It’s no secret that owning real estate is an incredibly lucrative and great way to bring in passive income, while also building your net worth. I’ve shared a bit about our real estate journey on Instagram, but recently I’ve gotten more questions around “how” we got started so I wanted to dive into that a bit more.
We own 3 homes right now, with the hope of adding more properties to our portfolio in the future. We were in our early 20s when we bought our first home, and while this home is not still in our portfolio, this purchase laid the groundwork for us being able to get started with our investing. We purchased our first home in 2011 when the housing market was trying to bounce back from the housing crash. We had saved our money and were able to buy a property at a very good price. The community we were in was so nice, but there were so many homes for sale and going into foreclosure that it was viewed as an area that was not desirable. We saw the potential and went for it anyway and I’m so glad we did.
We Treat Real Estate Like a Business
We owned that home for several years and when we sold it, the housing market had started to turn around. The community we were in had started to gain a lot of traction and we were able to sell the home for significantly more than what we bought it for. The money that we made from the sale of that property positioned us to be able to start buying more homes.
This point is important because when everyone is desperate to sell, this is when you need to be ready to buy. Why? Because this is when you have the potential to make money. Do your research and save so that you’ll always be ready when an opportunity presents itself. I think it’s also important to decide what your goals are financially. We treat everything right now like a business opportunity. For example, the home we live in is not my “dream house” and there are so many things about it that I do not like. SO MANY THINGS!!! BUT we bought it from a family who was desperate to sell – it was listed for 180 days – so we got a great deal. It had the bones of what we needed for our family in terms of bedrooms and bathrooms, and we knew it had the potential to increase significantly in value over time.
Things that we look at when determining this include: area development, quality of schools, and comps from near by homes.
All About The Equity
We’ve owned the home now for 2 years and the property value has almost doubled. Meaning our earning potential has doubled on this home. For us, this purchase was a smart business decision. If we were ready to sell we’d take a very nice profit and be able to roll that money into another investment property.
I’ll be honest, removing the “emotional” part of home buying is not something that comes naturally for me. A lot of times when you’re looking at homes, it is an emotional purchase – it’s where your family will grow, it’s where you come home as newlyweds, it’s everything you ever dreamed of, etc, etc. For us, we’re always looking at the numbers, the potential, our net worth.
The real estate market right now is a great example of how buyers can put themselves into a difficult situation financially. I’ve seen reports where buyers are getting into bidding wars and paying well over asking price, and while this is fine if you really need to buy a home, I will say that if you can wait, WAIT.
I want to buy a home when people are desperate to sell, not when buyers are desperate to buy.
3 Tips For Getting Started in Real Estate
My best advice if you are interested in buying rental properties would be these key points:
- Keep an open mind on location and do your research on which markets/locations will allow you to get started and stay within your budget.
- If you can hire a management company, do it. I could not imagine managing each of our properties directly.
- Start saving NOW! Add the goal of owning multiple homes to your monthly budget so that you are prepared to put down a down payment or purchase a property outright when the opportunity presents itself.
I hope that answers some of the questions surrounding how we got our start! If there’s anything else you wan to know, please don’t hesitate to reach out. You can read about how we paid off our home here. Thank you for reading!