I always tell people that there is potential for a big investment in real estate. But getting started can be difficult.
As an eight-year-old real estate investor, I have found that the key is to take small steps. When I first started investing at the age of 23, I set a decent goal to make some extra money with one or two rental properties on top of my engineering salary.
Today, I own 61 rental units that earned $ 431,000 in rent last year I am a real estate coach at Ruffstock Academy. I mostly work from the converted van in which my wife and I live. When we don’t travel to the United States in our van, we stay at our Duplex home in California.
After paying my mortgage, property taxes, property management and maintenance fees, I earn about $ 6,000 per month on passive income from my real estate portfolio.
Since 2019, I’ve been investing that money in a redevelopment project that is transforming eight units into 17 and surviving my full-time coaching salary.
How I bought my first real estate property
In 2013, out of college, I worked as a fire safety engineer and earned $ 73,000 a year.
Saving for an investment property was one of my goals, so I lived under my money. I paid $ 800 per month to rent an apartment with roommates. My employer has covered the necessary expenses like my car And cell phone bills, allow me to save more every month.
In 2014, I saved $ 40,000 in cash to buy my first real estate and sold ্যের 20,000 worth of stock: $ 295,000 single family home in Southern California. For the rest of the expenses I took a loan from a family member, so I did not have to borrow from the bank.
The house was empty for two months before I rented it out, but it didn’t need any repairs. Renting আমার 1,810 per month from my tenant allows me to cover the monthly home loan payment and the operational costs of managing it.
By 2016, I owned three homes. I financed my second purchase with a traditional bank loan, and I bought the third with a% 250,000 loan from a family member at a fixed rate of 4%, 30-year.
I made মোট 51,404 in total rental income from three properties that year, and most of that money went to cover mortgage, maintenance, and property management costs, and I was able to take home about 8 1,800 per month.
In 2017, I decided to increase my savings to buy additional real estate. I found a cheaper apartment to share with my roommates and invested those savings and the money I was earning from real estate in the stock market and in my investment accounts.
When I learned how much each dollar could go to a convenient market – where cash flow was high and buying prices were low – I began to look outside of California. I bought and fixed the cheapest multi-unit features available in the Midwest, mainly Ohio and Kentucky.
To do this from afar, I have built relationships with agents and property management professionals in those markets, so I knew I would have a team to identify the best properties and take care of my tenants.
I work with a small family-owned management business, whose fees per property cost an average of 7% of my total rent but can reach up to 20%.
I feel very lucky to be able to do a simple 9-to-5 job as an instructor from my van and explore new parts of the country – as well as make passive income through my real estate investments.
I believe that if you save enough money and look in the right place, you can take a step back by investing in real estate – even in the age of sky-scraping home prices.
Here’s my best suggestion:
1. Start small with a good research strategy
My investment strategy is the “BRRRR” method: buy, rehabilitate, rent, refinance, repay.
I bought homes in markets where units are paying much more rent than their monthly mortgage payments. I fix them, then rent them out to cover the cost of the house and to invest in other properties
To find out which strategy works best for you, I recommend researching the basics. Lots of resources available from podcasts (including me, Remote Real Estate Investor) Online Course.
You can also interact with other investors in forums like BiggerPacket, where the BRRRR method has become popular, to learn their strategies.
Many are also wondering what their return on investment should be. I always say that people should compare all the returns they can get in real estate (calculate it by adding cash flow, appreciation, loan repayment and tax benefits) as opposed to the return they can get on other investment vehicles.
Choose a number that works for you. And most importantly, don’t compare yourself to anyone else.
2. With my approach, the goal is to work as little as possible
It seems easy when I buy something and I know it won’t take much to outsource the property to a management company.
Even if it means a small profit margin up front, it allows me to simplify my life and use most of my real estate portfolio as a passive income stream. Once you do the work of buying and fixing the house and then you get rewards as long as you own the property.
The main goal of my real estate portfolio is to be 100% financially independent, or to cover all my expenses without working, even considering future expenses.
3. You do not need a complete overhaul to increase the value of the property
There are two ways to increase the value of your property: increase income or profit or reduce expenses.
So far, I’ve spent about $ 2.5 million on renovations across my portfolio, and I’ve tried to count every dollar. Adding upgrades to the ready-to-rent property, such as laundry room and stainless steel appliances, can help increase the rental value of a property.
Shopping in a convenient market, or a place where home prices are expected to increase in value over time, and making small adjustments to those properties can also increase the long-term value of your purchase.
4. Rely on local property professionals
In the markets I invest in, I always work with the local mom-and-pop property management business.
It allows me to build a portfolio in the Midwest while in California and now it allows me to travel while generating income through my property. I can view homes through FaceTime with my agent, rely on a trusted contractor for renovations, and leave my tenants to the property manager for the source of responsible tenants.
Use online platforms like all property management to connect with on-the-ground experts in your target market and seek recommendations from your peers and network.
Michael Albaum A real estate investor and its head coach Roofstock Academy. Follow him on Twitter Michael Albaum.