How to Build Massive Passive Wealth with Rentals

dollars-31085_1280I’m going to let you in on one of my wealth building secrets…

This is something I’ve actually been doing for years, and it’s also a strategy that other super successful real estate investors use. What is it?

I think most people know that real estate has long been used to build massive wealth. Even billionaire moguls like Warren Buffet use it as a wealth-building vehicle. So what is the secret behind one of the most effective ways to build a passive income stream? One that can be set to autopilot to generate returns month after month?

Buy and holds. Yep, rental properties are one of the best ways to build your income without having to do a lot of the heavy lifting. If you haven’t thought of becoming a landlord before, the time has never been better.

Why A Passive Rental Income Stream Makes Sense

Passive income is different that an active income stream. Passive income is money that you earn without even paying attention to it. You earn while you sleep. And that’s exactly what rental properties can do for you. There are very few truly, 100% passive income streams. The majority require some initial effort to set everything up, and that’s the case with real estate. BUT, once you put in the work, you really can just let it run while you collect the checks, especially if you hire a property management company to handle the day-to-day issues with tenants.

Rent rates go up with inflation. Right now the percentage of people renting rather than buying is still high, whether it’s because of a bad credit rating, job changes, life changes, or a past foreclosure. The ever-influential Millennials still prefer to rent rather than buy a home, as a whole. Retiring Baby Boomers are even testing out different areas for retirement, choosing to rent before committing to a home purchase. The seven-year foreclosure credit freeze is over for some who went through the housing crisis, but for others, their time is not up yet. Homeownership rates are still near the lowest rates of the past 20 years.

Some markets don’t make as much sense for rentals anymore because rent rates have skyrocketed out of reach for prospective tenants, making home ownership the more affordable option.

RealtyTrac found that the average potential return on residential rentals to be just shy of 9%, which is actually down a bit from a year ago. Rent rates have gone up about 4%, which is good news for passive investors. As of 2013, the average rent rate in the US was just over $950.

Experts agree that rentals remain a smart real estate investing strategy. Daren Blomquist, vice president at RealtyTrac explains, “Buying rentals continues to be a brilliant strategy that allows investors to hedge their bets in a real estate market shifting away from homeownership and toward a sharing economy.”

Demand for rental housing is expected to increase, according to Rent.com.

It’s All About Buying Right

Becoming a successful buy and hold investor will involve some work, particularly up front. But the time and energy you invest will be worth it when you can start building your retirement or investing portfolio towards complete financial independence.

With rental properties, it’s all about how you buy the property. It’s important to buy low so that even after any repairs or rehabbing you do, you’re able to recoup your investment through rent payments. There is also many opportunities to purchase a “Turnkey Rental Property” which means that the property has already been renovated and tenanted by another investor.

Ideally your purchase should be made using bank financing, private money (other people’s money), self-directed IRA money, rather than your own money cash. We have financing sources who will lend up to 80% of the cost of the property, leaving only 20% that you have to come up with. You also want to minimize your risk as much as possible by researching the market you’re looking to own rental property in, researching rent rates, having a solid rental agreement in place, and also having a contingency plan in the event of vacancies.

Once you buy the property, you may need to fix it up to make it move in ready for tenants, manage the rental (yourself or outsourced to a trusted management company), and maintain it. If you purchase a “Turnkey Rental Property” the renovations will already be completed, the tenant will already be in place with a signed lease, and the property will come with a professional property manager to look after it, collect the rents, deal with any maintenance issues, etc. etc.

With buy and hold, you won’t get rich overnight. It will take work, but once you get that tenant in place and can begin to see some returns on your investment, it’s very much worth it, and before long you’ll be looking for the next rental to add to your portfolio.

It’s all about buying the right property, the right way, and knowing the numbers in the deal… all the numbers. And like with so much in the world of real estate investing, it’s about finding the right mentor. And that’s where I come in.

 

 

Basic Things Every House Flipper Needs to Succeed

construction-work-carpenter-toolsYou buy a house, renovate it and then sell it. This is what happens when you flip a house.

It sounds easy. So is this all there is to it? Believe me, it isn’t. There are a lot that goes into each of these three steps and you need to have all the right information before you venture into the business of residential real estate flipping.

