How to Invest in Real Estate [4 Profitable Strategies]
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How to Invest in Real Estate [4 Profitable Strategies]

The biggest mistake investors make in real
estate is thinking that it’s about using just one strategy. In this video, I’ll show you four real estate
investing strategies I’ve used to make hundreds of thousands. I’ll show you how to put these four strategies
together to not only make more money but also reduce your risk in investing. We’re talking getting rich with real estate
today on Let’s Talk Money. Joseph Hogue with the Let’s Talk Money channel
here on YouTube. I want to send a special shout out to everyone
in the community, thank you for taking a little of your time to be here today. If you’re not part of the community yet,
just click that little red subscribe button. It’s free and you’ll never miss an episode. I’m excited about today’s video because
we’re starting an official series, a three-part series into my favorite investment, real estate
investing. I’ve been in real estate, first as an analyst
and then with my own portfolio, for more than 20 years and I can tell you that property
has the potential to make you rich like no other investment . Stocks aren’t going to do it. First of all, you need money to get started
so most people are kinda stuck right there. Then, the best you’re going to do is seven
to ten percent annual returns. That’s going to grow your nest egg but it
won’t make you rich, not like most people think of rich. I’m a big fan of creating your own online
assets and starting a business but that’s not investment. You might make a lot of money but it’s going
to be on the back of 80-hour work weeks. You can do these, invest in stocks and start
a business, but if you want to be truly rich, real estate needs to be a part of your portfolio. Now most people think of real estate investing
as one strategy, maybe they buy a book on rental real estate or they watch a show on
house flipping . Let me tell you folks, if you aren’t taking advantage of multiple
strategies in real estate investing, you’re just setting yourself up for failure. That’s not something you’re going to hear
most of the time because most people are trying to sell you their course on one particular
strategy but if you are going to protect yourself from the risks and grow your money, you need
to be investing in different real estate strategies. In fact, I’ve been active in four real estate
strategies and it’s what I’m going to show you today. Each strategy has its advantages and disadvantages
but the secret is integrating them together. When you do this, you’re going to diversify
the risk , you’re going to be reducing the risks in each and make your wealth grow more
consistently. I’m going to detail each of these four real
estate investing strategies; rental property, house flipping, wholesaling and real estate
crowdfunding. I’ll be sharing my first-hand experience
in each from how I got started and how much you can expect to make. What I want you to get out of this video is
this, first that you need to be using two or more of these strategies. One just isn’t going to do it. You’re going to get caught in the next crash
and it’s going to eat up your cash flow and you’ll end up in bankruptcy. The only people that get rich when you do
that are the ones that swoop in to buy up your assets on the cheap when it happens. So make sure you watch each of these strategies
so you know which ones you want to use. Second is I’m going to be adding some resources
in the video description below, links to other videos that go into more detail on each strategy. I’ll also be creating a couple of investing
video series around each so join the community by subscribing so you don’t miss those episodes. Our first investing strategy is going to be
real estate crowdfunding and there’s a reason why I want to talk about this one first. A lot of people haven’t heard about crowdfunding
yet or maybe they don’t have all the facts so I want to get this out there. Real estate crowdfunding is one of the best
opportunities for property investors since real estate investment trusts were created
in 1960. Real estate crowdfunding is the social media
revolution come to investing. Developers and professional investors submit
their projects to online platforms like EquityMultiple . They apply for either debt or equity financing,
so for a loan or to sell ownership in the property. These can be anything from a huge commercial
development to a simple residential flip. The platforms have teams of underwriters and
analysts that look over these deals, doing the due diligence on developers and the properties. They look at the developer’s record, they
look at legal ownership of the property and look at the financial projections on the project. If everything passes this inspection, and
only about one in 20 are usually approved, then the project goes on the website for investors
to see. As an investor, you look through projects
on the platform and can invest as little as $5,000 in most. This is one of the biggest advantages in real
estate crowdfunding and why I think all real estate investors need to be using it. That means for less than maybe twenty or thirty
grand, you can get exposure to every property type, that’s office, warehouse, retail,
storage, even hotel and exposure to properties in different markets. You see, all of these other real estate strategies
we’ll be talking about focus on one property at a time or a few properties. You might be able to buy a few rentals but
unless you’ve got a couple million to put down, it’s probably going to be a handful
of houses in one area. That leaves you hugely at risk of any number
of problems. From economic problems in the area like unemployment
to problems with the specific property type. What happens when apartment developers decide
