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SHOW NOTES FOR EPISODE 541: REAL ESTATE INVESTING AS A SUCCESSFUL SIDE HUSTLE
More than 44% of Americans work a side hustle or job to supplement their full-time work. If that’s true, why can’t real estate investing be a good side hustle? In today’s podcast, Bill examines how real estate investing would work as a side hustle and offers tips on how to succeed as a part-time real estate investor.
Tip of the Week: Generate Referrals
- Savvy investors generate a large portion of their business through referrals. Because of this, it’s important that you build your network and treat other investors with respect.
- This includes any business partners, clients, tenants, and anyone with whom you’ve had a relationship with in the past.
- Real estate investing groups are prevalent, and burning one bridge may potentially lead to many more burned bridges.
- The best real estate investors pay extremely attention to detail. They’re also typically very open to feedback including complaints and concerns, and represent their business in a positive manner.
- This allows investors to build the kind of reputation that makes other investors interested in working with them in the future and referring their friends as well.
Real Estate Investing as a Successful Side Hustle
Ask any professional investor, and nearly all will agree: Real estate is a great way to build wealth over time, making it one of the most valuable asset classes in any portfolio. In fact, 41% of Americans surveyed in 2021 said “real estate is the best long-term investment.”
But real estate investing is challenging, requires education, networking, knowledge, and experience.
Many investors, new to the world of real estate, start with part-time investing before jumping in with both feet. Part-time investing is a great way to test the waters and generate a supplemental income while keeping a full-time job and building a base of knowledge, experience, and contacts.
More than 44% of Americans work a side hustle or job to supplement their full-time work. Can part-time real estate investing be a worthwhile side hustle?
With the right strategies and mindset, absolutely.
Here are some tips that can help you successfully launch a part-time
Know Your Options
Many real estate side-hustles call for more hustle than money, making them an ideal place to start for new investors.
- Wholesaling
- Flipping
- Bird dogging
Other options do require an outlay of cash and may require working with a lender, but can yield higher returns over time.
- Buy ‘n Hold
- Rental properties
- AirBNB and vacation rentals
There are advantages to owning and managing rental properties, whether a multi-family home in which you live in one unit and rent out the others or a single-family home or vacation house. These investments can generate value in three different ways: supplemental monthly income from rents, will typically appreciate in value over time, and they provide a number of tax benefits.
On the other hand, buying rental properties requires a significant outlay of cash, regular investment of time and skills to manage tenants and the property itself, and the possibility of vacancies, repairs and maintenance, that can reduce cash flow.
Before deciding if rental properties are the right choice for you, you might consider something to try out the waters like overseeing other investors’ properties to learn the ins and outs of tenant management, property maintenance, and marketing.
House-flipping, or buying an undervalued home to renovate and sell for profit, is an option for experienced investors who have the knowledge, cash and expertise to either oversee the renovation or the time and money to do the work themselves. House-flipping can yield high returns in a shorter amount of time but runs the risk of becoming a loss if an investor isn’t able to easily sell a property, though working with an iBuyer such as Opendoor is always an option.
When it comes to selling properties such as a recently renovated house, investors in most states throughout the U.S. — from Maine to Arizona — can benefit from using a 1031 exchange, in which capital gains are deferred when proceeds from one investment property are reinvested into another.
REITs (real estate investment trusts) and real estate crowdfunding are two more passive real estate investment options for investors who want to benefit from the higher yields in real estate without the hands-on commitment of buying, renting, or flipping property.
REITs allow investors to diversify the purchase shares of a portfolio of income-producing properties owned and managed by the trust. The holdings often include a variety of asset classes including shopping malls, apartment complexes, office buildings, resorts, warehouses, or other large-scale properties that might be out of reach for an individual investor.
Publicly traded REITs are listed on the major exchanges and are registered with the SEC. Like other stocks, REITs provide dividends and must payout 90% of its taxable profits in order to maintain its REIT standing.
Similar to REITs, real estate crowdfunding allows investors to pool their funds to purchase shares in a portfolio of commercial and residential assets, and in some cases even income-producing farmland, through an online platform. You’re typically able to easily monitor your investment through online tools, and returns can be competitive.
Many online platforms have a low minimum investment, which makes a starter portfolio within reach for most beginning investors. You can invest in property through crowd funding for as low as $10.
Like any investment, crowdfunding has its risks and may be subject to management fees and other restrictions.
Find a Partner
For a part-time investor, working with a partner has its advantages. Splitting the financial load can help fund your investments as well as reduce your risk. And, sharing the hours needed to launch a part-time business with a partner will grow the business faster and more efficiently, as well as dividing the labor based on your individual strengths and skillsets. You might even consider working part-time as a realtor, along with a seasoned realtor who understands the industry.
Real estate investing requires knowledge and know-how. Partnering with an experienced mentor will not only up your investment skills but it will keep you accountable and motivated.
If you have limited funds, you can partner with an experienced real estate investor who doesn’t have the time to do the “foot work” but has the funds, if you are willing to put in the time to make the deals work.
Assemble Your Team
A network of reputable and reliable contacts is one of your most valuable assets, particularly if those contacts have years of knowledge and experience and are willing to share. The most valuable advice you’ll receive is that of a trusted mentor who wants to see you succeed.
Part of your network should include a good real estate attorney, good accountant to handle the bookkeeping and manage the taxes associated with your real estate business. Also, connect with a solid contractor for repairs and maintenance, property managers you can count on, and an experienced realtor or broker (who is well worth the commission) to help you navigate the market, whether you’re buying or selling.
Automate Your Process
As a part-time investor, it would be wise for you to automate as much of the operations of your real estate business as possible.
Any new venture is a lot of work, and real estate investing is no exception. Efficiency is the key to prevent burnout from balancing a full-time job and personal life with a part-time side hustle. Your time is your most valuable asset, and anything that frees up more of it is a good thing.
Automate or outsource the tasks you can, and remember: Just because you can do something yourself, doesn’t mean you should.
Consider these options for automating or outsourcing various business functions:
- Use a call-forwarding app or an answering service to manage incoming calls, and auto-responders for incoming emails (Remember to respond!). You can also use auto-dialing software if you plan to make a lot of cold calls.
- Market your business with email drip campaigns and email blasts
- Engage a freelancer to maintain your website, blog, and social media accounts. Use accounting software to keep track of your expenses and finances (and make things easy for your accountant at tax time)
- A virtual assistant to keep things behind the scene running smoothly
- FIVERR is a great resource for quick talent referrals and virtual assistances.
The Pareto principle or “The 80/20 Rule” says 80% of results come from 20% of the effort. In other words, ask yourself “which 20% of my actions are causing 80% of the effect”? Use the most effective 20% of your marketing, sales, and productivity to drive your business forward.
Don’t Stop Learning
Knowledge is power, and you need a lot of it to get started in real estate investing, even part-time. Keep current with seminars, training courses, or online classes. Use your downtime to listen to real estate podcasts you enjoy, read or listen to books on investing, watch webinars or YouTube, and subscribe to association newsletters. Glean everything you can from reputable sources of information to build your knowledge base.
You might even consider selling real estate part-time as a way to really immerse yourself in the ins and outs of the business.
Successfully investing in real estate, while still maintaining a full-time job, takes a commitment, discipline, knowledge, and a thoughtful plan.
Using your time and resources wisely and efficiently is key to creating a successful part-time real estate business.
Well that’s it for today!
Reference:
https://thinkrealty.com/tips-for-investing-in-real-estate-part-time/
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