It’s almost everyone’s dream—along with running an inn or becoming a celebrity chef. Become a real estate investor, add properties to your portfolio and eventually you may end up with a mini-empire that provides solid income as a full or part-time profession. But it’s not always so easy—as those who invested prior to the Great Recession may have found if they became highly leveraged or didn’t do sufficient due diligence. An area may change, renters may not show up, and problems with any or all building systems and parts may need repair or replacement, hobbling the anticipated healthy cash flow.
Today, there are countless books, blogs and podcasts to help learn the important do’s and don’ts. To guide those who haven’t yet dipped their toes into residential real estate investing, we talked with Charles Weinraub, who founded his successful company, Handsome Homebuyer in Farmingdale, N.Y., in 2014 (www.handsomehomebuyer.com). To date, he has focused on buying more than 100 distressed homes to flip or rent after he has done the necessary rehab work. We talked with him by phone; following are his edited responses.
How do you hear about properties to buy?
I do so through a combination—word of mouth, social media, general advertising, radio ads and direct marketing strategies.
How and where should someone start to buy real estate as investment property?
It depends on your goals. Is it to buy one rental a year to fund your retirement or go bigger and flip 100 houses a year which is a much bigger money commitment? Of course, part of the answer depends on your time available—is this a full-time or casual pursuit? And how much money do you have to invest? Write down your goals and formulate a step-by-step plan. Consider consulting a professional real estate investor who has already seen success—and even failure—which they learned by.
Are there other good options to invest in besides distressed properties?
Yes, you can buy ones that aren’t distressed and rent—the return will be less. Or [you could] identify distressed properties and pass them off for a fee to an investor, what’s called wholesaling.
Is it best to start with a small house or apartment or go big right away with a multifamily building?
Conventional thinking says start small and build. Seasoned experts will tell you to go big right away because the time to get in is the same and the return with larger numbers is better. The truth lies in the middle and varies depending on your personal goals. In the current market, returns on smaller properties are far better then large apartment buildings because there’s less competition.
Where do you invest—locally so you know the market well and can check or does that not matter?
The hard and fast rule for beginners is to draw a radius of four hours around where you live to start. Closer is easier when starting because you’ll need to make frequent trips to familiarize yourself with the area and build a team of attorneys, contractors, property managers, etc.
Do you also advise taking a course?
There are tons of great courses, books, local real estate groups, and articles online. In 2017 there is no lack of information. The most important thing people need to understand is that investing successfully is a process. It takes years of hard work and relationship building before you get traction. I myself studied under different mentors for four years before I did my first deal, which was a house that I renovated and resold—start to finish—in five months.
What are the key challenges once you find a property?
Credit: Handsome HomebuyerAfter purchasing a property, the biggest challenge is having a good team of contractors to do the work on the house. A second one is building and designing the house to what people want and not overdesigning it. There are things that won’t give a good return such as nice landscaping and a brick patio while a good boiler would make a difference. I subcontract out everything and use the same team.
Is it wise to hire a property manager or take on that role on yourself to save funds?
It depends on a few things, namely, how close the property is to where you live and what kind of experience and available time you have. I self-manage but this is my career.
What are the three most common pitfalls amateurs run into when starting out?
They don’t get the education they prior to investing; they get emotionally involved in a deal; and they don’t know when to sell and move on.
What about challenges later as someone becomes more experienced?
You constantly have challenges at different stages—getting education, finding properties, lining up more contractors, supporting growth as you build the business.
Is there a sign that it’s time to sell?
You should know what your goal is when you start—whether you plan to sell or rent it for a long time or “forever.” For me these are my two strategies.
Is it essential to have a website to showcase listings?
No, the houses sell quickly if priced properly and on your area’s real estate database. It’s important to list with a qualified real estate salesperson and not on your personal website.
What else have we not asked you that you’ve found helpful?
Know this is something that takes several years to become successful. It’s very important to invest upfront in your education before you do something and then keep educating yourself to keep growing the business. Be generous and invest in the people around you by paying them well so they stay with you and bring you more deals. Honor your word. If you say you’re going to do something, do so.