How to Easily Start Investing in Real Estate
Get started in real estate investing the easy way
Given the tenuous state of consumer confidence in the U.S. economic recovery, and in particular, the real estate market, it seems somewhat counterintuitive to recommend launching a career in real estate investment. Nonetheless, consider William Nickerson, author of ”How I Turned $1,000 Into a Million in Real Estate — in My Spare Time.” He launched his investing career during the Great Depression. Nickerson’s book remains a bestseller and the real estate investment bible today. While “easy” may be misleading, becoming a real estate investor with little or no capital is more than possible.
Due Diligence
• Read up on the real estate investment market; how-to information is available online and in the bookstore
• Network, network, network—cultivate potential lenders, buyers, sellers and agents
• Find a mentor willing to invest time in you
• Consider becoming an appraiser, mortgage broker, escrow officer, Realtor or other real estate related job
Understand the market
Take the time to understand the market conditions. Fortune magazine’s Chris Matthews wrote in December 2014 that while the housing market is on the upturn, there are uncertainties. Home prices in many markets are at or above pre-bubble levels, but the rate of increase is slowing. It seems doubtful that the “rebound effect” will continue to drive prices up sharply, however there are signs of continued growth on the horizon. Most economists predict that mortgage rates will rise, probably to 5 percent by 2016. Housing prices will continue to increase, albeit slowly. Focus on your local market conditions.
Here come the Millennials
• In 2015, the first wave of twenty-somethings will begin to launch their families and buy homes, driving up prices
• Millennials prefer housing in more cosmopolitan markets—New York, Honolulu, Austin
Find your market niche
• Land—buy raw acreage to develop or sell to developers
• Single family homes
• Multifamily homes
• Small apartment buildings (5 – 50 units)
• Large apartment buildings (50+ units)
• Mobile homes
• Commercial real estate—shopping malls, office buildings, industrial sites
• Real Estate Investment Trust—invest in shares
Develop your strategy
• Buy and hold—buy property to rent out and sell later
• Flip—Buy at 70 percent of current value, rehab and sell
• Wholesale—Identify a property with a motivated seller, execute option contract to buy at fixed and reduced price, sell option cash buyer or “flipper” for a percentage of the purchase price.
Find the money
• Hard money private lenders—generally 100 percent of purchase price
• Home equity loan on existing home
• Partnerships
• Private loan—similar to a mortgage
• Lease-option—long-term lease that locks in the price
Your very first time
As a first-time investment, consider a small multifamily property:
• Duplex
• Triplex
• Quad
Consider living on-site, benefits include:
• Minimal mortgage and maintenance expense—your tenants will pay most, if not all, of your living and business expenses
• Increased cash reserves
• On-the-job experience in property ownership and the rental market
Don’t quit your day job…yet
Start small. Despite the slick infomercials and for-a-fee seminars, there is no such thing as overnight success. Those talking heads gloss over the determination and commitment required to succeed in real estate investment—it all takes time. Steady employment will not only keep a roof over your head, but also build your cash reserves. Patience and commitment will bring the day when you can forsake your 9 to 5 job.