Professional flippers who have been in the industry for years and celebrity flippers who we see in shows racking up good deals can attest that there’s more to it than just buying, renovating and re-selling.
Before buying that house, make sure you read through these house flipping rules to make the most of your investment and make each one a residential real estate flipping success.

Buying Residential Real Estate

To profit from your investment you need to buy smart. Everybody knows that impulse buying will not yield great results. You need to spend a good amount of time finding all that you can about a property before you make an offer.

1. Conduct thorough inspections

Don’t take everything at face value. Inspect the property diligently so you’ll know exactly what you’re getting and have a close estimate on what you need to budget for the renovation.

2. Consider the location as much as the property

Even if you do an excellent job at renovating a house, if it’s located in a neighborhood that’s in decline, you will not get a good deal out of it. Go for properties in growing neighborhoods. Properties in neighborhoods that people want to live in will sell faster and at a higher price.

3. Avoid buying at market value

Look for properties that are selling below market value as this will give you instant equity. If you buy a property at market value, you can’t immediately re-sell it at a higher price as you’ll need to wait for the market to catch up.

Renovating Residential Real Estate

When it comes to renovating your residential real estate, remember these three points.

4. Focus on the kitchens and bathrooms

Kitchens and bathrooms are the prime selling points of a property. Most buyers decide on buying a property depending on these two rooms. Make sure that you focus your renovations on the kitchens and bathrooms first.

5. Don’t personalize

Remember that the house is not for you but for a potential buyer. Avoid personalizing the renovation or else it might not sell. Go instead with simple and universal designs that will attract a wide market.

6. Consult professionals

Don’t hesitate to ask help from professionals. Whether it’s for repair or home staging, it’s always best to let the professionals handle them. Trust me. Your investment will pay off. There’s a huge difference between a house styled by a Do-It-Yourselfer and a house styled by a professional.

Selling Residential Real Estate

7. Create a marketing plan

Market your property using as many platforms as you can. Follow traditional marketing methods like giving out flyers, putting up signs and posting on print ads. Also, use modern strategies like marketing your property online through social media and blogs.

8. Have a backup plan

Things may not always go your way so it’s best to always have a backup plan. Properties might not sell right away so your carrying costs will pile up. Buyers might also back out at the last minute. Make sure you have something you can fall back on once things don’t go as planned.

House flipping is something that involves a lot of hard work. If you just do it haphazardly, then you will only lose on your investment. It is important to take your time and give your all to each property so you can make it into the best that it can be.

Take note of the tips above and always follow them to make each of your residential real estate flips a success.

How to Find a Real Estate Investing Mentor Who’ll Help You Succeed

leadership-913043_1280Imagine you are blindfolded. You struggle your way through a room, not really knowing where you are, where you’re going and if what you’re doing is right or wrong.

Now, in this situation what you need is someone to guide you. Someone who will give you directions and help take you where you need to be until those blindfolds are taken off and you can see.

This is what it’s like to enter the world of real estate investing as a novice. That blindfold is your inexperience and that guide is your real estate investing mentor.

So how do you find real estate experts who can be your mentor?

We’ll help you find an effective guide who will guide you so you can successfully tread the real estate investing business.

Understanding Mentoring

First things first. You need to understand what mentoring is and isn’t. This will set your expectations on what having a mentor provides and will also give you an insight on what it is that you should do during the whole mentoring process.

So what is a mentor? A mentor is defined as “an experienced and trusted person who gives another person advice and help.” When it comes to a real estate investing mentor, this can be someone who has an extensive knowledge about real estate investment and who’s had years of experience with it. This person is then willing to share his knowledge and expertise to you by offering advice and, in some cases, providing training. He is like a teacher in a class who helps expand your knowledge on a specific subject and who answers questions you might have about it.

So what is a mentor not? A real estate mentor is not someone who makes the decisions for you and who does the hard work. This is your job. You are like a student in a class. You are the one who will do your assignments, make your projects and answer your exams. Your teacher will not do this for you. In real estate investment, your assignments and projects are the preparations you need to make in setting up your real estate business and your exams are the different trials you will undergo in doing so. And you are the one who will need to do all the work needed to go through all these, not your mentor.

