Top 5 Real Estate Questions Answered

Photo by Maria Orlova on Pexels.com

What’s the best market to invest in real estate?

This has to be the most common question I see in the BiggerPockets forums and real estate Facebook groups. The answer (like most tough questions) is: it depends. Also, there is no “best” market that fits every investor! There is money to be made in every real estate market in the country, it’s just a matter of figuring out which market fits your strengths, your goals, and your strategy the best. The ‘best market’ question always leads me to ask follow-up questions, such as: what are your long-term goals? What is your risk tolerance? Where do you have an advantage in the form of local knowledge, boots on the ground, or insight into the local economy?

I recommend people first determine their long-term goals for why they are even investing in real estate. Do you need the cash flow now or do you have a high-paying W-2 job that will allow you to focus more on markets expected to appreciate over time? Next, figure out how much capital you have access to for purchasing real estate. This is an important factor. It’s much more expensive to purchase an off-market single-family home in Southern California than Tulsa, Oklahoma. 

Another important consideration is: how much time do you have to devote to investing? If you work a demanding 9-5 job or just don’t have the desire to put in the work to actively invest (and it is a lot of work!), maybe focusing on 100% passive real estate investments like syndications is a better fit. More on that strategy later….

I don’t have very much money at all. How do I get started in real estate?

You must have a strong foundation in your personal finances before you get started in real estate investing. You will need a good credit score (650 or better), cash reserves, and steady income to qualify for mortgages. If you only have $500 in your bank account and a 550 credit score, you need to focus on the fundamentals of personal finance before you make the jump to real estate investing. 

While you’re working on this (Dave Ramsey’s teachings are a great way to establish a strong finance foundation) you can begin building your real estate knowledge base by reading books, listening to podcasts, watching youtube videos, and most importantly – connecting with other real estate investors! My favorite ways to connect with people are via the BiggerPockets forums, real-estate Facebook groups in your local area (or the area you want to invest in), and in-person meetups.

Once you build up some real estate knowledge and a network of real estate investors, I recommend you partner up with someone on a deal who can bring capital, and you do the work! If you’ve done enough research, you should be able to put a team together, find a deal, and get the whole process started. Then you can own 50% of a cash-flowing property with little or none of your own money.

Photo by Jonathan Meyer on Pexels.com

Should I buy a property at every duty station and rent it out when I move?

Again, it depends. You can’t use your VA loan an infinite number of times. Yes, you can sell a property and free up your entitlement, but if you’re buying and selling a primary residence every 2-3 years, are you really building long-term wealth? The transactional cost of selling real estate is high (usually 7-8% of the purchase price including commissions and closing costs) so that will likely eat into any appreciation you have if you only hold for 2-3 years.

If you want to rent out your property once you move from that duty station, you have to analyze the property as a rental before you commit to purchasing that property. Think of it as a long-term rental that you happen to also be living in for a few years before you rent it out. How much would that property rent for? What would the expenses be? How much is property management? If you keep that property, will you rent at your next duty station or purchase another property? How will you purchase that property – with a conventional mortgage or a VA loan?

My point is it’s not a simple answer. You need to do some research and determine if it makes sense to buy as a long-term investment or not. It might make more sense to rent! If you’re having trouble figuring out what to do, feel free to message me on Instagram @honorandequity and I’ll give you my thoughts on your situation. 

How many times can I use the VA loan?

The purpose of the VA loan is to provide a low/no money down mortgage to military members and veterans for a primary residence. You can’t just buy an investment property with your VA loan. That being said, you can use your VA entitlement multiple times. The thing to remember is that you have a limited amount of VA entitlement, and once you hit that amount, you have to sell (or refinance into a conventional mortgage – which you can do one time) that property to free up your entitlement. 

For more information about the VA loan, check out the interview I did with Jon Lallande, and make sure you read the article I wrote about the San Diego VA Loan house hack we did. This is the best way for military members and veterans to get started in real estate!

Photo by Aleksejs Bergmanis on Pexels.com

What is a real estate syndication?

A real estate syndication is a method of investing in which multiple investors pool money together to purchase an asset. This is commonly used for assets like apartment complexes, self-storage facilities, and mobile home parks.

A real estate syndication is comprised of general partners and limited partners. The general partners are core team members doing all the work on the deal, which can include finding the property, underwriting the deal, raising money, managing the property, and more. The limited partners are the individuals (or entities) that invest in the deal. They are called limited partners because they do not have a say in how the deal is structured or how it is managed: they are strictly passive investors. 

Syndications are a great option for individuals that have capital sitting in an account but don’t have the time or desire to put together their own real estate deal. 

