What’s up investors. How to invest in real estate, it’s a million dollar question. Let’s take a look and see what the top article on Google says. Watching in. Right, so Nerdwallet has the top five ways of how to get started. I’ll let you know some of the pros and cons in each of these, based on my personal experience, investing in each one of these that they recommend.
- Buy REITs. What are the pros, it’s easy. If you can click a few buttons on your phone you can own a REIT, which is backed by real estate. So you’ve got cashflow, a loan paydown, you’ve got appreciation. You don’t really have the depreciation and the tax advantages that you get from direct ownership, but you got good diversification. Let’s say you own a piece of a bunch of different malls, down side of this is that it can erode some of the returns with fees, with management, with overhead. You know, if you had a bad mall or two or three or 10 in portfolio that can drag down some of the other malls and the overall return, so I would expect to get single digit returns with my my REITs that I own. I bought some back in March of 2020 because they were way, way, way down and I thought, hey, if this thing comes back to life it’ll probably double in value and it’ll probably have some pretty good returns. That could be a good buy and hold and people were running for the hills, you know, that’s generally an interesting time to buy.
- Use an online real estate platform. They’re talking about Fundrise and Realty Mogul here, which really means do crowdfunding, do syndication or joint venture deals in larger commercial projects where you own a 5% stake in a multimillion dollar transaction. And I gave that a big thumbs up because that’s pretty much what I do. I just don’t make it available to the public or put it on a platform like this. I invite friends or colleagues or people that I have an existing relationship with, we go buy an asset together at a deep discount, we force appreciation and then we all collectively benefit from the cash flow, the loan paydown, the appreciation and the depreciation on a deal, the tax advantages or the paper losses. So that’s one of the awesome things direct ownership versus the REITs where you really own a derivative of that building. People have a piece of that LLC.
- Think about investing in rental properties. Yes, do it, it’s good if you know what you’re doing and you’re buying the right deal in the right market. Rentals have been very good to me over the years, granted they’ve been a lot of work, right. You’re dealing with tenants, you’re dealing with the termites, you’re dealing with a new roof as of this last week. There’s a lot of management intensiveness at the mom and pop level because you just can’t afford great property managers in some cases, the returns aren’t quite high enough. But, you know, my properties, I sold one last week that tripled in value, the loan got paid down so, you know, it was something like 10 X on my money over the last decade. There’s another video where I talk about that duplex case study so check that out, but I’m a believer in it. I think the bigger that you can go the better. So if you can get into a 4 plex you’re probably gonna have better returns than a single family unit. Look for good school districts, look for landlord friendly environments, look for great property management companies and try and get as much off your plate as you can ’cause I think that property management is a relatively low cost, low return, just kind of fulfillment type of deal so that you can be freed up to go do wondrous things in your day job, or buy another deal, or invest in more, or whatever it is you like investing in.
- Flipping properties. I’d say, do this too as long as you’ve got good guidance and training and you know how to go buy properties at a deep discount, you know how to negotiate with sellers, you know how to oversee construction or find a good contractor and manage that through, you know how to work with change orders, you’re really sharp on what your exit properties are gonna be and you can work really quickly, right. ‘Cause the holding costs can gobble up a lot of the returns when it comes to flips, ask me how I know. They wanna know the downsides is, I kind of felt like an adult babysitter of my contractors, especially when we were juggling multiple properties at once. That said, it can be an entire annual salary in a single transaction, but it’s very intensive, right. Like you see on HGTV, there’s a lot going on and it’s definitely not a passive type of investment, at least in my experience.
- Rent out a room. Ooh, maybe if I’m 20. I don’t love the idea of that when my kids are sleeping upstairs. Maybe what I would do is buy a duplex, live in one side, rent out the other. That probably nearly covers the mortgage. You could do that in commercial as well. If you bought a building and you put your business in it, you could rent out the other side of that building and maybe have that cover most of the profit, or excuse me, most of the mortgage. Hey, hope that was helpful. If you have any more questions or comments about those five that we covered, leave a comment or shoot me a message and I can do a follow-up video. Also check out the how to invest through your retirement account video, how we do underwriting and what our buying criteria is right now for 2021. Happy investing, get in the game, we’ll see you soon.