Does anyone have a suggested strategy?

Question

I'm currently saving to purchase my first SFH. I want to learn how to invest in real estate full time, mainly rental properties. Do any of you experienced investors have a suggested strategy in which I can eventually invest in real estate full time?

Jon Holdman · Answer

First, you need to figure out what you mean by "invest in real estate".  Broadly, the different strategies fall into "real estate jobs" and "investing".

Investing in real estate is not that different than stocks, bonds, precious metals, art or whatever.  You have money you want to put into some investment with the expectation of a return.  Real estate has the extra twist that its possible to use loans for a big chunk of the total price.

Many times, though, when people talk about "real estate investing" they really mean a real estate job.  Something like being a broker or a wholesaler (same job, IMHO), a developer, a fix and flipper, a property manager, etc.  Some of those are jobs where you can get paid by someone else.  Most are commissioned sales, though, and you have to bust your hump to get paid.  Some, like developing and fix and flipping, require a pretty good kitty of your own cash.  Some can make you quite a bit of money if you're good at the job.  A statement you could make about many jobs.

If you're wanting to invest (i.e., put money into an investment) or if you want to do one of these businesses that require money, you need, well, money.  There's no miracle, short of winning the lotto or having a rich relative you never heard of die and leave you a big inheritance.  To accumulate money you spend less than you make.  End of story.  If you don't do that, you won't accumulate anything.  If you're struggling, you can decrease your expenses or increase your income.  Some of these RE jobs, especially wholesaling, are often held out as a good way to make an easy buck with minimal money required.  I'm dubious.  But the notion of a second job is valid, if there's nothing you can do with the job you already have.

Living off your capital, regardless of what you have it invested in, is an ultimate goal of many of us.  The whole retirement industry is set up to do just this.  I assume you mean you want to do it sooner than retirement.  That just means you have to work harder, accumulate more cash, and make good investments (the hardest part of this equation).

Rental real estate really has two parts to the income.  One is from the property itself.  That's the cut of the income you'd make if you have someone else managing the property, or have your money in a REIT or NNN property.  The other cut comes from your efforts at managing the property.  That is, if you're willing to be hands on, and collect the rent, deal with troublesome tenants when they misbehave (like not paying the rent), showing your properties, and dealing with the maintenance, you can earn the property managers cut of income, too.

So, two big steps:  1) find a way to accumulate some cash, and 2) figure out what you want to do with the cash.

Account Closed · Answer

I agree with Jon.  Sounds like you may want to buy and hold property.  You will certainly need cash and patience with this strategy if you want it to provide a full time income.

Buying rental properties is a great way to build wealth and cash flow.  It does require cash for both purchasing new property and to hold in reserve for capital expenses and potential long term vacancies.

You will probably want to look at an intermediate step.  You may want to work in a RE profession that provides cash and investment opportunities.  You might even want to consider wholesaling.

Besides cash, you need good credit and a willingness to work hard to succeed.  Forget the infomercials that tell you that you can get rich quick with only part time or no effort.

There is lots to learn and you have to work at it.  There are lots of investors here willing to help with questions and share experiences.  This is a great place to learn RE so dig in if this is your cup of tea.