Real Estate Investing Strategy
"Be An Active Investor,
Not A Passive One"
When chatting about a real estate investing strategy I often hear, "But Tom, I don't want to be a Landlord".
Question for you. Why not?
What else can you buy using leverage (other people's money - namely, the bank's) and have the people who live in it pay for it? And you get to keep the thing. I mean, this is a beautiful real estate investing strategy.
As a passive investor in a real estate trust can't match these benefits, not even close. It's my strong opinion that being an active investor is the best real estate investment strategy for generating wealth.
Wealth is built by controlling assets and controlling the cash flow yourself. Not owning a small stake in them. Remember that.
Warren Buffett, one of the most successful investors of all time, didn't get to where he is by having small stakes in his purchases. He is an active investor.
He may have other people running the show at a particular company, but he is active in that he controls the companies he purchases.
Why wouldn't you want to do the same? Are you just talking about building wealth? Or do you really want it?
If so, your real estate investing strategy should be to become an active investor.
When I hear people say that they don't want to be a landlord I think they've been assimilated into the consciousness of the masses who don't want to think for themselves.
The myth that being a landlord is a negative thing keeps a lot of good people out of the game and leaves a lot of opportunity on the table for us investors.
This is great news for you and for me!
Basic property management or creative "self-regulating" tenant strategies can easily handle any of the "leaky faucet" horror stories that people have. And this should be a part of your real estate investing strategy.
Residential real estate investing is just not that scary.
If you write down on paper the very worst thing that could happen you'd be surprised at what you find.
It's probably the house burning down, and you have insurance for that. If someone doesn't pay you, you evict them. If they damage your property, you evict them.
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ASIDE: And I know everyone has a story of how it took someone they know six months to evict a tenant. Well, I challenge you to get the details. They likely didn't take any action. It just doesn't take that long. My money says they didn't treat their property as a business and bought into someone else's drama for way too long and gave them 4 or 5 second chances and that's the real reason it took so long to evict their tenant. Don't believe everything you hear.
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Many people have all the real estate knowledge they need, they just lack the guts to get started and use excuses about "being a landlord" to talk themselves out it.
Don't let your real estate investing strategy be one of excuses that stop you from getting started.
And ask yourself this. Think of the wealthiest people you know, do any of them own real estate? Bet they do.
Let me give you a real world example of why being a landlord is a great thing. This is based on real world real estate investing strategy occuring often in Ontario:
- Buy a $220,000 house with 5% down = $11,000
- Have a tenant move into the property before the first mortgage payment.
- Receive $10,000 in the form of a down payment plus first and last month's rent within 60 days for a total of $13,100.
- Have the tenant handle minor repairs in the house.
In what other investment can you put down $11,000 and have $13,100 in your hands within 60 days? And that's not the best part. You've done all this, you have over a 100% return on your money and YOU STILL OWN THE PROPERTY! Please, read that last line again.
real estate investing is just a beautiful thing.
There are closing costs that aren't represented above, but that's for good reason, there are strategies to handle those as well.
Now I need to throw in the regular disclaimers and state that this doesn't happen on ever single property when residential real estate investing. But it does happen, and often.
But for arguments sake, let's say that you are a rookie and you "only" managed a 25% return in 60 days, wouldn't that still make you jump with joy. It should.
Return from the Active Real Estate Investing Strategy to Residential Real Estate Investing by clicking here.
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