Today’s segment is about understanding leverage and liquidity in real estate investing. We want to focus on real estate financing. To frame this conversation, I’m talking about real estate assets, or investments, under five-million dollars. Once you get about five-million dollars then you’re competing in the professional class. With assets under five-million dollars, most of those real estate assets are purchased by local people in local markets.
Investing in single-family homes versus multifamily represents two completely different business models and required operational management. They are not the same at all. Multifamily, with the potential for higher rewards, moves at a completely different velocity than does single-family.
Most instruction on house flipping teaches people how to do a segment of the house flipping business so they can be involved in the process. Well, the process is very extensive. You have to be able to purchase, repair and market the property. And you have to do all three very well to be successful in the home flipping business. Most people do not have the capitalization and/or skill set to do all of those things. Let’s break it down a little bit more.
Most people know these sources but they’re not necessarily all in one place at one time so that’s the purpose of today’s episode: to have all five types of return on investment from real estate in one place while you are contemplating future investments and use this list to analyze your current investments, to measure if you are gaining yield from all five sources with your existing portfolio.
Getting down to brass tacks for purposes of making your first purchase or becoming a property owner: make the purchase as a homeowner. We want you to make your purchase as a homeowner because as a homeowner you get better access to financing, therefore, this the absolute easiest way to buy your first property.