If you are like me and are constantly thinking about real estate (*insert awkward smile here*), then I’m sure you’ve considered a fix and flip or rental property. Did you know that procuring one of those gems is actually a lot simpler than you think? Hear me out here…
Buying a #home, whether it is a primary residence or purely for investment purposes, is a lot like building a hockey team; you need a coach (REALTOR), a strong offense (you), a mean defense (your mortgage lending and title companies), and a goalie (a solid inspector). When you apply that mentality to an investment, the level of competition increases ten-fold.
However, when you consider the most well-known forms of property investment, there are so many things to consider. First and foremost, the most popular ways to invest in real estate would be:
- Buying a primary residence. While you may not see an immediate financial return from investing in a primary residence, you are still purchasing an appreciating asset – one that, if well-loved and taken care of, can provide decades of shelter, memories, and if you’re lucky enough, a hefty chunk of change the day you sell it. In addition to being an appreciating asset, did you know you can actually tap into the home’s value at certain points of ownership? In many cases, if you have good credit and a solid income, you can actually tap into the equity to help you secure another home! (Please note: I am not a lender, nor am I going to give lending advice, but you’re welcome to speak to your favorite mortgage lender to ask more questions and see if this option is right for you!) If you want to learn more about what you can do with that hard earned equity, read on…
- Fix and flip properties. I know we’re all familiar with the show Fixer Upper, and I’m sure if you’re reading this, you’ve also dreamed about flipping a property or two! Again, a good lender can walk you through all of the options to obtain this property financially, but there are a couple of other ways to creatively finance that investment as well. For some, a more traditional option is utilizing an FHA 203k; it requires a minimal amount down and allows for including the cost of renovation within the loan. The cons are that you have to utilize all licensed contractors (aka, generally no DIY work), and that you have to utilize it as your primary residence to access the loan type. One non-traditional, creative way is to do a seller finance, where you purchase the home directly from the seller and set terms with them to do so. When you do this, you are able to work through a title company to formalize everything, but it is beneficial to have a great legal partner to fall back on to make sure your contract is written properly, as well! If you are a previous client of mine, I guarantee you’ve heard my rants about how much I love FHA 203k’s and the idea of making real estate investing attainable to everyone – if not, I invite you to become a client so you can hear it! Just kidding… but only kind of. (*insert another awkward smile here*)
- Long-term rentals. Long-term rental properties are exactly what they sound like… renting to someone on a long-term basis. They definitely come with their own set of pros and cons, as well! Sure, there’s the idea of a consistent, monthly income stream that is enticing, but you need to be aware of the amount of work that goes into the as well! Any home needs maintenance and repairs, so if you go this route, be sure that you are prepared to throw that landlord hat on at 3:00am and fix a furnace that isn’t working – or be comfortable hiring someone who is willing to do so! For these instances, be sure to plan accordingly for any fees that may arise.
- Short-term vacation rentals. Short-term rentals (STRs) are an animal all on their own, as they force you to become not only an investor, but jack of all trades. Owning an STR forces you to wear all of the hats, all of the time, even if you hire someone to run certain aspects of your business. As the owner of an Airbnb, I can tell you that between my husband and I, we’ve been the real estate agent, business owner, project manager, designer, branding agent, hospitality concierge, cleaner, and property manager – sometimes all in one day! It can get exhausting but is extremely rewarding. However, this type of investment comes with pros and cons as well, and I’m happy to discuss them at length if you need some advice or help setting yours up! Psst… there may or may not be a short e-book coming out soon with further information, too… (this entire post is filled with a lot of cheesy smiles – ha!)
There are obviously various other ways to invest in real estate in the commercial sector, but these are just the highlights of the most common ways to get involved in residential real estate investing. There are tons of other methodologies, financing options and approaches once you get into the industry, as well.
After working on investment deals, looking at homes, and purchasing one myself, here are a few takeaways I’ll leave you with:
- You know the sales saying “ABC – Always Be Closing?” Let’s change that up a bit with “ABC – Always Be Calculating” – calculating your potential income, the LTV (Loan to Value) of the home, and the likelihood you’ll get a tenant or buyer.
- Build that roster. Even if you aren’t a hockey fan (if you aren’t, shame on you – just kidding!), you get the point of my example. You need a solid team no matter what approach you’re taking! Remember: agent, lender (private or public), investor, title company. You’ll need an entirely different list of teammates once you secure an investment, but that’s an entirely different conversation.
- Speaking of teams, don’t be afraid to interview lots of candidates for each role! Don’t start looking for a house and scramble to find an agent or inspector – interview them all and keep them on speed dial for the moment you find one!
- As for agents, make sure to find one that is familiar with and/or specializes in investing! We are not all created equal – we all have our own niches, trainings, education, and experiences, and you want to find one who sees your vision too!
- Hire a designer, coach, or mentor. There is no “i” in “team” but there are two in “investing” so I’ll let you make of that what you will – but I say it means you need a hype crew! Don’t be afraid to lean on those that have done what you want to do – they’ve got knowledge beyond what you can find in a classroom, and most of them are beyond happy to share it with you over a cup of coffee! If we lift each other up, we can accomplish things.
If you’ve considered investing in real estate, I hope this answers at least a couple of your questions and gives you a place to start! If this sounds like a foreign language and would like to talk about these options in depth, or would like to start looking for your next property, I’d love to help!