Have a burning real estate question? Shoot it our way.
Every couple of months we do an “Ask The Guys” show. In this week’s episode, we shared several real-life questions from our listeners and provided our ideas on how we would approach their situation. (Note: We do not give advice. We provide ideas and information. We recommend getting professional counsel.)
Below are summaries of four of the questions we covered this week ranging from market selection to self-directed IRAs to optimum use of leverage.
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Question: Nicole from Pennsylvania wrote, “My husband and I have saved up $30,000 cash to purchase an investment property. We’re prepared for a 20% down payment and are interested in the condo rental market in Florida. What do you know about that market?”
We like to say, “Live where you want to live, invest where the numbers make sense.”
First, visit with your mortgage professional and see what you qualify for. When you know what you can afford, it’s easier to tackle where to invest.
As a background on Florida, it’s been a great job creation market. A lot of baby boomers have moved there, as it’s known for being a popular state to retire. We are fond of the central Florida market. It might be a bit pricey for what you’ve saved at this point, since you’ll want to have a contingency cache.
As part of your budget, you’ll need to allocate resources to travel and your team. Don’t be skimpy on picking the right person. In fact, if you’re buying out of state, it’s often wise to let a local property management company help you find a property.
One caveat: When you’re looking at condos, consider the condition of the HOA. That’s something you’ll want to make sure you understand before making a purchase.
Question: Ryan in Georgetown, Massachusetts, age 23, is living at home with his parents and considering buying a home rather than renting. He asks, “What’s the ideal percentage to put down? Who should be on my team?”
To answer both questions, you need a great mortgage professional on your team. There might be mortgage programs available for first-time home buyers. To make sure you take advantage of them, your mortgage professional will be your best friend.
He or she will also pull up your credit score, the starting point to see what kind of credit you qualify to receive.
We recommend planning your credit approach to property ownership a year in advance or more. If you don’t want to wait, you might need a co-signer.
If your income is low enough, you may want to owner-occupy your first property. Live in it for a little while, then turn it into a rental property. If you can force some equity, making valuable updates to the property, you can use that on your next investment property.
We don’t recommend a condo. A single-family home is a good bet, as far as liquidity.
When you are young and willing to compromise on your lifestyle, feel free to be creative. For example, you can go bigger than you may be comfortable on your own, then rent rooms out to your friends.
If you’re interested in learning how to invest using other people’s money, we will share in-depth about how to do that in our upcoming Secrets of Syndication Success event.
Question: David in Boise, Idaho, asked: “Are there limits, as a percentage, to invest my self-directed IRA? Can I invest it into one property?”
We definitely recommend you talk to a tax advisor. If your IRA is self-directed, then yes, you are legally allowed to invest as you please.
While you can, the bigger question is should you invest it all into one real estate project?
Generally speaking, it’s not a good idea to put all your eggs into one basket. It may be prudent to diversify.
We don’t have all the details on David’s portfolio, but the general principle is it’s never good to be greedy. Sometimes you swing hard and get the Grand Slam, and sometimes you strike out. If you’re not prepared to strike out, it might not be the best route.
Question: Kevin in Bellingham, Washington, asked: “What do you think about paying for online real estate courses? If that’s not advisable, is studying for a realtor’s license a good idea?”
We are big proponents of paying for education. But make sure it’s a quality education with a reputable teacher. You should always know somebody’s agenda.
For example, our agenda is to teach you the market. At our events, we’re not looking to sell you property. We’re looking to teach you the market.
Once I spent $2,500 on a one-day course. I thought of it as an investment and have used the knowledge I gained that day to make a far greater return.
Don’t hold back on investing in your future. When you can gain actionable knowledge, expect that you will get a return. It’s up to you to put knowledge to practice.
As for a realtor’s license, most of the time when you’re getting a professional license, you are being trained on how to represent someone else. You’ll learn the legalities and structure of how to help. That’s good information to know, but it might not be necessary, depending on what you want to accomplish.
Spend time around other investors. Rely on your technical advisors. If you need a specific skill beyond that, invest in your education and then use that knowledge until it pays you back.
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