SS24: How To Get Started in Real Estate Investing

Charles discusses different avenues a beginner is able to take in order to start their real estate investing career.

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Talking Points:

Real Estate Investment Trusts (REITS)

– You can do this easily by purchasing a share or unit of a publicly traded real estate investment trust (REIT). There are 166 of them currently listed on U.S. stock exchanges and they range from residential apartment REITs to REITs that own industrial/commercial properties.

– Doing this will enable anyone to learn some of the key metrics of property investing by reading an annual report from your REIT holding and becoming familiar with some of the risks and dangers as well, all from a distance.

Renting Out a Room or Mother-In-Law Suite or House Hacking

– If you are fortunate enough to already own a single-family home with a spare room or even a fully-finished basement or mother-in-law suite, then you can do the next best thing to purchasing an investment property by legally becoming a landlord.

– Make sure your city or town zoning laws or ordinances don’t prevent you from renting out your spare room or basement without a license or permit.

– Be aware of fair housing laws in your state and get a proper, written lease agreement in place with your tenant. You would be taking these exact same steps if you were renting out an entire property, so you get a head start!

Real Estate Investing Platform

– Crowdfunding platforms have proliferated over the years, so it comes as no surprise that real estate crowdfunding sites have also sprung up, these enable you to pool your money with other real estate investors to purchase properties, in which you then share capital appreciation and dividends from any rental revenue.

– Make sure to do your due diligence on the platform and the asset prior to investing.

Residential Rental Properties

– This can take the form of an apartment, condo, duplex, or even a single-family home. We actually discussed some of the merits of each type of property in our previous episode.

– These include single-family rental homes or small multifamily properties.

– The type of property with the least amount of ongoing maintenance requirements (in most circumstances), such as condos, but which also in turn carry some of the highest ongoing fees (HOA and others), as well as other considerations.

Wholesaling/Flipping

– You have probably seen this done on HGTV, but the process of investing in an underpriced home in need of some renovations, which you then complete usually as inexpensively as possible and then resell the home for a profit, is a little more complicated than this.

– There is a big risk factor not just in the price you pay for the property, as you need to be able to turn a profit on the sale over the very short term (3-6 months), but regarding the estimated amount of repair costs, contractors, the time needed to complete said repairs, all of which could blow up your investment budget.

– Relies solely on value appreciation for a Return on Investment (ROI), instead of value appreciation + rental income.

Real Estate Syndications

This is what our firm Harborside Partners does where we are pooling our money and our investor’s money to purchase large commercial multifamily properties. We handle finding the property, and the asset management and work with the property managers so that everything runs smoothly for the passive investor.

Become a real estate agent

Yes, you are not really becoming an investor at this stage but you are getting started in real estate and learning usually the residential side of the business. The information you are learning here can be utilized when purchasing rental properties.

Transcript:

Charles:
Welcome to the Strategy Saturday;, I’m Charles Carillo. And today we’re going to be discussing how to get started in real estate investing as a beginner. So there’s hundreds, if not thousands of seminars, training courses, books, and other programs and materials that have been produced to explain how to get started in real estate investing. And I really want to condense that information down, but I also want to put together the seven points using information from experiences of other investors I’ve known and the route that they’ve taken to become successful. So probably one of the easiest ways of starting to invest in real estate is by buying shares of a real estate investment trust. And you can do this by easily purchasing a share or a unit of a publicly traded REIT. And during our research for this episode, we found there’s 166 of them currently listed on us stock exchanges.

Charles:
And they can, they range from residential rates to reach that own industrial and commercial properties. There’s REITs that own a little bit of all different types of asset classes. There’s REITs that don’t have any leverage and they pay for everything in cash, or they have very little leverage on properties. It compresses your returns a little bit, but it’s much safer of an investment. You know, doing this will enable anyone to learn some of the key metrics of property investing by reading an annual report. And it’s also, you’re getting, when you’re getting a vision from the institutional REIT, they’re telling you an overview really of the sectors within real estate, the different property classes in different markets. And it’s, it’s a much different word it literature than you’re going to get from any type of guru or anything like that. So it’s great to be able to review those reports and understand them and become familiar with some of the risks and dangers as well as investing, right?

