Last week, I was fortunate enough to be on a panel at my local real estate club meeting, where I was asked to share a few tips with real estate investors on how to be more successful in the coming year. It was fun, and the tips could really be anything somehow related to real estate, whether it was how to save time and money, avoid aggravation, or even increase yields.
The beauty of it was there were four panelists sharing ideas, so I walked away with 32 new tips on everything from designing and staging rehabs, to working with contractors.
The least I could do is share mine.
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9 Real Estate Investing Tips for a Better 2018
1. Use tax strategies.
Let’s face it—every dollar saved on taxes is another dollar freed up to invest with. This is one of the main pillars of building true wealth.
There are many ways to save on taxes, whether it’s depreciation, all the write-offs the real estate business can offer us (mortgage interest deductions, taxes, maintenance, etc.), or even becoming an agent to take advantage of unlimited passive losses. My personal favorite is probably investing through qualified plans like self-directed IRA accounts, HSAs, ESAs, etc.
This year in particular, it would be wise to meet for a planning session with your accountant about all the new tax law changes to avoid any surprises. That said, the biggest advantages didn’t really go away, as they stem from things like providing housing, creating jobs, or helping charities.
No one said you have to choose just one either. For example, my buddy’s non-profit owns an apartment building that leases units to disabled veterans. Perhaps you can incorporate a similar strategy into your business model.
2. Be focused and disciplined.
Sure, focus and discipline can be applied to things like sticking to a budget and having your financial house in order, but what I’m referring to is a little more philosophical. As Jim Rohn puts it, “We need to work harder on ourselves than we do at our jobs.” Many of us could use more work on our soft skills—things like time management, sales, negotiations, public speaking, or even just reading more.
3. Set goals.
Earl Nightingale, an author and successful insurance broker, best known for The Strangest Secret, put it best when he asked the question, “Where do you see yourself based on the actuarial statistics for 100 men at age 65?” At the time (1950s), the statistics were that one was very wealthy, four were very well-off, five were still working, 54 men were dependent on others, and 36 were deceased. What he noticed was not so much that 36 of the men were deceased, but that there was a common trait in the top 5%—they all set goals!
4. Plan purposefully.
We should all try to be more strategic in our investing this year. For example, you should know your exits before you invest. Maybe you could plan to purchase your first owner-occupied place with the intention of keeping it as a future rental. As my buddy Jeff Brown always says, “You should have one goal in life, to have as much passive income, as soon as you can, by retirement at the latest, and have as much of it tax-free as possible.”
5. Utilize leverage.
You can leverage many things, like relationships, time, etc. What one thing could you really leverage this year to take your business or your investing to another level? Maybe it’s utilizing your equity better by incorporating more arbitrage? Maybe it’s accumulating more assets with good debt or eliminating all your bad debt?
6. Source OPM (other people’s money).
I’ve always said that your money list is more valuable than your buyer’s list or contractor’s list. Some of the best ways to raise capital involve teaching it, whether that’s teaching about how to invest or the parameters of your investments themselves. One of the best ways for me to raise capital is to actually teach raising capital. There are probably too many ways to mention, but another favorite strategy of mine is working with charities, or having a charity component to your business.
7. Pay down debt.
If you’re not in accumulation mode and you’re thinking of how to accelerate the pay down of your properties, try to do it in a fashion that considers all the risks, including the use of asset protection and/or estate planning. One of my game plans as I approach retirement is pay off a rental home, move it to a family trust, then when the values and interest rates rise, sell it with owner financing to a real estate investor’s LLC, and place the loan into servicing for collections. Now, I’m cash flowing without the headaches of ownership.
So, whether you do a biweekly mortgage, send in next month’s principal with this month’s payment, or if you’re using a more advantageous strategy like utilizing sweep accounts, there are plenty of ways to shrink your debt service and increase your cash flow.
8. Build in asset protection and liquidity.
Obviously, the use of debt can be an inexpensive form of asset protection, especially property that’s held in your own name. This is why I like using HELOCs on properties with substantial equity because not only does it act as asset protection but gives me liquidity too. Equity loans were off the table for a while but seem to be coming back and in a rising market, with good employment, it may be a good year, with still fairly low rates, to put some of those in place.
Another area we can look at in 2018 is how we can take business or investment risk off the table. Maybe that means pulling excess capital out of our businesses and putting some into more diversified, safer investment vehicles such as other qualified plans, insurance contracts, etc.
9. Have your assets pay your liabilities.
This is probably my favorite. Whether it’s income from my rentals paying for my vacation home or buying a note to have the payment pay the payment on my wife’s car that costs twice as much as what I paid for the note, I just love this strategy.
Well, no one says this is the complete list of things you could do to make 2018 your best year ever, but I would sure love to hear some of your tips!