BP Community, I'm hoping you guys can provide some insight into my situation. I'll start first with my long term goals.
Long term: I would like to make full-time income from residential properties I own and rent. Start with small properties and over time acquire more and/or trade up for larger multi-unit properties. I currently have zero properties - brand new to this. Please don't ask me what "full-time income" means because that changes over a lifetime. I'm currently married with no kids, but that will change. I don't need to be stupid rich, but I would like to be financially comfortable with the freedom to live my life on my terms. Nothing crazy.
With that being said, for the past 8 years I have been training college athletes, helping them to become faster, stronger, etc. The hours were awful and the pay was awful. Most jobs hover around $30-45k per year while working 60-70 hours a week. I enjoyed aspects of it but there was zero life/work balance.
With my long term goals in mind, I believe becoming a real estate agent is the best approach to learning the ropes of the real estate world. However I do not have an interest in being a real estate agent for decades. I simply see it as a way to gain knowledge and lessen the learning curve for real estate investing. I'm hoping it could also help me make decent money (i.e., more then $30k) to help save for down payments on invest properties.
Leading a life with balance (not working all the time) is important to me though and my biggest fear is walking into a job with the same hours that I had before. I've been told that residential real estate has very bad hours (evenings, weekends, etc) and can be a grind to make a decent living.
Conversely I've heard differing thoughts on commercial real estate. I've heard that it's a better life/work balance because the hours are more predictable and weekends aren't often required. However I've also read that commercial real estate is a huge grind and "only the strong survive / dog eats dog" type of stuff. All the info online about commercial real estate makes it seem far worse then residential, yet I've had the owner of a very successful private real estate brokerage tell me that commercial is a much better life then residential.
With my long-term goals in mind, I would greatly appreciate any insight people could offer. I realize it's a bit vague (I'm new to this, remember), but anything is helpful.
The first thing that comes to mind for me is spend time learning who to wholesale properties, build income and cash reserves and start your buy and hold career using your profitable wholesaling venture to fund the whole thing.
@Daniel DiGiacomo I appreciate your thoughts, however I've read a number of posts on BP about how difficult wholesaling is, especially for newbies. I'm not completely opposed to the idea, or saying it's a bad approach, but I also need to make a living. I can't afford to take months to learn wholesaling and maybe create income. I'll also be living in Santa Fe, NM which seems to me like a small market.
I'd be interested in hearing the thoughts from people about residential vs. commercial real estate, based on my original question.
Hi @Ian Lockwood !
It's true. Buying and selling commercial real estate is Monday - Friday 9-5. MANAGING commercial real estate is 24/7 - depending on how much you have. The more you have, the higher the likelihood of having to respond to a false fire alarm because someone forgot to put the system in test mode, or dealing with a stolen backflow preventer, or whatever the case may be. So yes, there's work life balance there if you hire a property manager so you don't have to deal with the day to day issues.
It's also true that it's a little more difficult to get into commercial real estate (CRE), simply because the property values are higher than residential property and lending for commercial property is not as easy to obtain for 100% of the property value as it is in residential real estate. Lenders likes to see 75% or less LTV. I don't know what the CRE world looks like in Santa Fe, but around here there is a lot of "smaller" assets...$100k+ There are triple deckers with retail on the first floor and two apartments above and 3,000 sf retail buildings.
Residential is easier to break into, but there should be plenty of opportunity for small commercial real estate properties if you have enough money to put into it.
Oh...as far as selling commercial real estate. Just make sure you find a really good mentor. If you don't you'll have to study hard on your own. You don't necessarily need to land a job at Cushman & Wakefield to make decent money. There are plenty of boutique brokerages that make bank. Some brokerages focus on a particular type of property or a particular client base or region. Shop around.
First I would learn what type of commercial property fits your personality and bank account. From my own experience, I've had a progression that changed as my personal reserves and risk tolerance ability changed. The beauty of all commercial properties is the ability to force appreciation. Buy something partially vacant or below market leases, fill it or sign new leases and the value goes up. You can start with small apartment complexes, quads, etc. If you buy right you should be cash flowing from day one. You will still need to have a reserve for large capital expenditures like roof, boiler, etc depending on the size of the building. However you will also have steady rents. Next step up would be small retail, office. Vacancies are longer, broker fees to fill spaces are higher, and tenant concessions can be large so higher reserves are needed. However once you get tenants and sign them to multi year leases, the headaches are much less than an apartment building, in my experience. Lastly, you go to the commercial space that Joel Owens specializes in which are big box stores with really long leases but low cap rates. That's more of a capital preservation strategy in the later years. I come out to your area about once a month. Maybe we can arrange a sit down and drive through the city looking at potentials.
I would start looking for some landlords that are done. Ones that want out bad enough to seller finance. Offer them a decent return with you taking care of everything. They will see it as an annuity. Try to amortize the loan over ten years. That way you can start building a portfolio of properties. After a while you may be able to bank finance your portfolio and get extra money to buy more rentals. Before you know it you will have an empire.
I do not like residential either. When I first entered real estate over a decade ago I was in the restaurant business side. Very long hours as an owner operator etc.
First year or two in real estate I did a few residential deals and couldn't stand it. I enjoy businesses and investments etc.
Basically I review hundreds of properties a week for clients with offering memorandums to find the few that are good deals. I do a bunch of analysis and number crunching. If you go to work for a commercial firm they will generally take 50% of your money but you will get a secretary and research assistant etc. They generally put you on teams where they take volume listings for very low commissions. They try to sell buyers on the listing whether it's a great deal or not.
My niche is very different. I do some listings but work with buyers that have capital to understand the process and locate the deals to buy. Most large brokerages will not give buyers the time of day they just want to push the product they have.
I do not have anything to do with property management. I am the principal broker so I keep all the commission.
I do work very hard for what I have but I love it. If you have drive and a willingness to learn everyday to become the best you will rise to the top. When people are investing millions of dollars buying a property they do not want to make a massive mistake using a newbie agent. This is why generally when you start at a brokerage they have a director above you training you up. As one recent buyer client I just picked up told me this new agent kept having to go back to his boss to get answers because he didn't know anything.
Hope it helps. Sometimes my clients are overseas in various time zones so I am talking at all hours.
Are you planning to stay in Santa Fe? Santa Fe is a nice town but it is kind of small with minimal commercial. It also has significant restrictions on building additional commercial.
Commercial tends to be high risk, high reward. Deals are bigger and tend to pay alot, but can be few and far between.
I think if I was staying in Santa Fe, I would work in the residential side of the business.
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