Real Estate Investing
By Jeff Riddell
Jumping into real estate investing without a plan can be painful. Biting off more than you can chew is one problem; panic instead of patience is another problem. There will be bumps in the road in any real estate investing career, but if you stay the course you will be rewarded. But don’t forget to do your homework before you buy or sell—goals should be lofty, yet realistic.
As Marvin Naiman said:
Average people, people able to raise five to ten thousand dollars, have it within their power to become millionaires.
If you are young and starting your real estate investing career, my suggestion is to open a separate bank account only for your real estate business—I call it your real estate piggy bank. Start funding it with as much money as you can each month for a year or so, and during this time, go out and study the market. Learn all that you can before you make your first purchase, and then when you have enough money to make a down payment on your first investment—it will probably be a rental house but use your imagination—get it under contract, shop for the best mortgage you can find and buy it. Deposit the rents and pay expenses only out of your real estate piggy bank and when you sell the property put the proceeds back in.
If you spend part of the rents or sale proceeds on other things, you will never achieve the wealth accumulation results of leverage and compounding. Of course you should constantly—month after month and year after year—transfer at least some of your other income into your real estate piggy bank.
Nowhere is patience more of a virtue than in real estate investing. Except for flips, it’s never fast money; usually real estate is a long term investment. For most investors, it will take ten to fifteen years to start seeing significant results, but you will have a substantial portfolio by then if you buy something every year. As mortgages amortize, your equity should grow nicely. As rents rise, cash flow should materialize or increase. Seeing your real estate piggy bank grow is very satisfying indeed. Appreciation, amortization and rent increases are your friends, but it doesn’t happen overnight.
You don’t have to be a genius; don’t be intimidated.
As Owen Feltham said:
The greatest results in life are usually attained by simple means and the exercise of ordinary qualities.
Dream but don’t daydream. Try to put aside ten percent of your income for real estate investment, then put it to work. Be steadfast but don’t be afraid to make the investment. Even if you pay a little too much the first time, real estate can be very forgiving over time. You will learn from your mistakes—and your real estate investing Savvy will grow with experience. As the old Chinese proverb says “a journey of a thousand miles begins with a single step.” Go ahead, suffer a little; give up immediate gratification for awhile to put together a down payment on some kind of investment real estate—it gets easier once you get your toe in the water.
Jefferson F. Riddell is a Florida Board Certified Real Estate attorney with thirty-five years of experience assisting people with a variety of residential and commercial real estate matters. U.S. 1031 Exchange Services, Inc is a 1031 exchange qualified intermediary (QI) and a member of the Federation of Exchange Accommodators (FEA). As President of U.S. 1031 Exchange services Jeff has been facilitating 1031 exchanges for more than twenty years. Jeff has been awarded the Certified Exchange Specialist (CES) certification. Jeff may be reached at 941-366-1300 or via email at jeff@us1031.com [1]. www.us1031.com [2]
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