Category: Education

How to Build Your Real Estate Portfolio From Scratch

Many of my friends and colleagues are interested in owning rental properties as a way to earn passive income. I think it’s awesome that people have this goal and that real estate can help them reach it. But I also want to help people understand exactly what it takes to get there.

Let’s say your goal is to eventually bring in $10,000-$20,000 per month, which would essentially allow you to retire from your 9-5 and start living life on your own terms. Let me be the first to say that I think this is a fantastic goal! But what’s your strategy?

In this article, I will walk through the steps of building your portfolio, starting with your very first property. I help you build a plan that will work for you without breaking the bank in the short term.
Let’s get started.

Step One: Assess Your Current Buying Power

This is going to look different for everyone, so stay with me. Depending on the amount of available cash you have, you might be looking to start with just one investment property, or a handful of them. For this example, let’s focus on just one.

If you have decent credit, minimal debt and a little bit of cash to put down, you may be in the perfect position to purchase your first investment property. I recommend discussing your options with a few different lenders.

Questions you should ask your lender include, but are not limited to:

  • How much can I be approved for?
  • What will my interest rate be?
  • What’s the difference in rates for investment homes vs second homes?
  • What are my options for the length of the loan and how quickly can I pay it down?
  • Are there any penalties for paying it off early?

Once you decide on a lender, be sure to obtain pre-approval so you can confidently put an offer in on a property when you find the right one. Once you collect all the information you need to make a good decision for your current financial situation, you can move on to the next step.

Step Two: Choose a Property in an Area That Sells

This may seem like a no-brainer, but it often is not. You need to start your property search by looking at the different areas of town. What areas are you interested in?

If you’re looking for a house in the suburbs that you can rent out to families, you will want to consider several factors that appeal to that audience. Most families are all about location, location, location. You want to find a neighborhood with easy access to schools, shopping, recreation and even places of worship.

If you’re considering a condo or high-rise downtown, the conversation shifts a bit. People looking to rent these types of residences tend to be single or married without children. Sometimes they are empty-nesters looking to downsize. In this scenario, you’ll want to consider parking, storage space and the amenities of the community.

The other thing to consider is whether or not the community you have chosen allows rentals. Whether it’s a neighborhood or a high-rise, chances are good that there are some restrictions on rentals. Be sure to do your research on your selected neighborhoods before putting in an offer.

Step Three: Purchase the Property

Once you’ve decided what type of property you’d like to purchase, BUY IT! Your realtor and lender will walk you through this process, but it basically entails putting in an offer, considering any counter-offers from the seller, going through the home inspection process, etc…

If you’re working with a realtor, this will all seem like a fairly simple process. If you ARE the realtor, you already know what to do.

Step Four: Marketing

Now that you own your investment property, it’s time to start marketing it and finding potential renters. Finding the right tenant has a lot to do with where you purchased your property and who your target audience is. If you’re still not sure who they are, do a little more research on your area.
You’re looking for information like this:

  • What are the market rates in your area for rentals of similar size?
  • Who are the main inhabitants in your area?
  • Who is moving in and out of the area?
  • What do people value the most about that specific neighborhood?

Once you learn a little bit more about the people living in the neighborhood, you can start to target your marketing to find the right tenants.

Social Media

It’s no secret that social media is one of the easiest ways to get your product or service in front of the masses. But again, do your research first. Based on what you learned about your target audience, join some online forums and groups that cater to those specific types of people.

You will be amazed at how much you can learn about your target audience by hanging out where they do. You’ll learn about their habits, hobbies, interests, dislikes and more. Once you learn more about them, you can craft your messages in ways that will resonate with them.

You also need to create social media accounts for your properties or your business as a whole. Remember that the internet is a visual medium, so you need really great photos of your properties to entice people to click. Once they click, you need more photos for them to view.

Give them more information than they need. If they feel like they have to search for it, they will exit your post and keep scrolling.

Word of Mouth

As antiquated as it may sound, people still take recommendations from their friends, family and even anonymous people online! Think about it… you read Amazon and Google reviews before purchasing, don’t you?
Ask existing tenants to write testimonials for you. Or do a short 30-second video of them saying their testimonial out loud!

Online Marketplaces

There are tons of places online where property owners can advertise their available properties. You can look at the various platforms, their fee schedules and requirements and figure out what will work best for you. Here are just a few options:

  • Zillow
  • Hotpads
  • Oodle
  • Padmapper

Depending on your marketing budget, some of these might be more realistic for you than others. But they are worth the time investment to at least learn what your options are.

Your Own Website

Whether you’ve been in business for several years, or you’re just getting started, a website can be one of the most lucrative things you can invest in. Consumers are savvy and information-hungry. They want information at their fingertips when it’s convenient for them.

Just as with social media marketing, you want to make sure your website has fantastic images and lots of information. Have you ever been looking for a house online and you won’t even click on the ones with terrible photos? Your customers are the same way!

Take the time to take great photos of the home. If you can invest in a professional photographer, go for it! If not, newer smart phones have fantastic cameras, so you can get some great shots on your own.

Last but not least, consider whether or not you need to hire a professional web designer. If you have the expendable cash, it can be a great investment. If not, I recommend either WordPress or Wix. Both platforms are designed to help non-web-designers create and launch their own websites.

Step Five: Screen Potential Tenants

This process can seem daunting when you’re just getting started. But I recommend you to be as diligent as possible to minimize the risk to your property and your business. The following steps are critical in the process of screening potential tenants:

Have potential tenants fill out an application. You can create one on your own, use a template or have a lawyer draw one up for you.

Run a credit check. This will give you information on the past 7-10 years of the tenant’s payment history to other creditors, including past landlords. Depending on what state you live in, you may or may not be able to charge the potential tenant for the cost of the credit check.

Run a background check. This will give you information about the tenant’s past. You can order these through companies such as StarPoint and ScreeningWorks. This will give you information about previous evictions, crimes committed and other public records.

Complete reference checks with previous landlords. If your application is thorough and includes past landlords / living spaces, you can reach out to these people for information about the tenant’s behavior and payment history.

Call the tenant’s employer. Verify the income amount that they listed on their application. You want to be confident that they can pay the rent on time each month.

Interview the tenant. This is one of the most important things you can do. It will be mutually beneficial for both parties to get to know one another and decide whether or not the relationship is going to work.

Step Six: Do It Again!

Once you’ve gone through all the steps listed above and you have some renters in your first property, you can start considering what your next property will be. You can return to step one and start again!

However, I highly recommend waiting for a little while until you’re comfortable. Get to know the process and how to manage your first investment property before going out on a limb with another one!

Over time, your income per month will hopefully grow and you will have more to invest. As I said in the beginning, you can absolutely grow your business to the point that you can walk away from your 9-5. It just takes time, patience and smart decision-making.

Should I Hire a Property Manager?

Only you can answer that question for yourself. Maybe you were an executive at a company and didn’t have the available hours in the day to dedicate to your rental properties.

You may or may not be in that situation. If you have the time and the know-how to market your properties, screen clients, handle maintenance issues, etc. then you will be fine! If not, I really do recommend a management company to handle those items for you.

If you screen them carefully, you will find one that fits your needs and your budget. I also base a lot of my decisions on how I feel about their integrity. You need someone who will be honest and who is licensed and insured,


Hopefully you now have a clear understanding and the outline of a plan for how to go from where you are right now to owning your first investment property. Remember that it takes time to build your portfolio. Not overextending yourself at the beginning will help you be more successful in the long-term.

Picture: Pixabay

How To Know If You Are Ready For Real Estate Investing

Real estate investing is an excellent strategy for long term wealth accumulation, but how do you know if you’re ready?
In a nutshell, you’re going to need some cash reserves and a good strategy that works for you. There are tons of real estate investment strategies and it’s easy to get overwhelmed. But narrowing your focus can help you get started on the right foot.
Here are the top three things that will tell you whether or not you’re ready:

  • You have access to cash
  • You know which kind of investor you want to be
  • You have a strategy

How Much Cash Do You Need for Investing?

Contrary to popular belief, you don’t need a ton of cash on-hand to begin investing in real estate. Many investors actually prefer to take out loans from private lenders rather than using their own cash. It all depends on your financial situation, your credit score and your level of comfort with taking risks.
Here are some of the key considerations to help you decide whether or not you’ve got enough cash in the bank, or good enough credit to find a lender.

Are you in survival mode? Living paycheck to paycheck can be a tough situation. Or maybe you’re not quite in the “living paycheck to paycheck” spot, but you make just enough to pay your bills and start digging yourself out of debt. This is a normal and commendable place to be. But it’s not likely a great place to start investing just yet. Focus on getting to a comfortable spot first, unless you can qualify for a loan

What do your reserves look like? Do you have cash reserves in the bank? In general, you want to have $1,000 in an account for a rainy day fund. This is for emergencies and unplanned expenses. Beyond this, it is wise to have about 6 months’ worth of bills saved up for the property you want to purchase. If you’re looking to purchase a rental property with a $1,000/month mortgage, you want to have at least $6,000 in the bank.

Passive vs Active Investing

Investing in real estate can be as much or as little work as you want it to be. Some investors really want to be hands-on while others don’t have the time or the interest in doing so.
Let’s talk about the specifics so you can make the best decision for you.
Passive Investors make monetary investments in properties without getting involved in the decision-making, negotiations, etc. For example, when you invest in the stock market, you don’t get involved in the daily operations of the companies in which you invest. You simply earn some dividends when the company does well.
Passive investing is similar. People who invest passively in real estate typically do so in one of three ways: the stock market, crowdfunding or partnership.

  • The Stock Market is a quick and easy way to invest in real estate without getting involved in construction, fixing and flipping, negotiating deals, etc. But you still have to do some research on which funds and REITs to invest in. There are some great resources available for this, but I usually prefer to talk to successful investors. They are already doing it, so why not buy them a cup of coffee and pick their brain for great ideas?
  • Crowdfunding is a scenario in which a professional investor identifies a property to renovate into a hotel, multifamily unit or other such entity. If the investor doesn’t quite have enough capital to make the purchase, they may look for private investors to assist in that area. If you invest in it and it does well, you will receive a portion of the profits.
  • Partnership with an active investor is another great way to get involved without doing a ton of work. Much like crowdfunding, partnering with another real estate investor who actively purchases rental properties can generate some income for you, as well. In this type of partnership, you can partner with the active investor to purchase the properties and then you share the profits in a way that is proportional to the work you put in. So the active partner will likely receive more of the profits, but all you did was invest a little money on the front end, so it’s worth it.

