in single-family properties. Again, that’s not my identity, but if that’s you… that’s great!! You just have to understand that’s who you are as an investor and that’s who you want to serve as tenants in your rental properties.

If renting to residential tenants isn’t your interest, you may be more likely to invest in commercial properties. That’s a whole other category. You’ll still be serving tenants, but of a different type. I don’t do deals YET in the commercial realm, but I am open to it. For example, the more I learn about self-storage facilities I have to say I’m pretty interested in doing a deal like that down the road!

Now that you understand the “P” in my PLTO system, sit down with pen and paper. Figure out who you are as an investor and whom you want to serve.

Then wait for my next three short articles and videos in this series. That’s where I’ll cover the “L,” “T” and “O” in my system.

For now, watch the video embedded in this article.

Oh, and do this quick exercise:

Think about who you are as an investor. Think about whom you wish to serve as tenants. Think about the type of properties in which you want to invest. Then let me know what you come up with. I’d love to hear your answers.

Share them with me in my Facebook group here:

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You can also check out my latest podcasts and collaborations here keeponcashflow.com/podcasts/