Breaking into real estate investing
I didn't know anything, but I had a paycheck and sometimes that can be a bad combination. Lisa Philips: And I purchased this completely overpriced house that I should have never purchased at that price. It wasn't sustainable. It was more than one paycheck to live in it. I look back and I'm like, wow this was during a time they literally were giving loans to everyone.
You have life expenses. Saving isn't as easy as you think it might be over five years, things are going to come up. Like just thinking you're going to have that huge sum of money. It's just not really realistic for most people when you're living life. Carla Harris: Foreclosing on her first property was a big setback for Lisa, both financially and emotionally. But she wasn't alone. But while most homeowners were wary to re-enter the housing market in the coming years, Lisa saw an opportunity to take what she'd learned and apply it to her next investment.
Lisa Philips: I had actually purchased a condo out in Ohio. Very doable. It's even less than what I was paying to live in an apartment out there. And in Ohio is where I really learned when you get out of the west coast, that there are properties and locations that aren't expensive to live in.
You just have to wrap your mind around different neighborhoods, wrap your mind around different demographics. Don't assume things about certain areas. You actually can find some really good gems. Carla Harris: Once she bounced back from her first setback Lisa was thriving, in part due to her biggest asset she didn't know she had: her lived experiences. Lisa Philips: I use my background being from a working class neighborhood and environment.
I just sort of understood almost instinctively and intuitively how to not only use the numbers, but how to get the lay of the land in a way where if you are from a more affluent place, you really don't know how to navigate maybe low-income environments the way I do, right? It's something that's in your bones. It's in your energy. You were born into it. At this point the properties were paying for themselves and then some. Things were going great for Lisa and soon she felt a calling to help others like her.
People who had been taken advantage of or simply ignored by the traditional real estate industry. That's when she created her consulting business, Affordable Real Estate Investments. Lisa Philips: I was just struck that there's a lot of people in corporate America who were like me and we just don't fit in. I'm too good at what I do to not be lifted to higher heights because I don't know how to play the politics. And I knew there were people out there like that.
But I have to tell them about this rental property strategy. It's brilliant. And I was like, Do I go to the local library? Well, let me just go to YouTube and I'll tell people, this is what I have. I have like three properties.
I'm not telling you I'm a millionaire, but I'm telling you if you're someone like me who wants to get started, there is a way to do it and you can do it safely. You can mitigate most of the risks, follow me. Lisa - YouTube: All right. If you guys are out there, go ahead and say hello and hi.
Okay I got a request to do a live on how to buy your first rental property. So we are going to go into that. Carla Harris: Lisa built an educational platform online, and through it, was able to find an engaged and loyal client base of middle income Black professionals like herself. She coaches them on every aspect of real estate investment, from how to navigate loans to tenant relations.
James: I bought the house. Lisa - YouTube: Oh my God. Round of applause. James: So wait a minute. So it was me and four other people were bidding on this house and I was like… Lisa Philips: The neighborhoods we tend to invest in, they can be any, but generally the majority are low income Black communities.
So I actually thought it was a beautiful symbiotic circle of, you know, people who came from it, got some means. And then we go back to invest to make the life of the people who we resonate with better. Carla Harris: Now, let's be clear: investing in low income communities is complicated. While these communities do need capital to be maintained and revitalized, too often large institutional investments instead go towards gentrification that raises the cost of living and pushes out longtime residents.
Lisa does her best to model a different approach. Lisa Philips: I come from this and I come from a working class background. Low-income does not mean everyone is out to not pay or to trick you or to scam you because that is a perception and stereotype. My decision is to make affordable long-term stable housing, and so I do have a really strong ethos about being very careful about coming in and pushing out people who don't have money versus getting long-term stable tenants.
I mean, we are definitely in here as investors to make a return, but also be very mindful about what you want your impact to be long-term. Carla Harris: Through her business, Lisa Phillips is sharing hard-earned knowledge so more Black professionals can benefit from rental income for years to come. Our next guest is empowering people to tap into returns that were previously only available to institutions.
While historically this industry has been about who you know and how much you can invest, Ryan sees a different future is possible. I talked with Ryan about his vision for lowering the barriers to real estate investing, diversifying commercial real estate, and bringing more capital to minority owned developers and banks. Carla Harris: Ryan. It's a pleasure to have you on the show.
