Real Estate Investing For Beginners | 4 Tips For Low Risk Growth

In today's video, I'm going to show you 4 tips for low-risk growth. Coming up next. Many people think real estate is risk-free, but the fact is one needs to understand the market and research quite a bit to stay afloat and move ahead with lesser risk. Let's look at a few tips that will help you grow slowly yet steadily in real estate investing. Welcome back, I'm Joe Homs. I've been a broker, mentor, and investor for over 40 years. I created this channel for the new and experienced investor, those who want to create the life they've always wanted through real estate. Tip number 1, do your homework well. This is probably the number one important thing to do. I get a lot of calls from a lot of investors. What about this? What about this, Joe? I don't feel comfortable doing this. Actually, the only way you're going to feel comfortable is if you do your homework, you do your research, and then start putting that into action. And the more action that you do, the more comfortable you're going to feel at the end of the day. The hardest flip or the hardest wholesale deal, whatever it is, the first one's going to be the hardest. After that, you're going to look back and you're going to say, wow, this was really easy after all. But then you're going to get more sophisticated and more deals are going to come your way that are a little bit more complicated than just, you know, purchasing a property from a seller who agreed to a price. So do your homework and you'll feel comfortable. Number 2, a good location is as important as a low-risk property. And by location, I can mean, you know, you've decided to invest locally, which is what I recommend, at least No more than a couple of hours away from where you live. Or if you've got some experience in another state because you live there, you grew up there, you went to college there, then you can go invest out of state. So a good location is, is very important. Another factor to look at for location, specifically when you're flipping homes, is a home on a busy street? The same home that you're going to use comparables for, you have to take account that busy street because that same home could be in the same housing tract but not be on a busy street. It's going to be worth more than that one on the busy street. So location is, is very important when you're dealing with any type of property, whether it's a flip property or you're just going to move in at the end of the day. You're wondering why this house On the busy street is, you know, like $50,000, $60,000 less than the other one that's exactly the same model match, let's say. It's because of that busy street. And is that going to affect you at the end of the day when you go to sell it? Absolutely. So keep that in mind. Number 3, rule out negative cash flow properties. Now, have I invested in negative cash flow properties? Actually, yes. And it was back in the '80s, and we're kind of experiencing a similar thing right now. More sophisticated investors back then were purchasing properties, let's say in January, for back then $200,000. By the time we got to December, because the inflation was out of control back then, as it is now, we were experiencing 10 to 15, 20% growth during that time. And yes, I had a tenant in there, and yes, I was paying, you know, part of his payments. I had a negative cash flow of $200 or $300. But then on the other hand, I was making $10,000 to $15,000 a month just on the appreciation alone. So I had a tenant in there for a year. They left after a year. I put the house back on the market. Obviously, there's a lot of appreciation there. Cashed out at that point and moved on to my next venture. But rule of thumb, do not buy a property when it has negative cash flow unless you want to write something off of your taxes. And even then, there are new rules nowadays that there weren't back in the '80s. You really can't write off more than I believe it's $25,000. Don't hold me to that. Check with your CPA. But back then we didn't have any of those rules. So if you had like a $50,000-$60,000 loss, you could write that off on your taxes, your 1040, at the end of the year. But that, that rule I don't believe applies anymore. I believe there's a limit of $25,000 right now. But again, check with your CPA. Tip number 4, keep your vacancy low. And this is really important because if you have a vacancy and it's Vacant for a month or 2 or whatever, and let's say you're paying— somebody's paying you, you know, $1,000 a month and you have a vacancy for 1 month, that's $1,000 less. If you're asking for $1,000 for the rent next time, you're really kind of behind the 8-ball because you've lost that $1,000. So it's really like you're asking for $900. So try to keep your vacancies to a minimum. What I usually do is I usually look at the market, see what's going on in the market, and certain times I will price it just at the market or a little bit below to attract that person that is going to meet my qualifications, because I qualify everybody that comes into my properties, which is another tip that you should follow. So anyways, keep— try to keep them there for A year or longer. I prefer that they stay in for 3 to 5 years. What's happening now is literally I'll put a property on the market. I'm literally going to go $200 over what it's going for now because I know there's a high demand. And then of these clients, I vet them very well. And again, we're 2022 here. So So you've got resources, online resources that I use to find out if they've ever been evicted before, what their FICO score is. And then finally, at the end of the day, I do a personal interview with everybody because you have no idea how much people are going to reveal when you talk to them in person. And I've met many people where they start out with, hey Joe, I know my credit score is bad, But this is kind of what happened. And you can see my red flags going up like this as they're talking. Yeah, Joe, I was evicted, but that was 10 years ago. That they've gone through the process is still a red flag. Okay? So that's why I kind of do the final approval with an interview before they come into the property. These are just some strategies that can help you sustain in this real estate market. Keep in mind there are many other factors that could affect your real estate investing. If you're new to investing and want to know how to source your own deals, click on this video right here. If you have any questions, please feel free to reach out. I'm always here to help.