Charles:
Because they’re going to have some properties that perform great, and they’re gonna have some that don’t perform as well. And they’re going to explain why that happened. Number two, renting out a room or mother-in-law suite or house hacking. I started with house hacking in a threefold. Triflex a three family house. And if you’re fortunate enough to already own a single family home with a spare bedroom or even a furnished basement or mother-in-law suite, then you can do the next best thing to purchasing an investment property by legally becoming a landlord, obviously check with your city or town zoning laws or ordinances, make sure they don’t prevent you from renting out your spare room or basement or other unit in this house. Make sure it’s a legal unit that you can rent out. Be aware of fair housing laws in your state, get a proper written lease.

Charles:
So this allows you to dip your toe in without buying a property that was specifically for real estate investing. It’s also, some people have never had anybody live inside one of their properties before, and you have this very expensive asset and you’re letting someone move in for a very nominal rate per month. And you being on site will give you a little bit more comfort because you’ll know exactly what’s happening at that property. Number three real estate investment platform, crowdfunding platforms have really grown over the last few years and they’ve sprung up all over and they enabled you to pool your money with other real estate investors to purchase properties in which you share capital appreciation and dividends from money rental revenue. You make sure you do your due diligence on the platform and the asset prior to investing in a note, I’ve never used a crowd funding platform to invest in real estate, but I know people that have number four, residential rental properties.

Charles:
This can take a form of a apartment condo, duplex, or even a single family home. We actually discuss some of these metrics of each property type in our previous episode. But these are properties, usually one to 40 units. So single family homes or small multi-family properties, and you can start, you can start investing in them right away. And maybe if they’re nearby to where you are, you can self-manage them as well. The type of property with the least amount of ongoing maintenance and requirements is going to be probably a condo, but make sure that if that’s one of the things you are looking at, they’re going to have the highest ongoing fees hos, and they’re going to have a lot of other considerations and they’re gonna have a lot more maintenance requirements. Then if you had your own property, one to 40 unit property that you’re renting out, because usually in that situation, you’re the one that’s making all the decisions on what you want to do and what you don’t want to do.

Charles:
Number five is wholesaling and flipping wholesaling is becoming a real estate investor, but it’s not really what most people can consider because you’re not actually buying something. Flipping is more of what someone consider as really a first step when starting to invest in real estate hands-on. And you’ve probably seen this done on HGTV, but the process of investing in an under-priced home in need of some renovations, which then completely you, you, you, you try to complete these renovations as inexpensive as possible, and you’ll have higher end properties that it’s, it’s going to be a more of in-depth renovation, much more expensive finishes, but you really you’re trying to complete the property as inexpensive as possible and generate a profit from the home. And it’s a little bit more complicated than this. There’s a lot of fees that go on with it. There’s a lot of costs and it’s ongoing maintenance.

Charles:
During this process of managing all of the contractors, there’s a big risk factor as well, not just in the price you pay for the property, as you need to be able to turn a profit on the sale over the very short term, three to six months, but regarding the estimated amount of repair costs, contractors time needed to complete said, repairs, all of this can blow up your investment budget. My thing is when you’re investing in real estate, the longer you own a piece of property, the less risky it is. So when you’re doing short term investments like this, not saying it’s bad, but it’s something where you’re carrying more risk. It’s much safer to buy a property and to own it for many years. And that’s something where it’s just a much safer investment. And obviously if you have you’ve doing that, you probably have really good fixed financing as well, which makes it even lower risk.

Charles:
The last thing on the flipping of the houses is rely solely on the value appreciation for return on investment instead of value appreciation rental income. So when we buy here, we’re buying for cashflow appreciation is just a nice bonus, but cashflow is really what you should, you want to be doing when you’re buying rental real estate. But when you’re flipping properties, you don’t really care about cashflow. You care only about the appreciation that the property is going to experience while they’re doing the repairs. Number six real estate syndications. This is what our firm Harborside partners does, where we are pooling our money and our investors’ money to purchase large commercial multi-family properties. We handle finding a property, the asset management and the work with the property managers so that everything runs smoothly for the passive investor and the passive investor can then get usually quarterly dividends.

Charles:
Sometimes on certain investments, it might be monthly. Number seven is become a real estate agent. I know this is not really investing in real estate, but it’s a great way of getting started in real estate and learning. Usually the residential side of the business and the information you were learning here can be utilized when purchasing rental properties. I myself am a licensed real estate agent in the state of Florida. I do not use it. I’ve never shown a property before I only have it so that if someone comes to me and says, Charles, I want to buy an investment property or something like this. I will do a referral to a broker or a real estate agent in the area of Florida that they’re looking at and I can legally be paid a commission. So I hope you enjoyed. Please remember to rate, review, subscribe, submit comments, and potential show topics at global investors, podcast.com. Look forward to two more episodes next week. See you then

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