Are you ready? Can we jump in? Ryan Williams: Yes, it is a pleasure to be here. Thank you for having me. Carla Harris: Alrighty. So let's talk about real estate. What was your exposure to real estate? You know, with respect to real estate investment, real estate ownership, as you were growing up in Baton Rouge, Louisiana? Ryan Williams: Yeah. Well, I never owned a home. Never owned a house. My mom never owned her home or house. That's really how you build multi-generational wealth.
But you know it was just an ambition, it was just an aspiration. And frankly, it didn't become more than that until I got to college. I went to Harvard undergraduate. That opened up a whole new world for me in that I saw all this wealth around me. And the more I probed and the more I asked, the more I realized a lot of folks had made their money through ownership of real estate.
Why aren't there more folks from working class backgrounds, folks that in Black and brown communities, like the one I grew up in who can also own real estate? Carla Harris: You know, Ryan, I want you to connect the dots for me to help listeners understand why that first step of owning a home is so important to being able to build wealth going forward.
So can you connect some of those dots? Ryan Williams: Yeah, absolutely. You know real estate, like single family homes and the like, are one of the most commonly owned properties or assets through multiple generations. Real estate has historically appreciated over long periods of time meaningfully. There's unique tax benefits to owning real estate and people generally buy from an emotional perspective because they want somewhere where they know they can be grounded and hold over much longer periods of time than a lot of sectors or asset classes.
And so it's a long-term investment in many ways, but it's a personal investment. And so if you can own a house and you can pass it onto your kids and your children's children, you know, you have the opportunity to create long-term wealth. Now, if you don't have that access you have the same challenge with building long term wealth. Carla Harris: Yeah. And if I can add on to what you said, a house is an asset and it's an asset that can generate and create other revenue — i.
So with an asset, you can sell the asset and get cash, or you can leverage the asset — i. And you can borrow money to then invest in other businesses or to create a business or to buy other assets. And once those other things start making money for you, you can then pay off the loan that you've used, still own the asset, and now you have all these other things that it has now given you access to. Ryan Williams: That's right. It's equity and it's that ability to build long-term equity, and then utilize that equity to multiply that equity and that's what I saw early on.
Carla Harris: I hear that. Now you said being at Harvard at the same time you were there the housing crisis was starting to unfold. So how would you say that that impacted your perception of the housing market and how it might've been connected to the inequity or racism in the country?
Ryan Williams: Yeah, so between my first and second semesters. I went down to Atlanta, Georgia, and visited my roommate who was from Southwest Atlanta, predominantly Black community within the Atlanta Metro area. And I had been there the year before — street was almost pristine. When I went down this time though, I looked and it was every two, every three, homes that looked like they were being boarded up or people were moving out.
So it was like night and day. And I asked him what was going on. And so I bet there are a lot of folks who are losing the wealth that they had tried to create and build over generations. Because a lot of the communities that were suffering the most were the ones that were most prone to predatory and subprime lending. So give our listeners two or three examples of some of the discriminatory policies that are out there that helps to institutionalize this problem. Ryan Williams: Yes.
Well, one of the ones I saw firsthand was just discriminatory lending practices and policies. Underwriting certain potential prospective homeowners differently based off of everything from where they're from, to their ethnicity and their race. Our articles, interactive tools, and hypothetical examples contain information to help you conduct research but are not intended to serve as investment advice, and we cannot guarantee that this information is applicable or accurate to your personal circumstances.
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BETTER PLACE LYRICS BY RACHEL PLATEN CALENDAR
Kristen Ray. She is a real estate investor from the DMV area. That is the District of Columbia, Maryland, and Virginia. She spent much of her earlier days pursuing an education in the nursing sector and crossed over to real estate investing in Since then, she has grown her real rental portfolio to include single-family, multifamily properties and units syndication deal in That is perfect for this theme in wealth, real estate and the Black community. Welcome to the show, Kristen. Thank you so much.
I appreciate being here with you Lisa. To get started, can you share with our readers, back in , how did you get started investing in real estate? I fell into it. In , unfortunately, I lost my great grandfather, who then left behind some properties that got passed down to my brother and me. I had a six-month-old baby whom I was also taking care of. I was working nights and going to school during the day. The last thing I wanted was another responsibility.
