A simple way to become a Real Estate Investor!
by Kaushik Sirkar, Chandler REALTOR®
Chandler AZ Real Estate
Real Estate Investing. I suppose, theoretically, everybody would like to be a Real Estate Investor. Why? This is a path that is believed to result in fame and fortune! (OK, at least fortune!)
Who is a Real Estate Investor? There are certainly many definitions including...
- A rehab flipper?
- An owner of an REIT?
- A landlord who owns investment property?
Who can become a Real Estate Investor? Once again, there is no definition - I list a few broad examples below
- stay at home mom
- fresh college graduate
- lawyer
- high powered wall street executive
So as you can see, there is no set blueprint. You don't necessarily have to be earning X dollars, living in Y city and have Z background. With soooo many divergent paths for Real Estate Investing - where does one begin? Let me propose a very, very simple path. This path doesn't work everywhere. Definitely not in high $$ cities like San Francisco or New York. But places like Texas, the midwest and various other locales that aren't ridiculously expensive - this plan works!
Step 1a - Buy your first home. If you are unable to afford a starter home, for you to LIVE IN, then stop reading. I can appreciate someone in San Francisco not having an extra 800k lying around for a modest home. No problem. But if you are in a market where you can afford a starter home, do it. What is a starter home? Its not a gazillion square feet. It does not have granite, it doesn't have Italian marble nor does it have a 5 car garage or a pool. It is a simple starter home.
Step 1b - While searching for that first, simple starter home, do a little bit of research. Find out how much the typical 3 bedroom, 2 bath, 2 car garage home (aka your simple starter home) rents for in your city/town. WHY? Simple....in case you ever had to move, and for SOME STRANGE REASON didn't want to sell it - could you rent it out and cover your mortgage payment?
Step 2 - After living in said simple starter home for some time, ideally at least a year, decide if you are ready to make the leap. Yes, you already own a home, so technically you are investing in Real Estate. But you aren't a Real Estate Investor, per se, yet. If you are ready to take the leap - TIME TO MOVE!
Step 3 - Don't move into a mansion. No granite, no italian this, no fusia/suede that. Buy another simple starter home. Put up your first simple starter home for rent. Heck, put your first simple starter home up for rent BEFORE YOU BUY THE 2nd home. Make sure you have a tenant lined up, or at least a fair amount of interest, before buying the second home. Guess what? You are now a landlord and own investment/rental property.
Steps 4 - infinity - RINSE AND REPEAT, over and over again.
Now mind you, there are many things to consider before said plan will work. First off, you must be in a relatively inexpensive area. You must also consider the fact that lenders will only count ~ 75% of your Rental Income so eventually you do want to have some positive cashflow. You probably also need a decent income, good credit and of course enough funds to purchase that first house. But is this a possibility for many folks given the correct set of circumstances?
YES!!
For various other bits of information regarding Real Estate Investment, please check out previous blog entries of mine regarding some important multifamily property financial terminology as well as a general outline I put together on Real Estate Investing.
Thanks for Reading :)
Kaushik Sirkar, Chandler Realtor®
http://www.homesphx.com
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