Real Estate Investing tips
Being a landlord or buying homes to flip is a tough business. My personal opinion is if you are new to the real estate investing business, is to do it slowly. There is no magic or easy way to make money in real estate. Sure there are people that do it, but there are more investors that have failed. I don’t want you to lose your house or your life style because you invested in real estate. Here are my rules for real estate investing.
- Buy one property and complete the transaction before buy another. Sell the first home before you sell another home.
- If you are going to rent the home, rent it for a year before you buy another.
- Don’t put more than 25% of your assets into real estate investing until you are an experienced investor
- Flipping and being a landlord takes time. Do you have the time to devote to being a landlord?
- Don’t be afraid of cutting a bad investment loose even it means letting it go to foreclosure.
- Have insurance and liability insurance on the property, no matter what.
- Set up a corporation if possible to protect your other assets.
- Treat it as a business. Your renters are not your friends. You have a contract with them. They can live in your home so long as they pay the rent. They don’t pay, they don’t live there. It is that simple. Be sure to tell them that up front. It is strictly business. Nobody pays your mortgage to live somewhere. Your renters are not your friends or family to support. No exceptions.
Here are some examples of experienced real estate investors that have given up or lost money.
- White Lake guy I met at a Christmas party. Has 14 rental homes in Oak Park, Hazel Park. Has had them for 5 to 10 years. Is going to let them all go back to the bank. People are now wanting to rent some of them for as little as $300.
- 94 year old real estate agent. His nephew emailed me. His uncle has about 80 properties in Detroit on Land contract. Got 7 of them back the just in the week of Thanksgiving. At 94 years old he is having a hard time comprehending how bad the market is. He has made a lot of money his whole life renting and selling real estate. But even he is having a rough time in this market.
- A friend’s son in law in Taylor. Buying and fixing up homes. Started out as flipping them but couldn’t sell the house outright. Had to do a land contract. Has 2 homes. One just came back from land contract. So the kid is out a month on mortgage payment.
- A couple in DC. Bought a duplex in Oak park for 170k 2 years ago. Rented it out. Can’t keep renters in one side. Duplex is worth max 70K.
- A friend in Rochester. Bought a duplex in Pontiac. Couldn’t keep renters in the home. He bought it for 70,000, let it go to foreclosure because he owed more than the house if worth. The duplex recently sold for 12,000.
I do believe there is a lot of money to be made in real estate investing if you buy carefully. Pick your properties well.
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Most investors I know are being very careful about investing more. So if you are thinking about starting to invest in real estate go to an investors club like the one below.
|REIA of Macomb|