We decided to hold on to them and we still have them. Diving right into those, what were some of the key takeaways from that experience of taking on, some of the memorable key lessons that you could share with my audience? Maybe 2 or 3 of them come to mind that would be beneficial for people owning long-term rentals. For one, get your wills and any trust in order. It was messy when my great grandfather died in terms of the properties. One of the properties, we lost to a tax sale.
If you plan to leave it to anyone other than Uncle Sam, make sure that you get that in order. Who wants to do that? Another key takeaway would be to screen well. The tenants that we did have had been great and we still have them. My great-grandfather did a great job at choosing long-term tenants. We were patch and go. I had a young child and my life was very busy. Maybe if I had some friends in the field, some of those minor issues that came up, we could have dealt with them a lot better.
Breaking Into Real Estate: Location is everything. Certain locations will attract certain tenants. At what point did the bug catch you? Are you now a full-time real estate professional? I am considered a real professional, but I still do the practice. A pivotal moment came for me when I was still in school. I ended up doing a cash-out refinance on those properties and use the equity to fund my doctoral studies. I got a lot more interested in it once I could see how you can leverage it and do other things and accomplish other goals other than collecting rent every month.
Would you have done something differently in that aspect or not? In that aspect, no because at the time, I had my mind made up that I wanted to finish my studies. In hindsight, it is The fact that I could get through my doctoral studies with no student loan debt put me in a good position. It woke me up to the other opportunities real estate can present other than having a tenant, collecting rent and fixing the leaky sinks.
Moving forward from that, can we talk a little bit about how you invest in real estate these days? In , we closed on a syndication deal. However, if the numbers make sense, I will pursue it. You said units.
What market was that located in? That was in Columbia, South Carolina. For the purpose of my readers, how do your syndication opportunities differ from the strategy of when you are going to buy a single-family outside of the fact that there are obviously more doors? Leveraging your funds to get a good return is a great way to invest passively as a professional. Click To Tweet The short version of that is it is very much a relationship business. The underwriting is different. I feel like the fundamentals are similar, but you have to 10X it.
You have to build teams and partnerships. Understanding each of those roles and there are attorneys involved. There are a lot more moving parts, but at the same time, you have more people to help you with those responsibilities. You also talked about how you are an opportunist which sounds like you are pivoting.
Could you talk about what are some of the strategies or things that you put in place to determine which opportunities work for you based on what you want to do? Look at your long-term goal. What does that ultimately you want to achieve? My primary strategy is to buy and hold rental properties and that will never change.
I certainly would not call myself a fix and flipper by any stretch of the imagination, but if the opportunity presents itself because I do have experience with rehab because I have to rehab my rentals. I do have that experience. Because you also have that experience, you also have the contacts and relationships with contractors and etc.
Moving into the aspect of the Black community, for a lot of our communities, in , there has been tons of struggle and things that have always been issues. The inequalities have always been issues, but have not been brought to light until lately. Can you talk about the advice you would give, starting out with people who are in the beginning parts of their career, maybe coming out of college and getting started?
What advice would you give to them for building wealth and perhaps even using real estate to accomplish building that wealth, given your experience? My biggest piece of advice and the advice that I give my own children starting out would be to house hack. Make sure the numbers make sense. That is an excellent way to up your level of investing.
Breaking Into Real Estate: Visit the area. Would your advice change for professionals? People who are further along in their career and who are now wanting to invest in real estate? For professionals, you could still house hack. However, professionals usually have families or for some reason, they might not want to share. Could you talk about some of the key foundational things that people should have in place before investing, given your experience investing?
One of the basics is to get a budget. You have to be able to see where your money is going. How do I feel about that number? That covers the foundation. Building from the foundation, the next step is looking at the different ways you could invest in real estate. One is primarily the long-term hold strategy and the syndication strategy. Some of the key things that people need to consider when deciding to go down the path of buying an investment for long-term hold purposes.
One of the key things you have to consider is location because you need a tenant and you want a decent tenant. Location is everything. Be very mindful of the location. Secondly, look at your finance and how are you going to pay for it. How much of your cash do you have to put in the deal? Make sure that you have some reserves as well.