I have personally invested in one syndication as a limited partner – a mobile home park in Colorado. You can read more about it here

I hope you found value in this article. Please let me know what you think by sending me a message on Instagram @honorandequity, or email me at doug@honorandequity.com

My Favorite Podcasts

Podcasts are my second favorite way to consume information (behind books, of course!). I absolutely love how there are so many available with hosts who just want to provide value to others. And they’re all free! I listen to A LOT of podcasts and have for years. I mostly listen to podcasts that focus on personal finance, personal development, and real estate, and these are my favorites.

Personal Development

Image courtesy of dailystoic.com

The Daily Stoic

Ryan Holiday is the host of The Daily Stoic, in which he talks about life in the context of Stoicism – an ancient philosophy that focuses on self-improvement in all areas of our lives. I like the format of this one: they do a few short, 2-5 minute podcasts during the week, and a longer 45-60-minute episode on the weekend. Ryan is highly intelligent and it’s immediately apparent. He discusses the various weaknesses inherent to humans and how we can strive to overcome and improve on a daily basis. He also ties in current events and problems and how the advice of the Stoic philosophers (Marcus Aurelius, Seneca, and others) are still relevant 2,000 years later.

Image courtesy of podcasts.apple.com

Filling the Storehouse

Stu Grazier and David Gutierrez are experienced real estate investors – but real estate isn’t the main focus of this show. Rather, they focus on “Faith, Family, and Financial Freedom”. Stu and David were roommates back at the United States Naval Academy and have been bro’s ever since. It really shows on the podcast, as they are always making jokes and laughing at each other. They bring on awesome guests to discuss topics such as leadership, giving, gratitude, finding your why, and having the right mindset. I always feel motivated after listening to this one!

Investing

Image courtesy of stitcher.com

Investing for Freedom with Mike Ayala

This podcast is relatively new, but you won’t be able to tell by listening to it. Mike Ayala is a successful entrepreneur and business owner who genuinely wants to help others achieve their investing goals. He provides motivating advice and engaging interviews with other interesting, successful people. He’s a member of Gobundance (a mastermind for healthy, wealthy, well-rounded men) and anyone in Gobundance is worth following closely. Mike had his wife, Kara, as a guest a couple of times, and they offered up some great relationship advice as well. This is one of few podcasts that I listen to pretty much immediately after they are released on iTunes.

Image courtesy of affordanything.com

Afford Anything with Paula Pant

Paula is an excellent host and interviewer with a wealth (pun intended) of knowledge about personal finance, investing, and real estate. She meticulously researches topics and guests and produces an extremely professional and informative podcast. She asks fantastic questions to her guests and provides a lot of value to the listener. I have learned so much about personal finance from her podcast. I wish she would talk more about real estate because she knows a lot about it (only about 30% of the show is RE focused), but I understand that she wants to keep the show more broadly focused on personal finance as a whole. She is a mainstay of the F.I.R.E. (financial independence, retire early) community, so when she interviewed Suze Orman – an outspoken F.I.R.E. hater – I knew it would be a great episode. Suze roasts the community, but Paula maintains her professionalism and waits until a follow up episode to “address” Suze’s scathing opinions on the concept of early retirement. It’s a must-listen!

Real Estate

Image courtesy of stitcher.com

The Bigger Pockets Real Estate Podcast

This is the podcast that got me into real estate. A friend told me about it 5 years ago, and I’ve been a regular listener ever since. They cover a wide spectrum of real estate topics from beginners getting started to interviews with massively successful tycoons. When it began, it was hosted by Josh Dorkin and Brandon Turner, but Josh has since left the podcast and was replaced by David Greene. Brandon and David are extremely knowledgeable about real estate and have helped many people get started and succeed in real estate. Bigger Pockets has published many great books on the subject as well, and http://www.biggerpockets.com is another valuable resource for those interested in learning more.   

Image courtesy of realestateguysradio.com

The Real Estate Guys

This one is hosted by Robert Helms Jr and Russell Gray. They have been doing a real estate radio show since long before podcasts existed, and they are buddies with Robert Kiyosaki and many other hugely successful people. What I like about this show is that they frequently talk about real estate on a macro level and have topics you don’t hear about on other shows. For example, they just interviewed PhD economist Richard Duncan who works for the IMF (International Monetary Fund) who talked about the long term economic impacts of COVID-19. It’s episode #2,028 (yeah, they have a lot of episodes!).

