Today’s Life Planning Checklist probably isn’t for everyone. We’ll dive into creating wealth with real estate investments.
I’ve asked Katie Lemieux of La Rosa Realty Beaches, to guide us with her best advice. Katie is a Realtor, a business owner and an experienced real estate investor.
I’m excited to hear what she has to share.
Thank you for the introduction, Andy!
My first bit of advice is a word of caution:
Real estate is a long-term investment that requires patience.
Those who want to dive into this strategy may have setbacks and disappointments, especially in the first few years. That is why it is important to work with a real estate professional who is also an investor.
Unless you’re buying and flipping properties quickly, the goal is to hold onto your investment and reap the benefits over time.
(And, speaking from experience, flipping properties is MUCH harder than HGTV wants you to believe).
If you can commit to the long haul, the benefits of investing in real estate include:
- Steady cash flow
- Appreciation, or growth of the value of your investment
- Tax advantages, including expense deductions and special tax savings
- Investment diversification
- Protection against inflation
Those are amazing benefits!
So, how do you get started?
Step 1: Select a niche
Begin by educating yourself on investments that might interest you.
I’m a big proponent of picking a niche so you can develop systems and expertise in that area. It will make your investment process smoother and easier in the long run.
There are lots of investment niches:
- Long-term rentals
- Short-term or vacation rentals
- Multi-family properties (which includes duplexes up to apartment buildings)
- Section 8 housing
An easy way to explore investment options is to listen to real estate investment podcasts.
One of my favorites is the BiggerPockets Real Estate podcast. They often feature guests who explain their speciality. If a particular guest resonates with you, start following that person and read up on their strategies.
Once you have an idea of how you want to invest, it’s important to set clear goals. To do that, you need to understand your chosen market, how much a particular investment yields on average and the risks involved.
Working with a real estate investment advisor will help you define those goals as well as numbers so you don’t end up making choices that hurt you in the long run.
Step 2: Save for investment
Typically, you’ll need to have 20% of the property’s value saved as a down payment.
There are some workarounds to that rule, but 20% is usually a good goal for your first investment.
I also tell my clients to save an additional 5 to 10% of the property’s value to cover reserves, or “surprise expenses.” If the AC dies in that first month, for example, you want cash on hand to fix it right away.
Step 3: Consider hidden expenses
Finally, I advise my clients to plan for the monthly and yearly expenses it takes to keep an investment property going.
What are the ongoing costs for lawn care and landscaping? Does the property have a pool that will need maintenance? What are the Homeowners Association fees? How will you handle repairs? How much will you pay in property taxes?
The expenses of a real estate investment will rack up quickly.
Don’t give up! Remember that you’re in it for the long haul.
An Estate in One Place account is a great way to organize the logistics and pass on the details of your hard-earned investment to your loved ones.
If you have any questions, I’m happy to help you on your investment journey. Give me a call, (954) 401-9011, and let’s make your big goals a reality!