Things will happen. Something will break. Make sure you have a loan next-day put aside to have any repairs done that maybe need or maintenance issues that come up along the way. Get something that needs a little dusting off, maybe switch out a kitchen or something like that, but nothing where you have to go in and you have to go down to the studs.
I would not suggest doing that as your first project. What about long-distance? Do you have any experience dealing with long-distance purchasing? I would interview property management companies and get recommendations.
That would be my biggest suggestion. You make your money, but you keep your money when you manage it right. Click To Tweet First, find a good reputable property manager. I would also suggest that you visit the area. You want to get a good feel of it at least. Flipping over to the passive aspect. I want to dive the passive aspect into two. One, approaching it as an active syndicator.
Which one do you want to start with first? You have to be able to hold an intelligent conversation. There are a lot of different programs out there. In fact, many different options are available to start investing. As your business grows, so will your knowledge of the industry.
A smart real estate investor will diversify their portfolio. Wholesaling Wholesaling is an easy way to break into the real estate investing business with no money. With wholesale real estate , the investor enters into a real estate contract and then assigns that contract to a different buyer. The key to wholesale real estate is to quickly find a buyer who will pay more for the property than the original contract amount. The good thing about wholesale real estate is the quick money earned can then be used to invest in other real estate deals.
Co-Wholesaling Like with wholesaling, co-wholesaling is a quick way to make money through real estate investing with no money and without taking ownership of the property. However, with co-wholesaling the investor forms a joint venture with another wholesaler to maximum reach. The benefits of co-wholesaling are a faster process, larger buyer base and larger inventory of properties. Working together benefits each party.
Usually in a co-wholesaling venture, one party brings the buyer and the other brings the property. This helps speed the process in order to minimize risks for either party. Co-Wholesaling is also a great way to break into the industry of real estate investing with no money. When partnering with a more experienced investor, you have the benefit of their industry network and knowledge.
Look for trusted partners that can lead to lasting relationships. Instead, the mortgage remains in the name of the original owner, but a contract is created to give the investor rights to the property. With a subject to deal, the title is transferred to the investor and the investor is responsible making the mortgage payment. However, the mortgage is not transferred to the name of the investor.
The investor can sell the property, pay off the mortgage amount and retain any difference as profit. For lease to buy, the investor leases the property. The title and mortgage remain in the name of the owner. However, a contract is signed to allocate part of the lease payment toward the purchase amount of the property.
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CANADA US FOREX COMPANIES
BiggerPockets is a good place to start for networking, as always. Visit for Yourself Nothing compares to being there for yourself. For any market outside of your local one, visit it. Not only will this prevent you from getting potentially scammed there are people out there who will try to put fake real estate listing up for remote buyers. Go visit. Stay for awhile. Meet with some of your contacts and chat with them about the market, face-to-face. Identify a Top Notch Management Company For any investor that chooses to invest out-of-state, your number one most important asset is a trusted, top notch property management company.
Bonus: Partner with a Turnkey Real Estate Company The simplest, cleanest way to invest in a remote real estate market? Go turnkey. You save so much time and energy spent researching and locating professionals when you instead can lean on the experience of an established, well-vetted, experienced turnkey real estate investment company.
They already know the market, they already have investment properties ready to go, usually with tenants and generating cash flow, and they often have their own property management teams. It is a marketing term without much of a definition. Many companies use the word to attract investors, yet they may be stretching it - big-time! Investors should always do thorough due diligence when vetting a turnkey opportunity. Not all opportunities are created equally and not all turnkey companies are equal!
Chris puts these natural talents on display every day. As a partner at REI Nation, Chris addresses small and large audiences of real estate investors and business professionals nationwide several times each year. Owning your own home creates a great financial foundation and will kick start your investing. It will also teach you a ton about the process of investing purely for profit. Maybe you are fresh out of school, still in school, or have just been strict about paying cash for everything.
Credit can play a role in some types of investing and in business. It is important to recognize that it can throw a wrench in your debt-to-income ratio, but there may be no faster way to pay off that debt than real estate investing. Expectations: Buying and flipping houses is often made to appear very easy. However, it is easier said than done. New investors will quickly learn that they need to start marketing for deals, learn how to evaluate properties, and write offers.