If you already have a full-time job that you enjoy and that allows you to live your preferred lifestyle, passive investing is likely a great option for you. Depending on how much cash you have to invest, you can really build a nice portfolio.
There are downsides to everything and this is no exception. In passive real estate investing, you need to make sure that the stocks you purchase or the partners you choose are reputable. Make sure they are purchasing properties in a viable end of town. Do the research on the projects they are working on before putting in any money!
Active Investors are involved in the identification, purchase and/or management of the real estate in question. The simplest example of this is a person who flips houses. They find a home that they think will be a good investment, put in an offer, purchase it, renovate it and then sell it (hopefully) for a profit. Although there is a lot more that goes into the process, this is a good illustration of active investing.
Another example of active investing is to purchase rental properties. In this scenario, you purchase a rental property, find a renter and allow their monthly rent to serve as an income source for you. Many of these investors hire property management companies to take care of the logistics of finding, renting, getting contractors to do repairs, etc. But it is still much more involved than passive investing.
Some of the key benefits of active investing are control over the situation and the opportunity to make more money in a smaller amount of time. If you are the one purchasing and managing the property, you are relying only on yourself to make good decisions, rather than a company, a partner or a large real estate investment firm. You also have the opportunity to flip the house quickly and make a fast profit.
This type of investing typically requires a higher toleration for risk.

Developing a Strategy

Once you decide what kind of investor you’re going to be, you will need to develop a strategy on how to make it a successful venture. Your strategy can change drastically based on your available/accessible cash.
Strategies for Passive Investors
If you’ve already decided that you’re going to be a passive investor, you need to develop a plan that makes sense for you. Real estate investments via stocks, bonds and REITs are a great place to get started.

What is a REIT? I’m glad you asked!
REITs or Real Estate Investment Trusts are companies that own and manage income-generating properties. These include residential properties like apartment buildings and condos, as well as non-residential properties like hotels and shopping malls. These companies share their profits proportionally with their investors on a quarterly or annual basis.
Some REITs are publicly traded while others are non-traded. It is helpful to discuss your options with an investment broker to help you choose which ones are best for you.
So let’s talk about next steps.
Step One:
To invest in stocks, bonds and REITs, start by identifying a broker you want to work with or an online brokerage that you trust. It pays to do your research and find one that has a similar philosophy to yours and a fee schedule you can live with.
Step Two:
If you’re working with a broker, you’ll want to schedule time to sit down and talk about your goals. Tell them why you want to invest, how much available cash you have and what your ultimate goals are. Your broker will discuss the various options and assess your tolerance for risk. From there, the two of you will build a plan.
If online brokerages are more your speed, there are tons to choose from.
Step Three:
After developing a plan with your broker, it’s time to take that leap! Whether you have just a small amount to invest at the beginning, or a much larger sum, now is the time! As you become more confident with your investments and returns, I think you will find it really gratifying to invest in this way.
Note to self: Crowdfunding is a much bigger world. It is a type of investing that is typically reserved for accredited investors. If that’s you, then go for it. If not, perhaps it will end up on your real estate investment bucket list.

Strategies for Active Investors

As an active investor, there are several ways to jump into the real-estate business. But let’s consider how your available cash affects your strategy.
If you’re in survival mode right now, it might be best to focus on real estate as a side-hustle or even a job, rather than an investment. Simply put, you need more money coming in right now, rather than going out. There are a variety of full and part-time opportunities in real estate that will get you involved in the industry and making connections, while putting more cash in your pocket. Leasing agents, real estate agents, property managers, appraisers and other such jobs are a great way to get into it without investing just yet.
If you have plenty of cash available to invest, there’s no better time than the present to start doing it! If you’ve identified yourself as an active investor, start looking for your first fix-and-flip or rental property. It’s important to know whether you want to flip it or rent it out before you purchase a property. These two types of properties will look very different. One will be a “fixer upper” while the other might already be in great shape and you’ll just need to find a renter.

Fix and flip investments are a great way to make a profit quickly, assuming you’ve done your homework on getting a great price, doing the renovations and then listing and selling it. You need to consider what your ROI will be once it’s all said and done.
In the fix and flip world, the faster you get it done, the better. You don’t want to hold onto these properties for too long because you’ll end up paying the mortgage until it’s sold. After all, you OWN it…
Rental properties are a completely different animal. With these types of investments, there is generally a lot more risk involved. Again, you need to do some homework on the potential ROI of a rental property. You’ll need to be confident that you can rent it at a price that will give you a positive cash flow each month. To create a positive cash flow, you need to consider all expenses that are tied into owning the property.
For example, if you purchase a rental home with a mortgage of $1500/month, an HOA of $200/month and a property management company of $150/month, you’re looking at $1850 per month plus maintenance and upkeep if it’s not covered by your management company. So you’re looking to rent it out for $2200-2500/month or more in order to make a profit each month.
Of course the math is much more complicated than that, but you get the picture.


Real estate investing is an exciting and sometimes scary world. But doing some research on the front end and answering the simple questions above will help you get started off on the right foot. A great strategy and a business plan will give you great peace of mind and the confidence to take the first step.
So what are you waiting for?

Picture: Pixabay

Fixing and Flipping Multifamily Real Estate Investments

For any business you can think of, the end goal of the owner or investor or the entrepreneur, as it is commonly known, is to make profits. This is the same with multifamily real estate investments; every real estate investor wants to make an above average return on all the money that is invested.

This article aims to analyze all the issues relating to fixing and flipping multifamily real estate investments to make profits. Although this may not be ideal or appropriate for some real estate aficionados, those who can pull off the fixing and flipping arrangement do make substantial financial gains. The fix and the flip process can pose a significant challenge to certain real estate investors; however, to begin the process, there is a need for proper funding.

These can come in the form of loans, which is also made available in some instances for individual properties and even for more experienced investors who wants to flip more than one real estate property at once.

These loans come in a whole lot of forms which include:
Cash-out refinancing (which involves refinancing one property to fix and flip another one)
Home equity lines of credit
Bridge loans
Hard Money Loans
Permanent Loans (not typical in flipping)

It is worthy to note that the process of fixing and flipping real estate can be carried out with any property, no matter its enormity. The types of highlighted loans above are to help support the purchase of single or multifamily investments.

For fixing and flipping operations, funding is a real issue, and if you are a serious investor looking for a source of financing, hard money loans are a good source of funding. The hard money loan option may be more expensive than the other types of funding though.

The demand for fix and flip processes concerning multifamily real estate dwellings is only increasing these days. Many fix and flip professionals are choosing this path because the number of rental households has increased by more than 15%, and this upward growth is expected to continue.

This is because many teenagers are expected to leave their homes and become renters themselves, further boosting the multifamily real estate market. The need for independence from parents is real around this age, so it is not surprising.

Path to Fix and Flip Profits:

When it comes to multifamily real estate investments, fix and flip, investors have to compete with other buyers for the properties on the ground. Fixing and flipping has the sole principle of making use of a certain amount of money to make some brief renovations; in all, a general uplift to improve the valuation of a real estate property before selling it at an excellent price.

This way, an excellent profit is made. Concerning multifamily real estate, seasoned fix and flip investors still have to contend with repair and flip newbies in the industry; those who do not have the required skills and expertise.

These new entrants into the industry tend to make things difficult for experts. These newbies tend to buy existing properties for more, making it difficult for them to come across an affordable fix and flip property. On the path to fix and flip profits, you should seriously consider multifamily investments.

All you have to do at first is to be conservative enough in calculating the potential returns. The rule made is by seasoned investors is to estimate the property’s rental income, then subtract half of that amount for monthly expenses and then subtract the mortgage payment from what remains.

Then if the property cash flow does not cover these costs, you can either decide to negotiate a lower purchase price or look for a building in another area that supports higher rent payments.

Fix and Flipping MultiFamily Properties:

As mentioned earlier, projections have concluded on the path that rentals on properties are most likely to be on the increase. Many seasoned real estate investors have turned to multifamily real estate holdings, all in a bid to diversify their holdings and increase their profit.

As the demand for rental housing units continues to rise, the fix and flip experts are also noticing it is expected that with multifamily holdings, they will undoubtedly require more significant investment and more work for you to gain maximum benefits.

For a first time investor, they are seeking to make new inroads into the world of real estate investments. Getting to sell a multifamily holding can be very challenging. Even for experienced investors, the rules have to be followed. As it is the norm, the search for a buyer can be more challenging than for single family buyers.

For example, in America, property owners and investors alike are coming to terms with the fact that they can increase their profit by choosing to purchase multifamily units. This inadvertently opens up a new path for fix and flip real estate investors as there is a higher chance of success when you decide to fix and flip a multifamily property.

Funding for fixing and flipping multifamily real estate holdings, many platforms on the internet and even near you offer programs for this. Most only have programs designed for clients with strong credit scores. Also, those who have the needed experience with renovating and owning multifamily properties are given a chance.

Very strong net worth and liquidity also allow for flexibility to be exercised in the decision making. Some of the prerequisites which usually are considered include:
• The multifamily property must contain at least five (5) units of housing.
• In some instances, projects with at least 50% occupancy are also considered.
• At least a credit score of 670 is needed.
• Loans from 250,000 to $5,000,000 can be provided with no limit placed on the number of multifamily housing units you can flip.
• Finally, loans up to 80% of the purchase price with rates which are as low as 8.5% and a 24-month term.

But first this disclaimer, this is not a get rich quick method. If you are looking for a means of getting rich quickly, then real estate investing is certainly not for you.

An alternative to fixing and flipping real estate holdings is to buy properties in perfect locations where you are sure after doing the necessary valuations; the value is going to increase. Having a great strategy at this point is very crucial. This strategy is key to knowing when to improve property values and also knowing when to sell and reinvest the funds in other profitable properties. One very sure way to amass wealth and reach that dream milestone is to buy real estate rental properties, then fix and flip them accordingly.

• You can decide to flip ten (10) houses that make $100,000 of profit.
• Flip 20 houses that make $50,000 of profit on average.
• Or you can also decide to flip 40 houses that make $25,000 of profit on average.

Markets also influence these profits. As if you live in a market with lower property prices, the real strategy will be to flip smaller houses with smaller profits but at an increased volume. An excellent example of this is buying $50,000 homes that you can resell for $120,000 and can net you $25,000 to $30,000 after renovations, closing costs, or commission and taxes. This you can repeat about 3 to 4 times per year. If you live in a place like Los Angeles; it is more realistic to find flips with $100,000 t0 $200,000 of profit.

