Making Mistakes Is Part Of The Game
I got a call from one of my tenants one night who said, Youve got to fix this. Sewage is pouring out of the kitchen sink and its all over the floor now. I hired a clean-up crew and then a plumber to assess the situation. It turned out that I would need to replace the whole sewage line. This cost me $9,000 out of pocket.
Not only that, I hadnt realized when I purchased the property that it had virtually no AC system. This led to loud complaints during the 100+ degree summers. I ended up having to install a mini-split HVAC system which solved the problem, but it cost me $15,000. Finally, I had a vacancy for eight months because I had no idea how to advertise my bedrooms. This cost me $5,200 .
At the end of it all, I was feeling very depressed and discouraged. I was tired of having to take calls during my lunch breaks and late nights on weekends. I thought I had made a huge mistake investing in real estate. But I kept at it because I knew if my grandpa could do it, I could do it too.
Over the next four years and after so much trial and error, I finally created a system for student housing that I now teach to others. The system allowed me to cut the amount of time spent on my rentals to less than an hour a week.
Simple Understandable And Safe
One of Warren Buffetts primary rules is to purchase assets that are simple and understandable. Residential real estate, particularly houses and small multi units, is the most simple and understandable investment I know.
People like you and me live in rental units. Our needs are things like safety, convenience, comfort, affordability, style, and good school districts. You probably already intuitively understand the fundamentals of good real estate.
Real estate is also a real asset. Its tangible. In the right locations, its value is buoyed by construction costs and salaries which keep getting higher over time. Housing doesnt go out of style or get replaced by the latest technology. People will still be living in homes long after you and I are gone, and this makes it a safe long-term investment.
Campus Cribs: Investing In College Town Real Estate
If youve been thinking about investing in real estate, there are many options available to you. You could flip a home, purchase a multi-unit property, buy a vacation rental, lease your starter home, etc.
But there is another opportunity in greater Lansing that you may not have considered: off-campus student housing.
A stable investment
The National Center for Education Statistics predicts college enrollment in the U.S. will reach 19.8 million students by 2025, an increase of 14% from its 2014 enrollment of 17.3 million. While year-to-year numbers may vary, the overall number of people enrolling in higher education continues to rise, driving up demands for housing.
While college town investments have their pros and cons, REALTOR® Rob Buffington, associate broker with Berkshire Hathaway HomeServices, Tomie Raines REALTORS®, says this built-in demand is one of the benefits.
The university isnt going anywhere and students will always need a place to live, he said. And because of their proximity to the university, these properties tend to enjoy steady and often significant appreciation.
An attractive option for parents
In addition to investors looking to expand their real estate portfolio, local REALTORS® often get calls from financially-savvy parents who are interested in purchasing a property for their children.
And Buffington adds that if a property has the appropriate license, adding roommates can offset costs even more.
A few things to consider
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Working As A Real Estate Investor
As a Real Estate Investor, you will actively or sometimes passively invest in real estate. If you are an active Investor, you will buy property, make repairs and improvements, and sell it for a profit. You make your living as a Real Estate Investor by purchasing investment properties and generating money for the long-term. Become a Real Estate Investor allows you to make good money almost immediately. You will get income from rental properties as well as investment properties. You will need to have good communication, patience, and money for investmnent. Real Estate Investing is difficult and requires an initial investment of time and effort. To become a Real Estate Investor, you may need a college degree in finance, economics, business administration, computer science, statistics, and mathematics. You also need to know the market, be honest, encourage referrals, stay educated and understand the risks. You can make a great deal of money as a Real Estate Investor, and some investors have made millions.
There is more than meets the eye when it comes to being a real estate investor. For example, did you know that they make an average of $38.64 an hour? That’s $80,377 a year!
Between 2018 and 2028, the career is expected to grow 7% and produce 26,500 job opportunities across the U.S.
What Is The Real Estate Impact On Fafsa
Each year, about 18,000,000 families file a Free Application For Federal Student Aid form in hopes of qualifying for college aid. The FAFSA is used to determine qualification for federal financial aid by computing your Expected Family Contribution . About 400 colleges and universities also use the CSS Profile to make need-based aid decisions.
