Vail Daily column: Getting started in real estate investment
Ask a Realtor
I have a mature friend who has made a lot of money just investing in real estate over many years. He told me that real estate was tangible and simple to understand, so he just invested in what he felt he knew. He said Wall Street and stocks, bonds, mutual funds and annuities weren’t anything he felt he could see, touch and feel, so he never went there. I have now reached a point in my life where I feel I can invest some money, and I guess I feel just like my friend did. I would like to get started investing in real estate, but I am worried about making a poor investment and losing everything I have saved. There is a ton on the Internet and lots of books with conflicting advice, so I thought I would ask your opinion. You usually seem to take a plain, uncomplicated approach to things, so please point me in the right direction.
Dear Anxious Real Estate Investor,
I am delighted with your story and will take the fact that you think of me as relatively simple as a compliment. I am a big fan of investing in real estate, and I feel you should diversify within your real estate investment portfolio in locations and types of real estate. I also feel it is good to eventually have a little backup in some traditional investments that can be quickly liquidated if need be.
EASY, SAFE OPTIONS
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Now back to the plan for you. You have heard me say before that the first real estate investment you make should, in almost all cases, be your home. Hopefully you have already done that. After that, I personally think it is easiest and safest to buy smaller, less expensive, residential rental properties.
If you can afford a lower end, smaller single family home in a good neighborhood, that is almost always easy to rent and then resell. Townhomes and condominiums that are in a good area and at a good price work well, too. Your goal is to have the rental pay for itself. If you pay cash, it is much easier to find rentals that can pay all their own expenses (upkeep, taxes, HOA fees, etc), but if you have a loan, you also want to know that the rental rate will pay for the mortgage in addition to the expenses.
This is where a great real estate agent is invaluable. The experienced agent can help you find the right property, in the right location, at a price that will work for you.
The Realtor can also recommend professional lenders and management companies, if you do not want to handle the rental process yourself. Your Realtor will also help you gather all the facts, run the numbers and allow you to make an intelligent decision.
As your real estate portfolio grows, you might look at some commercial investments, too. Small office buildings, or commercially leased land or storage can bring in substantial income, in many cases.
I think your next, most important step is finding a knowledgeable, professional, interested Realtor who will take the time to get you all of the facts, knowing it may take some time for you to decide on your first purchase. I am excited for you and know you will enjoy the process and reap the rewards!
Joan Harned is an owner and broker for Keller Williams Mountain Properties and heads up Team Black Bear, her own real estate team. Harned has been selling real estate in Eagle County for 27 years, is a past chairman of the Vail Board of Realtors, past Realtor of the Year, past director on the Great Outdoors Colorado Board and a member of the Luxury and Land Institutes. Contact Harned with your real estate questions at Joan@TeamBlackBear.com, 970-337-7777 or http://www.SkiAndTeeHomes.com.