Invest In Your Own Home
Primary residences are the most common way most people invest in real estate. You take out a mortgage, make your monthly payments and gradually build ownership in your home. With luck and strong demand in your local market, you can cash in on the equity when you sell your home.
While investing in your own home can help you build wealth over the long term, average annual returns are less than you might expect. From 1994 to 2019, homes only increased in value about 3.9% annually, according to a report from industry analyst Black Knight.
While there are areas of the country where home appreciation is much higher, on average the house you live in is unlikely to dramatically grow in value, especially once you figure in costs like maintenance and repairs, insurance, property taxes and the interest you pay on your mortgage.
Other real estate investments, like REITs, have seen average annual returns as high as 11.28%, according to Nareitâeven a vanilla S& P 500 ETF has provided average annual returns of about 10% long term.
This isnât to say you should never buy a home or think of it as an investment. Government support for the mortgage market generally, in addition to programs that support first-time homebuyers, help you buy a home at a much lower price than would be possible with other real estate purchases.
Property Manager / Field Manager
When buying rental properties youll want to have a hardworking and reliable property manager on your real estate investing team. A good property manager takes stress off of your plate by handling all tenant calls, repairs, bookkeeping, leasing vacant units for you, and overall improvement of your cash flow so you can pocket more money.
If you are in the business of flipping houses, a field manager will be a helpful member to your team as they can run around to different job sites to inspect work being done by contractors. Having someone help manage your flips can improve your overall team system and help you do more deals, making more money in excess of the cost of the field managers wages.
Starting In Real Estate Investing Build A Solid Team
Many experts recommend that before you even decide on investment property, you should start building an investment team. While its not necessary to have every member of a good team to start buying properties, the earlier you assemble your go-to-experts, the sooner you can take full advantage of expert advice and hit the ground running. When youre ready to buy your first property, make sure Privy is part of your team! The best way to understand the ins and outs of a profitable real estate investment deal is to take away the guesswork. Reach out to schedule a demo and learn more about how the Privy Advantage helps investors make more money through real estate.
Learn more about building your team for success! Download a free copy of Assemble Your Real Estate Investing Team: A Worksheet.
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Morgan Stanley Real Estate Investing
One of the most active property investors in the world for three decades, MSREI employs a patient, disciplined approach through global value-add / opportunistic and regional core real estate investment strategies. With 17 offices throughout the U.S., Europe and Asia, regional teams of dedicated real estate professionals combine a unique global perspective with local presence and significant transaction execution expertise.
MSREI strives to provide our clients with superior investment performance combined with firstclass service. MSREIs investment principles are guided by patience and discipline, seeking unique opportunities to generate superior risk-adjusted returns by aligning with bestinclass partners, actively managing financial and currency risks, and consistently providing transparency. With deep experience managing global real estate assets in nearly every major market and across all property types, MSREIs inhouse asset management team drives value in our investments from acquisition through disposition. In addition, MSREI has an exceptional capability to make judgments on markets and investments and is distinguished by its local market knowledge and insight, an industryspecific global strategy and research team, plus the ability to leverage the vast resources and talent of Morgan Stanley.
What Is A Real Estate Investment Group
A real estate investment group refers to a business that focuses the majority of its efforts and capital on real estate. In search of profits, real estate investment groups may choose to buy, renovate, sell, or finance properties. Real estate investment groups commonly buy out multi-unit properties, selling units to investors while taking responsibility for administration and maintenance of the property.
Typically, real estate investment groups either do not elect or do not qualify to be a real estate investment trust .
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Your Guide To Building A Successful Real Estate Team
How do new investors go about building a successful real estate team? Better yet, where should they begin in 2017?
Assembling your dream team as a real estate investor can render exceptional benefits, especially in the starting stages. The ability to create a thriving business from the ground up is no easy task, but building a successful real estate team has the ability to give investors expanded networking and investment opportunities. The attraction of a real estate team is easy to see, as even the most successful investors know that they cant do everything by themselves.
Once youve decided on the idea of building a successful real estate team, the next step is to bring it together. A real estate team seeks to harness the collaborative powers of its talent in order to not only achieve specific real estate goals, but run the business smoothly and as efficiently as possible. Therefore, investors need to understand that building a winning combination of team members takes time and due diligence, and it definitely wont happen overnight. However, there is a general strategy investors can follow to streamline the process. If you want to start a real estate business, you have to have the right pieces in place.