These forms look at different types of real estate ownership in different ways, explained Rynda. Its important to know how your real estate assets may affect how much you or your child pays for college so you can plan ahead.
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Transform Your Own Space Into An Airbnb
If you have an extra room, attic space, or a basement, why not put $10,000 into your own property so you can earn some rental income?
Use your funds to finish or improve rooms and turn them into spaces short-term renters will want to pay money for. You can list your space on Airbnb and similar sites to earn passive income.
As a bonus, investing in your own home can also raise its value should you sell.
Should I Invest In A Condo
Condos are often cheaper than comparable single-family homes, and they have fewer maintenance requirements. However, it can be more difficult to finance a condo, and you must consider the ongoing association dues and the potential for expensive special assessments. When considering a condo for an investment, be sure to investigate the financial health of the homeowners association and the current condition of the overall buildingnot just the individual unit.
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Insulation From Stock Market Returns
Although there is some correlation between the general economy, real estate returns, and stock market returns, real estate income streams tend to have quite low correlation with the overall stock market. Combining a 529 plan invested in stocks with a real estate investment can provide some real diversification. Obviously, putting a big wad of money into a single property could be considered the antithesis of diversification, especially with regard to any possible appreciation.
Is Buying A Condo A Good Investment
Condos can be a good option for rental property buyers because they tend to be more affordable than comparable single-family homes, and they are often located in desirable locations . Additionally, condos often have fewer maintenance demands because owners aren’t responsible for taking care of the grounds or the building’s exterior.
Still, financing a condo can be trickier than getting a mortgage for a single-family home. For instance, most lenders require that at least 50% of the units are owner-occupied and that the homeowners association is in good shape. It’s also important to consider potential special assessments. You may be able to swing the monthly dues with no problems, but if the building needs, say, a new roof, you may owe a special one-time payment that could be thousands of dollars.
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Crowdstreet Has A Long Track Record
Since their founding in 2014, CrowdStreet has distributed over $100M, has 200K members, and has funded over $3B in property deals. When it comes to investing with real estate crowdfunding platforms, its important to stick with the largest and best.
Given CrowdStreet has higher barriers for whom they do business with, it feels like they really are focused on hitting singles and doubles instead of home runs. This is more in line with how I like to operate my own business and invest.
Why Should I Add Real Estate To My Portfolio
Real estate is a distinct asset class that many experts agree should be a part of a well-diversified portfolio. This is because real estate does not usually closely correlate with stocks, bonds, or commodities. Real estate investments can also produce income from rents or mortgage payments in addition to the potential for capital gains.
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Tips For Buying Your First Rental Property
Thinking about purchasing an investment property? Real estate has produced many of the world’s wealthiest people, so there are plenty of reasons to think that it is a sound investment. Experts agree, however, that as with any investment, it’s better to be well-versed before diving in with hundreds of thousands of dollars. Here are the factors and challenges you should consider before buying your first rental property.
Profitable As Airbnb Rentals
Lastly, being a landlord of a college town property is not limited to traditional renting. This aspect is very unique to college rentals, as many other traditional rental properties cannot be easily converted to an Airbnb rental. College properties can also be used as Airbnb rental properties to great success. Many colleges are part of a locationâs success in tourism, particularly through university conferences and sporting events. These events garner high demand in these areas and thus require Airbnb rentals for visitors. Real estate investors should definitely consider using their college rentals as Airbnb rentals, as they are also in high demand and generate lucrative rental income and return on investment. Just be sure to check the local short-term rental regulations beforehand.
Have Access To Plenty Of Working Capital
Renowned real estate investors like Sam Zell and Roger Staubach dont need to look for capital because people are literally lined up to do deals with them.
Until youre ready to join the ranks of the ultra-wealthy, its important to make sure you have access to plenty of capital. Thats because investing in real estate sometimes requires more cash than expected.
Plan on putting at least 20% down for a rental property, set up a separate capital reserve account for repairs and maintenance, and factor in the loss of cash flow created by vacancies and the time it takes to turn a tenant.