to build thousands of units and destroy rents in the area? What happens when an overzealous local housing
official decides he wants to make a name for himself, shutting down landlords because he’s
got an eye on the Governor’s mansion some day? I’ve seen it happen. If you’re not diversified with money in
different property types and in different areas, you’re not a real estate investor,
you’re a real estate gambler and you’re gonna lose money. Not only does real estate crowdfunding diversify
your risk but it’s the most passive form of investment among the four we’ll talk
about. You get professional management of the property
through that developer and the platform manages all payments, first your investment then the
payments from the developer back to investors. Investing on crowdfunding platforms is pretty
quick and straight-forward. I’m going to be covering what to look for
in properties and some tips in another video that I’ll link to in the description. Just remember, you want to invest across the
five property types and in different regions of the country. Real estate crowdfunding isn’t the hands-on
investment we usually think of but it’s great at diversifying and creating that passive
income. Both of those advantages are really going
to be important as we talk about these other three strategies. I’m leaving a link to a real estate crowdfunding
platform I invest on, EquityMultiple, in the video description below and I’ll be following
this video up with a couple more on how to create a portfolio of properties and how to
analyze a crowdfunding deal so watch for those. Next we’re going to talk about property
rentals, easily the most common type of real estate investing strategy. There are more than 120 million households
in the U.S. and only 75 million of them are owner-occupied. That means over 43 million people that need
a roof over their head and are paying for it every month. And the scenario for the buy-to-rent strategy
is only getting better. The percentage of people renting touched a
50-year high last year as fewer people are buying. Demand for rental units is outpacing construction
so rental rates are growing twice as fast as other income growth. On top of price appreciation, you can easily
make 15% to 20% a year with property rentals. The first house I ever bought was a rental,
this small 560 square foot two-bedroom. I bought it for $33,000 in 2002, the year
I got out of the Marine Corps from another investor. I put that deck on there, finished out the
basement and immediately refinanced it for $55,000 to buy other properties. Rental property carries a certain appeal,
right? Here you have this asset that is growing in
value and someone is just paying you every single month to use it. Here I was making about $43 a month after
all expenses and mortgage payments on this house. Now that might not sound too spectacular but
consider a 6% appreciation added another $300 a month and the tenant was paying down another
$152 a month on the mortgage principal. So here I was making just under $500 a month
or $6,000 a year on a house that cost me $33,000 in the first place . That’s an 18% return
and remember, I cashed out after fixing it up so I essentially had no money in the house. I paid cash with money saved in the Marine
Corps and then refinanced to cash out. Rental property has the advantage of being
a slow-and-steady approach and is less management intensive than the flipping strategy we’ll
talk about next. It’s obviously more work than crowdfunding
but find good tenants and it can be next to nothing in terms of month-to-month management. The disadvantages to rental property investing
are that it can take a big down payment to get started. If you can’t put down 20% on a loan, you’re
going to be paying PMI insurance which is just money down the drain. Even a 3.5% down-payment with an FHA loan
is going to be over seven grand on the median home value. There’s also that risk we talked about earlier,
that you might only have a few houses in one area so you’re exposed to the property type
and the regional risks but I’ve got three tips to help you be more successful in rental
property investing. These are three things I picked up on over
more than a decade of buying-to-rent. First is you have to get the house at a price
where you have instant equity. That means paying less than the real value
of the house . Now don’t roll your eyes, I know everyone wants to get a deal on an
investment but do you know the negotiating tricks to do it? Go into every price negotiation knowing exactly
how much the house is worth. You do this by comparing it to home sales
in the neighborhood within the last year, not other homes on the market but actual prices
of sales. You also put together a list of homes that
sold for less than the house’s value on a price-per-square foot basis. Basically, you’re getting a list of all
the sales and then cherry-picking the ones that sold for cheaper. You’re going to use this shortened list
to start your negotiating, saying that compared to this list you have, the house is only worth
X amount of dollars. You also want to go into the negotiations
with other things you can bargain on besides price, like all taxes or closing costs paid
or repairs. This is just going to give you ammunition
to get a better deal . They go up on price and you hit back with more from your list
of demands. Using just these two ideas, I regularly bought
houses for between 15% and 20% less than what they were worth. You have to be ready to walk away if you can’t
get your price. In fact, a successful real estate investor
is going to be walking away from more deals than they take. Second is start out with duplex or triplex
if you can. This is called the house-hacking strategy
