House Hacking: Living for Free and Building Wealth - Part 2
Ugly houses are where you secure the bag!
Okay, after my last post, I hope you are thinking about the housing hack of investing in a small multifamily property as your next wealth-building move. You may ask, “So, De’Andre, where do I find these properties?”
Believe me: These properties are everywhere.
Your first step is to find an investor-friendly real estate agent. Check out Upnest.com to find an agent in your market, and start a conversation about how you’d like to invest in a small multifamily unit that you can possibly live in and rent out.
The best part about working with agents is that all of their marketplace knowledge is free for you! You can ask a thousand questions and get a thousand answers without pulling out your credit card. Use this to your advantage! Yesterday I had three conversations with a few competing investor agents in the Metro Detroit area. In one hour, I learned where investors are saturating the market with rentals and what rental markets are erupting. I also got free market reports for the three areas I am prospecting for investing.
The first principle of The Culture of Money is to KNOW MORE. Don’t underestimate the value of information. Investing is about “getting smart” on the market and researching before throwing your money into the game.
Remember to be clear with agents that you are only looking for properties with two, three, or four units. Once you hit five units or more, the entire world of real estate changes into something you don’t want to mess with if you are new to the real estate game—commercial real estate. So, for now, focus on the duplexes, triplexes, and fourplexes.
Be clear with the agent you choose about what your investment goals are. Tell them what type of return on your investment you want. For example, I shared with those agents my target cash-on-cash return is 10-15% for the markets I’m prospecting. They will direct you to where those types of returns can be found.
If you want to just start looking, you can also use sites like Realtor.com, Zillow.com, Trulia.com, or one my personal favorite, Roofstock.com. I must disclose that I love Roofstock.com so much that I am now an investor in their platform. They provide all the educational tools you need to “get smart” or invest in real estate.
Roofstock.com also brings the real estate marketplace to you, so you don't have to find an agent, property manager, bank, title agent, inspection company, or anything else. That’s why they call it Roofstock.com - everything you need to invest in real estate under one roof.
With each site, you can limit your searches to only multifamily properties. Start looking at the cheapest properties in your area, and try to find neighborhoods in which you want to live.
Don’t be scared of homes that are a bit “ugly” or have been foreclosed. You may need to add a little sweat equity and upgrade the carpet and paint. However, “ugly” usually offer substantial discounts because everyone else is scared away by the work.
First, I key in on the smell. Why? The worse, the better. The smell is the easiest and cheapest thing to fix (usually just by installing a new carpet and re-painting). Still, it drives 99 percent of home buyers from even considering the deal.
Secondly, I consider the (furnace, air conditioning unit, water heater), basement and roof. Why? No matter how ugly the property might be, you'll avoid significant repair costs if the major appliances, roof, and basement are okay.
Thirdly, I’m also looking for water marks around the base of the floor and walls in the basement to determine if any water issues need addressing.
Again, my point is simple: open your eyes to the value that can be added while avoiding major repairs that drain money. You want to rent units quickly after closing your first property. This is your key: discover a property where you can add value.
In my next post, I’ll walk you through one of my most recent deals and show you how to do the math on a rental property deal.
De’Andre Salter