Podcast Summary
Student loan debt and real estate investing: Student loan debt doesn't prevent investing in real estate, assess personal financial situation, learn from failures, and make informed decisions
Having student loan debt doesn't necessarily prevent one from investing in real estate. Tom Keating, a successful real estate investor, shares his experience of starting his investing career despite having student loan debt. He emphasizes the importance of assessing individual financial situations and making informed decisions based on personal goals and resources. Tom also discusses his entrepreneurial background, starting with selling golf balls as a kid and later attempting a meat delivery business in college. Despite the business failing, he learned valuable lessons about customer relationships and perseverance. After college, Tom went into finance before discovering his passion for real estate investing. His story highlights the importance of trying new opportunities and learning from failures, even in the context of managing debt and pursuing financial goals.
Unexpected discoveries: Discovering new passions and opportunities can come from unlikely sources. Tom found a life-changing book at the library, inspiring him to start investing in rental properties and eventually build a successful portfolio.
Sometimes, discovering new passions and opportunities can come from the most unexpected places. For Tom, this meant finding Brandon Turner's book on rental property investing at his local library while he was still working in finance at a bank. Inspired by the content, Tom started listening to the BiggerPockets podcast and within three months, he had his first property under contract. Despite initial hesitations and the challenges of juggling a new investment with a full-time job and student debt, Tom persisted and went on to build a 12-property portfolio. His determination and eagerness to learn served as the foundation for his successful real estate investing journey.
Real estate investing with little money down: Explore creative options like RentToRetirement.com, Deal Machine, and reliable rental property insurance to get started in real estate investing with minimal upfront capital.
There are creative ways to get started in real estate investing with little to no money down. For instance, RentToRetirement.com offers new construction properties at discounted prices and investor loans with low rates and flexible down payment options. Another solution is using a tool like Deal Machine to find off-market properties. Lastly, having reliable and customizable rental property insurance through National Real Estate Insurance Group can provide peace of mind. As for personal financial considerations, Tom Keating shared that even with significant student loan debt, the potential higher return on investment made real estate a worthwhile pursuit for him. Ultimately, the goal is to increase net worth and secure a better financial future.
Interest rates and debt vs real estate investment: When considering debt vs real estate investment, if debt interest rate is higher, pay it off first, if lower, consider investing in real estate. Tom earned $2,000 more annually by investing in real estate despite a $4,000 debt interest payment.
When deciding whether to pay off debt or invest in real estate, it's essential to consider the interest rates on your debt. If the interest rate on your debt is higher than what you can earn in real estate investments, it may make sense to pay off the debt first. However, if the interest rate on your debt is lower than what you can earn in real estate, it may be more beneficial to invest in real estate. Tom, for instance, had a 4% interest rate on a $100,000 debt, which meant he paid $4,000 in interest per year to the bank. By investing in real estate and earning a cash-on-cash return of 10%, Tom could pay off the interest to the bank and earn an additional $6,000 per year, not including appreciation, tax benefits, and other potential income. However, in today's environment, finding profitable real estate investments may be more challenging, and it may be necessary to get creative with strategies like converting a single-family home into a duplex or adding bedrooms to a student rental. Tom still holds some low-interest debt but continues to invest in real estate due to its strong return compared to other investments. The key is to evaluate opportunities carefully and make data-driven decisions about how to allocate capital within your portfolio.
Real Estate Diversification: Diversify real estate investments across different markets and asset classes to mitigate risk and maximize potential returns, trusting the operator and financial viability of each deal.
Successful real estate investing often involves diversification across different markets and asset classes. The speaker in this discussion started with a single family home in Florida, then expanded to multifamily properties in New York, North Carolina, and passive investments in the southeastern United States. He emphasized the importance of trusting the operator and the financial viability of the deal, regardless of its location. By spreading investments among multiple markets, the investor aims to mitigate risk and maximize potential returns, much like diversifying a stock portfolio. The specific balance between affordability, cash flow, and appreciation potential varies from market to market, and the investor continues to explore new opportunities while maintaining existing investments.
Real Estate Diversification: Diversifying in real estate involves considering various markets, asset classes, and partnerships to minimize risk and enhance returns. Building trust with market experts is crucial for successful management and operation.
Successful real estate investing involves strategic diversification. This means considering different markets, asset classes, and partnerships to mitigate risk and maximize returns. The speaker shares his experience of investing in both high appreciation markets like Denver and cash flow markets in the Midwest. He also mentions his investments in multi-family residential, self-storage, and even campgrounds. However, he emphasizes the importance of building strong relationships and trust with experts in each market to effectively manage and operate these investments. While diversification can be beneficial, it's important to focus on mastering one market when starting out to build a solid foundation for future growth.
Real Estate Tech & Information: Using technology and staying informed can give real estate investors an edge in finding hidden opportunities and making informed investment decisions, such as using Deal Machine for contact data and mail campaigns or creating overlay maps for development areas. Proper insurance coverage is also crucial for securing investments.
Successful real estate investing often involves staying informed and taking advantage of technology to uncover hidden opportunities. Sarah, a savvy investor, uses Deal Machine to tap into unlimited contact data and send automated mail campaigns, giving her an edge in finding off-market deals. Meanwhile, Tom, a new investor in Charlotte, North Carolina, creates an overlay map to identify areas of development and potential property value increases. Both strategies demonstrate the importance of using technology and information to make informed investment decisions. Additionally, having the right insurance coverage is crucial for real estate investors. National Real Estate Insurance Group (NREG) offers customizable insurance options for residential tenant-occupied, vacant, and renovation properties, providing peace of mind and securing investments. In summary, staying informed, utilizing technology, and securing proper insurance coverage are essential components for successful real estate investing. Whether you're a seasoned investor or just starting out, these strategies can help you make the most of your investment opportunities.
Local resources for market research: Contacting local planning and zoning offices and subscribing to local business newsletters can provide valuable information for real estate market research not easily accessible through online searches.
Conducting thorough market research is crucial for real estate investors. Bigger Pockets provides a market finding tool with information on metro areas across the United States. However, to find where developers are building and gain deeper insights, contacting local planning and zoning offices and subscribing to local business newsletters are recommended. These resources offer valuable information not easily accessible through online searches. Tom, a real estate investor, used this approach to create a map system to identify developing neighborhoods in Charlotte, North Carolina. While it's too early to tell if the system will be successful, the process helped Tom understand the market better and potentially discover areas with similar growth patterns to other Southeastern markets. Ultimately, this research can inform investment decisions and help investors identify promising neighborhoods within a market.
Real Estate Investing Flexibility: Drive around neighborhoods to identify deals, build relationships with property owners, create a flexible schedule, and utilize resources like BiggerPockets' market analysis tool to simplify the search process.
Successful real estate investing involves a combination of proactive searching for deals and being open to flexibility in your schedule. Tom, a full-time real estate investor in North Carolina, emphasized the importance of driving around neighborhoods to identify potential opportunities and building relationships with property owners. He also shared his goal of eventually scaling his business to be more passive and hands-off, allowing him to travel and unplug from day-to-day management. The key to achieving this balance, Tom noted, is creating a flexible schedule and staying motivated. Additionally, the real estate market search process can be simplified with the help of resources like BiggerPockets' market analysis tool, which allows users to compare and contrast markets based on expert recommendations and key data points.