because you live in part of the property and rent the other units out . Since you’re
living there, you can get access to low money down loans like FHA loans and it makes managing
the property a hundred times easier. You’ll learn a lot that first year as a
landlord and that experience is going to be worth it when you buy more properties. Finally here with rental property investing
is buy only in a neighborhood where you would want to live . That old saying about location,
location, location isn’t just a funny cliché. Don’t go buying in neighborhoods nobody
wants to live just because you can get a house on the cheap. You’re going to be spending all your cash
flow repairing the house when tenants destroy it and people will go all of a few months
before they stop paying rent. It’s just not worth it. Spend a little more for quality houses in
quality neighborhoods. Now I’m going to leave a link in the video
description below to another video that goes further into my experience in rental property
including more on that negotiating strategy that is going to save you thousands. Our next real estate strategy is house flipping
and this one is a fun one . In fact, I made most of my money flipping houses and it was
an amazing experience. I bought this 1,460 square foot three-bedroom
as a foreclosure in 2010. It had sat empty for two years and it was
just outright nasty . We’re talking asbestos shingles outside, plaster walls that had more
holes than wall and the electrical was almost a century old. But then again, I got the place for $25,000…so
yeah, there’s that. I took it all the way down to the studs, ripped
everything out and started over . I updated the electrical, new plumbing, tiled the floors
and walls in the bathrooms. The moldy bathroom got a custom dual-sink
and subway tiles . That nasty kitchen with ripped up vinyl got a marble tile floor, backsplash
and oak cabinets. By doing most of the work myself, it cost
just $50,000 to completely remodel before selling it for $117,500 That’s a profit of over $42 grand and we
used the homestead exemption to save on taxes. Not only did we make that money but working
on the project with my wife brought us closer together and there’s just something about
building a house up from scratch like that. We almost didn’t want to sell it. So the advantages in house flipping are that
huge potential for profit. This isn’t that weak ass six grand a year
from rentals, this is five-figure profit in a few months but you have to put in the work. That’s the disadvantage, that to really
make the big money, you have to treat it more like a business than an investment. I’m not going to leave you hanging though,
I’ve got another three tips you can use with house flipping to get you started and
help you make as much as possible. The same tips for renting work here as well,
getting the right price and buying in the location that’s going to make it easier
to sell. First is learn to do the value-added work
yourself. This means starting with either electrical
or plumbing because that’s going to be your biggest cost. I always hired out my plumbing but did all
the electrical myself. This one is going to save you a lot of money. You’ve seen these guys that show up to fix
the plumbing, right? There’s no reason you can’t learn to do
this yourself . Then I’d recommend learning tiling, also very easy to do and you can learn
this with free weekend classes at Home Depot or Lowes. Then there’s easy stuff like painting and
carpeting. Second here is don’t be afraid to take a
little longer, especially on your first project, if you can do more of the work yourself . I
have a friend that only works weekends on his house flips. It takes him five months but it’s almost
all sweat equity. This is going to allow you to do a little
on-the-job learning at first to save money and your next flip will be twice as fast. Finally is leave a lot of room when deciding
how much loan you can afford . The number one reason people fail house flipping is they
can’t afford the payments when the flip takes longer than expected. Those house flipping shows are more entertainment
than reality. Don’t kid yourself and think you can get
a project done in a week and you’ll find a buyer immediately. Even flips that go off without a hitch usually
take three months from buying the property to closing on the sell. I’m going to be doing an entire video series
on house flipping, building off my experience, so make sure you subscribe to the channel
and click that bell notification so you don’t miss it when it comes out. This next real estate strategy is a really
interesting one and one of my favorites for getting started without a lot of money. In fact, you can make five or ten grand a
month here just on the weekends. We’re talking real estate wholesaling which
is like extreme flipping . Here you contract with a seller to buy the house, say with a
closing in 30 or 45 days. You then spend that time lining up a buyer
that is going to take the property off your hands at a higher price on the same closing
date . So you might actually own the house for all of ten minutes. The earnest money you collect from the buyer
covers the money you put down with the seller so you can use this strategy with just a few
grand to get started. If the closing is done on the same day, you
might not even need the down payment. I don’t have as much experience with real
estate wholesaling, I’ve done one deal but love this strategy for its potential. This is really one where you don’t need
those remodeling skills like in flipping or renting and it’s an instant payoff. You only have a month to get everything done
though so wholesaling can be intense and that can be a disadvantage because if you can’t
find a buyer then you’re still left holding a contract. Just like the other real estate investing
