Real Estate

Real Estate Investment Guide – Net Worth Update: $86.5K

Real Estate Investment Guide – Net Worth Update: $86.5K

This week marks the launch of our comprehensive real estate guide. We’ve put a lot of effort into this guide and investment model over the past few months to help make it possible for you to have the most successful experience in real estate investing possible. The guide is information-packed from front to end with the key considerations you should have when purchasing a multi-family home, mistakes we made that can be improved upon, and things we did really well that we recommend you do as well. Additionally, we are selling our real estate investment model which allows you to input all the numbers for a property you are considering investing in, and based on your investment criteria, will allow you to project whether or not you are making a sound investment. But enough talking, below is a preview of the guide which you can buy at this link.

For a limited time, the guide and model can be purchased 50% off using the code: Introduction

Introduction to the Guide

Why Should You Invest in Real Estate?

If you’re reading this guide, you’re probably similar to us: ambitious, motivated, in search of a side or passion project, looking for a route to financial freedom, or some combination of the above. For most, it’s the prospect of a financially secure future that sparks an interest in real estate investing.

Our real estate investment was sparked primarily by our desire to achieve financial freedom. While financial freedom can mean different things to different people, for us it means earning enough money that we can afford to not work for someone else or choose lower-paying careers that inspire us and ignite our interests.

While there are many routes to financial freedom, many people consider entrepreneurship, real estate, and finance (investment banking, trading, etc.) the three traditional paths to massive wealth in the United States. While there are advantages and disadvantages to each path, we elected to invest in real estate for three key reasons:

 

  • Higher return on investment. We had extra cash from our day jobs to invest and we wanted to earn a higher return than the 10-12% that investing in index funds would yield in the long run; this was one of our criteria for selecting a property.
  • Lower risk. While real estate markets suffer the same ups and downs that financial markets do, if you’re able to buy a property with strong cash flow in a high-demand area, you’re likely to have fewer losses in the long term.
  • Better fit with our lifestyles. Unlike entrepreneurship and finance, real estate investing, though still demanding, requires less of your time and effort and pairs well with a day job.

 

We wrote this guide because we wanted to share what we learned by going through the process of buying our first investment property. We began the process as complete rookies and while we’re not seasoned professionals just yet, we learned more than we ever expected by buying and managing our first property and we want to share that information with you because it will set you on the path to financial freedom if you’re willing to commit to real estate investing.

How Does This Compare to Other Investments?

We strongly recommend comparing potential real estate investments to other potential investments before making any buying decisions. While investment options can vary between investors based on risk tolerance, capital, etc., we primarily compared our real estate investment to a passive investing strategy. We both continue to invest in index funds and/or ETFs that track the performance of markets around the world (mainly US and foreign stock funds, bond funds, and some alternatives such as REITs).

For this reason, we compared the long-run return on investment (ROI) of all of our potential real estate investments to the projected long-run ROI from our current investment strategy. For purposes of comparison, we looked at historical ROI for investing in the S&P 500, which is remarkably consistent even if you select different time periods; consider these average annual ROIs for the following time periods (adjusted for inflation):

    • 1900 to 2016: 6.6%
    • 1950 to 2016: 7.5%
    • 1970 to 2016: 6.1%
    • 1990 to 2016: 6.8%
    • 2000 to 2016: 2.3% (includes dot-com bust and Great Recession)

 

  • 2007 to 2016 (includes Great Recession): 5.0%

 

We used a comparison rate of 10% when comparing our investments to the market. This is higher than the 6-7% that the market earns in the long run because a) We wanted to account for inflation and b) Investing in real estate takes a bit more time and effort than a passive investing strategy.

If your financial investing strategy is similar to ours, we recommend the above approach. If not – we recommend determining the appropriate metric for comparison (typically ROI) and considering additional financial factors such as timeline of investment and relative risk as well as non-financial factors such as time and effort required. It’s important to make sure that real estate investing is a good fit for you and your goals.

What Will You Get From This Guide?

This guide will provide you with the knowledge, resources, and motivation to stop thinking about investing in real estate and start actually investing in real estate. With the right information, drive, creativity, and patience, just about anybody can begin a successful real estate investing career. We’ll share our successes and failures and if you’re serious about investing, we’re also offering an easy-to-use financial model that we built to evaluate potential investments for sale at MillionBy30.com.

Throughout this guide, we will walk you through the process of purchasing and managing your first real estate investment property by:

 

  • Explaining each step in the process and suggesting key next steps when you’re ready to get started
  • Offering our opinion and guidance based on our experience
  • Relating the insights of our broker, who also owns investment properties and guided us through the process

 

Our Experience

Before we get started, we also want to share a bit about ourselves and our experience because if you’re reading this guide you’re probably similar to us, and we want you to realize that real estate investing is more attainable than you might have thought:

  • We grew up in middle class homes in the Midwest and earned undergraduate degrees in finance/economics
  • At the time of our first investment (2017), we were 24 and 26, living in Chicago and working full time advisory jobs, each earning $80-90K annually (pre-tax)
  • We both utilized gifts from our parents for our first purchase ($20K in total), which you can do tax-free (we’ll cover this in more detail later)
  • While there are many different styles of real estate investing (“flipping”, hold and rent, “house hacking”) and several different types of properties (single family homes, condos, multi-family homes), we invested using a hold and rent strategy in an owner-occupied, multi-family property

Keep in mind that you don’t have to share our background to invest in real estate. There are thousands of stories out there about investors who started with next to nothing and built a successful business by following the same principles we describe in this guide. By the time you have finished reading this guide, you will have absorbed knowledge that took us several years to acquire. Your future as a real estate investor starts now.

Posted by CoffeeForTheBuzz in Real Estate