Real Estate Investing Cheat Code
Table of Contents
While real estate investing can be profitable, it can also be intimidating for novice real estate investors. There are plenty of options when it comes to real estate investment strategies as well as the types of properties you can invest in. New investors may not know where to begin.
Real estate investing only works if you know what you are doing. This is why beginners need a guide that will help them get started.
There are many reasons to consider real estate investing. Among the benefits are appreciation, cash flow, leverage, and tax benefits. It can help investors diversify their portfolio as they build wealth and work towards financial freedom. [1]
Here we will discuss some of the most important tips that will help beginners make smart real estate investing decisions early on.
Tips for the Novice Real Estate Investor
Real estate investing is a good way to make a profit, but it is not a “get rich quick” scheme. This means investors who want to succeed in real estate have to put in some extra effort and due diligence in order to understand what really works and what doesn’t. This is the key to a long-lasting business.
Get educated about the ins and outs of real estate investing. There are many ways to participate in this particular type of investment vehicle. The good news is that investors do not have to pay thousands of dollars to learn the tricks of the trade.
Just keep in mind that there is no easy solution or strategy that will work for everyone. The tips you pick up from someone else may not necessarily be applicable for you. A strategy that works for someone may not work for you. There are many factors that go into real estate investing. But with experience, you should be able to identify high quality investment opportunities.
There are plenty of resources that can help investors learn the basics of real estate investing. There are books, websites, podcasts, and mentors that can act as valuable sources of information.
If there is something you want to learn about a certain type of property, there is likely an article or a book written on the topic. You can also learn more about important real estate math terms like income, expenses, cash flow, return on investment (ROI), etc. [1]
If you are too busy to read, listening to podcasts and audiobooks or even watching guides online can be helpful.
Find a Real Estate Mentor
As for mentors, they can provide you with updated information based on real life knowledge and experience. They can also give personalized tips based on your current situation and investing goals. There are dozens of professional mentors in real estate who charge for their services, but there are also those who are willing to give advice for free. Look at local investors before looking online for paid mentorship. [1]
Some mentorships happen organically. An avid real estate investor with plenty of experience may choose to help a newbie with the simple goal of passing on their legacy or just having someone with similar interests to talk to. You can build these relationships through networking.
Mentors may offer real estate investing advice for free if you strike up a friendship or offer something valuable. Perhaps you have investing knowledge when it comes to a different type of investment vehicle. Even if your mentor is more experienced in real estate, you may be able to offer value in other areas. [1]
You do not need a paid mentor or guru to succeed in real estate, especially since there is plenty of information available for free online.
Choose Your Real Estate Niche
What makes real estate investing so unique is that there are many different ways to get into it. As a real estate investor, there are plenty of ways to make money. The key is to find the one that suits your investing strategy. Specializing in certain property types will make you an expert, which will enable you to make better investment decisions. Once you have chosen your ideal niche, you can narrow down your focus and work on becoming an expert.
Some of the most common real estate niches are the following: raw land, single family properties, multifamily properties, commercial real estate, and real estate investment trusts or REITs. Each of these have several subsets, but you have plenty of time to learn about them once you have chosen a niche. [1]
Raw land is self-explanatory: it’s just basic earth. But land can be improved, leased, or rented to generate cash flow.
Single-family homes are some of the most common investments for first-time investors. Single-family real estate properties do not generate as much income as multifamily properties because they only have one rentable unit. However, they are easier to manage for first-time landlords.
Multifamily properties like duplexes, triplexes, four-plexes, small apartment buildings, large apartment complexes, and condominiums can generate a much stronger and more consistent cash flow because they have multiple units. Due to the strong cash flow, investors can hire property managers to handle the day-to-day operations of the real estate. It is a solid investment for smart investors.
Investors may even look into things like opportunity zone investing. Since the government began upping the incentives for those who invest in these properties, more tax-savvy investors started purchasing their own opportunity zone rentals to enjoy a significant tax reduction. An opportunity zone rental property may help investors defer taxes to secure their hard-earned profits. [2]
Another alternative is investing in REITs. A real estate investment trust involves multiple investors pooling their resources together to purchase large real estate properties that they normally would not be able to afford. But unlike syndication deals where you can choose which deals to participate in based on the real estate property being purchased, investing in REITs does not allow you to choose the property. The REIT will choose the property and distribute profits to individual investors later on. [1]
Finally, commercial real estate investment properties come in all shapes and sizes. Some commercial investors rent buildings to local businesses. Others opt for larger spaces like megastores and supermarkets.
Figure out your niche and start learning the specifics of it.
Figure Out Your Investment Strategy
Real estate investing is very flexible in terms of the ways you can invest your money into the various niches mentioned above. Some of the most common strategies include: buy and hold, flipping, and wholesaling.
Buy and hold is the most common form of real estate investing. It involves buying a property and then renting it out for an extended period. Most investors will go for this because it’s a very simple strategy. The concept is familiar to most people. However, you need to keep in mind that being a landlord is a huge responsibility.
