Chapter 9: Investing
« Lesson 1: Why You Should Invest in Real Estate »
Investing in real estate as an agent does a few things for you. It will open your brain up to a whole new world of real estate and help you relate better with not only your buyers and sellers but also your investor clients. It will give you some practical experience in owning/renting/flipping/financing/etc. It can have tax benefits, especially since we are ‘real estate professionals’. It will help you develop a deeper knowledge of value and how this whole real estate thing can work to help you build wealth.
Let’s be clear, I’m no expert in investing and it’s a completely personal decision on how you spend your money. If you choose to move forward with an investment property, make sure you do your homework, your math, your double checking, and that everything looks good BEFORE you make an offer.
There are TONS of resources available for you that are cheap or free, and I highly recommend giving yourself an education BEFORE you bite the bullet and buy a house. Here are some of my faves:
- Wealth Can’t Wait
- Loopholes of Real Estate
- Tax Free Wealth
- The Book on Investing in Real Estate with No and Low Money Down
- Set For Life
- Money Master the Game
- The Millionaire Real Estate Investor
We have lots of local meetups here as well. It’s good to meet ACTUAL investors to hear their stories, challenges and advice. Check out MNREIA and some of the events the Pine Financial holds locally. You could also host your own meetup or event to bring experienced investors together with those who are just getting started so you can all learn from each other, or reach out to people you know own property and see if they need help with anything. Learning from other people’s experiences is very valuable.
You’ll need to decide on what kind of investment is right for you. There are lots of options: house hacking, buy and hold, flipping, short term rentals, multi family, syndications, development, commercial, and out of state, to name a few. People make money in all of these different flavors, but what matches your knowledge base, comfort level, budget, and financial goals? You’ll want to build your team of advisors: tax people, real estate attorneys, different lenders for different property types, and so on. Meet with these people to learn about their experiences and what kind of advice they can offer. Remember, you don’t have to take EVERYONE’s advice, but it’s nice to have a sounding board so you can pick and choose what sounds right to you.
I think the best way to get started is to just start analyzing deals. And it’s easy to start where you are. First, figure out what your house is worth as it sits. Then figure out if it would be worth something different if it was fully updated. Next analyze how much your house would bring in as a rental. Since you know what your monthly expenses are on your own place, it’s easy to decide, is this a good investment? Would it make a good flip? Could I rent it out? How much could I get by renting out a room a few weekends a month? At what price WOULD your house become a good rental?
Then move on to other properties within your same community, expanding your knowledge to different properties in a similar location. Do apartments bring a different amount of rent than a townhouse? What’s the price difference in a 2 bedroom vs. a 3 bedroom? Do updates demand a higher payout when properties sell? How much? Etc.
Search the MLS for properties that are distressed or clearly and extremely outdated. Run comps on them as they sit. Are they priced at market value? What is the ARV? Can you make a list of what repairs would need to be done and get an estimate for how much that would cost?
Continue this way until you increase your confidence in pricing in the same way you’ve built it up as an agent. Now it’s time to start seeing some properties!
- Comp out the house you live in as described above.
- Post to social: ask your friends if they own any rental properties because you’re interested in learning more. Take the people who respond out to coffee and learn about their experience.
- Read some of the books and listen to the podcasts mentioned above. If you’re serious about investing, do this on the daily.
© Copyright 2018, Brick & Banister Real Estate Co.
Properties are provided courtesy of the Regional MLS of Minnesota, Inc., Broker Reciprocity Database.
Information Deemed Reliable But Not Guaranteed. ©2018 Regional Multiple Listing Service of Minnesota, Inc. All rights reserved.