Choosing a Real Estate Investing Mentor

Now that you fully understand what mentoring is and isn’t the next thing to do is learn how to look for a good real estate mentor. To choose a good mentor you need to know what qualities he should have.

Extensive knowledge, years of experience and a good background – these are the three most important things that a mentor should have. You don’t want to waste your time with a mentor who may not really know what he is talking about. Also be wary of individuals or companies you’re not familiar with who are offering mentoring programs. Check them out online and get testimonials from people who they have mentored.

Another important thing you need to keep in mind is this: a mentor shouldn’t be making false promises of getting rich quick. Good mentors know that succeeding in the real estate investment industry takes a lot of hard work and there’s no universal formula you can follow to quickly become successful. So if someone makes grand promises that are too good to be true, you better think twice about asking him to be your mentor or enrolling in their training. A good real estate investor will discuss both the benefits and the risks of getting into the real estate business so you can rightfully prepare for what will happen along the way.

Directions on where to go and what to do – this is what you need and this is very important when you can’t see. In finding the right real estate investing mentor, you’ll be guided when you’re just starting with your real estate business.

 

Tips for Financial House Flipping Success

building-joy-planning-plans-710x250Let’s talk about money.

Money is the one thing that you need when flipping houses. If you’re successful, it’s also one thing that you will get a lot of in the end.

Because money is a key component in your real estate investment, you need to know how to handle it properly. Whether you will tap your personal finances or get help from financing institutions, there are a number of things that you need to know.

Take a note of these different tips to get a better handle on your finances and profit from flipping houses.

1. Take care of your finances

Before you look for a property, you should first take care of your finances. There’s no point spending so much time looking for a good property when you can’t really buy it and flip it. If you have limited finances, you also won’t be able to offer a good deal on a great property and of course won’t have finances to flip the house. So get this sorted out first before you do anything else.

2. Do the math

After you’ve set your sights on a few properties that you want to flip, you need to do the math. Know the after repair value (ARV) and estimate the costs of repairs and renovations properly. This vital part of the house flipping process will help you determine if a certain flip makes sense financially. It will let you know if the project will give you a good profit and help you decide whether or not you should do the flip.

So what information do you need when flipping houses? Get the selling price of similar properties around the area. Find out about the current state of the property, what repairs are needed and what enhancements are necessary. Then shop around to find out how much all of this work will cost you. Lastly, do the math.

3. Always stick to your numbers

After you’ve got the figures, ingrain this in your mind. A good rule of thumb when flipping houses is to never buy a property and flip a house that’s more than 70% of the ARV minus the repair estimate. Don’t buy a house and make repairs that are more than you can afford. Always remember your numbers as this is your baseline. You can go beyond this of course, but know that if you do there’s a risk of seeing little to zero profit on your real estate flipping project.

4. Consider getting help

When flipping houses, you may want to consider getting help when you need it. While there are a lot of investors that have managed to do everything on their own, it is, of course, easier if there’s someone who can help you with some things occasionally. Especially if there are some things you’re not particularly good at or simply don’t have the time for, you can hire someone for this. If you don’t have the funds to hire, you can offer them a split of the profits per deal.

Bear in mind though that if you do decide to bring someone into the equation, make sure you have a written agreement spelling out exactly what the other persons’ responsibilities are and what happens if that person doesn’t hold up their end. Partnerships have positives and negatives so go into them with Eyes Wide Open.

5. Don’t get greedy

So you’ve done all the hard work, spent a lot of time fixing up everything and now your property looks great. Maybe even better than you’d imagined. After seeing the finished product, you may be tempted to jack up the price. Don’t do this. Never overprice your property as you will risk it not selling. If this happens, you will have to hold on to the property for a longer time and this will mean carrying costs piling up. Always price the property appropriately when flipping houses.

With the right systems, flipping houses can be a walk in the park. But trust me, it’s not for everyone. You will need to invest a lot of time and effort into the project and make sure you get the financial part right so you can enjoy the fruits of your hard work. Following these tips above though is already one step towards becoming successful in your real estate flipping project.