Being a landlord means you have to collect rent, handle repairs and renovations, deal with emergencies, accommodate tenants, etc. A single-family home may be easier to manage, but multifamily properties tend to bring in a stronger cash flow. This is why specific strategies work better for certain investors than others.
Flipping a property is another option. It is also a popular tactic, and it involves buying a property at a discounted price, improving it, and then selling it for a profit. The goal is to “buy low, sell high”. This is not something we can consider a passive investment. It is basically a full-time job. [1]
Finally, wholesaling involves finding real estate deals, writing a contract to acquire it, and then selling the contract to another buyer. [1]
Wholesalers never own the piece of property they are selling, generally speaking. Instead, they find great real estate deals, put them under contract, and then sell the contract for an assignment fee.
They essentially serve as the middleman whose job is to find real estate deals. Because the wholesaler never owns the property, they do not have to worry about rehab costs, banks, tenants, loan fees, contractors, etc. This is why the strategy has become so popular. [1]
Find Investment Properties
Choosing the right property for your investment strategy is essential. There are plenty of factors to consider such as the property’s location, condition, lot size, property size, neighborhood, number of units, cap rate, cash flow, and appreciation potential.
The number of criteria you look into depends on what you consider important. It all comes down to personal preference.
Investors usually find potential investment properties through networking and word of mouth. However, you may also look at the multiple listing service or MLS, which is a collection of properties for sale by various brokers across the country. With the MLS, you can find your ideal investment property.
Cheat Code for Accredited Real Estate Investors: Try Multifamily Syndication
Some investment opportunities are not available to the public. For example, a lot of real estate syndication deals are exclusive to accredited investors.
Real estate syndication deals are passive investments, meaning investors can just let their money work for them. Unlike flipping houses or renting out apartments, you do not have to get involved with the real estate syndication. You can enjoy all the benefits of owning a real estate property without the headaches of being a landlord.
A syndication deal is similar to REITs wherein multiple investors pool their funds together to purchase a single real estate property. A syndicator serves as the general partner (GP), locates the real estate investment property, coordinates the funding, and looks for accredited investors who will participate in the syndication. These accredited investors act as limited partners (LP), providing most of the capital needed to buy the property. [3]
While this can be done with any real estate property, multifamily syndication is the most popular because of the strong and consistent cash flow.
This approach solves a lot of problems associated with the traditional buy and hold strategy. For starters, it eliminates the large barrier to entry that prevents most investors from participating in multifamily investing. Regular investors typically do not have the funds to purchase large apartment complexes on their own, especially since these properties usually cost millions.
Even accredited investors who have the income and net worth for it may hesitate to buy a large property for that amount. But with a syndication deal, the risk is smaller because you can purchase the property with other investors.
The syndicator also handles property management, which means accredited investors do not have to worry about becoming a landlord. In fact, this is a completely passive source of income. Investors participating in the syndication get their share of the monthly cash flow as well as a portion of the equity upon resale, depending on the deal structure. [3]
Multifamily syndication deals are exclusive to accredited investors. If you are interested in multifamily syndication, work with BAM Capital.
Why Invest with BAM Capital for Multifamily Real Estate Investing
BAM Capital can help you enjoy all the benefits of owning a large multifamily real estate without having to put in any of the work. Multifamily syndication is the perfect investment vehicle for accredited investors looking for a passive income.
BAM Capital is an Indianapolis-based syndicator with a strong Midwest focus, whose mission is to help investors grow their wealth through high quality multifamily real estate properties. This company prioritizes Class A, A-, and B++ multifamily properties with proven upside potential and in-place cash flow. [4]
Accredited investors can rely on BAM Capital’s award-winning multifamily investment strategy that creates forced appreciation and mitigates investor risk.
BAM Capital is a vertically-integrated company, which means it can handle every step of the process from start to finish. They will negotiate the purchasing and financing of the real estate property on your behalf. [4]
No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions. Accredited investors can schedule a call with BAM Capital and invest today.
BAM Multifamily Growth & Income Fund III
BAM Capital created this fund in order to yield consistent and reliable cash flow, long-term appreciation, and accelerated tax benefits. The fund aligns with BAM Capital’s demonstrated track record of successful multifamily investing by continuing to implement our signature investment thesis, now in fund format. The fund aims for greater overall returns and lower risk through a multi-asset diversification strategy.
- Consistent passive income
Lower-risk assets with in-place cash flows with the ability to distribute preferred return after acquisition.
- Significant tax benefits
A cost segregation analysis allows for accelerated deprecation to years of ownership. This large passive loss gets passed onto investors through a K1.
- Vertically integrated company
In-house property management and construction allow for predictable cost reduction and value add.
The post Real Estate Investing Cheat Code appeared first on BAM Capital.
source https://capital.thebamcompanies.com/2023/02/real-estate-investing-cheat-code/
No comments:
Post a Comment