Real Estate Investing

Real estates always beat stock market.

Do you have what it takes to be successful in real estate investing?

Everyone wants to be successful in building wealth. And real estate investing is one of the greatest ways to do so.

The whole real estate investing is about learning how money works, how to find money and "make" money magically. It's this challenge that makes real estate investing fun and exciting.

I started out with using equity in my own primary residence. I don't have any fix-and-flip experience on paper, but I do know how to buy-rehab-rent. I'm currently planning to rent my current home out, and use my owner-occupant status to qualify for a home loan to buy my next property. It's easier to qualify for owner-occupant property loan than an investor's property. Besides, hard money lender won't lend on owner-occupant, and they only lend up to 50-70% of value.

There are 3 basic elements to real estate investing: money, knowledge and deals.

Do you have these 3 elements to succeed?

1. Money

This is the biggest challenge for most people starting out. Most of us don't have a couple millions sitting around waiting to be spent. Besides, as we all know, Honolulu real estate is one of the most expensive, so the initial cash needed is a big challenge.

But still there are ways to find that money you need. And the word we love to use in real estate investing is "leverage". It basically means stretching what you have to accomplish more.

Remember, this money does not need to be your money. It can be and preferably other people's money.

For example, you have $100,000 sitting in your savings account earning 0.05% interest from the bank. Instead of earning 0.05% and being taxed every year on that earning, you decide to use that money to invest in real estate.

You have 2 options to do so.

One, buy a small condo with the $100,000 all cash. Second option, buy 5 small condos by putting 20% down on each, and mortgage the remainder 80%.

It's true, with the first option, you save on mortgage interest and closing cost. But you're missing out on the earnings.

Say, each of these condo gives you $200 a month cash flow. With 5 properties, your cash flow would be $1,000 per month vs $200. And from the article, Why Buy Rental Properties? you'll realized that you not only have 5 times the cash flow, but you also have 5 tenants paying down your mortgage and building your equity each month, you'll have 5 times the tax-deductions, and your real estate portfolio also appreciates 5 times faster.

So, are you ready to find some money for investing? Here's a list to give you some ideas:

Be Your Own Bank

Conventional Mortgages

Home equity loans or line of credit

Rent-to-Own

Self-directed IRA

Seller financing

Friends and family - I prefer to not get them involved. Other investors may have a different opinion.

Related articles: Hidden Down Payment

2. Knowledge

The next thing you need is knowledge. No one is born to know how to invest in real estate. Even seasoned investors spent many years and experienced many failure to become successful.

My motto always is imitate the person who you want to be. If you want to be a successful real estate investors, get a mentor and see what they're doing. Also read up on books and blogs. There are tons of free resources on the internet to start.

Avoid scammers who promise you the Babylon for a big sum of money.

This website is a good place to start. I use this site as my running notebook for real estate investing ideas. I would also be constantly updated the information here as new information appears.

3. Deals

Ok...nothing would happen if there is no deals. This is a tricky one. With Honolulu real estate being notorious for being very expensive, many investors shy away from investing here locally and choose to invest in cheaper mainland location.

I, on the other hand, prefer to invest here. To me, investing out-of-state is risky because you lose all your control. You have to depend on your real estate agent and property manager to manage everything for you. Even those turnkey properties are still not 100% foolproof.

Trust me, you can find good deals here. You just need to know "what" you're looking for. Otherwise, a deal will just fall on your lap, and you wouldn't even notice. I have a bunch of criteria that I'm looking for when I'm hunting for deals. Properties that provide good cash flow, I keep for rentals. Those that provide poor cash flow, they'll be fix and flip.

Finding the good deals goes hand-in-hand with your knowledge. You need to know your local market well. This is one reason why I insist on investing only in Honolulu. I live here and know the market well. I can easily drive over the check on a neighborhood. Pictures are great, but you should not trust everything in the pictures.

Related article: Search Short Sales and Foreclosures

I once went to a showing for a multi-family property. The pictures and everything looks great. I went to the location, and found a bunch of people and children sitting by the parking lot. The adults just sitting around chitchatting, and kids running around and riding their bikes. Obviously, a low-income pocket in the area. Even though the house is brand-new and would potentially generate a pretty good cash flow, I skipped this deal. One of my criteria is that the properties have to be in a decent neighborhood.

In real estate investing, we often say "when you find the deal, you'll find the money to close it."

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