Before we talk about how do I invest in real estate, I think you need to catch the bug, which means reading a lot and finding out how others have done it. That means what mistakes did they make so you can avoid repeating their mistakes.
Kevin Perk in Bigger Pockets asks do you remember catching the real estate bug? “I do,” he said, “and I remember being really excited. I remember thinking that all of my worries would soon be over and all of my dreams would be fulfilled. The people I was listening to and the books I was reading were all telling me the cash would just roll in. It would be easy.” Nothing could go wrong in Los Angeles. “I saw the world through rose-colored lenses.”
“A lot of what I was told about real estate is true. It is a great way to invest and build wealth. But there is another side of the story that I had to learn from experience. I wish I had known then what I know now. So to help out those just catching the real estate bug, here are four things I know now that I wish I had known then.”
I Wish I Had Known:
- Upkeep is something you shouldn’t underestimate. All of the books I read said that you should put aside about 10 percent of your gross rents for maintenance. I am here to tell you that 10 percent of gross rent does not even come close. It just costs a lot more money to keep everything looking nice, repaired, and in good working order. How much? I would budget at least 20 percent for repairs and upkeep when examining properties to purchase.
- Tenants WILL drive you up the wall at some point. No matter how well you screen them, no matter how well you vet them, there will always be one or two tenants that will drive you nuts. And…if you rid yourself of one, another will come along to replace the one gone.
- Recapture probably isn’t what you think it is. One of the many things that is promoted about being a landlord is the income tax deduction of depreciation. Basically, recapture gives a lot of that money you saved with depreciation back to the IRS when you sell. Sure, you can avoid it with a 1031 exchange, but sometimes you really just want or need to cash out. If you do, you need to be aware of how big your tax bite is going to be because you may not get all that you thought you were going to be getting.
- Your retirement plan may not take everything into account. Have you thought about your exit strategy? How are you going to retire from being a landlord? How are you finally going to get rid of those pesky tenants and all of that upkeep?
How Do I Invest in Real Estate
Here’s a thought. If you want to be in real estate for the appreciation and the extra income, but want to avoid the four items above, why not consider investing in a partnership with a knowledgeable, experienced real estate investor. is such a real estate investor. You can also, invest in real estate through notes and deeds. We are experts in this area. We welcome your questions
We are also, seeking hard money lenders. We offer flexible terms and returns that are higher than typical banks offer for savings. If you would like specifics about projected returns to hard money lenders, please call us to discuss the kinds of deals we offer.
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