Welcome to the Fearless Innovator Podcast, my name is Mechiel Kopaska and I am your host.
Today’s episode is entitled What does a Buccaneer’s ticket and a townhouse have in common?
I tend to attract and coach a lot of first-time real estate investors or people that just want to start investing but they don’t know how. One thing I’d tell you right out of the gate is to go read Robert Kiyosaki’s book called Rich Dad Poor Dad. This book will change your mindset about real estate investing. Once you’ve read that, then go read The Cash Flow Quadrant – this book was an eye-opener for me!
The next thing I will share with you that investing in real estate IS NOT A GET RICH QUICK Scheme, that doesn’t mean you can’t make the right moves and get out of the rat race quicker than someone else. If you want to learn what the rat race is (you’re probably in it right now and don’t even know it) you can join me online every 1st Tuesday from 7pm to 9pm Eastern – we will use the CashFlow Game online as a tool to educate you about how to invest in real estate. Sign up at www.fearlessinnovator.com/roundtable to receive the online instructions. That’s www.fearlessinnovator.com/roundtable.
There are sooo many ways to invest in real estate, but it really depends on your circumstances. I’m going to assume that most of you were like me when I got started. I was working full time in IT and I just wanted to start to dabble in real estate and I didn’t know how either! All I ever really heard about were people working full time and they owned rental properties. There wasn’t a lot of education out there like there is today (boy that just made me sound old).
Today, you can be a
- Note Buyer
- Multifamily investor
- REIT – Real Estate Investment Trust
- Commercial investor
- Short Term Rental – Vacation Rental
- Flipper – Rehabber
- Hard Money Lender
- Private Lender
- Single Family Home
- Vacant Land
Each of the above come with their own set of risks and rewards. It’s safe to say that if you’re working full-time that becoming a Flipper/Rehabber wouldn’t allow you the time necessary to devote to both your J.O.B. and the rehab project. While flipping can produce a big chunk of money at the end of the project you’ll also need to understand the tax implications on the ordinary income. Another option the younger crowd may select is Wholesaling. Wholesaling is a lot of hustle finding deals and finding buyers with its own set of tax implications, this is a full time J.O.B.
Most investors are after the passive income/cashflow – you’ll hear those words used together a lot. In the book Rich Dad Poor Dad you’ll learn that passive income refers to making money while you sleep and it’s taxed at a lower rate than ordinary income and this is a step in the right direction if you’re wanting to move from the J.O.B. Employee status to the status of Investor. I bet you didn’t know that working as an employee at a J.O.B. you are taxed at the highest rate and true investors are taxed at a much lower rate and are able to take advantage of some tax laws. Robert Kiyosaki discusses in his book The Cashflow Quadrant.
Maybe you have a big chunk of money sitting around, who knows? maybe you inherited it – did you know there are people out here like myself that uses OPM – (Other Peoples Money) on an investment opportunities? It’s handled legally through an attorney and it’s backed with a Note and Mortgage. This allows the Full Time Employee to remain in their working status but their money is passively working for them at a fair rate of return.
I think you can see now why you need to figure out what type of investor you want to be and understand all the risks and rewards.
Another tidbit be sure to connect with a mentor. This can be someone that is willing to teach you along the way or signup for a mentoring program.
I was very fortunate that I had such a mentor. My mentor did the same thing I mentioned above, only Jim bought me the Rich Dad Poor Dad book and encouraged me to read it. And because I’m on the global stage, I’m sorry but you’ll have to make the effort to buy your own book!
After reading the book, I became hungry to get started and like you I did NOT know how to get started. But I did know this about me and that is I can make things happen.
Several months had passed and I was visiting with my girlfriend Patsy. She had increasingly become more discouraged as her daughter Michelle had moved to Charlotte and started rambling about wanting to be closer to her as she missed her very much. The two had been inseparable until Michelle moved. Each time I visited it was becoming more evident that she was going to move. She had tried to find someone to buy her townhouse and had failed, she was a bit reluctant to use a realtor because she didn’t have much equity and she wanted to retain as much as she could for the move.
One day she says – “Mechiel you should buy my house”. I was like I have no idea how to do that. She said it’s easy, I’ll just call my Title company and they will handle all the steps. We just need to agree to a price. I said, “ok?” I got on the phone with Jim – he helped me walk through the steps on my side, Patsy and I agreed to 50K. We both signed the sales contract. I believe I skipped the whole appraisal and inspection phase – which I would advise everyone not to skip today. I went and got a mortgage approved and we closed in 30 days. I helped Patsy pack her things and off to Charlotte she went.
Now here I am – with a vacant townhouse and no idea how to get renters, how to manage them, no maintenance people, no idea how to track income and expenses and I’m working full time.
I ended up putting a For Rent sign in the front yard and I put an add in the newspaper. (Yeah, this was a while back!) Soon, I had people calling me and I’d setup appointments so I could “interview” them and they could come look at the place. Back then I told them, “if you have bad credit, just tell me now so I don’t have to run your credit”. I would also advise against this today, but it seemed to work back then. For the next 2 years, I learned everything by a firehose. I had no maintenance crew and my dad even helped with a major leak under the kitchen floor that ultimately the runoff from the water ended up out in the street, but dad saved the day!
At the end of the 2 years, my running tag line was – I have a guy for everything! Then because I thought I had become so proficient that I bought another one in the same development. This of course, added a whole new layer of complexity and issues but I was hooked!
In summary, here’s what I did:
- I negotiated directly with the seller
- I bought a single-family townhouse – without knowing anything at all about real estate and I was working full time and traveling.
- I placed the tenants without knowing how to screen or manage them.
- I held onto to the property for years and bought another one – because I now understood cashflow.
- I sold the 2 properties when there was enough equity to buy my next larger property.
Moral of this story – The best way to start in Real Estate is to just jump in wherever you’re uncomfortable! What are you afraid of?
Oh and if you’re wondering about the Buccaneers seasons tickets – I scored them in with the purchase of the townhouse!
B U C C A N E E R S – GO Bucs!
The common denominator was my friend Patsy. Patsy got me started in Real Estate! I miss her dearly – she passed a few years ago – so I dedicate this episode to my dear friend Patsy Rogers!
Thank you for listening, I hope you were inspired, entertained or you learned something new!
Laconia Bike fest is around the corner and I can’t wait for the wind therapy and my adventure with Insane Wanderers which is a diverse group of Latino’s and a couple of white people. I may not understand everything they say, but I can point!
While I’m gone to Laconia my real estate business is thriving! I’m producing income while I’m out riding around the countryside! If you want to know how, reach me at www.fearlessinnovator.com!
Catch me later…