Within two months, we found two gals from Michigan who moved into the basement, and that almost eliminating expense the house caused me.
The next month the house appreciated about $5,000 and I realized, "Wow, this just appreciated equivalent to what some of my friends were making working full-time." Without having to pay rent, I HAD to get more houses!
Eventually, I went back to school for an MBA, borrowed $100,000, and started full-time (no salary) on my real estate company in 2012 after graduating. I couldn't pay myself more than a few hundred per month for 12 months, but I had the faith to keep going (maxing out almost $85,000 on credit cards) because I had acquired a second property, and that one, too, was appreciating $4,000-8,000 per month.
Now I realize not all of you are ready to buy your first house, and I have great news for you.
Here are some recommended strategies to get into residential real estate in order from Novice to Expert:
Consider your options
1. Look at your current living situation and simply ask yourself the following questions. No action required.
-If you were to tidy the place up, and rent it on Airbnb, google how much do they estimate you'd make?
-Look at zillow and start learning how fast your house is appreciating each month. Do this by creating an account, saving your house, and making sure you have a checkmark to receive monthly updates.
-Consider how much time it may take to message back and forth with prospective guests as well as clean up after them or ensure the person you're paying cleans up neatly after them.
Become an aspiring landlord
2. Lease a 2 bedroom apartment, and register as an airbnb host. Save yourself some time and after your listing goes live, go talk to Daniel Rusteen and Optimize Your Airbnb.
Purchase your first buy-and-hold
3. Purchase a inexpensive condo or townhome (under $250,000) that you find using Zillow and make a financial goal of what type of cash flow you want to make in the next 12 and 60 months.
-Your big expenses will likely be the mortgage (principle, interest, homeowners insurance, and property tax), utilities, average cost or repairs, and water. There will likely be other small expenses, like if you choose to include wifi for your tenants. Research Craigslist and Airbnb and other similar sites to get an idea for what it would rent for.
-Make sure you research historical appreciation and are familiar with what you hope it to appreciate at each year.
-Research the Homeowner's Association (HOA) carefully, many HOAs might ruin your investment if they're run poorly. Yes, look at their financials and meet the people in charge while you're under contract.
Fix and Flip a single family home
4. Use Zillow to search for and find a single family home that you can add 1 or 2 bedrooms to. Bonus if you can also add a bathroom.
For financing, you can get a traditional loan if you qualify, but many real estate investors with many properties might search for "Hard Money Lender" to close on the house quickly.
Airbnb hosts: If you're already making airbnb income, Check out ClearBanc here in order to get a great loan to expand your business--no credit check, and totally reasonable fees, you qualify based off of past airbnb income and future plans with the funds. I've been a customer for coming up on a year.
-Create a budget. Get bids on the work (take lots of pics since contractors can't come by).
-Make a offer. Don't be afraid to lowball. Negotiate with other things besides price like how fast you can close, promise to be easy on inspection, tell them you can buy with cash or a cash equivalent instead of relying on a traditional bank
-Before closing, confirm budget, and reconfirm all of your numbers, what you think it could sell for after and what you think it could rent for if you hold it.
-Bonus: Add bedrooms. Especially if you're trying to rent it out. On two different occasions, I've spent less than $800 to create an additional bedroom on a property to then turn around and rent that room for more than $800/mo. Enough said.
So much more potential in this industry that we examined in Part 1 of Assets and Entrepreneurship in the auto industry.
Or, check out Online Assets and Entrepreneurship, Part 3
If you'd like to see videos of my most recent single family home flip, check out my YouTube Playlist documenting the journey.