Crowdstreet Does Good Due Diligence
Many critical pieces of information are reviewed before investment opportunities are approved and opened up to investors.
In real estate circles, this analysis is called due diligence.
CrowdStreet provides due diligence on behalf of their investors, and here are five core criteria they consider during the due diligence process.
A) The Real Estate Company
The first thing that one should look at when analyzing an investment is the real estate company involved in the project. This is also known as a sponsor, who is an individual or real estate company that will acquire the real estate and execute on a business plan.
B) The Market
The second thing we review when looking at a real estate investment is the market of the property. Realtors often say that the only thing that matters is location, location, location and not without good reason.
C) The Asset
While the real estate company and the market are both important, so too is the asset, or the property itself. It is important to review not just whether it is the right time in the real estate cycle, but also whether it is a good time to purchase the asset. The asset is so key to the investment that at CrowdStreet we do an in-person site visit for every investment.
D) Capital Structure
When investing in commercial real estate, the capital structure must be looked at closely as it directly impacts the return.
E) Risk and Return
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How To Become A Real Estate Investor
If you’re interested in becoming a real estate investor, one of the first things to consider is how much education you need. We’ve determined that 64.3% of real estate investors have a bachelor’s degree. In terms of higher education levels, we found that 8.5% of real estate investors have master’s degrees. Even though most real estate investors have a college degree, it’s possible to become one with only a high school degree or GED.
Choosing the right major is always an important step when researching how to become a real estate investor. When we researched the most common majors for a real estate investor, we found that they most commonly earn bachelor’s degree degrees or associate degree degrees. Other degrees that we often see on real estate investor resumes include master’s degree degrees or high school diploma degrees.
You may find that experience in other jobs will help you become a real estate investor. In fact, many real estate investor jobs require experience in a role such as owner. Meanwhile, many real estate investors also have previous career experience in roles such as sales representative or manager.
Raise Your Own Capital
If youre eager to get started and youre willing to start with a small property, the best option may simply be to raise the capital yourself. If you start with a home for yourself, you can save as little as 5 percent of the purchase price for a down payment. Even if youre struggling with student loans, a combination of a steady job, a good side gig, and a strict budget should set you on the right course to save all the money you need to get started.
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Benefits Of Real Estate Investment
If it fits within your financial plan, investing in real estate is a great way to save for your childrens college expenses. Real estate is almost always one of the safest investments around and it can benefit you in multiple ways:
- Cash FlowIf you invest in an income property , you can be earning supplemental income that you can then invest elsewhere to make even more money over time.
- AppreciationIf you buy property when your child is born, were talking 18 years of appreciation. The value will most certainly go up during that time, perhaps by quite a large amount. When your child is ready to go to college, you can sell the property and use the profits to fund their education. Or, you may be able to cash out some of your equity in a refinance loan or home equity line of credit to hold onto the property while simultaneously covering their college expenses.
Safe Real Estate Leverage Lets You Start Small And End Big
The basic version of my real estate college savings plan is this:
This plan is simple. You use safe leverage against a solid rental property to grow your down payment into significant equity that can be used to save for college.
For example, you could buy a property for $150,000 and put $30,000 down. If you amortize that loan completely in 18 years before college begins, your equity should be worth at least $150,000. At a more historical average of 3% appreciation, your nest egg would be worth more like $255,000 .
Five Things To Consider Before Becoming A Real Estate Investor
As with everything else in life, there are both right and wrong reasons for doing something. Here are a few important things to consider before deciding to take the plunge and become a real estate investor:
Real Estate Limited Partnerships
Real estate limited partnerships are a form of REIG. RELPs are structured similarly to hedge funds, where there are limited partners and a general partner . The general partner is typically a real estate business that takes on all liability.
RELPs are a more passive investment in real estate. Typically, the general partner sets up the partnership and recruits investors to be limited partners. Investors then receive a K-1 to report income on their taxes, but they dont have much influence in operations.
RELPs can be very profitable if you find a good general partner. But youre relying totally on that general partner who must, without much oversight, manage the property and reliably report financials back to you.
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