Real estate deals can be a lot like relationships. Being that it’s love month here at Proud Places, it is my privilege to give you advice as your matchmaker. Like any relationship, knowing where you stand and what you want is the foundation of good relationship decision making. Are you interested in a long-term investment or short-term? Is immediate cash flow your goal or investing for retirement? The great thing about real estate investing is you don’t have to have one strategy or one property; it’s a great way for happily married people like myself to play the field
Finding your soulmate(s) in real estate is very achievable with some care and consideration. Many people find it adds value to their relationships with their community as well as helping them build wealth.
The Fix & Flip. It’s the equivalent of serial dating without the long-term commitment. The thrill of the chase is alive and well in this field. Perfect for people new to engaging in real estate. Buying a property and making improvements to resell it can be a great short-term investment. Investors should be mindful of the market so they don’t overspend on an asset that will only take without there being a reward. Strategically, look to the urban acupuncture method. Find the worst house on a great block and fix it up. Improving the dynamics block by block eventually building up values in a neighborhood can have a long-lasting community impact and create a good return on investment. The downside to this method is that it doesn’t have as many tax benefits of other strategies and can gentrify neighborhoods if it’s done excessively in a moderate to high market without a concern for ensuring neighborhood economic health. This investment requires an understanding of the local real estate market and a solid team to renovate the property. From here you can build wealth to move into other portfolio building arenas or be a serial bachelor/bachelorette and continue to hit it and quit it.
The BRRRR. Not the cold shoulder, this acronym stands for Buy Rehab Rent Refinance Repeat. It’s being set up by a pushy family member and scared of what you’re about to walk into yet finding value exists. Long-term monogamy and dedication is alive and well with the BRRRR method. You may start this endeavor wearily but love grows over time. It’s similar to the fix and flip but instead with a hold and lease. Most of the challenges are tackled early on and then it’s smooth sailing. This can be done for commercial and residential properties. It’s a great way to build portfolio value and leverage that renovation value in the refinance. Often investors do this with multiple similar properties. It can strengthen blocks, neighborhoods, and downtowns but in order to do so requires you to be an advocate for strong tenants driven to do great work or love where they live. You’re adding value and holding on. It’s an excellent strategy for markets that aren’t as hot because long-term investment is rewarded. When you decide to move on, you can shift that value into your next relationship with a 1031 exchange as you move on to bigger and better things.
Vacation Rentals/Airbnb. Depending on location and the way you chose to structure this, it could vary on the level of return. Often people rent out second homes as a way to help cover the ownership costs but utilize it themselves most often. If you meet someone on vacation, deciding how much energy and potential exists are elements to tackle early on. You’ll have to decide how much time to spend together, the cost and investment that time together involves compared to the opportunity cost of staying home and earning rental income.
Commercial investments. Generally more long term but offer more variation in the level of time and dedication they require. For the sake of this discussion, we’ll focus on the most hands off approach. A triple net lease structure offers exactly that. Find a good tenant to love and maintain the property as their own while you own it and reap the depreciation and rental income. Akin to having a marriage with separate lives. Along with commercial investments come commercial mortgages which are more costly as they pay back in shorter horizons and often involve a balloon payment. Even if you have a wife with a separate life, be prepared for expensive milestone anniversary gifts that will cost you.
Land. Buying vacant land on the promise that your community will expand is the equivalent of making self-improvements to render yourself more attractive. An expensive endeavor that requires a commitment to be made at some point. It’s all going to depend on location and time. The great thing is that land values are steady and only tend to go up in value. The downside is you’re sitting on an investment that doesn’t bring in any cash flow but has the operating costs to mow it. The brilliant Alli Quinlan says, “Farm it, develop it, or even put a food truck on it. Don’t project your commitment issues on vacant land by taking up its time and never putting a ring on it.”
Real Estate Investment Trusts (REITs). Investing in REITs is a very traditional option but you won’t be choosing your place. These real estate corporations own and often operate a variety of residential and commercial real estate but in choosing this you’re deciding to have a purely financial relationship while living separate lives. You will not see your money work for you in your place or any improvement on main street from this investment. A mail order bride you’ll never meet but one that’s going to contribute to your investment portfolio.
Gold digger. Beware of the gold digger. The investments that look pretty and have great public perception but only drain your savings. Enough said.
These scratch the surface of some major options for real estate investments. When you’re ready to get out there, find yourself a matchmaker. A commercial real estate broker that knows the local market, can get you information for you to analyze a deal’s potential. It is much more effective than swiping right on Zillow yourself. Who’s the person that comes to mind when you think of your local deal maker? As a commercial agent myself, I called clients and set meetings late last year to ask them what their goals were for real estate investments this year. It’s my job to ensure my clients have the cashflow they’re looking for or to find properties if they need a 1031 exchange. This offers the ability to help shape more positive investments in my place and support the client’s goals. I thrive on making deals and helping investors find their match.