Image courtesy of coachcarson.com

Real Estate and Financial Independence Podcast

Chad Carson is the man! He wrote my favorite book about getting started in real estate (Retire Early with Real Estate – a must read) and his podcast provides a lot of fantastic info as well. Chad is an excellent teacher. His simple but effective methods are ideal for the novice investor. He recently started interviewing real estate investors that only have a few deals under their belts, but are making money and learning a lot along the way. I like this because it shows the listener that anyone can be successful in real estate no matter your income level or background. A must-listen for beginners!

Image courtesy of stitcher.com

The Real Estate Syndication Show with Whitney Sewell

Whitney is a fellow military bro who got into real estate syndication a few years ago. A syndication is when a group of investors pool their money to purchase assets they would not be able to purchase alone. Whitney is somehow able to produce a new show daily, and he has a different guest each episode who shares their journey in real estate. Even if you’re not interested in syndication right now, this show is definitely worth listening to. Whitney and his guests have insightful discussions about all aspects of real estate. He’s all about helping people as well, and will respond if you reach out to him!

I hope you liked this article. Please share with a friend and follow @honorandequity on Instagram. I love connecting with people and chatting about personal finance and real estate!

First Real Estate Syndication – Mobile Home Park in Colorado

A lot of people would think I’m crazy to invest $50,000 in a mobile home park I’ve never been to, located over 1,000 miles away from where I live, with a team of people I’ve never met in person, at the height of the COVID-19 pandemic.

And they might be right.

More Than Money

However, I think I will look back on this decision and see it as an excellent one that greatly contributed to wealth generation for my wife and I. But that is just one way in which it will benefit us. This is my first foray into the real estate syndication world, and thus far, I have a seemingly insatiable desire to learn as much as I can about the process. In the real estate context, a syndication is a method of investing in which multiple investors pool money together to purchase an asset. This is commonly used for assets like apartment complexes, self-storage facilities, and mobile home parks. I’m listening to syndication podcasts and reading articles every day. I’m having conversations with individuals in my mastermind about it and consuming as much as I can on the topic. So even if the deal doesn’t work out as well as I think it will, I am GUARANTEED to learn a great deal from the process.  

I had a conversation a few weeks ago with a gentleman in my mastermind group who has much more syndication experience than I do – which isn’t saying much! He said the sponsors (the team of individuals who are doing the actual work in the syndication) will send out quarterly statements with information on how the property is performing. He said that just by reading this information, I will be ahead of most investors. Apparently, not only do most investors not read these documents, most don’t even open this email. This is baffling to me. Wouldn’t you want to know how your investment is performing? Then again, people throw lots of money at the stock market and have no idea about the companies or funds in which they invest.

Invest in People, Not Deals

One thing I’ve learned so far is when you invest in a syndication, you’re not investing in the deal, you’re investing in the people doing the deal. The numbers make sense, and I wouldn’t do it if they didn’t, but the team and their actions and character will likely determine the success or failure of the venture. I found out about the opportunity through Stu. I have purchased two turnkey properties through his company and both have been great experiences. I trust Stu and David (his business partner) completely, so when Stu sent me an email about the mobile home park, I knew this would be a good opportunity even before I read the specifics. Literally the day before I received his email, I was reflecting on how much money I had saved during deployment and wondered “what am I going to do with all this cash?” Stu’s email seems serendipitous in retrospect.

Stu and David are only two of the people on the syndication’s team though. I asked Stu how he knew the others on the team and if he trusts them. He said he has known the lead sponsor – Byron – for over 3 years and trusts him completely. If Stu trusts him then I do too, but I still felt like I had more work to do before I wired the money.

Due Diligence

As part of my personal due diligence process, I reached out to Byron – the “Chief Vision Officer” who is overseeing the syndication. I had a number of questions for him, and not only did he respond within a few hours, the responses were excellent and significantly increased my confidence. I also read his bio which mentions his experience as an attorney, business owner, and the work he has done in other real estate syndications. A key element of his bio that jumped out at me was his 24 years of service as an Army officer. Though this alone is not indicative of someone who will manage a syndication well, it does indicate to me that he can be trusted, he has integrity, and he will work hard to accomplish a task. Prior military service – especially over two decades worth – speaks a lot about someone’s character, in my opinion. After reviewing his biography and reading his thorough email response, I decided I would wire the $50,000 and commit to the deal as an investor.

These early steps and due diligence just reinforce what I have heard about the importance of relationships and networking. Your net worth is determined by your network. I feel thankful I have developed such a network around me to help me as I begin this journey, and I will continue to grow my network regularly – to help myself and to help others.

Look out for my quarterly updates on my first syndication deal. Thanks for reading and please let me know your thoughts in the comments section below.