Understanding Real Estate Investment Groups
Real estate investment groups are comprised of multiple partners or private . Having multiple sources for capital investments provides a greater pool of capital and a greater ability to invest more broadly.
Real estate investment groups focus the majority of their business on real estate, but they are not necessarily subject to any specific real estate entity status or beholden to any specific type of operations. As such, they have flexibility to structure their business in several ways, and they can make real estate investments as desired.
Also, real estate investment groups may engage in other business activities such as property financing, flipping properties, leasing properties to clients or property management companies for a portion of rental income, or selling units of a property while maintaining overarching control. In general, there are no specific limitations on the activities a real estate investment group can be involved in. Many REIGs will market themselves as such to make it easier for investors to identify them.
The goal of a REIG is to provide monthly cash flows from the investments made in real estate holdings.
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Ready To Buy An Investment Property
My goal of early retirement becomes closer to reality each time we purchase an investment property and the amount of work I have to do each time is getting less because I have built up a system and a team around it.
There is so much I still have to learn and with each new purchase, book or website I read, I learn a little bit more. There is huge potential out there, especially with the young millennial generation that doesnt want to buy a home and get locked into an area.
Those people need a place to live and someone has to own those homes and make money off those renters. Why not you! Hopefully my series of articles will give you some insight into the opportunities that are out there. Good luck and I will let you know how my next purchase goes in spring 2016!
Private Money Lender Or Equity Partner
A private money lender is a non-institutional individual or company that loans money, generally secured by a note and deed of trust, for the purpose of funding a real estate transaction. Private money lenders are generally considered more relationship-based than hard money lenders. A private money lender can provide you with earnest money to secure a deal.
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Value Your Own Time Highly
When you come to making a decision about whether or not you will hire a contractor to carry out maintenance work, if you will not use a property manager to handle your tenancy and other decisions that face real estate investors every day, first consider the impact these tasks will have on your own time.
You are a valuable commodity. Can you really afford to do the work yourself when you could hire a professional and write the costs off as a tax deduction anyway?
As a general rule, you should choose a property investing team of experts whose help you can call upon. They will include:
Essential Members Of Your Property Investment Team
Raising the initial capital to buy into real estate can be difficult for some investors, so can tempting to bypass identifying professionals whose help will be needed.
Real estate investment is much like running your own small business.
Whether you have 1 or 100 properties in your portfolio, you will need to make decisions about tenants, property management, and maintenance and keep thorough records of all transactions and dealings.
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What Is Real Estate
Real estate is the land along with any permanent improvements attached to the land, whether natural or man-madeincluding water, trees, minerals, buildings, homes, fences, and bridges. Real estate is a form of real property. It differs from personal property, which are things not permanently attached to the land, such as vehicles, boats, jewelry, furniture, and farm equipment.
Invest In Rental Properties
If youâre looking to make a major commitment to investing in real estate, consider purchasing rental properties. Rentals can offer steady cash flow as well as the possibility of appreciation over time, but they are one of the most labor-intensive methods of real estate investing.
There are two main ways to make money with rental properties:
- Long-term rentals. These properties are generally designed to be rented for at least a year and in theory provide a steady monthly cash flow, though this depends on your tenants being reliable. You might buy a multi-unit property or a single-family home that you rent to others.
- Short-term rentals. These properties cater to rotating tenants whose stays might be as short as one night, like Airbnb. You might list your entire home or apartment when youâre away, or you could invest in a separate property meant only for short-term rentals.
While investing in real estate with rental properties offers greater profit potential, it also requires a great deal of effort on your part. You need to find and vet tenants, pay for ongoing maintenance, take care of repairs and deal with any other problems that arise.
You can reduce some of these headaches by hiring a property management company, but this will cut into your returns. When it comes to financing rental properties, the resources and low interest rates available to primary residences may not be available. This can make buying rental property more expensive.
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The Keys To Building An All
There are several professionals you want in your corner when youâre investing in real estate. But you donât have to assemble the whole team at once.
In fact, it can be better to build over time as you gain experience and solidify your investing strategy.
But it helps to know who you should be looking out for and how they can help you. Hereâs what building an all-star team real estate investment team looks like.
