THE BIG PICTURE
INVESTING STRATEGIES
Riches in Niches THIS IS NOT YOUR GRANDFATHER’S ‘ROOMING HOUSE.’
tion and wealth creation by acquiring, at a lower cost, single-family proper- ties and converting them into quality shared-living space. Before you jump to the assumption we are proposing a “rooming house of old” model and turn the page, let us assure you we are not. This effectively turns a traditional sin- gle-family house into a systems-based, scaled-down version of a multifamily dwelling, providing numerous benefits for both investors and occupants. The neighborhoods where we pur- chase such properties often are located in the path of a city’s plan for redevel-
by Kelly Edwards and Chris Edwards
investment will be defined as an all- cash purchase of a single-family house with a total cost landing somewhere between $30,000 and $60,000. This cost includes the investor outlay for acquisi- tion, closing and rehab expenses. This is a C to D Class two-bedroom, one-bath, 1,200-square-foot older home—built between 1900 and 1960. Understand that this range may vary depending upon location and many other factors. We will also presume that the investor is local and will self-manage the property. “the riches are in the niches.” For most business owners, mastering a particular niche can be quite profitable. But it takes a commitment of time and effort. In the New York Times bestseller “Outliers: The Story of Success,” author Malcolm Glad- well cites “the 10,000-hour rule” in posit- ing that the focused and diligent practice of one’s craft will ultimately make one an “expert.” Likewise, we contend (backed by our own experience) that focusing on a niche will increase the likelihood of success as a real estate investor. THE 10,000-HOUR RULE AND NICHE REAL ESTATE INVESTING As the often-repeated adage goes, THE SHARED LIVING REAL ESTATE MODEL One such niche is the Shared Living Model. This is one strategy that our company pursues in seeking diversifica-
A
s students of real estate invest- ing for the last 13 years, we’ve
seen—and participated in—quite a few strategies related to single-family and multifamily investing. We have learned a great deal along the way, but one timeless lesson remains far superior to any other: buy where the numbers work. Sounds simple enough, right? Sure, until the day you make that first offer. For a traditional buy-and-hold strat- egy, it seems logical to simply acquire the lowest-priced property in the best possible neighborhood and seek the highest rent the market will bear. Prob- lem solved, right? Again, not so fast. Experienced investors understand that, generally speaking, the lowest-priced properties typically do not return the highest rents, for many reasons. So what’s an investor to do? Let’s look at some viable options for building wealth by acquiring, rehabbing and managing the traditional low- cost property, often referred to as “the $30,000 house.” But be forewarned: This requires a wide-open mind and some “out-of-the-house” thinking. Are you ready? Let’s go! THE TRADITIONAL $30,000, BUY-AND-HOLDMODEL Much has been written about the upside as well as the challenges of investing in the prototypical low- cost property. For the purpose of this discussion, let’s set some parameters about our $30,000 property. A low-cost
18 | think realty magazine | mar :: apr 2016
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