Some expect to be doing a dozen deals a month right out of the gate. Money can come fast and easy in real estate, but it can take some time to build up a pipeline and close deals. Some are, but there are even more millionaires and highly successful real estate players that have worked their way up from the bottom. Connections and relationships are some of the easiest things to build. You may need to learn or hone some communication and rapport-building skills, but nothing is stopping you from getting out there and making new contacts today.
Build contacts, and you will be surprised at where some of them end up taking your business. Finding Customers: Stop looking for people to sell to, or for deals to fall into your lap. Start looking for as many people as possible to help with their real estate and finance problems, and everything else will fall into place. Create a system that works for you, one that is tailored to your goals.
Use it as a reference when you get stuck. The key to investing at a young age will be learning how to leverage your time, motivation, and capital you have to your advantage. While it may seem difficult, finding success as a young investor will come down to learning the best ways to work with what you have.
Luckily, several investing strategies are well suited to young investors. As you gain experience and connections , the best part is you can use the profits from these strategies to continue building an investment portfolio. Beginner-friendly exit strategies can serve as an excellent gateway to more complex investments down the line. Here are three strategies to get you started: House Hacking Wholesaling House Hacking House hacking refers to renting out a room in the property you are already living in.
For example, if you have a second bedroom or converted garage space, you could use those rooms to generate monthly rental income. This strategy is a great way to supplement your income without purchasing a property for yourself. House hacking can also be a great way to reduce your overall living costs, as you may be able to split living expenses other than rent with your tenant. There are a few things to keep in mind before house hacking, like understanding how to be a landlord and setting tenant boundaries.
While this is a great way to generate rental income, the situation will involve taking on a roommate. Make sure you are ready to share communal spaces and manage a tenant before you list the space. If you are interested in getting started, read our ultimate guide to house hacking to learn more.
Multifamily Rental Property Multifamily rental properties can be another great option for those wondering how to invest in real estate at a young age. This strategy involves purchasing a multifamily property and living in one unit while renting out the rest. This can be a great option for investors who like the benefits of house hacking but not the idea of an actual roommate.
That being said, multifamily properties offer shared maintenance costs, steady cash flow, and in some cases, better financing when compared to single-family homes. There are several types of multifamily properties investors can look into. These include duplexes, townhouses, and even small apartment complexes. You should learn how to evaluate different markets, potential cash flow, and financing sources to get started.
If you play your cards right, multifamily rental properties can turn out to be highly lucrative for young investors. Wholesaling Wholesaling refers to finding properties, getting them under contract, and then assigning that contract to a buyer. Wholesalers will earn money through contract fees.
This process does require a strong understanding of your market area and an ability to network effectively. However, it is a great strategy to learn a lot about real estate and fast. This real estate exit strategy is actually where a lot of real estate investors get their starts.
While wholesaling revolves around buying and selling houses, the wholesaler never actually purchases the property. Therefore, it does not require significant capital to get started. If you are interested in learning more about wholesaling , be sure to watch this video.
Increasing Income And Savings If your goal is to increase your funds to begin investing, look for ways to increase your income in the meantime. For many people, this means starting a side hustle. Successful side hustles range from selling photography, to working online as a virtual assistant, to delivering Postmates.
You may also be eligible for a promotion at your current job, and can negotiate a raise. Once you are able to increase your income, treat the extra amount as savings. Set aside this money as you get paid. Gradually, you will build up enough cash for your first investment. From there, you can keep growing your funds and so on.
Learn how to get started in real estate investing by attending our FREE online real estate class. Many new investors of all ages are hyper-focused on landing their first deal and securing their first property. While this is a monumental feat, it is not nearly as important as establishing the foundation for a future real estate business. Young investors should pay particular attention to creating a network and establishing strong business practices.
A great place to start is getting a real estate mentor and joining networking groups around your area. Be consistent as you try to break into the industry and focus on building lasting relationships with other real estate professionals. This should include real estate agents, contractors, other investors, real estate brokers, and more.
Networking is key to a successful career in real estate, and building an expansive network early will help you in more ways than one down the line. When it comes to your business, take extra care to develop your business plan and branding.
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