“It takes money to make money.”
You’ve probably heard that quote if you understand the business world and are familiar with basic investing strategies.
Well, it’s very applicable and valid in the real estate world, too. Why?
Because to acquire rental property, regardless of whether it’s a single family home, small multifamily, or a 300-unit apartment complex, you’re probably going to have to pay a down payment and fork over some cash.
Hence, it takes money to make money.
In my personal experience in building a portfolio of properties in Indianapolis, I generally put 25% down on my investment properties, meaning I have a nice chunk of cash “tied up” in my assets. Since I’m constantly saving then re-investing on repeat, you could call me “asset rich, cash poor” -- which many investors can relate to, as well.
With money tied up to acquire property, that brings us to the questions, “Is real estate liquid?” and “Can I access my equity quickly, if needed?”
As a quick answer, I’d say no.
To keep reading, check out the full article I wrote that was published on Roofstock below!
I recently had the chance to catch up and chat real estate with my friend, Bryan Pham, on his podcast called: Crushing it in Real Estate.
I was super pumped to be on his new podcast, because Bryan is literally CRUSHING IT in real estate having done 20+ flips as well as investing out of state.
In this episode, Bryan asks me about my first deal, how I got started, valuable learning lessons, and the IMPORTANCE of networking and mindset.
Give it a listen! I hope you enjoy!
Okay, real estate investors ... let’s get one thing straight.
To grow and succeed in this business, you must understand how to analyze assets and potential investment properties. That starts with comprehending one of the most foundational metrics in the real estate world:
Let’s talk about cap rate! Don’t worry - I’ll explain exactly what cap rate is and how to use its formula in practical ways to analyze markets and rental properties.
Check out the full article I wrote that was published on Roofstock!
The list of investment options in this world could go on for another 98 pages. But, I’ll stop right there and focus on my favorite investment strategy of them all:
Residential Real Estate Investing.
I’ve been investing in real estate for a few years and am often reminded that this industry is ever-changing and evolving. But, there are key foundational facts about residential real estate that will always stay constant.
Check out the full article I wrote that was published on Roofstock!
When it comes to talking. I enjoy it. Especially when it comes to Real Estate :)
Meeting new people with different backgrounds, different strategies, different challenges, and having deep conversations...is how you grow. So, when the guys from Bigger Cash Flow asked me to be on their podcast, of course, I said "HELL YES!"
Take a listen as we chat through my journey in the real estate world, lessons learned, and the importance of having a strong mindset.
THE JUMP IN MINDSET.
Let me know what you think! I hope you enjoy it!
Here’s a scenario: You just closed on an awesome investment property and you eagerly share the big news with your friends.
“What’s the ROI [return on investment]?” they ask.
“It’s amazing!” you say. “It’s …”
Then it hits you. You’re not sure how to answer the question, because there are a number of possible answers.
Are they talking about capitalization rate? Cash-on-cash return? Internal rate of return? Cash flow? Appreciation?
Every investor has their own understanding of what an "amazing" ROI is. In this article, we’ll look at defining your investment goals (namely, cash flow vs. appreciation) and run through the primary formulas for calculating rental property ROI.
Check out the full article I wrote that was published on Roofstock!
*A GUEST POST BY AIDEN WHITE*
It’s a dream for every investor to find the "perfect" investment option. But practically, finding such an investment doesn’t actually exist.
Every investor has their specific choices and criteria by which they may consider an investment option suitable. Each investor has their separate risk-taking abilities and mindset about investing. So, there is no such guaranteed investment option that can be proved to be the best.
Is it still a good time to invest in real estate in 2019? At Equity Trust’s recent Wealth Building Summit, Rebecca, the Executive Director of the National Real Estate Investors Association (National REIA), elaborated on her research about the situation of the real estate industry.
She explained that individual investors are concentrating on increasing investment in the real estate market, and the number is growing continuously.