At this juncture, it is only ideal to find out the real reasons investors flip multifamily real estate units. In the real estate industry, there is a big market for single family homes. It is only natural for flippers out there to cater to the needs of this large population. However, in contemporary times, there is an increase in renting.

• It is usual for more people to have a hard time believing that investing in a home is the best option they have. They are beginning to see primary residences as more of liabilities than assets.
• Some have been burned in times past as they have bought homes that sunk considerably in value after a certain period; contrary to laws of real estate investment.
• The increasing proportion of the workforce is becoming mobile to the latest advancements in technology; hence, they are beginning to like the flexibility renting provides.

These reasons are highlighted as a result of accessing the opinions of industry experts on the latest realities facing rents and mortgages in developed societies. Multifamily properties are the ideal property to flip, but why decide to flip multifamily real estate holdings?

Reasons for Flipping Multifamily Properties:

Marketability: Much has been mentioned of the fact that many areas are seeing a rise in their rental rates, and the absolute economic crisis turned many people from homeowners to renters, and this has made it more difficult for single family flippers.

The markets for single family flippers have changed and shrunk considerably over time, and only fewer people qualify for mortgages. Higher rents also mean higher selling prices for investment properties, and this is a significant factor for commercial multifamily.

• The Exit Strategy: When talking about single family units compared to multifamily housing units, any experienced single family fixers and flippers will always tell you to plan your exit strategy properly. Part of the procedure is to determine the After-Repaired Value accurately.

You need to know the amount you can sell the place for after the repairs have been made.
It is common knowledge that with single family homes, the rent will barely cover the mortgage, which includes insurance and taxes. With the inclusion of maintenance items, you might be losing money.

However, with multifamily properties, these properties are unarguably cash cows. You can choose to cover the mortgage payments with rent from one or two units and receive pure profits from the other units. And if your multifamily flipping does not work, you can simply rent it out and make some money, with no loss on your part.

Tax Advantages: This should not be mistaken as tax advice coming from a professional. But the buyers of multifamily residential properties, especially the buyers who live in one unit, can take advantage of both the homeowner and tax deductions. In addition to the edge to buyers, there are excellent incentives for flippers who get to buy multifamily residential.

Finally, it should be known that fixing and flipping are done for the sole purpose of making a profit. However, real estate industry leaders believe that it is one niche that is fraught with challenges considering the many rules and special considerations to be made. However, you need to be experienced enough to pull this off with multifamily real estate units, so you do not run at a loss.

Picture: Pixabay

Financial Independence By Investing In Multifamily Real Estate

One of the reasons for going into business, particularly the multifamily investment niche of real estate, is solely to create wealth and passive income. Current investors in this niche have made it known over and over again, how multifamily real estate investing has done that for them. However, one fundamental question to consider is how one can create wealth, satisfying a need in the process without financial independence? If you are a real estate investor, now more than ever is the time to escape the corporate rat race and become financially independent. Based on the main goals of any investor, the main aim of this content is to highlight the tips you can make use of in achieving this sole objective. However, it is only reasonable we inform that achieving financial independence is not as easy as we would be stating here. You need to be intentional about being financially independent. Learning how to create wealth and improve your business dealings can be very challenging.
If we were to conduct a poll today amidst real estate investors on why they chose the real estate sector to invest their resources, sure we would have lots of reasons to consider. Although some might treat it as a partial source of income, others commit fully to it with financial independence becoming the unifying goal. This has been the dream of many, and real estate has been one of the best ways of achieving it. Financial independence is achieved by an investor when the passive income, the returns from activities in the real estate sector, is more than their monthly expenses. In such a way that you have lots to spare. Although this might sound risky or seem like a very long process that can only be achieved in years, one uphill climb, it is achievable and very realistic, giving the factors involved. It has even been confirmed that rental property investors make cool cash, achieve financial independence through investing in real estate. As mentioned earlier, here are a few tips we advise the reader to strictly adhere to if one is so particular about achieving financial independence. These tips include:

• Get Educated:

One of the best things one can do to improve oneself is to get educated. It does not cost a thing to stay updated with the latest developments in the real estate world. As a real estate investor with your eyes on the goal, you need to be abreast of all the back and forth going on between the bigwigs in the industry, and you need to have an idea of the latest moves to make that are sure to bring in the needed profits. In line with achieving financial independence, although there is no real need for formal education or a college degree, one still needs to dedicate lots of time to reading and to grow at the same time. Successful real estate investors have achieved financial independence by knowing how to play the right cards at the right time. Investors are constantly educating themselves about the best investment strategies and investment properties. With investment property types including either single-family homes or multifamily settings while strategies include rental properties, commercial real estate investing, with the inclusion of Airbnb rentals. They seem to be growing in value every day, and you should consider investing in them.

• Financial Planning:

How can one achieve financial independence without top-notch financial planning? For most real estate investors, there is always a template more like a written plan as to how to achieve financial independence. It was observed that having a plan makes you more likely to achieve the set-out goals and objectives. Financial planning in the real estate investment niche is said to refer to all the processes of determining all that is related to the financing of your rental property. In plain terms, it solely involves anything that settles all your real estate concerns; the acquiring of a mortgage that fully suits your real estate investment. It also supports the calculating of your expenses and the cash flow through the rental property in focus.
In terms of mortgage and mortgage payments, they are referred to as the foundations of real estate financial planning. Having debts is not bad, but continuously piling up the debts to such an extent, it starts to impede your ability to save, that is a source of concern. This development, in the long run, tends to affect your ability to achieve financial independence as early as you would have wanted. While in terms of expenses, optimum financial planning should involve defining your passive income. To determine this number, real estate investors should consider all the monthly expenses, which should include repairs, maintenance, utilities, electricity and water bills, taxes, vacancy rates, property management, etc. For a real estate investor to achieve financial independence with all that has been listed out, an estimate of the expenses must be made to determine the extent by which they affect the odds of achieving financial independence through real estate investments.

• Endeavor to Grow Your Real Estate Portfolio:

This is no rocket science, but the more your investments, the higher the passive income you can derive from it. Growing your real estate investment portfolio is one sure way of attaining financial independence. The more you invest in real estate properties, the more passive income you earn. That is not all therein, and you are likely to earn more passive income from diverse real estate holdings. This also protects the real estate property investors from the dynamic economy and real estate investing market fluctuations, which ultimately allows for financial stability regardless of the conditions around.
To achieve this talked about financial independence, we have a lot to discuss about strategies one can apply to attain it in no distant time. Some of these are discussed as follows:

• Calculate Your Freedom Number:

This is one of the first things to do; the freedom number is not a unit or a property count. It refers to the amount of income you need to cover your current expenses or the amount of passive income. Which is more or less equal to the amount you are receiving from your current active full-time job, or that which can fully afford your full lifestyle. The best way to arrive at this number is to open up an excel spreadsheet and make a list of all current expenses. If you also intend to replace the current income and become a full-time real estate investor, then your freedom number automatically becomes your pre-taxed income. If you intend to improve or keep your current lifestyle, then you need to determine how much it would cost you, and that is referred to as your freedom number. To make this clearer, imagine a scenario where you currently earn $50,000 a year at a job, and you make calculations that you would need an additional $10,000 to maintain your current lifestyle. Your freedom number is about $60,000 yearly.

• How Much do I need to invest in real estate to achieve my calculated freedom number?

The next thing on the list is to calculate how many rental properties a real estate investor needs to be involved in before you achieve the calculated freedom number. This calculation is solely based on specific investment criteria as a real estate investor. For example, if your investment specification is only to purchase certain properties that are sure to achieve a 10% cash-on-cash return. Then you will need more money to achieve your $60,000 a year freedom number, Roughly about $600,000.

• Creating a Freedom Timeline:

After calculating your freedom number and the amount, you would need to invest in real estate to get that much as passive income, which caters to all the expenses that maintains your current lifestyle. Next is to create a freedom timeline, which is all about how often you will purchase properties to achieve your freedom number. These timelines do vary with all depending on current situations, investment strategies adopted, market, etc. the best recommendation is to have a freedom date then backdate a timeline.
For example, if you already have it in mind to quit your active paying job in the next 10 (ten) years to focus on real estate investments, following from previous examples of your freedom number is $60,000. You need to purchase about 60 units for a start and a cash flow of about $100 a month. The money that would be available as a rising real estate investor to be used as down payment will be any amount of money you have saved up, which is money you have set aside from your full-time job.
After purchasing your first housing units, you will have an additional stream, which is the $100 a month; and how long can you wait before you purchase your next property? And as from that point, you will have an additional $200 a month towards the next payment. At some other point, you will ultimately have enough equity in the earlier rental unit purchases that will be able to be refinanced and, in the long run, buy more units.

• Implementing your Freedom Timeline:

The last thing to consider after calculating your freedom number, determining how many units you need to buy, is to create a timeline. As it is the time to start making high-level purchases like a new real estate entrepreneur. One of the strategies that have been adopted in recent times is the BRRRR strategy superbly coined by Brandon Turner at BiggerPockets. The named acronym stands for buy, rehab, rent, refinance and repeat. By buying, you can purchase old or distressed properties, which translates to the level of distress you are capable of managing, and this will go a long way in you achieving the financial independence you so much want. By rehab, you only need to subcontract to someone who is a great general contractor to carry out random property repairs and general renovations.

As for renting, you need to lease your newly renovated asset to great residents who, to an extent, share your ideas. Individuals who would adequately make use of your property; as their use would not make you accumulate unnecessary expenses on repairs. Then on to refinancing, you can choose to obtain a new loan on the property in a bid to pull out the equity created from the rehabilitation carried out. By repeating the entire process, by using the money from refinancing, you can achieve financial independence. Honestly, we can only outline these steps and hope they work for you. The number of obstacles you are likely to face as a real estate investor or entrepreneur varies in a lot of ways, as achieving financial independence can be very daunting without mincing words. However, this is not to discourage you. Still, with consistent effort, partnering with reliable individuals, patience and resourcefulness are one of the positive ways to work through the many obstacles you are likely to face.
Many professionals or veterans in the real estate sector have spoken on some tricks that worked in their favor. Some of these tricks have helped them to quickly navigate the many obstacles that have barred others on their way to achieving financial independence from real estate investing:

• The use of Tax Benefits.

• Appreciation:

You must have heard of the common term in real estate that units with proper management appreciate over time. It is certainly one factor that comes into play in the real estate sector. For these individuals, they have been able to do an equity strip from the properties, and they do not have to pay taxes when they borrow money against the properties. The equity that was created by the appreciation of the properties acquired can be pulled out and used as a down payment to purchase other properties.