strategies, I’ll share three things I’ve picked up that help make real estate wholesaling
successful. First is you have to be active in a lot of
real estate investor groups. This is where you’re going to find your
buyers so this is one of the most critical pieces . Apart from this, that need to line
up a buyer in less than a month, it’s just basic real estate investing, right? You can take your time finding deals but then
when you pull the trigger on that deal, you need to be ready to go to work. So find a few Facebook investor groups, preferably
ones that are local to your area and there are almost always a few. You also want to find the traditional real
estate investor groups in your area and be active in their events. You can usually find a few through local agents
and I would say give it a few months at least to get to know people, what investors are
looking for, before you start looking for deals to present them. Of course, here negotiating that deal so you
have instant equity in the property is critical. These investors you’re pitching, they aren’t
newbies, they’re going to know the property value just as well as you. If you aren’t able to close on a property
at least 20% below what you think you can get out of it, don’t even think about it. Remember, you’re not going in and doing
any repairs or anything to this property. You’re basically just the middleman passing
it from seller to buyer so there has to be room in the price for your work. In wholesaling real estate, more than any
other strategy, walking for dollars becomes more than just valuable but necessary . When
I say walking for dollars, that’s not just an expression. It means you’re walking or driving around
neighborhoods looking for houses that might be ‘for sale’ but not on the market yet. So we’re talking properties that have been
vacant and the landlord is tired of the rental game or properties that are too much to manage
for the owners. And they’ll be all the signs like overgrown
lawns or maybe siding that needs replaced. Why this is important is because you’re
contacting the owners and buying these houses without the competition of the market. The house is worth one price on the market
but since it’s not on the market, it’s really not worth that much to the owner. It’s worth a little less because they’re
paying the property taxes, they’re paying the insurance and all the little expenses
but not getting anything out of it. So you can usually get these houses for that
20% discount or better. Finally with wholesaling, you absolutely need
a backup plan. Whether you can find a buyer or not, you’ve
got this house under contract . I know investors that will walk away from their earnest money
rather than actually take the house but that just seems like a wasted opportunity to me. If you’re serious about growing your wealth
through real estate then you’re using a couple of these strategies so you’ve got
this house at a 20% discount or better, turn it into a rental property if you can’t find
a wholesale buyer. Now if that’s going to be your backup plan,
you do need to have the down-payment available. Usually you’re going to need this to get
your financing approved anyway but make sure you are ready to take this house if you need
to. You don’t need to use every one of these
strategies. I love real estate crowdfunding and rentals
and those are really the strategies I use right now. I made a lot of money flipping houses but
it takes time. So don’t feel like you have to use all four
real estate investing strategies but use at least a couple to build that diversified portfolio
that is going to help you grow your wealth. We’re going to be talking about building
that portfolio, putting all these together in our next video. I’ll show you how I use real estate crowdfunding
and REITs to make my property investing more passive and share more tips on what will make
you more successful. Don’t forget to check out those resources
I’ve linked in the video description below. We’re here every Monday and Wednesday with
the best on beating debt, making more money and making your money work for you so click
subscribe to join the community. If you have a question about money or investing,
scroll down and ask it in the comments and we’ll answer it in a future video.

10 thoughts on “How to Invest in Real Estate [4 Profitable Strategies]

  1. Watch next for detail on my experience in real estate rentals
    How to be successful, common mistakes and how to get started!

  2. Real estate really does have the potential to make you fifty rich if you actually know how to use debt the right way. There are also tons of people out there that just don't know their way around debt and end up loosing their own houses, cars and sometimes even families. So, the first thing I really want to learn more about before I move the biggest portion of my wealth into real estate is using debt the right way, and while I have been learning about it for the past 7/8 years, I still don't feel ready for it. So, it's a good thing we have you, Joe!

  3. Wholesale sounds great.. Flipping takes quite abit of effort & crowd funding seems like mutual funds; much easier. 😊 Nice

  4. I would love to invest in real estate. Actual real estate, not just REIT's. I have to disagree with you when you said you can only get 7 or 8% in stocks…. that's what I'm good at, and I can tell you that if you do your research, dedicate yourself, and NEVER speculate, then 7 or 8% will be on the low side for your investments. You don't need a college degree either. But, other than that, I did like the video. You're very organized with what you're talking about.

  5. I bought rental properties over a decade ago and it has been a great income stream in retirement for us while increasing in value. Always great info. Thanks Joseph.

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