Rebecca also added some forecasts about the real estate investment possibilities in 2019, she explained the following five points:
1. Ignore building more starter homes
The number of homeowners is increasing day by day and they also want to stay in their homes for longer. This information is confirmed by the U.S. Census Bureau, which means the demand for building new starter homes will be much less than expected.
2. Focus on millennials
Millennials account for a total of 68% of first-time home buyers, per the Federal Housing Administration (FHA). Rebecca said that millennials also use a different approach for house shopping and provide value to different amenities.
Millennials usually follow these trends during their housing hunt, as per the FHA:
3. Consider the specialized housing requirements of seniors
Senior citizen population is another important factor among buyers and renters that investors should consider. As per the U.S. Census Bureau, senior citizens may outnumber kids population by 2035, the first time in history.
4. Number of foreclosures are expected to decline
Foreclosures have declined compared to the time of great recession. According to data given by Attom Data Solutions, the foreclosure rate was calculated at 0.51% in 2017, it was 2.23% in 2010.
5. Look out for larger trends
Rebecca advised that real estate investors should do their own research before buying a property. It is best to know the grounds before investing in an out-of-town property. Investors should do proper research about the employment rate in the locality, the geographical information (about natural disasters), and the crime rate of that neighborhood.
Let’s check out 2019 metrics for five major US markets
Dallas/Fort Worth, TX
The metropolitan area gives you a strong economy with steady population growth. The cost of living is low, and the growth of the labor market is good (4.3%) as the cost of doing business is also low.
New York/Brooklyn, NY
New York is popular as an international housing market for foreign property investors. Cost of living is high, so it makes it difficult for booming new construction. But the “city government, the local real estate board, and the construction trade unions are finally working together to increase new supply.”
The occupancy rate is high, and so is the rental income. It is a good option to buy a multi-family investment property. But there are few strict regulations on property investors renting out on Airbnb.
The housing market is balanced. It also has a strong, projected employment growth in 2019.
The number of new residents is increasing as well as the population under the age of 44, which makes the housing market more beneficial for investors. The area is filling with new construction to the house. Job opportunities, affordable housing, and a diverse economy will be helping the real estate market to become profitable for multi-family homes.
Orlando has beautiful scenery, high standard of living, and ambient weather. Orlando is having a population growth at a rate of 7.2%. The city is also becoming a business hub for young professionals with annual job growth of around 4.4%.
Florida has no personal income tax. The housing market is much affordable than other states. Affordability and increasing rental income boost cash flow.
Nashville has higher demands for both long-term and short-term rentals. The city also has the lowest unemployment rate and a strong job market.
Music City is the best place to invest in real estate short-term rentals. Overall, Nashville is an affordable, landlord-friendly housing market.
Data courtesy: mashvisor.com
I spent $142,987 last year.
I just did a 2018 personal financial recap (you should do one too!) and I spent well over 6 figures last year. That dollar amount includes living expenses, investment acquisitions, mortgages, business startup costs, EVERYTHING. And really....that number doesn't shock me at all.
Because I TRACK every penny that comes in and out of my accounts. I know EXACTLY where my money is going.
And by TRACK, I mean....
I use Personal Capital (affiliate link) to automatically track my financial life.
I don't have time to labor over spreadsheets, bank account statements, and credit card bills. And you probably don't either. The good thing is, Personal Capital links my accounts and does everything for me :)
By logging on, I was able to determine within 20 seconds that:
I spent $3,164 on Restaurants in 2018
I spent $940.23 on my cell phone in 2018
I spent $1,182 on groceries in 2018
Understanding these types of trends, and making adjustments is key to a healthy and successful future. Having these types of insights can exponentially increase your wealth.
*Bonus Tip* After identifying my spending trends, I leveraged that knowledge and picked up a new credit card that rewards me for my highest expense categories. If you spend a lot on restaurants and groceries like I do, check out the new American Express Gold Card. You'll get 4x points on those categories and 40,000 points by using my referral link.
