Why Now Is the Time To Expand Your Real Estate Empire

When you’re talking about why we’re in this business, the parts of it we enjoy the most, and the areas where we want to be better than anyone else, it all boils down to passion. You have to love it because this industry isn’t the easiest one to be in, nor is it a “get rich quick” business. 

For all of us, whether we’re investors or real estate professional salespeople, there are ups and downs throughout a business cycle or even one’s entire career. Quite frankly, this year has been tough for everybody in the real estate business.

For salespeople, the very best among us across the country are down as much as 40% this year. Our owners are stressed this year, too; they are combating higher interest rates, inflation on what it costs to get things fixed, and so forth. During times when everything becomes a little bit difficult, you start to think, “Well, my gosh, this is getting tough.”

Is there an easier way to make a living? 

I think about that every once in a while. What I keep continuously coming back to is the fact that, if I wasn’t already in the real estate business, it’s still the only business I would aspire to get into – even today. Trust me: There’s never been a better time to invest in residential real estate. 

You may question this because times have been hard for a lot of people, but the only time that was better than today to invest in residential real estate was yesterday. Why? Residential real estate, regardless of the ups and downs, is always going to be in demand. I truly believe it’s going to be in demand for the next 25 years for a zillion different reasons. 

One of those is the fact that COVID is kind of in our rearview mirror these days.

We’re not constantly thinking about it, talking about it, debating vaccines, and so forth. However, the pandemic changed how people think about residential real estate and the way people think about where and how they live. 

Some statistics claim that over 30% of the people who started working from home during the pandemic are still working from home today. You can see that reality play out in how badly commercial real estate is doing. 

Right now, San Francisco is hovering around a 30% vacancy rate – and vacancies across the country are higher than ever. That’s a whole different problem with refinancing and managing commercial real estate. To be honest, I am so glad we are not in that. Conversely, I am thrilled that we are in residential real estate because, when you think about it, our homes became our schools.

Our homes became our entertainment centers, restaurants, work, and study areas. Because we’ve become adjusted to this lifestyle – and have found substantial benefits in it – this fact is never going to change. 

Now, this doesn’t mean we don’t want to leave home and go on vacation a couple of times a year; we’re willing to spend money on that. However, we are going to continue to spend money on making our homes more functional, comfortable, and enjoyable. 

For that reason alone, I think the next 25-plus years are going to be incredible. When you think about it, real estate is one of those few situations in which you can get a loan and have financed the term, meaning you can still purchase a loan for 10, 15, 20, 30 years, or whatever your terms state. You can get a fixed term, or – at the very least – one for a reasonable length of time. In that sense, you’re not constantly at the mercy of up and down interest rates.

For much of the financing, there’s still a ton of Fannie Mae, government-backed financing available for real estate investors as well. Those rates are ultimately subsidized by the government – and you can’t get those types of loans for any other sort of assets. 

Then, of course, there are the tax advantages with real estate investments. These advantages are tremendous. 

Here’s an example to illustrate why: Let’s say you’re a dentist for your professional career, and that job is your primary source of income. That doesn’t mean the profits you make on your real estate investment portfolio aren’t tax-sheltered within that portfolio. 

I’m not a tax accountant and I always oversimplify that, but the fact is that the benefits of investing in residential real estate are bigger and better than they’ve ever been before. Regardless of the ups and downs in the market, there has never been a better time to invest in real estate. If I wasn’t already in this business, I’d be doing everything I could to get into it. 

Choosing the Right Team is a Vital Part of Real Estate Investing

Investing in residential real estate presents a tremendous opportunity. It makes perfect sense for many people right now – but that doesn’t mean there aren’t inherent risks in investing in real estate or any kind of investment. 

This year, we’re working with a lot of owners who purchased properties either right before the pandemic or during it. These people, typically speaking, were able to buy homes with incredibly low interest rates. Granted, some of those interest rates were adjustable, so they’re struggling a little bit now. 

However, in every single case where we have somebody struggling or going through a tough time with their residential real estate portfolio, it’s because they didn’t have a trusted partner or advisor in their corner to counsel them when they initially purchased the property. 

I can’t tell you how many folks we’ve talked to this year who bought their properties sight unseen.

A lot of people live out of state. They see something on the internet and get all excited even if they live in California. Everything in Ohio is cheaper than where they were in California. So, how could they possibly lose? 

You have real estate agent licensees out there whose job is to sell real estate; their interest is in pocketing the commission and moving on. Therefore, you can’t necessarily count on the fact that any realtor you speak to is going to be able to accurately assess the condition of a property or communicate what it will truly cost to put it into service or maintain that property for the long term. 

• Pro Tip: Buying a property the right way is 90% of the battle. 

I know that sounds like a cliché, but if you don’t go in with your eyes open and arm yourself with an absolute understanding of what your return on investment can – and should be – you could be in a lot of trouble. You also need to be aware of what it will cost to put a property back in service, which is part of your capital investment. If all these factors are a surprise to you and your property manager, who had nothing to do with purchasing that property with you, it’s a horrible thing. 

While all investments carry some level of risk, there’s an even greater one when you purchase a property without proper counsel or the knowledge of which questions to ask. You also can’t count on getting lucky with finding an agent who will have your best interests at heart, show you why you’re paying X for the property when Y is a better number, and so on. 

Now, there are numerous times when we have clients who “overpay” for a property because they’re counting on appreciation or have a specific reason for wanting a specific property in that neighborhood, et cetera. 

That’s fine. Whatever you do, make an informed, adult decision to go in with your eyes open. That said, if there’s one particular risk to avoid as a property investor, it’s purchasing something at the wrong price. 

That’s part of why we want to recast ourselves as Invest with ROOST rather than Manage with ROOST. 

Our jobs are almost impossible some days when we find ourselves suddenly taking on the responsibility of helping an owner manage a property profitably when, quite frankly, we have no chance – at least, not in the short term – of helping that owner make any money due to what the property needs and the additional capital investment, which is often required.

Final Thoughts

If you want to expand your real estate empire as an investor, you’ve got to have the right mindset, the right strategy, and the right people guiding you through the process. There is always risk involved with investments, sure, but you don’t have to take unnecessary ones.

I always tell people I’ve made every mistake in the book so they don’t have to – and that’s why I love working as a consultant, advisor, and property manager for my owner-investor clients. I know what pitfalls to avoid, where people break their budgets, and how to navigate the daily pain points that will inevitably surface. 

Ultimately, you don’t have to approach investing alone. If expansion is your goal, having the right team in place is your best chance at long-term success so you can grow and grow and grow to achieve your goals. Whatever those goals may be, our team at ROOST is ready to help.