Investing in Real Estate for Idiots

There are many ways to become a millionaire by age 30. If you asked my Brother-in-law, he would tell you to take your money to the nearest Casino and start out on the Slot Machines. Its been pretty lucrative for him but I am slightly more risk averse- so here are what my efforts to become a Sugar Momma have taught me so far.

1) Buy an income property. From a duplex to a quadplex, buying a residential property where you can get other people to pay for your mortgage is the ultimate real estate investment. The best way to break into this method is to purchase an owner occupied multi family unit (less than 4 units for loan purposes). Check this math out:

Actual QuadPlex listing on the MLS: 185,000$

Tenants Pay in rent: 595$ monthly

Owner Occupied so total monthly income: 1785$

Your Mortgage Payment at a 3.25% interest mortgage rate + property taxes and insurance: 1248$

Monthly Profit: 537$ (net 1785$!!)

Just by living in a quadplex that you own, you could MAKE 537$ a month as opposed to paying 1248$ a month to live in a single family home.

*these calculations do not include vacancy or maintenance considerations

2) Rent your unused house space on Air BnB.

Many houses I see being constructed or sold these days have a split floor plan or have multiple suites. This was probably intended for the nuclear family to have a mother-in-law suite or lets be real, to ensure the kids don't hear any grown up activities after bedtime. If you're looking to buy a house, having this quality built into the floor plan is a bonus. As long as you are a clean individual with no criminal history- just nicely decorate your unoccupied space, create an air BnB profile, and wait for tenants.

There are many ways to go about marketing and drawing customers into this, but with the frugality of us Millennials combined with the intense profiles developed with Air BnB, these are the hotels of the future in my opinion.

3) Buy a live in flip.

Go to the best neighborhood- buy the shittiest house- remodel that house as you live in it. Being able to deem a property as "Owner Occupied" alleviates a lot of potential insurance problems (its 3X more expensive to insure an investment property) mortgage problems, and holding fee problems. Yes you live in a construction zone for a year, and yes as soon as its pretty enough to have company over, you sell it, BUT the profits are usually worth it. Especially if you did most of the work. (Future post detailing my live in flip linked here)

4) Sweat Equity

Carpet was a huge trend in the early 2000s and 1990s. These days if its not hard wood, some buyers don't even want to see the inside. The average price of buying the materials to install a hardwood floor is around 3$ per square foot. The average square footage in a single family home is around 1500 square feet. That is 4500$ just to buy the floors. To have it installed is 4500$. To have the carpet removed and hauled can be around 1000$. Quit being lazy, buy a Miter saw, and do it your self. If I can ->, anyone can.

Do it yourself: 4500 (wood)+ 250 (miter saw) + 50 (miscellaneous materials)= 4800$

Contract it out: 4500 (materials)+ 1000 (Carpet and debris removal)+ 4500 (labor)= 10,000$

A house that has new hardwoods is approximated to sell for a minimum of 15,000$ more than a comparable so by doing it yourself (and not screwing it up) you made 5200$ more than if you would have contracting out the work. Inside hack for sweat equity projects: youtube how to screw it up and then how to do it properly... save yourself some time.

5) Fund a cash investor LLC instead of a stock market/TSP/IRA/CD/Saving account.

Do you ever wonder where people get the money to flip a home? Most serious flippers get their money from private investors or Hard Money lenders. These investors give them cash at an interest rate that benefits them, and the investors do all of the leg work into yielding a profit. The more invested and knowledgable about an investor you become, the more radical your investing can get. Start out by just loaning money at a higher interest rate than any saving account or CD will yield where you have essentially become the bank without the receptionist and loan officer with bad breath. Then as the real estate company surprises you with such a great and timely return on your investment- snow ball that money. As their business grows, your money grows and all you have to do is trust someone else to do the work. Don't know where to find a flipper? They usually hang out at the court house steps for the house auctions. Another way to find these guys is through a real estate attorney. I advise against just googling or going on craigslist...

Now go forth and conquer... all three people that read this.

#RealEstateInvestment