I started tracking my finances in detail a couple years ago, and it's literally been a LIFE CHANGER.
Just a couple years ago I was making $44,000 a year living in the San Francisco Bay Area. I knew that if I wanted to improve my financial situation, I had to understand my finances first. There's no coincidence that my income has more than doubled since I started educating myself and tracking everything.
Before you Jump In to real estate, build that financial foundation! Educate yourself on your income, spending habits, and investments.
Now, the cool thing is, not only does Personal Capital track your income and expenses, it also tracks Net Worth. Every couple weeks I check my Net Worth and it's been a game changer in building wealth.
What exactly is Net Worth?
Simplistically, it's your Assets minus Liabilities. It provides a snapshot of your financial situation in real time.
Why is it important to track Net Worth?
When you see your financial trends right in front of you, you're forced to confront the realities of where you stand financially. Knowing that, will cause you to be more mindful of your financial activities.
Coincidentally, I just got this email from CNBC the other day...
Glad to see that CNBC and I are on the same page :)
If you don't keep track and understand your finances, you're ignoring them. You can't expect to improve your financial situation and grow your wealth if you don't have knowledge over your own finances.
So, if you're the type of person that HATES talking about money...
Or, you refuse to confront your bank account...
Or, you need to step up your finance game...
Or, you want to grow your wealth...
The first step is to make a change and educate yourself in your own finances. Take charge. And face it now!
Check out Personal Capital (affiliate link) because I HIGHLY RECOMMEND IT! And if you sign up using my affiliate link, you'll get a $20 Amazon Gift Card.
And Happy Investing!
I have to show you something real quick...
That's a Purchase Agreement from December of 2016, when I purchased My First Property.
WOW...I can't believe it's officially been 2 YEARS since I started investing in Real Estate. And it's been a crazy roller-coaster ride so far, to say the least. Here's a quick recap:
I bought My First Property from a turnkey company in December of 2016. Everything went "smooth" for 11 straight months, until an unexpected vacancy and unacceptable management derailed the investment. With $16,000 in repairs needed, I decided to sell it.
I bought My Second Property in March of 2018. I bought My Third Property in July of 2018. Then I invested in an 80-unit multi family property just this past October.
I've had my fair share of bumps and bruises along the way. Tons of challenges, frustrations, and second guessing. And I know there's plenty more of that to come. But, I'll continue to learn every step of the way. And now it's my job, to share my knowledge with YOU.
Here are my TOP 8 TIPS after my first 2 years in Long-Distance Real Estate Investing:
1. Network, network, network
"Your Network is Your Net Worth"
I live by this and truly believe it. The people you keep closest to you, create such a profound influence. You've got to be conscious of that and surround yourself with the best and brightest.
I've met some of my best friends through real estate and I couldn't imagine my life without them. So, use the best real estate networking tool out there, Biggerpockets, and connect with locals that are just as ambitious and driven as you.
Set up local events and meetups to chat with novice and experienced investors, agents, contractors. Business and LIFE are all about relationships.
2. Master How to Analyze Property
The basics of investing start with understanding How To Analyze Rental Property. You MUST know how to quickly filter through potential investment leads, determine all expenses, and projected rents. You need an understanding of flood planes, school districts, neighborhoods, taxes, and much more.
If you're looking to acquire a property, I challenge you to start analyzing 1 property a week. Then 1 property a day. Repetition will get you to a point where analysis becomes clockwork, so when that great deal pops up, you can JUMP ON IT!
3. Location, location, location
When I first started investing in real estate, I didn't realize the importance of location. I just saw the numbers on paper, and assumed if the numbers on paper worked out, the investment would work out. Well, I WAS WRONG.
Having a great real estate investment requires so many factors...and location is a huge one. You must understand neighborhood crime levels (I use Trulia crime maps), school districts, neighborhood classes, and neighborhood amenities (is there a Starbucks nearby?).
Understand what type of tenant lives in the neighborhood (check out Neighborhood Scout). After all, your tenant is the primary source of income.