• Leverage:

Financial independence can also be achieved by leveraging properties with debt; in this way, they were able to control virtually 100% of the property by putting less than 100% down while also compounding the benefits of inflation. There are many ways to arrive at financial independence, but one central factor is the diligence and patience to see the processes through. We can only wish you the very best on your journey.

Picture: Pixabay

Building Your Real Estate Investing Team

In line with the common saying, “No man is an island,”; one saying which readily comes handy in this context. No one has it all, and when it comes to investments like real estate, which is prone to global interest rates and related regional variations, the need to build a team that makes real estate investing decisions worth it is highly essential. Experts in the industry have at one point or the other spoken or gave their opinions on the need to build a team for real estate investment decisions. When it comes to this aspect, building a real estate investing team is not as hard as individuals who are not privy to insider information have made it out to be. If done intentionally, it is a fun process as it solely involves surrounding yourself with individuals with the same ideology, the same aim and objectives as yourself as relating to making the best decisions as long as real estate multi-family investment is concerned.

Initially, it is sometimes the thoughts of real estate brokers that potential investors may be intimidated by the presence of a great team in brokering a favorable deal. They may believe that there is the possibility of their position in bargaining being threatened as they are dealing with more than one person. This should, however, be the least of worries as to get a credible building team, you need to effectively network and link up with reliable individuals who have a good understanding of the workings of the real estate industry. Conduct very effective interviews and also consider referrals from past acquaintances and work colleagues to fully determine how worthy they would be to the aim you want to achieve with them being a member of your team. For you to put a great team together, you do not have to go to the extent of putting up Ads on every trendy social media platform, advertising for willing individuals who share your dream.

As mentioned earlier, networking is vital to building a great team to help with making crucial real estate investment decisions. In networking, you do not have to get across to everyone, even those that are of no use to what you have in mind. Else you risk increasing the size of your team with no direct returns on productivity. In building your team, you only need to incorporate individuals that are vital to the achievement of your objectives. You need to connect with individuals of like minds such as real estate attorneys to address all legal issues relating to real estate investments. You also need to connect with commercial real estate brokers, building managers, and a multi-family mentor. This mentor should be one of credible standing in the real estate world, one with the experience to help with untangling knotty issues when you come across them. One should have it in mind that you do not get a good team by surfing online or reading books, hell, Nah! You go all out, connect, and form useful ties with individuals that you can be sure are ready to get down to business. The main aim of this compilation is to give you insights on the useful tips you can make use of to build yourself that dream team.

No matter how you look at it, real estate investment is not a one-person sport; it is not a one-man show. It entails you building a team which must be successful in achieving a set of underlisted goals. Hence, if failure is no option, you need to assemble a credible team, one which is not built to fail. It does not matter the number of deals they are going to be working with, either one (1), five (5) or thirty (30). Getting a team requires the recruitment of many different professionals who have a perfect understanding of their skill sets. When you can find a group of people who has the same ideologies as you, a team that aligns with the aims and objectives you intend to achieve in the long run, you can make your life easier in many ways than one. With a credible team, you can quickly run to your team for answers, and as they say, multiple heads are better than just a single head, you are in safe hands as it is rare for a group of people to run out of ideas on a single subject. In building your team, there are 6 key teams you need to form to ensure a smooth sailing experience.

• A Legal Team:

What is a multi-family real estate team without a credible legal team? You need efficient, reliable legal paperwork when dealing with real estate. Some attorneys can help with the buying, sale, and even owning real estate properties. Certain clauses in the real estate world require the attention of a credible legal practitioner or a legal team. A legal team can help with the handling of contracts, setting up appropriate and acceptable legal structures for all the parties involved. There are some confusing terms involved in setting up real estate contracts and everything in between. A competent legal team can help with dismantling this and making them clearer so one can determine a bargaining position properly. There is also a tendency to make costly mistakes in drafting and signing contracts. In all, there should be provisions for real estate, securities and exchange attorneys, transaction professionals, for all the transactions.

• The Acquisition Team:

This is one of the first teams to form as a real estate investor or a real estate aficionado. The members of your acquisition team would consist of those who can easily spot an opportunity or a potential opportunity as far as from a mile away. They are very relevant to the overall functioning of the team, as they without spotting these opportunities, you cannot be termed a real estate investor, as investing in these opportunities make you. The team members are also skilled in assigning value to any property they have settled on as an opportunity. The members of this team include marketers, appraisers, scouts, inspectors, brokers, and credible bankers.

• Equity:

It is safe at this point to say that none of your plans or hope for investing in real estate is achievable without the money, the raw cash involved. This equity expressly means the amount of money needed outside of financing. It is the amount of money you are paying to finance your portion of the purchase. As far as this equity is concerned, you can choose to pay singly or pay as a group of investors as this makes things more comfortable in the long run. When the pooling of resources from a group of people is involved, one needs to adhere to legal rules for the pooling of investors. Experts have also advised that the skill of competent and qualified security and exchange attorney can be helpful.

• Finances:

Finances in investing in real estate are one aspect that requires proper planning. Sometimes when you set your eyes on an opportunity, you may not have the financial muscle to pull off investing in that opportunity at such a given time. No one says it is a crime if you decide to get a team to help with financing. This team typically consists of members such as wealthy private individuals, mortgage brokers, lending institutions, etc. All these aforementioned entities will help with the provision of the money needed to kickstart your investment. As many are predisposed or are structured to provide this kind of help.

• Property Management Team:

One of the important functions a real estate investor has to fill in is in the aspect of property management. There is a need to maintain or find ways to improve the value of any property invested in, so in any case of resale, the value of the property remains appreciably high. After the purchase of a property, a single real estate investor cannot manage the property concerned alone; and one has to form a team to operate your property daily. The property team will be in charge of properties and repairs, overall maintenance of the investment. This team collects rents and leases on your behalf, making the property management team one who can make or mar your investment. So only credible, tested, and trusted individuals should be brought in to form a part of this team. For a third-party management team, you must make the best choice of picking a platform that is experienced in the type, size, and area of your property.

• Accounting:

Lastly, one of the things to talk about, one fundamental and essential aspect of your investment you need a team for, is your accounting. There is no way, and you are making all these deals, recognizing opportunities, pooling resources together from different bodies, carrying out repairs and maintenances on your property in a bid to increase its value, without proper accounting. This one step is very fundamental, and many investors tend to make mistakes. There is no alternative to having accurate accounts and up to date recordings. There is need for you to know all that happens as regards the finances of your business. Outstanding accounting will ensure you have an idea of how your business is doing; if you are making profits, when to sell, market trends, where the problems lie in your investment. Investors need to be very careful about getting involved with businesses or real estate properties that do not have accurate or efficient account keeping. Hence, there is a need for you to have a team for this as knowing when to ask the right questions will go a very long way in making your business decisions way easier. Costly mistakes will also be avoided, so go there and get things done, network, and get a team of the best minds, with your interest at heart together.

Networking has been mentioned earlier as one of the keys to building a great team. Other factors to consider when deciding to build your team is first to get your house in order. This is one fundamental thing always to consider. In line with Jan O’Brien of the Real-estate builder, who asserted that the foundation of building a successful real estate team is to have your own house in order first, as every play starts with a flexible game plan. In building a team, you need to set your aims and objectives, set your revenue goals, and reconcile these factors backward to see or determine the leads and the team members you would need to meet them.

Other facts to consider are:
• Always know who to hire and when to hire
• Be sure to do your math
• Never forget the little things: this is essential as when growth happens; consistent growth at that, there is the tendency to forget the most important things that stick to the mind of our clients when business is concluded. There is a need to make a good impression and strive to retain it when carrying out businesses subsequently. Never make the mistake of forgetting or ignoring these little things, which instigated the growth of your company in the first place. There is a need for consistency. Be proactive with your decisions, be relatable as most times clients do not have the sound understanding of real estate as you do, a significant reason you are in that position. Hence there is a need for you to strive to make sure your clients make the best decisions that would accentuate their bargaining and investment positions.
• Be sure to hire right
• There is also a need to make use of these recommended four trait personality combinations. This assessment is one that has been touted by leading opinion givers in the industry and how these personality traits have come to influence investment decisions. Each team member can be asked to rate their affinity or propensity for each of the following characteristics.

1. Dominance
2. Influence
3. Steadiness
4. Conscientiousness

Lastly, with this compilation, we are of the hope we have been able to fully explain to a real estate investor or participant on the need to get a team together, assemble individuals of integrity and reputation to make these crucial decisions on your behalf.

Image: Pixabay

Single Family vs. Multifamily Family Real Estate Investing

When the term real estate is mentioned, it is mostly linked to investment opportunities, and it is seen in financial circles as a credible means of getting legal, enduring and long-lasting value for money. In plain terms, it is said to refer to properties, lands, buildings, and anything you might think of that links land and money together. As unusual as this may seem, this term is said to even include air rights above the property and the underground rights below the land. Many legal struggles have erupted over this in contemporary times; hence, it is imperative to fully define the term which would be a recurring term in this compilation. The word means precisely its literal meaning; it is said to refer to a real entity, a physical property, something that can be seen with the eyes. Most constitutions have now restricted the term to those with legal rights to the property. There are generally four (4) types of real estate, namely;

    • Commercial real estate:

This comprises of shopping centers, malls, hotels, academic buildings, hotels, and office installations. Apartment buildings are regarded as commercial entities even though they are used as residential spaces. In so far, they are erected to provide income.

    • Industrial real estate:

This is said to include all buildings and properties used for manufacturing. It also encompasses buildings erected for purposes such as for research, the production, storage and distribution of goods.

    • Land:

In economic terms, this is said to refer to any vacant piece of land, a marked portion, a geographically bounded space, farms, and settlements. Categories include subdivision and site assembly plots, undeveloped and early development or reused land.

    • Residential real estate:

This includes both homes under construction, newly constructed homes, and even resale homes. One prevalent category is the single-family homes; Condos, duplexes, bungalows are also included in this category.


