It’s no secret that real estate is one of the world’s most valuable investments. Some of the wealthiest people in America grew their fortunes through property investing, including household names like Warren Buffett and Stephen Schwarzman. Approximately nine in ten billionaires have vested their incomes into rental, commercial, or specialty real estate buildings, many of whom dabble as developers themselves.
However, real estate investment is far from a simple affair. This multifaceted approach to wealth building is both intricate and complex, requiring an adept knowledge of the field and mental preparation for loss. Many hopefuls won’t have the chance to get started until their middle to late 40s, meaning property investments aren’t the ‘get rich quick’ schemes some people may believe.
“I can tell you right now that you won’t become a real estate millionaire overnight,” says Joshua Freed, a real estate investor with more than two decades of industry experience. “It takes years of hard work, planning, and sacrifice to generate a solid income from real estate, and longer still if you intend to retire well, or if you want to sleep peacefully at night.”
Freed is a seasoned real estate developer who has spent decades vetting potential investment properties all over the world. With investments of his own in more than two continents, Freed recognizes that real estate investing is harder to control than traditional wealth-building opportunities. That being said, he also believes adding a property to your portfolio doesn’t have to be an impossible endeavor.
“There’s a formula to picking the right property to invest in,” Freed says. “It does get easier over time, but following tried-and-true steps will take you a lot closer to the goal than if you’re just going in blind.”
Freed was willing to share five compelling steps for selecting a great real estate investment. While he suggested not all steps would apply to all types of real estate investment, he did encourage new investors to pay close attention during their first marketplace attempt.
1. Start with rental properties
Before jumping into more complicated investments, Freed recommends starting with small rental properties — preferably single-family homes — and scaling your portfolio over time. Try scoping out local properties that are close to where you live. Investing in an emerging neighborhood will offer better ROI growth while minimizing up-front costs.
2. Eggs in many baskets
Any investment portfolio requires diversification to be successful. The same is true for real estate, especially as your means of investing grow. Consider looking for new neighborhoods, cities, and buildings to add to your portfolio, with the goal of stratifying your earnings and hedging your bets against disaster.
3. Maximize your investment
Buying your investment property was only the beginning. Now is the time to double or even triple your earnings with a few strategic moves, including:
- Trash pickup in residential homes
- Renting ATM space or a commissary in commercial buildings
- Placing concierges or security guards
4. Research, research, research
Timing will make or break your property investment. Buy too early, and higher earnings may be out of reach for several years. Buy too late, and you may never get the payout you deserve.
Do what you can to vet a property and its area before throwing in a bid. If possible, talk to your real estate agent or do some Google searches on
- Crime rate
- Local schools
- Stores and attractions
Not sure where to start? Metros are always a good bet.
5. Find the right funding
Investing often boils down to dollars and cents — especially if you’re not supplying all the capital up-front. Be sure to choose the right loan for the right scenario (Fix & Flip, Rental, Portfolio, etc). If you want a little advice first, chat with a real estate mentor for guidance.
Putting The Pieces Together
Investing in real estate may be less straightforward than other financial opportunities. However, it doesn’t need to be the risky guessing game that some people make it out to be. With a little forbearance and lots of preparation, Joshua Freed believes it’s possible to turn your first investment into a springboard for new opportunities.
“Once you’ve got that first notch under your belt, you’ll be ready to take on more projects and make new investments, and you’ll be a lot more prepared to handle them, too,” he says. “I like to think of it as sleeping in your room without a nightlight for the first time. It doesn’t mean you’re not wary of what might or could happen, but it does mean you have the confidence and wherewithal to hold your own.”
About Joshua Freed
Joshua Freed is the CEO of Equity Capital, a private lending firm that provides financing services to real estate developers, investors, and operators. Freed has had the opportunity to serve on real estate projects in Africa, America, and the Philippines. To date, he has more than 17 years of experience as a real estate developer, and currently operates office locations in both Florida and Washington state.
