460: Is Real Estate Investing for You?

SHOW NOTES FOR EPISODE 460: IS REAL ESTATE INVESTING FOR YOU?

90 percent of the world’s millionaires have one thing in common: they’ve either started or expanded their wealth through real estate investing.  Indeed, real estate investing piques the interest of many people looking to build wealth and generate cash flow.  But is real estate investing for everyone?  In today’s podcast, Bill shares some of the tough realities, along with some of the benefits, of this amazing wealth building strategy.

TIP OF THE WEEK – To Do Lists*

To-Do Lists can be very helpful to help you accomplish both short and long term goals.  Here are a few simple big goal To-Do Lists:

Financial Freedom To-Do List

• Add up all your personal expenses
• Determine what you can reduce, eliminate or do without
• Figure out how many properties you need to own to cover the total

Business To-Do List

• Find your team
• Evaluate the market
• Find a great property
• Assign a valuation to the property
• Establish a property plan
• Develop a budget
• Manage the property

* Taken from The ABCs of Real Estate Investing by Ken McElroy

Is Real Estate Investing for You?

90 percent of the world’s millionaires have one thing in common: they’ve either started or expanded their wealth through real estate investing.  Indeed, real estate properties are lucrative assets, and the real estate industry piques the interest of many people looking for new ways to invest their money.

If you’re interested in real estate investing, there’s a lot to consider, learn, and understand before harvesting the fruits of your hard work.  Is real estate investing the right choice for you?

What Is Real Estate Investing All About?

First things first: real estate investing isn’t a “get rich quick” venture!  Real Estate investing can be broken out into two categories: Active and Passive.  Both take time to develop.

Active

• You are the Landlord
  • Residential
    • Houses
    • Apartments
    • mobile home parks
  • Commercial
    • Office buildings
    • Retail centers, malls
    • Industrial
  • Flipper
    • Fix and flip houses, apartments, etc
    • Buy raw land

Passive

• You invest in properties, assets or people with minimal involvement
  • Syndication
  • Hard Money Lender
  • Private lender – Angel investor
  • REITs
  • Crowd Funding

If you are an active investor, real estate investing involves the purchase, ownership, and management of real estate properties.  While these aspects might sound simple, they can be very complicated, expensive and time consuming.

When starting in active real estate investing, having a clear mindset and ample resources are paramount. You can manage your real estate transactions more efficiently by working with brokerage firms and real estate professionals, particularly if you’re a beginner.

The primary goal of real estate investing is to grow your initial investment costs and save it for the future. Remember, your investment returns should be large enough to cover your property taxes, costs of risks, and ownership costs, including maintenance, utilities, and insurance.

With passive real estate investing, it still requires time and money, but less of it.  The risks, however, can be higher because you have to rely on others to generate your profit.

Assessing Your Commitment

Now that you’ve grasped the concept of real estate investing, it’s time to assess your commitment to this venture. A great question to ask yourself is: will you be a full-time or part-time investor?

Fortunately, both of these setups are feasible as long as you can make the necessary adjustments. As a full-time real estate investor, you have to devote your working hours and prioritize your investments. If you have another job, it might be best to choose which one weighs more.

On the other hand, you can still invest in real estate as your side hustle. If you’re planning to make investing a part-time career, you should take the path where your complete attention is less required. Whether you’re doing part-time or full-time, your success will boil down to your goals and strategies.

Mapping Out Your Goals  and Strategies

As mentioned previously, you can take different paths and approaches to real estate investing, depending on your investment goals. Creating a clear, well-defined plan is crucial to your journey as it will guide you on which property to buy. Without a clear purpose, you’ll bump into unexpected results down the road.

Here are Some Ways to Invest in Real Estate:

Rental property: Buy a property, prepare it for tenants, put it up for residential or commercial rent, and generate rental income while paying off its mortgage.

Property flipping: If you have a broad network of contractors, enough money, time, and energy, flipping a property is an excellent way to achieve massive profits.

Real estate investment trusts (REITs): Real estate starters typically take this path because of lower risks and investing costs. REITs are your best option to diversify your portfolio.

Online real estate investing (crowd funding): Real estate investing can also occur digitally. This approach is like the online version of REITs, but there are more possibilities to connect with more investors and clients through an investing platform.

Real Estate Investing Startup Costs

Unlike many businesses, you can’t start investing in real estate with a small sum of money. Whether you’ll start with or without buying a property, having a good startup amount is ideal.

Properties vary significantly depending on location, size, and type. Being guided by a real estate agent can be advantageous, and they might help you close the deal with a lower price. But their commission is a huge amount, too.

Other startup costs are:

• Insurance: USD$600 to USD $2,000
• Setting up an LLC: USD $132and annual fees
• Arranging a business checking account: Some banks charge monthly fees and have strict maintaining balances
• Obtaining a landlord license: Some states may or may not require a landlord license, but typical costs range from USD$100 to USD$150 annually.

Aside from these tangible pieces, it will be more advantageous to your investments if you have assembled a team of professionals who can guide you through investing or ask help from emergencies:

• Financial lenders
• Real estate advocates (e.g., real estate agents, Realtors)
• Maintenance and repair contractors
• Insurance agent
• Real estate attorney
• Accountant
• Professional services (e.g., landscapers, painters, plumbers)
• Real estate investing partners (optional)

Bottom Line

Undoubtedly, real estate investing is a huge money-generating business. However, you’re the only one who can determine whether it’s the right choice for you. Before hastily starting your real estate investing journey, evaluate if it’s the right path for you through assessing your commitments, identifying your investment goals and strategies, and preparing for its costs.

reference: https://www.nuwireinvestor.com/real-estate-investing-right/

DISCLAIMER:  Many of the above strategies take knowledge and have a higher degree of risk.  You need to do your research and/or work with someone who is experienced to reduce your risk.

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