Have you considered investing your money in real estate? For many physicians investing in real estate is a path to early retirement and financial independence. Afterall, most physicians want to keep their future options open and striving for FIRE is another way to do it!
Have you considered what type of real estate you want to invest in? There are several categories that you are able to choose from including multi-family. The one I suggest for you to consider is investing in single family real estate.
Investing in single family real estate is a solid choice for a physician who is just starting to venture into real estate. The learning curve is pretty steep, but once you learn the ropes it becomes a little more routine. It also is a way of investing that involves the longevity that many investors like.
There are many people investing in single family real estate who will tell you that it is a passive income stream.
Well…
Reading this blog will help you decide if investing in single family real estate is your “thing”. Are you interested? Excited?
It will take more than excitement to get your single family real estate business going!
I am of the opinion that when you first start out, it is a lot of work and you need to invest your time in due diligence. You will struggle and make mistakes.
Having said that… for the right person investing in single family real estate is worth it! Now let’s put in some work on our due diligence and dive into investing in single family real estate.
Investing in Single Family Real Estate: Education is Key
If there is anyone on the planet who understands the importance of education and due diligence it is you! As a physician, you have already spend countless hours investing in your career and future.
The good thing is that learning the ropes to investing in single family real estate is not that hard. You know how to self-educate and find your resources. You know how to ask the right questions and listen to your intuition.
There are books, videos, courses–and most of all mentors willing to help you with this journey.
This means you have a leg up on so many people who are just starting to venture into investing in single family real estate.
So…where do you start?
Investing in Single Family Real Estate: Your First Deal
Your first deal is a big deal!
Take your time learning the ropes, get your first single family real estate venture under your belt in a conventional way.
What do I mean by “conventional way”?
I suggest getting an agent and going through the Multiple Listing Service to get started. Later on, when you have some experience under your belt and you are established, you can branch out and learn how to get off-market deals while investing in single family real estate.
The important thing to keep in mind is: The money is made when you buy the property.
The purchase price is a key factor to a great real estate deal. The purchase price affects your taxes and your rate of return.
This is a business of supply and demand. As markets appreciate it is harder to find deals. However, there is no need to stretch because the markets move in cycles. We are currently in an upcycle. Eventually, it will downcycle. What goes around will come back around.
What am I really saying?
This is definitely a time to check your emotions at the door.
Patience is the key to investing in single family real estate. Wait for the price points to come to you. There is no need to force anything!
There are a lot of people who think the house they bought to use as a primary residence is an investment.
Do you think your primary residence is an investment?
I will tell you that you are not investing in single family real estate when you buy a primary residence to live in.
I know you are asking “why not”? I’m building equity!
Yes, your primary residence does earn you equity over time. However, the downside is that there are lots of outgoing expenses and there isn’t any incoming profit to cover the lost costs.
Home ownership is expensive. The bigger the home, the higher the cost. You get the picture.
Let’s take a look at a few costs:
- Maintenance
- Property Taxes
- Homeowners insurance
- Homeowners Association (HOA) Fees
That doesn’t take into consideration so many other ways we spend money on our primary residence. For example our time taking care of maintenance or lawn care–or hiring it out.
When you are investing in single family real estate there is a profit in the form of rent. While you are paying your “rent” in the form of a mortgage payment on your primary residence, someone else is paying the rent on your investment property. That means someone else is paying off the mortgage on the rental!
How is that making you a profit when investing in single family real estate?
You are building up equity in the property with your tenant’s money and they are paying down the mortgage!
In order to get the tenant to pay the rent and for you to make a profit you will need a property.
But first, you have to find the right property.
What does choosing the “right” property look like?
Investing in Single Family Real Estate: Your First Deal Part III
What criteria have you set for choosing your first rental property and your first stab at investing in single family real estate?
As someone new to investing in single family real estate you may not know how to set a standard for your property or what will ensure that you have a steady cash flow in the form of rent every month.
Remember that your goal is to have a steady renter who pays the mortgage and increases equity.
