3 Simple Ways to Start Investing in Real Estate

What is the best investment to make? Is it stocks, bonds, or mutual funds? The answer might surprise you. Real estate has been one of the most proven investments throughout history.  It’s not much of a surprise; many know of someone that got wealthy investing in real estate. The majority believe investing in real estate is a good idea, but most don’t believe they have the money to start or know where to start. 

It’s why I decided to write this blog. In real estate, you must be creative, creative strategies can double, triple, or quadruple your return. That is why I wanted to share three easy proven methods to start investing in real estate with little money or knowledge. By being creative, you can start investing in real estate passively and with minimal effort.

Strategy # 1- House Hacking

House hacking is a term coined by the famous real estate investing website biggerpockets.com. If you haven’t heard of the website, make sure you check it out, they have a great forum with many active investors that share knowledge and ideas. I first heard this term on one of their podcasts by Brandon Turner. The strategy has been around for hundreds of years, but it finally has a name.

The house hacking method simply means renting out parts of your house to generate income and offset some of your mortgage and costs. Of course, you could have roommates that share your expenses in a single-family home; however, I have often seen this strategy implemented on a multi-family property with two or more units.

You are required to live in one of the units but, this strategy allows you to obtain ownership rights to a multi-unit for a minimal downpayment. Financial institutions consider five or more unit buildings as commercial, but you could buy a residential 4 unit for as little as 3% down. Compare this with a 20-25% downpayment that would be required if you are an investor owner.

Purchasing a home that you could house hack provides income that you could use to pay for, living expenses, mortgage, home improvements, or help fund your next deal. The property will also appreciate in value while your tenants help you pay down your principal.

Strategy #2- Live- In- Flip

Live in flipping is an old strategy that has been around for hundreds of years but again, never had a name until the internet. The strategy simply is like it sounds buy and live in the home while you flip it. This strategy is ideal for all the DIY’ers and handyman that don’t mind getting their hands dirty.  

Most home buyers are looking for move-in ready housing, but the move-in house comes at a cost. If you have great taste, a vision, and are ready to roll up your sleeves, this strategy could net you huge returns, and be tax-free.

If you are ok with a little dust this strategy could net you great gains with very little money down, vs a traditional house flip.

I would recommend using a real estate agent that is familiar with flipping or is an investor themselves. They could point out great homes that need a little TLC and could resale for great gains.

When you are live-in-flipping you must keep these two things in mind, 

1. You are improving the home to what the market desires, not your taste or design. 
2. Understand your limitations. Learn when to hire and when you can DIY. A poorly rehabilitated home can show up in home inspection and could cause thousands of dollars after repairs

Strategy # 3- Simply buy a house

In real estate, you must be creative, and this is why I wanted to introduce the last strategy. If you are not up for flipping or hacking your own home but want some hands-on investing in real estate then simply buying a house may work best for you.

Now I know that most people wouldn’t consider this a strategy or creative but simply putting your name on a deed could start you off in your investment career. The largest expense in most households is housing. By purchasing your own, you could be living rent and mortgage-free in as little as 15 years. Think about how much money you could save if you didn’t have you pay your rent or mortgage.

Having a free and clear home also provides you with the ability to borrow against the home. Having a line of credit of $300K-$400K would be a great start to your home flipping or investment career. Plus, it’s as easy and passive of a strategy as it gets.

Your first home could also provide you with the needed funds to purchase your second home and forever home. Most homeowners don’t start to buy buying them forever home. They simply buy what they can afford then sell and use the proceeds to purchase their second larger home and so on.

Conclusion

Real estate has been an important part of the US economy and growth. The United States government promotes homeownership because its provided wealth for all Americans alike. By using a government-backed loan, you could start investing in real estate for as little as 3% down. The tax law also allows you to realize a capital gain of up to $500k tax-free. Think about how favorable these terms are, where else can you realize a gain of up to $500k without uncle sam dipping in your pocket? 

These have been 3 easy strategies to start investing in real estate, There are many ways to start investing and even some that require no money down. It’s often the headline that attracts many people to those strategies but those strategies require marketing, selling, and negotiating.  These strategies on the contrary require very little knowledge or money.

Using the right realtor to help you find the perfect match is also crucial in a successful investment. The realtor can use data and sold history to determine the purchase price, estimate repairs, expected rental income, capital expenditures, and estimate returns.

If you are in the Chicagoland area and would like the help of realtors that are also investors please reach out, email, call, or text.