Stop overthinking it.
Real estate isn't easy, but it's simple—especially if you take this approach.
Welcome to this week’s issue The Un-Normal Investor. Each week, I publish one 5-minute read that’s written to make you a smarter real estate investor.
If you don’t know where to start, or you’ve hit a roadblock along your journey, consider joining our private community.
You’ll have instant access to our chat where we answer each other’s questions and share referrals, live Q&As with special guests, and invite-only in-person events and dinners.
Real estate investing doesn’t have to be complicated.
It’s designed to be the simple, slow, and steady route to building wealth.
Of the million different ways that you can get started, here’s the most straightforward approach:
It’s called the Live-In Flip, and I’ve broken it down into 3 easy to follow steps.
Step 1: Buy In Your Backyard
After I flipped a few homes here in California where I live, I bought my first buy-and-hold rental property on the complete opposite side of the country - Philadelphia.
I still own the building to this day, and I don’t foresee selling any time soon; but I wouldn’t recommend that the average first-time investor take this same approach.
There’s perks that come along with investing out-of-state, but it’s also riddled with risk and can be extremely capital intensive.
For these reasons, I advise all of those that are just getting started, to buy in their own backyard.
It allows you to leverage a low downpayment loan, and if you’re up to the task, you can take care of renovations and repairs yourself.
Whether you’re the one getting your hands dirty, or you hire someone else to do all of the heavy lifting, by investing within the same vicinity that you live in, you can keep a close eye on your property without having to hop on a flight.
Step 2: Add Value In Every Way You Can
No property is perfect.
There’s always something that can be done to update and add value to the asset.
The low hanging fruit are the aesthetics.
Modernizing the kitchen and bathrooms, or repainting the interior and exterior facade, will give you tremendous bang for your buck.
If you’d like to take it a step further, you can carry out structural improvements as well.
Adding a bedroom, converting the garage into a JADU (Junior Additional Dwelling Unit), or building out an entirely separate rental in the rear of the property, will increase your cash flow, plus force appreciation and add equity to your property value.
Step 3: Sell To Trade, or Refinance, Roll and Repeat
After you’ve added value, it’s time to trade up, or refinance and roll the proceeds into your next purchase.
If you don’t have to, I wouldn’t recommend selling.
Regardless of what the property’s worth today, it’ll be worth more tomorrow.
If you’re able to pull off your next purchase without letting go of your first, I highly recommend doing so. But if holding will hinder you from taking your portfolio to the next level, feel free to trade up to bigger and better.
For those that are able to refinance prior to taking down their next purchase, it’s important to pull only what you need.
If you have adequate equity, a lender will gladly drown you in mortgage debt.
Albeit a windfall of cash can be tempting, I encourage you to limit the payout to whatever your downpayment will be; plus the funds that may be needed for your next renovation.
Additionally, you should ensure that the post-refi debt service on your first purchase, does not exceed the projected rental income.
That’s all there is to it.
It’s not the exciting, rocket-ship style of real estate investing that the YouTube gurus tout.
But it doesn’t require you to harass your family and friends, or go out and raise gobs of money from random strangers.
It’s the somewhat boring, but simple route that I recommend all early-stage investors take.
By executing this same 3-step formula year after year, you’ll build a highly profitable, easy-to-manage portfolio that will spin off cash flow and stack up equity over time.
If you’re someone like me, who lives in an expensive market that’s highly competitive, send me a message; I’m more than happy to share a few pointers on how you can still invest locally without planting your money out of state.
What’s your take on today’s topic? Do you agree, disagree, or is there something I missed?
If you enjoyed this read, please share it so others can gain value as well.
For access to the Un-Normal Investor private community, live Q&A sessions with special guests, and our exclusive in-person meetups, dinners, and events, click the link below.