Real estate investment is that which is said to be a viable alternative for those who are unable to stand the unpredictability of the stock market. Real estate is also one which is a better investment option for investors who wanted to take their earnings from investing a notch higher. Instead of setting their funds only to be managed by someone else. For an arrangement that was prone to many external factors. One very effective strategy utilized in real estate is rental property investing. This is adopted mostly by investors who want a steady income aside from the slow, trickling, but sudden increases in the value of their leading portfolio. This is one strategy that has been adopted by many investors, including the moguls in the investment world such as Zhang Xin and Donald Bren were said to have built up a large percentage of their fortunes by investing in a range of commercial and residential properties. Some other multimillionaires have also made incredible profits from developing various commercial and residential properties. In terms of residential real estate, one of the types of real estate investments highlighted above, there are two types of properties one can invest in; they are Single-Family and multi-family investing. Single-family apartments are those with only one available building or space to rent. They are mostly residential buildings, but they do not have that much potential for maximized returns compared to multi-family investing. Comparing to multi-family investing, they are commonly known as apartment complexes; that is residential buildings built together with more than one rentable space. Over time, some of the advantages of investing in multi-family real estate settings include;

• You should consider that growing a single portfolio takes less time: The real estate multifamily setting is very comfortable for an individual who wants to build a relatively large property. Taking control of a single 20-unit apartment building is easier than managing 20 different home settings with the possibility of working individually on each property, different realtors, separate loans, while all the back and forth can easily be made by investing in a single multi-residential property.

• Multi-family Real estate investment is more expensive, but it is a lot easier to finance:
As expected, the cost of acquiring a multi-family property would be higher than investing in a single-family setting. But this should not be a bother, as multi-family settings are way easier to handle financially. Securing a single-family property can go for at least $40,000, while a multi-family environment can go up to the tune of millions. And the choice may be obvious, but you might have to reconsider. Getting loans for a multi-family property is far more comfortable than for a single-family property due to the significant cash flow that multi-family properties generate every month. The possibility of foreclosure on a multi-family asset is not as high as that of a single-family property.

• The owner is in a position to make reasonable financial decisions:
This is in the case of real estate investors who do not participate in the actual management of their properties. Instead of monitoring themselves, they seek a competent property manager who does all the work and monitoring. The manager is paid an agreed percentage of the monthly cash flow the property generates. In light of this, instead of splitting percentage margins across different properties, only a single property is considered. This allows for reasonable financial decisions to be made and will enable investors to take maximum advantage of the services property managers offer.

Multi-family investment settings provide a whole lot of opportunities. With these types of investments, it is not advisable to jump into investing without a template or the needed expertise and management capabilities. It is ideal to make your findings before jumping just into any multi-family investment window. Randomly window shopping would not be enough as it requires proper planning and financial evaluation of the about to be acquired property. The natural progression for serious investments in the world of real estate is to start with local family single family properties before moving on up to large scale multifamily establishments. The possibilities with prompt investment in multifamily units are endless and the industry has continued to grow with some positive projections going into the future.

Some reasons to invest in multi-family investing:

Aside from the boundless, timeless opportunities presented by real estate multi-family investing, investors generally do not shift from single-family real estate investment to multi-family investing. Some reasons precede most decisions. Some of the reasons alluded to the shift include the fact that it saves time; this is generally the biggest perk of investing in multi-family properties. Opinions have agreed on the singular point that it allows for efficiency in management and increases the possibility of making better, informed decisions.

Another primary reason is it allows for better control. Real estate investors all agree that investing in multi-family units allows for more control. Control to mean that since net operating incomes drive a lot of multi-family real estate investments, buyers tend to also look at it as a business, and as for the operator, you can effectively drive the net income which directly translates to the value one can get out of that.

Factors that influence multi-family investing:

Nearly everyone has the dreams of investing in a credible venture that would steadily bring in income. Real estate also affords that opportunity, but there are certain factors, qualities that an investor is expected to possess and how certain factors can influence a potential investor’s decision in the long run. These perceived factors are highly influential in the decision-making process. Some of these factors are:

  • Business plan/preparedness
  • Capital
  • Partnership
  • Experience
  • Mindset/Comfort Level

As mentioned earlier, the typical progression among real estate investors is from starting with smaller, scattered single-family units then gradually easing into large scale multifamily units that can house multiple families, with a central factor still on making a stable profit. It is known that once this progression is made, there are specific ways of making a significantly higher income by looking for off-market deals. Newer and larger multifamily settings are listed with a competent broker coupled with some assured online sources. These multi-family settings typically classified from the more modern class A units to the much older class D units. In descriptive terms, a value-adding multifamily unit generally is hard to find, as they are not readily advertised or listed. However, searching for class B off-market multifamily properties are considered as viable alternatives. The more massive and more complex the property a real estate investor is looking for, the harder it is to find on the market. To identify and acquire top-notch multi-family investment opportunities, one has to be creative. Many of the deals involved in landing these properties are built on forming enduring relationships with partners or one investor to the other. Another is through extensive networking, and if you are referred from one investor to the next. As mentioned earlier, finding quality multi-family housing units remains a severe challenge. Many cites in the United States are opening up and attracting real estate investors. In real estate, plenty of programs exist for when a potential investor is searching for single-family housing units. But this is not the case with multi-family settings. It is advised that thinking outside the box is required in these instances; to locate functional multi-family units suitable for investing in.

Every investor seeks to make maximum profit on whatever venture that eyes are set upon. You would not want to dabble into an idea without considering its Dos and Don’ts. Here are a few tips that are sure to come in handy when you are looking for a multi-family real estate opportunity.

• Calculate your cash flow:

This is highly crucial, as estimated mortgage dues are part of the equation in this step. Calculating your estimated monthly income or cash flow, be sure of the money you want to invest in your chosen portfolio, then subtract the monthly NOI agreement from your potential property. The simple calculation highlighted above would help to determine your cash flow estimate, and in the long run, learning if investing at that particular point in time would be worth it.

• Know your limit rate:

Before investing in real estate, multi-family properties for that matter, be sure to calculate your limit rate. To determine your limit rate, the simple thing to do is to take the monthly NOI, multiply it by 12 which is the number of months in a year to get the annual number and then proceed to divide that amount by the total mortgage amount. The main thing to understand as regards to the limit rate is to know that increases in the amount do not readily translate into better fortunes. It may indicate risk and a higher return. One common thing brokers do is to capture a rate between 5-10% and anything smaller, the investment may not have enough income. You want to be sure you fully understand all the risks associated with investing.

• Remember to find your 50%:

One of the best ways of analyzing potential investment opportunities is to check out the numbers to determine the potential gross income. This is done by calculating the difference between the expected rent and projected expenses in owning the setup. When one does not have to know all information about a potential property opportunity, only what one has to do is to use the 50% rule. The difference between the estimated revenue and projected monthly expenses is the net operating revenue and it is USUALLY around 50%. This is a very rough estimate.

• What to check before deciding to invest in multi-family settings:

Taking random walks or a drive through the neighborhood is seen as means by which one can come across a property begging for an investor. This is not always the case as finding the ideal estate requires much more than random navigation. Investors need a credible groundwork to analyze and evaluate the financial consequences of investing in a property. The following checklist should be considered before investing in a real estate opportunity;

• Cost
• The seller
• Location
• The total number of units.

Be sure to do your groundwork before considering investing in a multi-family property.

Getting Started in Multifamily Apartment Syndication

By now, the term multi-family real estate investment is not new; in investment circles, it is a collective term as it is a proven wealth creation vehicle. Foremost billionaires and many high-ranking individuals made a bulk of their fortune through investment in multi-family properties. Although this was not possible without these concerned individuals having top-notch knowledge about what they were delving into. They continuously do research and update themselves coupled with the association with some of the best minds in the real estate mind. Knowledge is indispensable to crucial decisions and that is what this medium is trying to achieve by continually providing you with tips on how to successfully invest in multi-family real estate. With this topic; multi-family syndication. Syndication on its own is said to mean the pooling of resources together to achieve a unifying objective. The pooling together of resources can be in the form of time, money, expertise, etc. it is done as mentioned earlier to achieve an objective that is otherwise impossible to achieve alone or might take time. Then in plain terms, multi-family or apartment syndication is said to refer to the coming together of multiple parties to jointly acquire and own a venture to make money together. Real estate experts often see apartment syndication as a faster way of getting returns on investments that might otherwise take time to profit on.

Multi-family syndication is often seen as a way of raising money from passive investors and buying high valued apartment buildings. Over time, some creative ideas have been fashioned out as the ideal ways for you to get your foot in the door with multi-family apartment syndication. You do not want to be a newbie just walking around in uncharted territory. Below is a list of ways to start in apartment syndication.

  • Conservatively underwrite deals
  • Take your time to find an excellent off-market deal
  • Negotiate and deconstruct all the strange terms; get all legal documents in order.
  • Secure debt financing (if this is applicable)
  • Raise capital and be the point person for all capital sources.
  • Do property management.

To correctly state, multi-family syndication is a form of a group investment. In this type of real estate arrangement, individuals known as syndicators are allowed to share all the profits and losses regarding the investment. For multi-family syndication, here is how it works; the key players in the partnership are referred to as general partners and limited partners. The limited partners are also referred to as investors. General partners are mainly responsible for putting together the whole arrangement. They are like the brains behind the entire set-up. They bring passive investors to the negotiating table regarding the venture to be embarked upon. General partners typically refer to a group of registered syndicators who are specialized in the different aspects of multi-family syndication. They contribute to finding the right deals, underwriting it, they secure finance, and they gather and form relationships with investors for lasting profitable dealings.

While the limited partners, on the other hand, are passive investors, as mentioned earlier. They invest money and expect returns that are equity in the deal. For the money invested, they are entitled to cash flow from the profits the investment generates. They also receive either monthly or quarterly reports on the performance of the asset. Not to forget, there is also a vital part of the syndication arrangement that has not been mentioned. This is the property management group. They help to manage the day to day operations of the property along with any other employed onsite staff, and they are also responsible for the execution of the syndicator’s business plan. The role of the property management group mainly becomes active when a contract is in place already. During the time which they go in and help the general partner with the due diligence process. They evaluate the property structure and any aligning issues or environmental matters that have not been previously considered. Other factors crucial to a successful syndication arrangement include:

1. The Market:

What is any viable investment opportunity without a market? The very first step in a long-lasting value-adding apartment syndication strategy is to choose an active market. Optimum markets are mostly those with high growth metropolitan statistical areas with more than an average population coupled with job growth and employer diversification. Another vital factor to consider in terms of market structure is the rate at which the market rent is growing. Without any renovation or value-added service to the existing structure.

2. The Property:

After identifying a stable market, another thing to consider is the ideal property. The most common practice is to find stable properties with conservative underwriting that will also bring about the much-needed profits. There is a need for the property to be stabilized as a property that is already performing, but not up to its full potential provides only little risk. The identified property should add value as mentioned earlier, as the gold spot is to find a property that will be strong enough to withstand renovations and rebranding that will improve its value. The property should not also be too old to cause money loss due to failing systems. There is also a need for due diligence to be performed on the property, random checks coupled with a thorough financial audit to discover any undisclosed liability.

