Every once in a while, we like to answer listener questions that are submitted by The WealthBuilders Podcast audience. In the real estate podcast episode that corresponds to this post, Karen Conrad, Mike Davis, and Frank Pulley answer all of your burning questions about how to build wealth from real estate. We hope that their answers are helpful to you! (Click here to listen to it on The WealthBuilders Podcast!)
Who should you have on your team to start real estate investing?
The banker/mortgage officer, real estate agent, property manager, home inspector, insurance agent, accountant, lawyer, and home stager. Bonus tip: a relationship with a mom-and-pop bank is great to have! Build this relationship early in the investing game, because by the time you acquire a few properties the big banks typically won’t want to lend to you anymore.
When somebody is getting started, which team members should they line up immediately?
The real estate agent. Not all real estate agents are created equal! You need an agent that knows investment real estate and preferably owns a few properties themselves.
Next, you need to find a good contractor and handyman. These can be two different people. Typically, the handyman is going to take care of the miscellaneous odds and ends, and the contractor will handle the bigger repairs.
In many markets, it can be hard to find a price-to-earnings ratio that works. In many places, it takes half a million dollars to purchase a home, and the rent that you’d receive won’t cover the mortgage payment. So, it’s important to research the best areas to invest and build a team in those locations.
If somebody says, “Look, I can’t find anywhere to invest and I need to find a place that fits my price range,” what are some suggestions you have for them?
Look at Smaller Towns or Outlying Communities:
Right now, the market is so hot in the big cities. I think it saves people time to avoid these hot spots altogether and shoot for the smaller markets. In fact, I often look at towns that are under 300,000 people. The numbers typically work out better there.
Work With a Realtor Who Understands Investment Real Estate:
Realtors with investment experience will know the fringe areas or pockets in big cities with good properties. They will help you get ahead of the curve by locating areas that have potential for emerging growth.
What is the best way in this market to create capital? Flips, wholesale, etc?
Initially, you can create capital by doing a cash-out refinance on your home or investment properties. With the current interest rates, that is a good source of cash. Wholesaling is another good, relatively low-risk way to build chunks of cash. (Typically 3-5%) Then, you can buy fix and flips and net around $20-$30,000.
Also, as Christians, we need to look to God! He has ideas that we may not think about—strategies other people aren’t using, items to sell, etc.!
Is a 30-year mortgage a good idea?
Absolutely! A 30-year mortgage your monthly payment is obviously lower than it would be with a 15-year. This is important because higher payments on a 15-year will cut into your cash-flow (ROI). So, with a 30-year you have more cash to continue investing, and you have the option to pay more on the principle each month (rather than the obligation to.)
We hope these answers were helpful to you. If you have questions, drop them in the comments below! And be sure to check out more real estate podcast episodes on Apple Podcast, Spotify, or wherever you like to listen.
Miss last weeks real estate podcast Q&A? Click here to check it out.