Ilyce Glink offers tips and advice for investing in real estate: plan extensively and be flexible.
Q: I just wanted to say thank you, Ilyce. Your over the air advice encourages me and moves me forward in my real estate pursuits. I am a dairy farmer in the Atlanta metropolitan area, milking goats and making cheese. We bought 12.5 acres and are now up to 18 plus a foreclosure home my assistant lives in. Your discussion on real estate helped me go up against my county on a zoning issue. I plan my cheese-making chores around your show.
A: Thanks for writing. It’s impressive that you are building your real estate empire on the back of goats’ milk cheese (which we love, by the way). That’s not an easy business, not that any of them are these days.
We believe that anyone can buy and invest in real estate. For the past ten or fifteen years, we have owned at least one investment property and currently have two. This summer, both of our rentals needed to be fixed up a bit, repainted, and rented.
We were very fortunate in that Sam found tenants rather quickly, and for excellent rental rates. We will more than break even on both of our properties over the next couple of years (both tenants took two-year leases, which saves us money in rental fees, brokerage commissions and maintenance). Including the tax benefits we get for our investment real estate, they are nice, tidy investments.
But we wouldn’t necessarily make money if we sold. We bought our properties years ago (13 years ago for one property and 7 years ago for the other) and they have surely taken a hit in value, as many others have around the country. Just because we are a real estate expert and a real estate attorney doesn’t mean our properties are immune from the housing market collapse.
One of the smartest things we did with the property we’ve held for 7 years is to rent it out instead of trying to sell it. We have had a fairly easy time renting the property but if we tried to sell it, I’m sure we’d lose money.
Real estate investors must be willing to change direction in order to stay afloat or make money. Your exit strategy may have been to sell a property at a specific time, but it may make much more sense now to hold onto it, rent it out, and see what happens over the next few years in the marketplace.
In some areas of the country, it could be a decade or more before home prices rise meaningfully, and by that we mean simply getting you back to break-even. In other parts of the country, it might be longer or shorter. The difference will be when you bought your property, at what price you’ve bought it and what you’ve done to it. If you over-renovated, and property values don’t look as though they’ve begun to turn the corner, your wait to break-even might be on the longer side.
The best thing you can do when you’re investing in real estate is to be as detailed as possible when you’re in the planning stage. Understand how much you might have to spend, what you might have to do, and how long it will take you to get out. Don’t forget to think about best and worst-case scenarios. No matter how much you might hope the real estate market will turn around quickly in your neighborhood, you have to figure out what you’ll do if it doesn’t.
It sounds as though you’ve been slowly acquiring neighboring parcels, and being thoughtful about your next moves. Good for you! We’re willing to bet that if you are as thoughtful about cheese-making as you seem to be about real estate investing, your varieties are award-winning.
Thanks for writing, and good luck!
[…] the rest here: Tips for Investing in Real Estate Tagged: air-advice, glink, investing in real estate, investment, investment-property, […]