3. The Business plan:

After the property to be invested in has been locked down, the partners together with the property management group, start the implementation of the value-adding plan. This is simply a means of increasing the net operating income. Renovations, both interior and exterior and other forms of rebranding are done to increase the value of the overall structure. Other assured ways of increasing the net operating income are to find ways of improving revenue-generating facilities in the acquired structure, such as the laundry area or by tightening operational leakages.

4. An Exit Strategy:

This follows after a long-lasting, and any adverse policy tight business plan has been implemented. It is now decided that it is time to either hold or exit. This crucial step is dependent on the principal investor’s strategy. How long the business plan holds depends entirely on market conditions and its stability.

5. The Money:

We saved the best for last; money makes the world go around, and it is crucial to the success of any business plan or future projections made. In an excellent multi-family apartment syndication deal, everyone wins; both the buyer, the seller, the investors, the property management, and the real estate broker. The sponsor’s share of the profit is the split from the limited partners, and a second form of the revenue for the sponsor comes in two forms; the acquisition fee and the asset management fee. Limited partners who are the passive investors and significant stakeholders in the business arrangement receive a large percentage of the profits from the operations and sale of the asset depending on the proportion of their percentage ownership. At this point, it is advisable to note that the splitting of the profit is not uniform, and they differ from structure to structure and will also vary by sponsor. The property management company for the random checks and the daily run of the business earns their share of the profit in two forms; from the construction management and the property management fee.

Benefits of multi-family real estate syndications:

1. Reduced Risk:

Acting as a passive investor and plugging funds into a real estate venture involving a syndicator is one with fewer risks. Compared to single-family housing units, which are like investing all your money in only one pocket. In that instance, although you may own 100% of the deal with regards to profit, you are also exposed 100% to the risks surrounding the investment; and this is not the deal with multi-family syndication arrangement, where you also get to share the risks with other investors.

2. Stable Value Creation:

One primary reason for investor’s preference for multi-family concerns over single-family housing units is the value it creates over time. Unlike single-family housing units that solely rely on market fluctuations and neighboring home prices, as an investor in a multi-family syndication venture, the syndicator has ultimate control over the value of the property and from time to time only finds ways to increase the property’s net operating income. The appreciation of capital can be achieved slowly and gradually over time.

3. Binary Occupancy:

Multi-family investments, according to research, have an average of 93% occupancy. The larger the property, the insignificant few tenants leaving is. However, this is not the case in a single-family unit as when your tenant leaves, you are left vacant and have to cover expenses from your pocket which can be disastrous in the long run.

4. The Advantage of Time Commitment:

Passively investing in a business set up is usually less time consuming than active investments. Investing in a single-family unit is deemed time-consuming as you need to find the real deal, handle the loan, and carry out the due diligence tasks yourself. With a syndication deal, you have a qualified person handling all that for you. Syndicators are responsible for maintaining the property and profits also come to you through a syndicator.

5. The Economy of Scale:

The handling of single-family units can be demanding. Operating expenses required are on a larger scale especially if the single housing concerns are scattered all across. Syndication provides the property management group necessary to handle all the changing dynamics involved in managing a multi-family housing unit. The management of the tasks linked with the management of the property while also being under the direction of a qualified and assuring syndicator.

The main advantage of multi-family syndication is that it expressly allows investors to take the full benefit and experience of the main sponsor, as capital is expertly aggregated amongst investors. Collectively investors can acquire high valued multi-family properties that would be unobtainable using a single fund source. The risks are also equally dispersed amongst the investors, coupled with the reasonable adjustment of investments at a comfortable risk level.

After discussing the advantages of joint investments in multi-family housing units, it is only normal for us to briefly mention some of the risks involved and some of the issues to watch out for. Here are some mistakes you should not make. Even though syndication is mainly an avenue to get maximum returns on investment, there are some mistakes a potential real estate investor should not make in multi-family syndication ventures. One is to avoid legal troubles as much as possible. Real estate is a legitimate business and one should aim to make it remain as such, endeavor not to have issues with your paperwork, violate regulatory guidelines or intentionally or accidentally mislead your investors. Legal tussles burn one out, try to run as far as possible from it. Else you open yourself to liability.

Another issue to consider is the issue of funding difficulties. It can be hard to know if to start with finding the right deal or locating the investors. Funding should be lined up first before finding the right contractor. Rookies in the real estate industry often make this single mistake. There is also the factor of non-existent or inconsistent marketing and this is in line with the issue mentioned earlier. There is a significant need for a consistent approach to marketing real estate opportunities to catch the fancy of investors. So, you are ready whenever the opportunity comes knocking. If you are trying to syndicate in multi-family investments, you are also in marketing, and you should be in charge of building your pool of credible investors by the development of an intentional plan to be out there and attract potential investors while also keeping them engaged as you continue to search for good deals to keep them interested. We do hope all through this compilation, and you have learned the basics of multi-family apartment syndication, the major parties involved, the roles of each party and the benefits and risk associated with syndication strategies.

Branding Your Real Estate Business With Thought Leadership

Every establishment needs to be in touch with potential customers; this is not an exception with real estate investments. Branding thought leadership is essential to real estate dealings. This compilation aims to highlight the benefits of branding considered guidance in navigating the murky waters of the real estate world. Every outlet for business wants to offer that service which is irresistible to those who desire optimum and quality service delivery. Thought leadership in relation with real estate businesses aims to allow real estate service providers related to the problems faced by potential customers; it will enable customers to think highly of your brand and its uniqueness, highlighting the different issues faced and in conclusion setting apart your brand from other players in the field.  Ideally, all dealings in the real estate world solely involve surpassing your well thought out goals, and it consists of producing the results that, in the long run, positively affect your brand.  However, if you want to be a decisive leader, one whose opinions are defining on its own, if you desire to position yourself as a leading voice, by having a distinct brand. One of the best decisions to take in becoming a commercial real estate thought leader is to be consistent and continuously find ways to position your brand as being influential and authoritative.

This involves taking well thought out steps, calculated steps to be a thought leader in the widely acclaimed real estate leader. This is not one status that is attained in a day; it involves deliberate efforts to learn more about the field, creating a credible notion among your peers that you are conscious about this and you are well aware of all the implications and what it takes to be a real estate thought leader. There are many assured ways of doing this; but the most credible forms of gaining a voice in an already stifling industry is to be intentional about the steps you take; growing you and your team’s presence through reliable means such as education, research and long-lasting investment in the industry coupled with assured commitment to your immediate community.  Let’s paint a scenario where you already have a successful real estate outlet, a thriving brokerage business. At all, you are on this page because this is one of the dreams you want to achieve in no distant time. You already know your industry, and you have, through consistent efforts, defined your niche, and you also intend to help others grow in that geometric growth you have experienced. Now how would you go about this? How would go from just a business start-up owner, from one random innovative individual who has an outlet for the buying and selling of assets in the real estate world to the assured and proven expert on real estate matters; a trusted and assured source for consultations on issues of interest, one oozing stream of knowledge for those who dare to tap from this knowledge you possess.

How do you become a unifying voice of inspiration, a defining voice who is passionate about transforming ideas into reality and shapes the way others think about their industry? One particular way to go about this is simple; you work on it and with consistent efforts channeled in the right direction, you are really on your way to becoming what you so much desire. In line with the common saying that Rome was not built in a day, becoming a thought leader, a branding-thought leader in the real estate world is not a day’s job, and it merely does not happen overnight.  It is always the endpoint of determination, consistency, intention and diligence. But with a fast-developing global world, there are many routes you can take to get to that point; depending on you, these routes may even be faster than others. Here are some tested and assured ways you can attain your goal. There are three (3) critical steps to follow in your way to becoming an opinion leader in branding thought leadership. Some of these are:

  1. Take consistent and calculated steps to grow your audience:

Expanding the reach and increasing target audiences is one of the ways emerging businesses expand and drive home their influence. This is not one strange way for you, too, also become a leader in your chosen niche. This is seen as a natural extension of associating with similar industry experts and thought leaders. In linking with individuals or brands with similar aims and objectives, the same goals as yourself, then you are on your way to continue making your voice heard. In doing this, the audience of those you relate with would also become your audience. This is not one difficult thing to do, and it is not one rocket science. It is a typical move in the business world. Take for example, relating to a marketing firm committed to expanding the frontiers of the real estate world. By doing this, you can develop a reliable, loop-hole free strategy to aid your goal of becoming a voice to reckon with in the real estate world. Coupled with this, the use of website blogs, periodic newsletters, and in recent times the use of email marketing, will also further deepen your influence and expand your reach. This is even easier if you have a niche and drive conversion, and each time an individual or a prospective client reads any of the articles or clicks a related link, you have ultimately grown your audience even if it is by that one person.

One guaranteed way of expanding your influence is to be ready to participate in related speaking engagements. Do not turn down any chance to physically speak to like-minded people, to share your dreams with other participants in the industry. Such audiences will want to talk to you, they will want to interact with you and know more about the plans you have, they will ask questions, interactions will be done and in doing this, you will learn more and become an expert in your niche. When doing this, do not forget to record your meetings, these interactions, even take pictures and share on popular social media sites such as YouTube, Facebook and Instagram. By doing this, you can still interact with individuals who are not privy to these physical engagements but are also in the same real estate industry as yourself. Through these mediums, you can even answer other questions thrown at you. This way, you have killed two birds with one stone and you have succeeded in participating in both online and offline interactions. In all, the earlier mentioned mediums if well utilized, have the potential to build your image to the desired level in the industry.

  1. Endeavor to associate with the right people:

As with the common saying, like minds attract. Within professional settings, you should only interact with the right people. Those with which you share the same ideology; building a following among the groups you intend to serve is that which takes time but will yield the needed dividends in the long run. Forming valuable relationships like this is sure to help you with lead generation and drive conversion through the power of attraction rather than promotion, in line with industry experts. In your association with proven opinion leaders in the real estate, you have the opportunity of tapping into their reputation and the needed influence while also expanding your audience by association. In the long run, you will find it that these top opinion shakers will become your peer group within the industry. As it also the norm with other human associations, the people you relate with will tend to help you with your dreams as they would have found out that you share the same ideas and goals for the industry. They are more likely to recommend you to their contacts, their circle of influence as one trusted authority. Hence creating invaluable awareness for your establishment. You also do not have to be concerned if you are increasingly thinking that you are doing too much leaning. It is more like a symbiotic relationship as they also have much to gain by their association with you. As you are indirectly helping to further drive down their influence as a loud voice in the industry.

