The Real Estate Play

Episode Transcript

Speaker 1 (00:00):
Let's talk about real estate. Are you wondering if buying
a property is a good financial move? Curious about the
different ways to invest in what kind of returns you
can expect. Let's talk about real estate, different types of
real estate investments, and how to choose one that fits

(00:21):
your lifestyle. We'll talk about practical tips on getting started,
financing and avoiding pitfalls, a breakdown of potential returns along
with risks to consider. So, whether you're a beginner looking
for your first investment or a seasoned pro looking for
fresh insights, we've got something for everyone. Real estate has

(00:46):
stood the test of time as a reliable way to
build wealth. Why is that? Unlike stocks or cryptocurrency, real
estate is physical. It's a tangible asset. You can see it,
live in it, or rent it out. It provides steady appreciation.
Over the past fifty years, real estate values have consistently grown.

(01:10):
The average annual appreciation rate for residential properties in the
US is around three to five percent. Rental properties provide
cash flow and generate monthly income. With the right property,
you can create a steady, passive income stream. You can
use financing mortgages to buy properties with relatively little upfront capital,

(01:37):
allowing you to control a large asset for a small investment.
This is called leverage five tax advantage. Investors benefit from
tax deductions for mortgage interest, property taxes, and depreciation. Real

(01:57):
estate isn't perfect Number one. Why is that there is
a high initial cost. Down payments, closing costs, and maintenance
can be a barrier for beginners. Market fluctuations. Like any investment,
property values can decline, especially during economic down terms. Owning

(02:20):
and managing properties requires effort and time commitment, whether it's
dealing with tenants or coordinating repairs. Unlike stocks, selling a
property can take months, making it harder to access your
money or liquidating. Real estate can be any an excellent

(02:42):
investment for long term wealth building, but it's not a
get rich quick scheme. Success requires research, patience, and a
willingness to adapt. Let's dive into the types of real
estate investment. First, residential rental properties. What is it if

(03:03):
you purchase a home, apartment, or multifamily property and rent
it to a tenant? Why does this work? Monthly rent
provides steady income. Over time, the property appreciates in value.
This is best for the investor looking for long term
passive income. So, for example, if you purchase a home

(03:26):
for three hundred thousand with twenty percent down, that's sixty
thousand dollars, rent it for two thousand dollars a month
after paying the mortgage, taxes and expenses, you net five
hundred dollars a month in cash flow. That's pretty good.
If you have several of these, say four, that's two

(03:49):
thousand dollars. The second type of real estate investing I
want to talk about today is house flipping. If you
buy a property below market value, and that is key,
it needs to be below market value, you renovate it,
and you sell it for a profit. That is house flipping.

(04:09):
Why does it work? Flipping can offer fast, high returns
compared to other methods. This is best for hands on
investors who enjoy renovation projects. For example, buy a distressed
property for two hundred thousand dollars, spend fifty thousand dollars
in renovations, and sell it for three hundred thousand dollars,

(04:33):
earning a fifty thousand dollars profit minus fees. Of course,
flipping requires careful planning. Always calculate potential profits after accounting
for renovation costs, taxes, and market fluctuation, and of course
always budget in unforeseen costs. When you're buying an older

(04:55):
home or a home that's been neglected, you never know
what you're going to find behind the walls, so budget
for these unforseeable surprises. Another type of real estate investing
is a real estate investment trust or RAI ts. What
are these? Invest in real estate without owning property by

(05:19):
buying shares of ri I ts. Ri I t's are
traded like stocks, offering exposure to real estate markets with
low upfront costs. Many also pay dividends. This is best
for passive investors who want a hands off approach. So,
for example, buy five thousand dollars worth of shares in

(05:43):
an r T r e I T focused on commercial
properties earned dividends of five to eight percent annually. These
are good. That's a good return. Then let's talk about
airbnbs and vrbos. These are short term vacation rentals rent
properties to short term visitors, typically tourists or business travelers.

(06:08):
Short term rentals often generate higher income compared to long
term leases, especially in vacation destination. This is best for
investors who can handle high turnover and local regulations. For example,
a beach house rents for three hundred dollars a night.

(06:29):
With an eighty percent occupancy rate, you could earn seventy
two hundred dollars per month before expenses. The rise of
vrbos has created a barrier in a lot of areas.
Many towns have either outlawed these short term rentals or

(06:50):
put you know, barriers on the numbers that can be
in the area. So make sure when you're looking at
an area you have a well qualified realator that knows
the local laws, knows how to get one of these
short term rental listings or licenses, and then proceed. But

(07:12):
don't go into a house and buy it expecting to
be able to short term rent it because there are
a lot of areas that don't allow it. Crowdfunding platforms
is another way to invest in real estate. You pull
your money with other large investors to fund large real
estate projects. You can invest with as little as five

(07:34):
hundred dollars in high end developments like apartment complexes or
commercial buildings. This is best for small investors seeking diversification.
For example, invest one thousand dollars in a crowdfunding platform
that offers an eight percent annual return that eight percent
is a great return. What kind of return or investment

(07:58):
or ROI can you expect with real estate with long
term rentals, ROI depends on location, rental demand, and property price.
Typical ROI on long term rentals is six to ten
percent annually when considering both rental income and property appreciation.

(08:21):
House flipping, typical ROI is ten to thirty percent per project.
Flips are high risk but high reward, especially in competitive markets,
so the typical ROI or return on investment of an
riiit is five to ten percent annually. This is more

(08:43):
stable and less volatile than direct property investment. For short
term rentals, a typical ROI is fifteen to twenty percent
annually in high demand vacation areas. However, management and marketing
costs can reduce profits. For crowdfunding, typical ROI is eight

(09:06):
to twelve percent annually. Returns depend on the project type
and success. So for some factors influencing your return on investment, property, location,
market conditions, and operating expenses like maintenance taxes and property

(09:27):
management fees can all influence your return on investment. If
you're trying to get into real estate investing, let's talk
about some tips to get you started. Number one, start small,
consider a duplex or a single family home to minimize

(09:48):
risk and cost. Of course, do your homework is number two.
That might actually be should be number one, but research neighborhoods,
property values, and rental demand. Find yourself a good real
estate agent or realtor to do this work for you.

(10:11):
Develop a relationship with this person somebody that you trust,
have them send you properties all the time, and then
when the right one pops up, you have somebody to
help you. Some financing options explore FAHA, which your government
loans which require lower down payments for first time buyers. Four,

(10:34):
Build a team, Hire higher reliable real estate agents, lenders, contractors,
and property managers. Run the numbers, use tools like rental
property calculators to ensure the deal makes financial sense. And
number six be patient. Real estate wealth is built over years,

(10:58):
not months, So if investing in real estate is something
that you have been researching and considering, your reward could
be huge. Whether you choose to flip houses by rental
property or explore rs, the key is to educate yourself,

(11:20):
build a team, and then take action when opportunity arises.
Thank you for joining and happy investing,