Investing • September 10, 2020

16 Tips for the Really Green Real Estate Investor

by Alisha Anglin-Pagan

It’s not rocket science, it’s not unheard of, and it’s not some Illuminati top secret that is withheld from the masses. We all know, that many of the wealthiest people in the world became wealthy through real estate investing. Many of these real estate tycoons started with just one property that grew into an empire. So yes, you too can become a real estate investor.

But, just like with other forms of investing, real estate investing is risky. And, just like with other forms of investing, with the high risks you will also get high rewards if done properly.

Here are some beginner real estate investor tips for those who dare to venture into the property-owning world.

Are you up for it?

Seriously, you have to be in it to win it! Seeing that you are green in all this, you probably don’t have tons of funds to spare. You probably want to penny-pinch as much as possible to make things work and maintain low expenses. This would mean that you would need to be a bit of a handyman or woman. This would mean that you would need to know how to fix that leaky faucet, patch a hole or two, and do some painting. Of course, if bigger things arise you will need an expert. However, when the little things come up, you would need to know how to take care of it to keep your expenses low and have more of a profit. So roll up those sleeves and get a little dirty!

Stick close to where you live

I am assuming that, just like with the above-mentioned tip, you don’t have a lot of funds to spare. So it would make more sense to have property within a 2-hour radius from where you live, no? This way when there is an emergency, and it happens, you will be able to rush over to your rental property and get it taken care of without having to book a flight, book a hotel stay, book a train ride, or pay for a long-distance bus. As you get better at it and build your experience as well as grow your property portfolio, you will be able to venture out further away from home and even possibly hire a property manager.

Jump in without the debt

If you’re going to be a real estate investor, you must realize that you are going to have a lot of expenses to deal with when you have an investment property. Things break, bad tenants, updating, and ongoing expenses will chip away at your profits. Unless you have tons of funds set away for an emergency, you shouldn’t have any lingering debt when you start your investment journey. Clear up those student loans, personal loans, and large credit card debt before looking into an investment property.

Beware of the higher down payments

You may think that you can get an investment property with as little as 3% down. I am sorry to burst that hopeful bubble of yours but that won’t happen. Generally, at least here in New York City, you would need at least 25% down. You also don’t have the luxury of mortgage insurance for investment properties and so, you are held at a higher standard from banks to get a loan approval.

Beware of the higher interest rates

Unlike traditional mortgages for residential properties, investment property mortgages come at a higher rate. This affects your buying power and your monthly payments. Since you have to worry about expenses and having a healthy margin of safety, you will have to look for properties that are cheaper to offset the interest rate to keep your monthly payments down.

Make yourself look good to banks

Along with paying off debt, ensure that your credit looks good too. Investment loans are more strict than using a traditional loan remember? That goes for your credit too, so getting away with a lower credit score might not cut it for investment purchases like it would for traditional residential purchases.

Margin of Safety

Just like with other forms of investments, you have to keep a healthy margin of safety with investment properties. Sure, homes can go down in value. Just like with stocks and other forms of investments, you may choose a property that loses its value suddenly due to an unsuspected change to the real estate market. I however think that more important for you to be able to keep up with your monthly payments. House values rise and fall in cycles but not the monthly payments. If you can’t keep up with it, you will end up losing the property.

Stay away from fixer-uppers

Unless you are a contractor or have the knowledge and skill to tackle such a feat, I would advise you to stay clear from this for now. Sure, you may think by buying a sweet deal on a place that needs major work would be cost-effective but it isn’t. Repair items can add up and so can the people you hire to do the repairs.

Your expenses

When becoming a real estate investor, you will have expenses, tons of them. If you are trying to rent it on your own without using a real estate salesperson or broker, you will have to worry about marketing and advertising as well as credit and background check fees. You will also have to worry about ongoing expenses like property insurance and taxes (which may or may not be a part of your mortgage payments or in escrow), utilities, maintenance, and accounting and legal services. You will also have to keep in mind for any sudden repairs or pest control.

Location, location, location

Location means everything with real estate including investment properties. Look for areas with lower taxes that has a good school district, low crime, and growing employment. It should also be close to local amenities like shopping and dining as well as transportation and/or highways or major roads.

Start Small

Don’t go overboard with your first investment in terms of size and price. You have to be able to not only take care of expenses but walk away with a profit.

Invest with others

By buying with a partner or partners, you can make the seemly impossible dream of investing come true. That 25% down payment can be split into two or more which will make it easier to move forward with a purchase, however, choose your partners wisely. You have to be comfortable with not only the partners but the agreements that you all have on the purchase price, updates, and management of the property.

Consider small banks

Big banks are typically less flexible than smaller banks. Smaller banks may consider a lower down payment and not have as many hoops to jump through to obtain a mortgage. Stop by a small local bank and shop around. You could also contact a mortgage broker instead. Mortgage brokers are intermediaries who bring mortgage borrowers and mortgage lenders together and typically have access to a vast array of banks and mortgage options.

Consider seller financing

If getting a traditional loan is a bit difficult for you then requesting seller financing can be an option. These types of terms are often for a short amount of time, about a five-year term, with a balloon payment at the end which can be refinanced before the end of the term. These arrangements are risky and can backfire so use caution.

Consider buying a multifamily and living in a unit as a way into becoming a real estate investor

This strategy is the easiest way to purchase an investment property. By living in a unit and renting out the other unit(s), the property isn’t considered an investment by the banks and if it is your first home purchase, you can reap the first-time home buyer benefits. You can also take advantage of FHA loans which allows you to purchase up to a four-family (fourplex) home with a down payment of 3.5%.