4. Interview and Vet Multiple Property Managers
I've experienced working with the wrong people. And it SUCKS. Don't be like me. My first property manager decided to just NOT tell me that one of my tenants left. I only found out when my friend drove by the property and spotted a lock box on the front door. Then, I ran into $16,000 in needed repairs as the property manager never checked up on the property throughout the year.
But, I take full responsibility for hiring the wrong people. And I learned real quick how to never make that mistake again!
The key is to interview multiple property managers and really truly vet them. Check out my post on How to Hire a Property Manager.
And if you want to work with my property manager, contact him HERE.
5. Always get an inspection
Ahhhh...I was so naive a couple years ago. When I bought My First Property I admittedly was a little too trusting. In buying the property all cash, I didn't need to get a property inspection from a 3rd party company. Unless you really understand construction, rehab, and can see the property in-person, I'd say: ALWAYS GET AN INSPECTION!
An inspection can and WILL save you from unexpected issues that'll cost you $. Lots and lots of $$$.
6. Don't ignore issues on the inspection report
Well, I learned early on about the consequences of not getting an inspection report. But, I guess you could say I didn't learn the whole lesson.
I had a relatively major issue pop up on an inspection report once...standing water in the crawlspace. I had a mold guy go out there and check it out, but I never decided to get a foundation expert to assess it.
I ended up brushing it off the whole thing and tried to push it out of my brain because emotionally I really wanted the property and the numbers looked AMAZING! I eventually bought the property.
Now, it's biting me in the A$$. Bottom line: don't ignore big issues on the inspection report. Take care of them or walk away.
7. Visit your market and meet your team in person
Some long-distance real estate investors might disagree with me here, because technically everything can be handled remotely. BUT, having flown to my market multiple times, I can say it's an invaluable experience.
You'll have a HUGE advantage if you take the time to get your boots on the ground, meet connections face-to-face, drive through neighborhoods, and really understand the culture and direction of the city. Real Estate Investing is a relationship business and meeting your team IN PERSON strengthens those relationships. Sitting down with your agent and property manager for a nice lunch goes a long way. Trust needs to be built if you're going to invest from afar, so get out there and understand your team on more of a personal level!
8. Keep a Positive Attitude and Move Forward
You're going to fall down. And you might even get kicked while you're down. But, that's not only real estate or business...it's life.
Being able to get back up from every challenge, move on, and LEARN is crucial to your development. This is much easier said then done, but get it in your brain, so when your next pitfall comes up, you're ready to move forward and grow.
Well, as a final conclusion here, I've got some last things to touch on:
A LOT has happened in the last couple years. Literally, my life has changed. My mindset has changed. My understanding of investing has changed. By the way:
-I'm nowhere near "Financially Independent." This is a LONG game. I'm 2 years in. Let's chat in 20.
-I'm continuing to learn each and every day. Books, Podcasts, and Meetups. Never stop.
I'm excited for the future.
Reach out if you have any questions, I'm always happy to help in any way possible.
Humidity: A LOT
Where was I Labor Day Weekend? Indianapolis, Indiana. Home of my investment properties. My previous trip out there was a little over a year ago when I checked out My First Property after renovations were complete.
Since that last trip in March of 2017, A LOT has happened.
I sold My First Property, purchased and rented My Second Property, and acquired My Third Property (which is finishing up a light rehab right now). Suffice to say, I was super excited to get out there to see how the market has progressed, soak up the culture, actually see my new properties in person, drive neighborhoods, meet with my team, and shake hands with connections in the area!
So, what value did I get out of the trip? HOLY CRAP...A TON OF VALUE:
If you can't tell by now, I HIGHLY recommend you visit your investment market. To be successful in this business, there are two major KEYS you need:
1. Strong relationships on the ground
2. An understanding of the market and its specific neighborhoods
How do you master those two keys? Get your butt out to the market and see it for yourself.
Peace and Happy Investing Jump In Nation!