INVESTOR REVIEW
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FINANCIAL EDITION
Real Estate Investing 202… Moving Beyond the Basics
W hen I am interviewed for a maga- zine article or TV, radio or a podcast, a common question I am asked is “how and where would you recom- mend new real estate investors get start- ed?” My answer is always the same… “New Investors should start with the end in mind. That’s the short to getting what you really want” Many new real estate investors think there is only one place to get started and that is wholesaling or fixing and flip- ping single family homes. While that is “a” place to start, the question is, “does that really get you what you want?” I believe it is critical to start with the end in mind. Decide what it is that you really want and then determine the best way to get there. Following that simple process will save you years of time and hundreds of thousands of dollars in lost income, easily avoidable mistakes and missed opportunity. The desire for more money is the pri- mary reason why most people invest in real estate. That is universal for all ages and there is nothing wrong with that. The money they are working hard to get can come in lump sums, a steady cash flow or in future equity in the property. Knowing in advance what it is that you really want will save you from wast- ing time, effort and money in reaching your objective. Let’s look closer at the options for real estate investing. Wholesaling and Fix and Flip are “trans- actions” that will allow you to make money just once. After the contract or the property is sold, you are “out of work” until you find
another property and you are able to repeat that process. In today’s market finding “good deals” that you can wholesale or re- sell for a profit, is getting harder every day. Buy, hold and rent. Whether that is with single family homes or apartment com- plexes, that process will typically net you $100 - $300 per home or per door after ac- counting for all of the expenses including the opportunity cost of you own money. Many people that have been investing in real estate for years neglect to account for the lost income their own money would earn if it were in hand vs in equity. For example, let’s say you own a rental property that you paid $150,000 for and is now worth $200,000. You are renting that home out for $1,500 a month and after all expenses you may be making $1,000 in “profit” That sounds pretty good until you think about the lost opportunity from your money sitting in equity vs in hand. $1,000 a month in profit is $12,000 a year. That is assuming nothing goes wrong and you have no vacancies… That still sounds pretty good until you think about that $200,000 not being productive. $12,000 earned on $200,000 is a 6% ROI. Now that doesn’t sound as exciting anymore. Here are 3 opportunities and alternatives that I’ll share with you now. “Golden Girl Homes” Rent the home by the room to 4 seniors that take care of themselves and don’t need assistance. They may be willing to pay $1,000 each per month. They don’t have to be concerned with the property maintenance, the taxes or the upkeep and they have peers their own age, 1 ST
they can spend time with. They would be low impact tenants and long term as well. Fewer vacancies, higher income and long term tenants. That $4,000 in rent will net you $3,000 or more after your expenses, each month and that’s a 18% ROI on the same home with less turn over.
2 ND Rent your home to an operator of a Residential AssistedLiving group home The operator will be making a lot of money and they may be willing to pay you twice the market rent, with a 5 year lease or more.
That would be a more passive income with increased rental income. That can be a good way to get started in senior housing without being directly involved in the operations. Use the home yourself and operate aResidential AssistedLiving group home These group homes for the elderly can net you $10,000 or more per month after all expenses including the real estate. That’s what I do and what I teach others how to do. • Gene Guarino is the Founder and the President of the Residential Assisted LivingAcademy. RALA is the pre- mier educational resource in the Residential Assisted Living space. To learnmore about owning, operating or investing in senior housing and assisted living, contact the RALAcademy at www.RALAcademy.com or call themdirectly at 480-704-3065. 3 RD
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