Consider a REIT

Having a physical property isn’t the only way to become a real estate investor. If all of this seems way too much for you, consider a real estate investment trust. REITs are companies that can be public or private. They use investors’ money to purchase actual real estate. REITs sell on the major stock market exchanges just like any other stock, ETF, bond, or Index. To purchase REITs, just create a brokerage account with company’s such as Vanguard, E-Trade, or Robinhood, and buy some shares. I currently own a few of the Vanguard Real Estate ETF, (ticker: VNQ) which costs about $74.36 at the time of this writing.

Whatever you decide to do, be sure to educate yourself! Jumping into the real estate investment world is an amazing adventure however, it can bring some major headaches along the way if you are not prepared.

Up here in Orange County, there are some great prospects that you can consider as your starter home into the investment world, feel free to check out some homes here or contact me.

Moving is always hard work but relocating to a new town can be exceptionally hard, even when you are excited about your next chapter in life. As your real estate agent, I can refer you to an agent in your new town to help you find your new home, and also give you referrals for other services you will need, such as recommendations for hotels, restaurants, child care, and pet boarding while you get settled.

To help make the logistics of your relocation as smooth as possible, here are some to-do items you may not have thought about yet that will help you when relocating to a new town

1) To keep or not to keep.

As soon as you know you will be moving, start to organize your belongings, getting rid of things you don’t want to take with you. The less you take with you when relocating to a new town, the less of a headache you may have. Also, sometimes the new space may not even fit what you currently have. Always remember, you buy furniture for your apartment not buying your apartment for your furniture.

2) Have a packing stash

Collect used packing materials like boxes and bubble wrap to reduce what you will need to purchase. Boxes and packing material pricing can get up there, especially if you have a large place and a lot of items to pack and protect. Simply saving those amazon boxes or stopping at local supermarkets or warehouses can help alleviate that cost. Even posting a question on your Facebook page for friends to see would help out too. When I relocated from NYC to Chester, NY, I had asked my clients who I had just recently helped purchase a home, if they had any spare boxes that they weren’t using. I was able to get two big boxes just by asking.

3) Pack rarely used items first

Start packing items you don’t use daily, like family mementos, holiday decorations, books, and décor accessories. Doing this will help you to not get overwhelmed when it’s crunch time.

4) Shop around for moving companies

Get an estimate from moving companies and schedule a tentative date with the one you choose, but don’t stop there. Check on Yelp, Google, Angies List, and Facebook (etc) for reviews, not all moving companies are created equal. Since you are relocating to a new town, you want to be sure that your belongings are safe while in transport and that there aren’t any delays. Ask your real estate agent, you can ask me for NYC moving companies, as well as friends, acquaintances and family.

5) Check out the neighborhood

Visit your new town, if possible, and arrange a driving tour with a real estate agent that can show you different neighborhoods, shopping centers, and the locations of hospitals, schools, churches, and recreational facilities or parks. Doing this will help you figure out if this is a good fit for you, and if applicable, your family.

6) Find out more about the schools

When you know what school district your children will enroll in, visit the schools your children will attend to meet the principal and tour the grounds. There is a lot you can find out just by going there and make a list of questions that you would want to ask the principal and staff to help ease your mind on things and make you more prepared for the school transition.

7) Get familiar with Nextdoor

Once you know what neighborhood you will be living in, join Nextdoor or the neighborhood Facebook group page to keep abreast of what’s happening there. I have joined several of the local Facebook groups in my area and learned a lot of things from people there as well as gotten referrals for local tax preparer, doctors, and veterinarians.

8) Keep your files in a safe and memorable space

Locate and pack your important papers and ID’s so that you know where they are at all times.

9) Work relocation services

If your company is offering you relocation services, make sure you know all the terms. Often, they will cover items you might not think about, like the cost of shipping your car or professional organizers to help you unpack. They may also be negotiable in what they cover.

10) Save your receipts

Save all your moving expense receipts. If you are moving 50 miles or more from your old job to start a new job, your expenses may be tax-deductible.

11) Connect and disconnect services

Make a list of services you need to terminate in your old town and services you need to initiate after relocating to the new town.

12) Cancel your future appointments

If you have a doctor, dentist, veterinary, or hair appointments scheduled ahead of time, call and cancel them. Sure, you’re no longer going to be using them so who cares, right? Wrong! These are professionals who had set aside time to serve you or your loved ones, or loved animals. Let them open up their schedule so that they can serve another in your place since you no longer in need of their services, unless you’re willing to travel.

13) Transfer your subscriptions and change your address

Remember to transfer subscriptions for things like magazines, food deliveries, and mail-order prescriptions. Lots of the time, updating your address with the United States Postal Service does that for you when it comes to magazines but just in case, update it through your service directly as well. Change your delivery address on your Amazon, Target, Shipt, or other shopping accounts so you don’t accidentally ship items to your old address and change your address on all of your credit and banking account as well.

14) Update the Department of Motor Vehicles

Schedule an appointment to transfer your automobile registration and driver’s license if moving to a new state or just update it to the new address within the state. Now a days, you can do all of this online if you’re staying in the state, so that saves a trip to their office while helping you to avoid their typically long waiting times. When you update your address through them, you can also take care of your voter registration at the same time.

15) Transfer your voter’s registration

If you didn’t do this at the Department of Motor Vehicles or just want to do this separately, transfer your voter’s registration. Get this done right away, especially if your move is close to a major election registration deadline so that you can participate and vote.

If you are in need of assistance with your move out of New York, don’t hesitate to contact me. I know some great trustworthy people that can help. If you’re planning on moving to the area, I’m here for that too! I service Orange, Rockland, Westchester and Putnam Counties. Feel free to contact me.