What’s in this Article?
The Title Company Is Your Closing Nerve Center
After the mortgage and housing meltdowns beginning in 2007, title companies have become much more cautious, and they are operating under regulations that keep getting more restrictive.
The title company can also help you in property evaluation and avoiding nasty surprises after a purchase. The right title research and insurance coverage are crucial to your real estate investment business.
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Why Do You Need A Team When Starting In Real Estate Investing
Having a real estate investing community isnt technically required, but its undoubtedly a smart way to go. Whether youre brand new to investing or youre looking to consciously ramp up your efforts, it pays to have qualified professionals at your disposal.
Even if you know a fair amount about real estate, there are bound to be gaps in your knowledge. For example, you may know about property maintenance for rental properties, but are you familiar with all legal obligations associated with your investment? Do you really have enough hours in the day to take care of everything on your own?
For most of us, we simply cant do it all . So when youre wondering what to know about property investing before you start, one of the most popular answers is: determine what you are and arent capable of doing yourself. For the things you cant DIY, find someone trustworthy who can.
When To Start A Real Estate Team
Starting a real estate team is a different ballgame altogether. Take a look at your schedule if theres a ton of free time for finding customers, youre probably not ready to start a team. The average real estate agent has enough time to handle around 50 to 60 transactions per year. When your brand is strong enough that youre turning away customers, your only way to grow your income is to start a team.
Of course, leading a team has its own complications. The accounting is more complex, and you have to set aside some of your own time for coaching, mentoring, and recruiting new team members. If none of that appeals to you, you might prefer to work solo for the rest of your career.
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Build The Best Rei Team With Our Free Worksheet
Ready to start building your team? The sooner you find the people and resources that can support your real estate investing career, the faster youll begin experiencing the benefits of property investments! Weve put together a free resource to help you learn more about the critical team members that can help you from the start .
Get your free copy of Assemble Your Real Estate Investing Team: A Worksheet today! Then, when youre ready to learn more about how Privy can help you find the best properties in the best markets, be sure to reach out to our team.
Putting Together The Dream Team
When it comes to building a real estate team, you must perform thorough due diligence. Conduct interviews with potential team members, gather references, and interview their previous employers and clients. Ask for recommendations from friends and fellow investors, but dont always take their word for it. You dont want to get stuck with someone whos incompetentcosting you time and money.
Before you start hiring team members, determine your niche, market, and strategy. It wont matter if youre working with the smartest people in your cityif youre not focused and clear on your plan and strategy, then no genius can help.
With that being said, this list is a catch-all, so depending on what type of investing youre doing , make sure youre hiring relevant team members.
Here is your list of possible team members, from A-Z.
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Real Estate Mutual Funds
Real estate mutual funds invest primarily in REITs and real estate operating companies. They provide the ability to gain diversified exposure to real estate with a relatively small amount of capital. Depending on their strategy and diversification goals, they provide investors with much broader asset selection than can be achieved through buying individual REITs.
Like REITs, these funds are pretty liquid. Another significant advantage to retail investors is the analytical and research information provided by the fund. This can include details on acquired assets and managements perspective on the viability and performance of specific real estate investments and as an asset class. More speculative investors can invest in a family of real estate mutual funds, tactically overweighting certain property types or regions to maximize return.
Focus On Gaining Alignment And Leveraging Diversity
Two of the biggest mistakes investors make when building a team involve alignment and diversity. Your organization has a certain level of entrepreneurial spirit. Additionally, your employees are expected to meet certain expectations and goals. Because of this, you have to hire someone who is aligned with your values.
Someone may look great on paper, but they will not stay long if they are not aligned with your organization. When someone does not fit in with the organizations culture, they tend to quit or get fired right away. Instead of wasting your time and resources on the wrong applicants, look for alignment as you build your team.
You also need to build a diverse team because diverse personalities and skills provide balance. As you interview people, consider their experiences, levels of risk tolerance and personalities. Then, you should try to hire team members who give your team diverse points of view.
It is almost impossible to understand someones complex personality and background in a single interview. Fortunately, there is an easy tool you can use instead. Personality assessments are a quick, simple way to understand an applicants personality. As you read through the personality results, you should avoid hiring people who are just like you. Many managers make this mistake, and it will reduce your team diversity if you are not careful.
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