Real estate visionary, President & CEO at ABI Multifamily, and Co-founder of Neighborhood Ventures real estate crowdfunding company.
I’ve worked in commercial real estate my entire 30-year-plus career, and I believe this industry has seen a huge change in the past three years. Until recently, the people primarily buying and selling commercial real estate properties were what I call the “country club crowd” — wealthy individuals who made their fortunes investing in projects, selling for a profit, then repeating. But today, a number of factors seem to have drawn the interest of investors of all ages.
Getting started with investing isn’t always easy, however. Below are some of my investing tips for those who are new to the game:
Understand there is no secret club.
I can’t tell you how many people I’ve met who think there is some secret insiders club of real estate investors. From successful executives to a man I met a few weeks ago when his bike got a flat tire, there seems to be a common misconception that you have to know someone in the business or spend a fortune on seminars and webinars to learn how to invest in real estate. That’s simply not true.
When I met the man with a flat tire, he, like many, had the impression you had to be in a special club to find an opportunity for a rental property. In reality, you do not need to spend thousands to learn how to invest in real estate. I believe you just have to do it.
Consider the pros and cons of investing with others.
Scarcity and rising prices have spurred on a sharing economy. Apps have been created that let people share cars, swimming pools and parking spaces. You can even buy fractions of stocks. So, it only makes sense that this sharing economy now extends to vacation homes and investment properties. Technology has created efficient ways to not only buy a piece of an investment but also to track that investment from purchase to sale and payout. Through these shared investments, each investor has partial ownership and shares in the profits and benefits. Real estate partnerships; fractional ownership or co-ownership; real estate investment trusts and real estate crowdfunding are a few methods of shared real estate investments that I’ve found are gaining traction. (Full disclosure: My company, Neighborhood Ventures, provides real estate crowdfunding solutions.)
Of course, when you invest with others, keep in mind that the person you’re working with will make or break your experience. From my perspective, it’s better to have a great person finding mediocre deals than finding great deals with someone who isn’t trustworthy, hardworking or focused. It can be difficult to be a partner. Partnering in any way has its challenges, and the breakups can be very difficult. Remember: It’s harder to unravel things than put them together.
Do your research, and proceed with caution.
I always tell people new to real estate investing to be careful about how you spend your money to become educated. I assure you, it does not have to be too complicated. That said, you must do your own homework. Don’t take someone’s word if they tell you an investment property is a good deal. Look at sales and rent numbers, drive around the neighborhood, talk to people in the area. If something looks too good to be true, figure out why it hasn’t been purchased already. The more you understand your rent or neighborhood, the better you will be able to run that property.
Get official documents drafted.
If you do partner with anybody in any way, spend the money to get official documents drafted by a recommended real estate attorney. Finally, as a multifamily broker with decades of experience, I’ve seen firsthand the importance of leveraging the research, insight and assistance that can be found from experts in your area.
Start small, and stay within your budget.
Don’t bite off more than you can chew. Start small either with a single-family rental or duplex, or you can go in with a few friends on a joint investment. The key is to grow your investments at a pace your budget can handle. As you begin to reap the rewards, your investments and projects can scale accordingly.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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