  1. Network, Network, and never stop Networking:

As it is often mentioned in public circles, the world is one global village. The internet and social networking apps and facilities have made linking of the chief director to that influential individual deep in the tropics of Africa possible. To become a leading voice in the real estate industry, deploying the use of social media should never escape your thoughts. Platforms such as LinkedIn, Twitter, Facebook, Instagram, and other similar social media applications have been known to help in further providing exposure for your startup. Platforms that have been implicated in the times past to be capable of influencing something as crucial as an election. Think about the possibilities and numerous advantages it can provide for your emerging firm. In the use of these platforms, the timing and placement of your links, observing the current trends and latching onto them can help to launch your brand into the public eye, further elevating your position as an emerging thought leader. Learn how to make use of search engine optimization, be on the lookout for rare opportunities than can help to grow your brand. Join reputable and assured platforms where you can list your properties. Platforms that show current market growth, which highlights your reach, shows its relevance and overall helps to position you as a business leader. In another guise, learn that becoming a voice to be reckoned with in the real estate industry is not a day job, its not something that happens suddenly, it is painstakingly done through consistent efforts; it is more like a marathon other than a brisk sprint. There is no reason to do all the above highlighted within a short time. Take your time to learn the ropes and work at your pace to achieve the lofty goal of becoming a branding thought leader in the real estate industry. You want others to acknowledge you as one with the experience, an expert, one that is worthy of listening to and solving related complex issues. This requires time; put the right effort and watch your circle of influence gradually increase.

Thought leadership is considered a very vital part of brand building. It is not an activity that can be done in a rush. Every business owner wants the brand to grow; we all want to achieve the geometric increase that has been panned out for our brand. According to industry experts, becoming a leading voice in the real estate industry requires you sampling the thought leadership template of established brands and think about how it can be applied to your establishment. What most of these top companies do is take ownership of the main issues that are responsible for driving forward the company. By owning these issues, they can effectively respond to dynamic marketplaces, and in doing this, they can redefine and lead in their respective industries. Thought leadership campaigns had been known to align with how world-class firms in the industry make use of marketing, build lasting influence and go through the extra work of delivering value to their numerous clients irrespective. Other tips by which you can become a thought leader in the real estate industry include; let it be known that these tips should be applied based on that which fully applies to your establishment. These tips are;

  • Creating a business blog: make use of a properly designed blog while offering trendy and valuable content to drive home your opinion. Gone are the days where blogs are dismissed as trivial and insignificant. Check the statistics of the proportion of the world’s population with an internet-enabled phone; then, you will get a grip on what we are trying to pass across.
  • Contribute guest blogs to other proven sites: This is also in line with you trying to grow your influence in the industry.
  • Write a column for your local newspaper
  • Create a vlog or podcast
  • Be internet savvy- answer questions on social media

10 Tips to Growing Your Network and Building Relationships

How many times have you heard someone say “it’s all about who you know”, or “it’s all politics anyways”? Probably quite a few times, and in a broad range of circumstances. While many people do all they can personally to be successful, all too often hard work and talent go unrewarded because someone’s nephew also happened to be going for the same job. Whether we like to admit it or not, favoritism is an omnipresent force in the world of business, politics, government, and any other situation where human beings are making decisions on behalf of an organization or group. This is likely to be the case for a long time, because as long as human beings are making decisions on behalf of companies, basic preference is going to play a role in making those decisions, whether consciously or not. 

This is why networking and relationship building is such a critical piece of success in today’s business environment. Failing to understand and build competency in networking and creating bonds with people is just as bad as neglecting one of the core functions of your job. With that in mind, we’ve put together a list of ten tips for networking and building relationships.

Being intentional about networking and relationship building will serve you in many ways throughout your professional and personal life. Having a network of people who are willing to help you out however they can will be a resource like no other. Life is unpredictable, and you never know how a person might be able to help you out at some point down the road or how you may be able to help them as well. With that in mind lets take a look at ten ways to be better at networking and relationship building.

Let’s start with networking. Networking is the actual act of generating new connections with strangers. It can be done at business events that are set up specifically for networking, or at your local restaurant. Good networkers are people who are adept at making connections, no matter where or when. Let’s take a look at some tips to getting started in meeting new people!

1.) Get involved

It’s difficult to increase the reach of your network if you spend time doing the same things, or nothing at all. One of the first things most people can do to become better at networking is simply to be more active in the community! People don’t always want to meet you in a business setting, ski clubs, fishing clubs, sports leagues and any other number of activities are a great way to grow your sphere of influence. When people get to see you in these settings, they can build trust and get to know you personally. Give people the opportunity to see you in a low pressure, informal setting and the opportunities for friendships will multiply quickly. Someone who is actively participating in groups within their community will make more connections in one year than others do in five, putting you ahead of the game and increasing the number of opportunities available to you.

2.) Be interested

One of the most common mistakes people make in networking is the way they approach making relationships. While this is an activity that can drive business, you don’t want to be overly directed or transactional when making new connections. When walking into a networking opportunity, seek to
develop a few solid conversations rather than gather as many business cards as possible. People won’t remember the person who walked up to them and took the first opportunity to ask for their contact information, and if they do it won’t be fondly. Seek to gather conversations instead. Talk to people about themselves, who are they, what do they care about? This information will be much more valuable than a business card and will open a doorway to a potential long-term connection.

One thing to keep in mind is that people are excellent at spotting someone who is not being authentic. Avoid coming across this way by asking questions and talking about things you care about. When people get to see you in your natural element, they get a chance to build a connection with you on a human level. This will make potential business relationships in the future that much easier.

3.) Set and track goals

One of the most important things you can do to increase your rate of success at just about anything is to be highly structured in how you set and track your goals. Keeping track of attempts and their outcome will serve you in two critical ways. On one hand, having solid information about your successes and failures will que you in on patterns that you may not notice otherwise. If your goal is to attend networking events in your area and generate clients from those events, you may notice after a few weeks that evening events tend to yield the highest results. Maybe Friday’s are your best day of the week because you’re the most relaxed and conversational. Measuring your success allows you to optimize for more of it!

The second benefit of setting and tracking goals is increased awareness this will give you in the moment. When you know exactly how many people you need to speak to in order to generate one client (because you’ve been tracking those numbers) you will be more willing to go the extra mile to strike up one more conversation. Having the goal at the top of your mind while networking will make you that much more successful.

4.) Cup of coffee

Never underestimate the kindness of strangers. One of the most powerful tools in your belt as a networking professional is the cup of coffee. Identify people in your network who are outside of your reach. The owners of companies, established professionals, or that intimidating local attorney you see on billboards in your hometown. You may be surprised to find how open to helping these people are. Many times, people in at the top of the ladder got there due to a few hands down over the years. They will enjoy paying it back by offering the same opportunity to those who ask. Simply send a message over LinkedIn or call their office directly, tell them you have a great deal of respect for them and you would like to get their opinion on a few of the things you’re working on.

Setting this meeting up as a chance to pick someone else’s brain will make them feel valued and respected. This is also a low pressure ask for a meeting. When you make it about asking them questions you remove much the fear that this is a sales pitch for something. Take advantage of this opportunity
by asking them thoughtful questions about the industry your in. Don’t ask for another appointment, and don’t ask them for business. Ask them if its alright if you keep in touch. Congrats! You just developed a long-term mentorship relationship with a successful and connected member of your community. These are the kinds of relationships that can prove to be invaluable over the years.

5.) Do what you love

Have you ever become frustrated in your networking endeavors by the difference between work talk and everyday talk? Have you ever said something like “I don’t get it, when I’m at the baseball field I can always carry a conversation with anyone, but as soon as I get in a business setting, I freeze up”? If you’ve ever been concerned about this it may be because those business settings are unnatural! If you don’t get excited about cars, and you aren’t terribly interested or informed in this area, a muscle car convention may be a difficult venue for you to have success networking within. While it
sounds cliché, its true. If you do what you love you’ll never have to work a day in your life.

Doing what you love also makes you unconsciously competent at whatever your doing. You won’t be able to help but become an expert in your passion. This excitement and passion will come through in your conversations with people and you’ll find that when your doing what you love, people will actually seek you out as an authority on the subject. Keep this in mind when selecting networking opportunities. Is this going to give you an opportunity to showcase yourself in the best light? Or is there a better opportunity somewhere else out there?

Developing Relationships

So, let’s say you’ve taken some of the steps mentioned above and you’ve developed a few introductory conversations with new relationships. Now the real challenge begins. Making the connection is just the first step, anyone who is truly successful in building their network is competent at creating long term bonds with people. In that spirit, here are five tips to help you further develop relationships in your network.

1.) Be kind

This may seem obvious, but being gracious and friendly at all times really goes a long way. In the same way that you never know how a relationship can generate benefits for you in the future, you never know when someone you’ve offended will be in a position of power over you at some point down the line. Aside from avoiding this uncomfortable scenario, having a reputation as a nice person will make it easier to develop relationships with new connections and to grow established relationships. When someone has heard good things about you, they are much less leery of allowing you into their inner circle. When people know what to expect from you day in and day out as a kind and thoughtful person, they will be more willing to engage with you in the long term.

2.) Be generous

A bank representative attending a charity event for a local children’s hospital had his number called at a raffle. He won a TV! Rather than quietly accepting, or better yet, passing the free TV off to the children of the family sitting at the table next to him, he loudly exclaimed “I won! I already have
all the rooms in the house covered so this baby is going in the garage for football!”

This was a story I heard after setting an appointment with this banker hoping to create a referral relationship. As insignificant as this moment seemed to him, this unfortunate banker had rubbed many people the wrong way that night. The optics of the well-off banker who already has more flat screens than he needs gloating and bragging about his win was less than positive. It just so happened that my future manager would be sitting at the table next to him that night. That decision he made years ago to behave in a greedy fashion is still rippling negatively through his network years after the event.

So spread the love! One of the most important factors someone considers when building a relationship with you is whether or not you care about others. More than just being kind to others, be generous to others. When a big sale is on the table, bring in one of the new members of the team. When you win something at a charity event, pay it forward and give it to someone who needs it more. Whatever you put out into the universe you will get back several fold. If you are unselfish and show people that you care about others and are willing to give to them, they’ll be much more likely to give to you in the future.

