At least 30 U.S. billionaires made their money from real estate; some say that it’s the greatest way to create real wealth and financial freedom.
This real estate and Airbnb tycoon suggest how you can invest $100,000 or start with nothing.
1. Start small.
I started out owning one apartment unit to test the waters and see if this was something I could do, after building years of experience and knowledge I now have 107 units. First, have a business or career that creates positive cash flow, which you can diversify into part-time real estate investing.
If you’ve never invested in real estate, start small and don’t use all your money. No one’s ever looked back and said, “My first deal was my best.” You’ve got to learn how to read the contracts, build your network of specialists—for example, lawyers and realtors—and develop a good eye for it. This only comes from experience.
The beauty of real estate is that you can learn the ropes while starting small: find some cheap properties, like single-family homes, renovate-and-flips, multi units, or commercial properties. Try to commit as little as possible while you get some notches under your belt. A piece of advice I give to others is, “Make your mistakes as small as possible without catastrophic consequences.”]
2. Understand the economics, then find a mentor.
The real-estate deals that look the prettiest and are easiest to find—such as buying a property that has a tenant and management in place, joining a crowdfunding website, or buying into a publicly-traded real estate investment trust—yield the lowest returns. The most profitable opportunities are the ones no one else knows about, which you find and create.
Due to a strong economy, high consumer confidence, historically low inventory levels, and extremely low interest rates, it’s the best time to flip houses in the past 40 years.
High consumer confidence and a strong economy give retail buyers the feeling that “now is a good time to buy” rather than retreat in fear and continue renting. Low interest rates allow retail buyers to purchase more of a home than if the rates were at historical average levels, like 6 percent. Low inventory levels create bidding wars by retail buyers, which increase the prices that investors sell their flipped houses for.
3. Learn, then earn.
Before throwing money away on the HGTV pipe dream, educate yourself! Don’t spend thousands of dollars on coaches and seminars. No matter how shiny they make it or how much you’re told you need an expensive education, you don’t. Information is inexpensive and plentiful. Find it or someone specializing in investment real estate, like me.
Holding assets is the way to build wealth through real estate. Shelter is a basic need. Dirt, in and around major metro areas, is a finite resource, and demand is constantly increasing. By owning a rental on that dirt, you have a small business that works to pay off your mortgage. Flipping is over glamorized, in my opinion. Rent and hold for the win.
Don’t blow your budget. Most projects have surprises or overruns; it’s just part of the business. Keep a cushion for the unexpected. Lever your funds to increase returns and reduce risk. Start with one project. Get your model set, tweak, then buy two. Continue and progress until you build a solid portfolio.
Educate yourself, hustle, and create value. Take massive, determined action daily. Talk to brokers, call contractors, view open houses, and go to meetups. Learn! And when you’re ready, door knock! The best deal is the one that isn’t for sale.
4. Profit is in the purchase.
Source transactions that contain some core elements: they take the shortest amount of time to complete, and provide the maximum amount of profit while minimizing risk and the amount of cash you invest initially.
Before really embarking, solidify your A Team (advisors whose opinions you trust) and B Team (associates who turn the gears).
Once you have a plan, pull the trigger. Don’t just have a backup plan—ensure that even the most airtight scheme has at least five exit strategies. Experience has taught me that the winds of a favorable real estate market can shift rapidly; the last thing you want is to be anchored to a dozen unsellable investments.
Finally, know the difference between buying, holding, and trading. Buying is a no brainer, but it’s what you do with a property that determines your success. My primary strategy has been holding onto residential real estate for the long term.
