In one of our recent podcast episodes, Sean interviews Selling Partner/Real Estate investor Elliot Mould and picks his brain about his real estate journey and the golden nuggets of wisdom he has gained through the process.
Staring out as an Investor
Elliot initially started with “house hacking” – at the time he didn’t know it. He owned a house and rented it out while he lived in an apartment and was able to come out with an extra $1000 per month in his pocket. When he eventually decided to move in, he rented out rooms for a period.
The next step in his journey was creating a secondary unit in his home. He renovated and rented out the basement while he lived upstairs. This allowed for a regular income flow that was steady and a separate situation than having roommates to live with.
He later separated his investment from his personal living situation – this was more conducive to having a family.
Some good investment moves
Purchasing an “off the shelf” investment unit is typically a good move. You inherit tenants and a steady cash flow. Then if someone leaves you can do some value add renos, increase the value of the unit and in turn increase the rent.
This contributes to the strategy that has recently been popularized (BRRRR Strategy) which is also called “forced appreciation”. The idea is to increase the value of the property through renovation, increase rent, increase the property valuation, and pull some money back out and reinvest. BUY, REHAB, RENT, REFINANCE, REPEAT.
Another good move is to look for projects where you can add extra units and fix them up. This may require a larger budget and is another step in the journey.
Years ago, investing in secondary markets was a smart move to increase cash flow – now cash flow is less likely, but creativity goes a long way. Exploring secondary markets is still a good idea though and ensuring that you fully research the community before you invest. It’s important to look into what future developments that they town/city may have planned. If you do invest, it is extremely important to connect with your community. Having a good working relationship with town planners and local municipalities is invaluable.
What is it like buying now?
It’s all about perspective and where you currently are in your journey.
It may not be as easy to proceed if you are early on in your investment journey. But important to remember that there’s always been market cycles and investors will always find ways to invest. They typically don’t head to the sidelines when everyone else does.
Generally, the best move is to run in the opposite direction of the crowd – that’s where you’ll find greater opportunity. When you start following, you will find less opportunity because everyone is doing it.
Although cash flow isn’t as easy to find right now due to interest rates, looking at the long game is critical. Because wealth is created by owning assets. At the end of the day, typically investment properties tend to hold their value and can been seen as a mini business. An “off the shelf” property doesn’t suddenly stop earning money. Demand for rentals is generally constant.
Ideally…
- The numbers must work.
- It’s ideal to get in the market when there is less competition which leads to more power to negotiate on price and terms.
- This leads to more opportunity for tried-and-true investing ideas that have been around for years, such as: mortgage takeovers, mortgage financing from the seller or borrowing back the down payment from the seller. It depends on the situation, but a creative approach lends well to investing.
Buy low and sell high – that’s what we all want to do. So, now really is a great time to buy.
The last couple of years were crazy, and realtors that have been in the field for decades will tell you that they have never seen the market like that. Well, we haven’t solved the underlying issues that came from that crazy market: high demand and low inventory. It will come back eventually – many are waiting on the sidelines for the interest rates to go down which will end up pushing the values up again.
Two things for sure – over the long term the market will go up (as it has for the last 50 years) and interest rates will continue to fluctuate.
Elliot’s advice: BE OPEN AND WISE – Be open to evaluating opportunities and have a thoughtful approach to ensure you are working within your numbers.
For more valuable real estate related tips, you can check out the REAL Collective Podcast on iTunes, Spotify or YouTube.
