It’s not hard to find a YouTube video or Instagram post promising a get rich quick scheme. Investing in real estate through buy and hold rentals is the number one way to build wealth. But let’s be honest—it’s a lot of work to put all of the right mechanisms in place. This is not something you can do overnight.
On this episode of Investing in Real Estate, I’m sharing 10 things you need to do before you start investing in real estate. If you’ve ever wondered what types of due dilligence you need to do, this episode is for you!
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- What is the vacancy rate? When we have a tenant turnover, need to be able to fill that spot quickly. A high vacancy rate is a big problem, stay away.
- What type of appreciation can you expect? While we don’t invest primarily for appreciation, we still like to see some consistent growth. We want average appreciation.
- What’s the trend with building permits? This data can show growth in the market. How many contractors are building new construction or renovating in the area?
- What’s going on with the market cycle? Take a good look what’s happening in that particular market. Look at mortgage rates, demand for affordable housing, housing prices.
- Is there job growth and diversity? Want to see multiple large employers: warehouses, hospitals, etc. This ensures availability and stability of tenants.
- Does it have low crime rates? At the very least, you want to see a downward trend.
- What type of property is right for you? Single family, duplex, commercial. As a buy and hold investor, I find the greatest value in SFH or duplexes.
- New construction or renovation? We focus on new construction – can buy in bulk, do large consistent projects, built-in cost segregation tax benefits. Ability to add high-end upgrades – making it a sweet spot for both the tenant and the investor.
- How do you find lenders? Using leverage strategically requires tenacity and networking. Spend time with bankers, develop a relationship, build a track record. This is work! Non-recourse financing is tied to the asset, not necessarily the investor.
- Can you find the right property management team? We spend a long time vetting property management teams. What’s their experience level? How long have they been in the market? Do they have a 96%+ occupancy rate? What’s their communication style and response time? How do they vet tenants? Property management is important piece of the puzzle, so you need a strong team. I recommend interviewing 5-7 different companies before choosing.
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
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