Choosing a well-maintained house is important. It should be in a location that has brisk employment, good schools and neighbors who take pride in their homes. These points will help ensure that a quality tenant can be found.
I come from a family of real estate investors and developers. I also invest in real estate so, I will share what I look for when I am investing in single family real estate properties.
First of all, while I say it makes sense to look for properties where the cash flows every month, do you understand what that means exactly?
My goal is to invest in order to make $150 per door because I am comfortable with the real estate market in Las Vegas where I am investing in single family real estate.
When buying a rental property I have strict guidelines that I follow when purchasing a house. I want to be sure that everything is in working order:
- I have lots of inspections on the property
- Has maintenance been regularly taken care of?
But first things first.
Before you think of purchasing your first property it is a good idea to have your plans and processes in place.
That is setting up your business!
Investing in Single Family Real Estate: Preparation
Have you heard that saying “Begin with the end in mind”?
It is a good idea to have your infrastructure in place before you actually buy a property.
Instead of the other way around, which is getting the property and then scrambling to figure out how you will take care of all the details, we will start with the end in mind!
The end result of investing in single family real estate is all the ongoing aftercare that your business will need, such as the continual maintenance of relationships, property, and paperwork.
In order to take care of the this “ongoing aftercare,” you will need to set up your business processes. Setting up the infrastructure is the hardest part–but once you have the framework the rest will become routine.
That means research the markets, decide on a city and have a property manager in place. A free softwarethat can help you with setting up your business is Cozy!
This software will help you to market your rental, choose your tenants, receive payments and track maintenance requests. It will also help with the organization of your expenses and electronically store documents.
Then you must decide who will handle the day-to-day business and aftercare.
Are you planning to manage the property or will you hire someone to take care of that for you?
Investing in Single Family Real Estate: Management
Instead of stressing over combining your family, a busy medical career and property management, you may choose to hire someone to manage your properties.
The best property manager is someone you feel comfortable with. That person will be someone who you can trust and that you are able to communicate easily with.
You may be new at hiring someone now, but with time, you will become a professional!
You will learn which questions to ask for your particular needs and what to listen for. Trusting your intuition and learning pay attention to their micro responses.
Here are some things to notice or questions to ask:
Is the prospective property manager calling you back in a timely manner?
What training does the prospective property manager have in relation to the position?
You definitely want someone who understands Landlord Tenant law for the state your rental property is located in!
What fees do they charge?
I will tell you that there shouldn’t be a fee if the property is not rented. The property manager’s job is to ensure that you have a renter.
There are some property managers who may want to take the entire first months rent.
The next year when the lease is resigned, the property manager may charge half of the first month’s rent.
In some markets this is standard. However, they need to guarantee that the renter stays for one year. If the renter doesn’t stay for one year, the next lease should be for free.
Does the prospective property manager know how to fill a vacancy? What is his turnover rate? How many evictions are performed per year?
It will save you time and money if the property manager is screening tenants effectively. Getting the right tenants in saves the property in more than one way!
What process do they have when a tenant falls behind on rent?
The property manager should be prepared to take appropriate action in order for cash flow to continue.
These questions are only a fraction of what you could potentially ask or find out about your potential employee. I hope by including these questions it underlines the importance of the job the property manager does and the trust that is needed!
Is investing in single family real estate right for you?
Were you told that is a “passive” or “easy” way to invest? I hope reading this blog has highlighted some important points for you.
The process of investing in single family real estate in order to build your wealth takes time. This is not a smash and grab, get rich quick scheme.
This is a slow and steady build to wealth. Investing in single family real estate is another way to diversify your investments and work toward financial independence.
This blog may just be your first step in the direction of investing in single family real estate.
As someone who put a lot of time and effort into becoming a physician, your goal should be to live the life you want. As you know people change and our goals change. The picture you have of your idea life could change over time.
That is why striving for financial freedom is important.
Financial independence gives you the stability to make changes and explore your options.
Diversifying your assets by investing in single family real estate can be a satisfying addition to your toolbox for building wealth!
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