3.) Create comradery

One of the easiest ways to build relationships is to create comradery with people. There are many ways to do this, but they usually revolve around building a one on one, special connection with someone. Create a running joke that only the two of you are in on. Develop a nick name that you give to someone in your office (make sure it’s positive and they appreciate it). Singling someone out for individual attention let’s them know that you care about them on a personal level. You see them as an individual and you’re interested in building a relationship with them. You’d be surprised at how far simply individualizing your interactions with people goes. Don’t be the person who walks into a room and says the same thing to everyone. Canned “how are you?” conversations won’t be very emotionally compelling to someone. Seeing someone and asking them about their favorite sports team or playfully bringing up a success they’ve just had will stick with them.

4.) Notice and appreciate

Another key aspect to building lasting relationships is to show that you care. You should be looking for opportunities to applaud or identify individual efforts, noticing successes and commiserating with failures. This will help to put you in a person’s corner and show them that you take a personal stake in their success. At the end of the day, people just want to know that you respect and care about them. Make sure your actions, and words are geared towards building people up and treating them as individuals. Being a good listener also comes into play here. People take notice when you ask a thoughtful question about something, they said last week, these small gestures will build over time and will begin to tip someone from a prospect or a new connection into a friend.

5.) Be Authentic

This should go without saying, but when implementing anything suggested in this guide, make sure you’re doing it for the right reasons. As much as some of these tips and tricks can help you improve your reputation and networking abilities, nothing will hurt your reputation more than doing these things through a fake smile. Pretending to be interested in people for personal gain almost always comes through and will be a nearly impossible façade to keep up over time.  If that is the reputation you develop, it will become a serious headwind into your network building efforts. Not to mention the stress and work that being false in all of these interactions requires. When you are being yourself and authentically interested in people, you won’t be able to help but be interested in them and their success. If your faking it to personally benefit, that most likely will come through.

After reading through these tips and tricks, we hope you picked up a few actionable pieces of advice. Bearing in mind that we should be networking to help ourselves by helping others, using these tips can supercharge your ability to take make connections and quickly expand your circle of influence. One important thing that we did not discuss is to manage these relationships over time. Take opportunities to reach out to old contacts and keep in touch with them. Letting your connections rust is just as bad as never making them at all!

Beginning Your Real Estate Investing Career With House Hacking

For many people the idea of getting into “real estate” can be both exciting and overwhelming. Aside from the steep learning curve and the time investment it takes to feel comfortable making the leap into investing.  The idea of coming up with the capital required to purchase a property can seem unrealistic, especially for younger investors. For the aspiring real estate moguls among you, “house hacking” may be your first step on this journey. House hacking is the process of purchasing any multifamily property with the idea of living in one of the units while renting out the rest. It’s referred to as “hacking” for one simple reason. It’s a real-life hack! Think about it, everyone has to live somewhere. Take the thing that is an expense for everyone else and turn it into a revenue stream while making your rent cost zero!

Said another way, when done properly, house hacking allows you to have your tenants purchase a building for you, that you can live in for free, and they might even pay you to do it. All that you have to do is be able to finance the property. For this reason, this strategy is one of the best ways to get into real estate investing as it provides an opportunity to feel out real estate with hands on experience. Living in your investment property gives you more control over tenants and the property itself and will serve as an excellent crash course in real estate.

As we mentioned above, entering the real estate game can seem like a daunting task. Simplifying your entrance into this lucrative industry will allow you to actually take the all important first step with some confidence. Buying a house is something that most people do at some point in life anyways, why not make your first step an investment experiment? Most people decide to spring for the largest single-family home they can afford the first time around. While the thought of living in a multifamily can be un-attractive to some, a large single home can become a giant set of handcuffs for young couples. Being beholden to high monthly payments can prevent you from living life on your terms and could actually slow your road to the first upgrade.

Instead of tying your financial life to your home, create more freedom and independence for yourself while exploring a potential lifelong stream of income. This can be accomplished through hacking your first home. This strategy will not only mean no (or at least very low) monthly payments for the place that you live, it may mean having the place that you live put extra money into your pocket each month. While this is going on, an asset that can be sold again at any time is being purchased in your name. This double dip effect that house hacking can have on your net worth cannot be understated. Not only do you not have the drag of rent effecting your budget, you’re now free to re-deploy that money as a savings. With the average American paying around 30% of their annual budget towards housing, that will separate you from the pack in your ability to supercharge your savings.

So, if you’re convinced on the benefits of owner-occupying for your first home, your next question is most likely “how do I get started?”. This is a complicated question and the answer may depend more on preference than any perfected science. Once of the considerations in house hacking that one does not have in other types of real estate investment is the owner’s preferences. Where an investor typically plans to have someone else living at the property, and therefore is designing a space to be desirable to another person, house hackers will be living in and commuting from their property. This means that personal choice will play a much larger role in house hacking than in other types of investing.

Firstly, an investor has to know how much house they can afford. The simplest way to do this is to be pre-qualified by a mortgage underwriter for a certain size of loan. A mortgage originator will look at your current assets, your annual income, your credit, and several other factors to determine the size of loan that you will qualify for. Once you have this piece of information you can begin your search.

Location is critical when it comes to real estate so narrow your search down to an area that you desire to live in. Consider things like proximity to your work, amenities in the local community, and potential for your hobbies to be available to you in an area. While selecting a property, keep in mind that you won’t be the only person living there, and the success of your hacking strategy will depend on your ability to get your second (or third or fourth) units rented out. Balance your priorities with the types of tenants you would like to attract.

Once you have determined the dollar figure of the home you’d like to buy, and have the location selected you have to determine how you will be financing the property. While you may have done some research on this step while investigating your potential loan eligibility. Now will be the time when you make concrete decisions about how much money you’ll be putting down, how long your note will be, and the details of interest payments.

FHA loans are loans offered by the Federal Housing Administration, and offer certain benefits for first time home-buyers. These loans allow homebuyers to purchase property with very low-down payments. This is an appealing offer as younger buyers typically have little cash on hand.

For house hackers with connections to more seasoned investors, “hard money” is another route that you can go to secure funding. Hard money lenders are lenders who have plenty of money to put up, but usually are not looking to do much work for their part. Hard money lenders want young hungry investors to approach them with potential deals. Hard money lenders put up capital, and their partners do all the work to make the deal a success. For putting up this capital, the lender will usually expect a cut of the business on the back end.

For house hackers without connections to hard money lenders, more traditional lending options are also available. Standard mortgages are always an option, and there may even be special programs available to investors depending on their specific situation and the state that they live in. Without diving too deeply into how a traditional mortgage functions, understanding the basic features is important. A mortgage requires a buyer to put a down payment on a property, and also agree to make a series of future payments that go partly to chipping away at the original purchase price of the house, and partly to paying interest to whatever lender has put up the money to allow the sale to occur.

Funding and financing these projects is one of the more research-intensive aspects of house hacking because people looking to use this strategy are usually on a tight budget. Individual situations will vary greatly, but as a rule of thumb you should expect to pay around five to eight percent of a properties total value at the time of closing. FHA mortgages will allow you to put down as little as three percent, and expect to pay an additional two to five percent on additional closing costs and fees.

So, let’s assume that you’ve found a property that suits your needs and has additional space for tenants, and you have worked with a mortgage professional to determine how much house as well as how much cash you’ll need to get the project started. Now comes the fun part, the actual house hack! After these pieces have been put in place, all that’s left to do is to spruce up the property however you see fit, according to your budget. Additional money that you put into the property will go a long way to increasing the monthly rent that you’ll be able to charge your future tenants. That’s a good thing because the goal of a house hack is to ideally have someone else buy an asset for you while they pay your rent.

Additions that typically lead to direct increases in rental value are appliances, bathroom furnishings, hardwood flooring and conveniences like AC or in apartment laundry already hooked up. Just think about the things that you would pay more to have in an apartment and attempt to add as many of those features as you can. This will help you justify your rent when the time comes.

That leads us to one of the most difficult aspects of house hacking and that’s your tenants. Once you have your property purchased and set up, you can begin moving into one unit, but in order to make this hack go smoothly you’ll need to quickly fill the other unit(s) with good tenants who pay rent on time and respect the property as their own. This can be a challenge for many house hackers as this will likely be the first time that their learning how to work with tenants.

One of the most important pieces of the tenant search is setting your rental price. Before you purchased the property, you should have done some math to determine how much the mortgage, or whichever other financing method you chose, will cost each month. Ideally, for a successful house hack you would like to be taking in more rental income than you’re having to pay out. If you can even create an additional one or two hundred dollars of “cash flow” per month you’ll be taking advantage of house hacking. Imagine, every month, getting paid to live somewhere, WHILE someone purchases that place your living for you!! That’s the beauty of a house hack.

So, when it comes to setting rent, most of your work should be done on the front end. How much do similar apartments rent for in your area? Who is your ideal tenant and how much can they afford to pay? If you are evaluating a potential property and see that purchasing the home will cost much more each month than you’ll be able to charge in rent, it may not be a great investment opportunity. Try to identify potential properties in the area where your mortgage will be less expensive than the cost of purchasing a property, this will lead to the most successful hacking scenarios.

After setting your rents you’ll need to find a tenant, this can be done in a multitude of ways and the more different methods you use in attracting tenants the better. Cast a wide net and post your property on real estate sites, blogs, even working with realtors can be a good idea. The more potential tenant’s you have to choose from, the better the odds that you’ll find someone who is not only able to pay every month, on time, but will also be respectful to your space.

Hastily rushing the first person who shows interest in your unit could be a one-way ticket to finding thousands of dollars in damage for you to take care of when that person moves out. Ideally, hackers would like to find long term tenants to avoid vacancies while you look for new tenants. Footing the bill only a few months can erase any money that you’ve earned throughout the year on your property.

Aside from concerns about nasty tenants and standard hazards of owning a property that you may have to pay to fix, house hacking is one of the least risky methods of entering into real estate investing. Even for those with no interest in growing a business, free rent and ownership of a property with minimal cash outlay on your part should be attractive to everyone. Most Americans spend around thirty percent of their budgets on rent alone, saving yourself an entire third of your budget will allow you to save more, take more vacations, and will open up a world of possibilities not available to traditional buyers and renters

When done correctly, house hacking should be seen as a way to take something that you have to have anyways, and turn it into a profit center for yourself. When checks come in your mailbox each month, and when those checks cover your rent and then some, you truly are freed up to supercharge the rest of your financial life, not to mention the profit that one can make on the back end when they sell a property that was purchased with someone else’s rent check. If your interested in learning more about this, and other topics in real estate investing, make sure to subscribe to our mailing list!

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