Updated: Feb 19
Real Estate is an industry that has existed since the dawn of man. Although back then, a simple home did the job, we have evolved into more sophisticated homes. Modern homes are now with the state of the art security systems, swimming pools, smart devices, and many more. Therefore, homes are now built to suit personal needs. The emergence of high-end interior designers, landscape artists, architects, and many more have paved the way to increasing homes' value. In this day and age, real estate has risen to become a multi-billion industry where individuals are more aware of their environment and what we need in a home. Therefore the need for better and more advanced housing grows day by day. There is a niche for everyone, including the young generation.
Below are some essential tips on real estate investing.
Start thinking bigger. Look at cash flowing through multifamily units plus because they are easier to finance and manage (yes, I know it's counter-intuitive, but it's true). Small seems like it's the best place to start, but if you have cash, skip it and move into better assets. Multifamily homes are easier to manage and the go-to option for a real estate beginner.
Never buy something where you don't own all four walls of the building. Condos lead to lots of pain and problems down the road. There is less autonomy. For example, pets are not allowed, home-owners association fees, lack of privacy, limits on visitations, and many more. These cons tend to discourage potential clients, and if you find them, they are likely to move out sooner or later.
House flipping has emerged as one of the go-to options for investors in real estate. Identifying a property with potential and renovating it to suit technological and aesthetic needs. A flipped house can upscale from just a typical house to an investment worth the time and money. However, do not just jump at the idea and execute. Due diligence is crucial in any real estate investment.
Use leverage as much as you can while you are young (not for consumer debt, of course) and find the right bank that knows real estate investors—usually smaller banks. Figure out a way to get the "real estate professional" designation on your taxes. It will save you thousands in taxes on your w2 income through depreciation paper losses taken against your job income.
Use mortgage carefully and wisely. Mortgage can either build or destroy investment plans for the future. Making informed decisions with a mortgage loan can set you off to success. For example, you can deposit $20,000 for a $200,000 worth home and pay off the mortgage in installments. In the meantime, renovate the home and make it available for rent. Use the rent payments to pay off your mortgage slowly. In the end, you will have invested little in the property.
Invest in markets with high job growth, industry diversity, and a high net population growth where you can still cash flow. Areas with abundant social amenities are a worthwhile venture. Schools, airports, hospitals, and shopping complexes attract many individuals who either work there or are served by the amenities. Before you fork out a dollar, consider the kind of property you would want to invest in. Most of these properties range from high income, middle income, and low-income earners. Consider each and the underlying pros and cons such as; security, water..etc.
Look at investing passively in apartment complexes. Syndications it's the easy button and can grow your capital very fast. People like me want to end up one day—all the benefits of real estate investing without the work. A partnership allows you to have free time managing the said property. Also, syndication works best with professional financial advisors who will guarantee you a safe investment for your finances.
Use your 401k and IRA to invest in Real Estate with a Solo 401k or self-directed IRA. You will do much better with your own money out of the stock market. There are several hoops to jump through (and pitfalls), but it's doable.
The easiest way would be to get your IRA to a self-directed custodian who allows for checkbook control and then starts investing in notes or making hard money loans. You can own real estate directly or indirectly (such as through partnerships or syndications) in an IRA, but you start running into issues quickly, such as: Can only use non-recourse debt.
Any outside money you put in counts as an IRA contribution, can't self-deal (and ability to manage is limited).
If you put these strategies to practice, there is no doubt that you will have achieved financial freedom in your thirties and have freedom of time.
To learn more about real estate investing click here
For more tips on Real Estate Investing for beginners and how you should get started read:
Or you can listen to the Rich State of Mind Podcast Episode 4: Top 10 Lessons I Learned In Being a Landlord (Year 1): https://anchor.fm/anthane-richie/episodes/Episode-4-Top-10-Lessons-I-Learned-In-Being-a-Landlord-Year-1-egl9r3