Buying Real Estate: Investor Insights and Strategies
Introduction
In 2024, real estate investors are facing new challenges and opportunities. With interest rates higher than in previous years, the criteria for good deals have evolved. Let's dive into what seasoned investors are looking for and their strategies for navigating the current market.
Key Takeaways
Evolving Multifamily Investment Strategies: Investors like Angelina are now targeting smaller multifamily properties (two to four units) with adjusted return expectations due to higher interest rates, aiming for around 6% returns instead of the over 10% seen during the COVID-19 era.
Importance of Creative Financing: Ian Cruz emphasizes creative financing strategies, such as subject-to deals, to acquire multifamily properties at significant discounts and focus on long-term cash flow and appreciation.
House Hacking for Cost Reduction: House hacking remains a popular strategy, especially in high-cost areas like the Bay Area. Renting out parts of a property, like to travel nurses, can help subsidize living costs, although high interest rates are now pushing some investors towards renting.
High Returns from Short-Term Rentals: Investors like Frank Molina are pursuing short-term rentals with goals of 15-20% cash-on-cash returns, focusing on locations in Missouri and California that can generate high returns from the start.
Networking and Consistency in Real Estate: Networking is crucial in real estate investing for gaining insights and potential deals. Consistency, as shown by Carmen Mackinda's commitment to making 250-300 calls daily for wholesaling, is key to finding successful deals and learning from each experience.
Investor Criteria for 2024
Multifamily Investments
Many investors, like Angelina, are focusing on multifamily properties. Angelina is aiming to buy two to four units, such as duplexes or fourplexes. Her return expectations have shifted from over 10% during the COVID-19 era to around 6% now. This shift is primarily due to the increase in interest rates, making high returns harder to achieve.
Creative Financing
Ian Cruz highlights the importance of creative financing. He's looking at multifamily deals in Cincinnati, Ohio, and emphasizes the value of subject-to deals. Ian’s strategy involves getting properties at a significant discount and focusing on long-term cash flow and appreciation. This approach allows him to navigate the higher interest rate environment effectively.
House Hacking
House hacking remains a viable strategy, especially for those in high-cost areas like the Bay Area. Ian, who recently got married, shares how house hacking worked for him. By renting out part of his duplex to travel nurses, he was able to subsidize his living costs. However, with current high interest rates, he's now leaning towards renting rather than buying another property in the Bay Area.
Short-Term Rentals and Cash Flow
High Cash-on-Cash Returns
Frank Molina is targeting short-term rentals with a goal of achieving a 15-20% cash-on-cash return. He's exploring opportunities in Missouri and California. The key for Frank is to find deals that can generate high returns from the outset, even as a new investor.
The Importance of Networking
Networking plays a crucial role in real estate investing. Frank underscores the importance of attending meetups and building relationships. These connections can lead to valuable insights and potential deals. For new investors, consistently attending events and meeting people in the industry is essential.
Shifting to Commercial Real Estate
Industrial and Retail Properties
Liam DeLumpa is transitioning from residential properties to industrial and multi-tenant retail buildings. He’s looking for properties in the path of progress with a minimum purchase price of $1 million. His experience with an eight-unit residential property has shown him the value of minimal renovations and strategic location selection.
Adding Value through Renovations
Liam's favorite deal involved an eight-unit property bought for $561k, which he plans to sell for over $800k after minimal renovations. This approach demonstrates the potential for significant returns through careful property selection and strategic improvements.
Wholesaling and Cold Calling
Commitment to the Process
Carmen Mackinda emphasizes the importance of commitment and consistency in wholesaling. His team makes 250-300 calls a day to find deals. Carmen's favorite deal involved a five-unit property in Manteca, which, despite being a long-term process, promises substantial revenue.
Learning from Experience
For new wholesalers, Carmen advises staying committed to the process and finding a niche. He shares that success in wholesaling requires persistence and the ability to navigate challenges. Each deal brings new lessons and opportunities for growth.
Global Perspectives on Real Estate
Comparing Markets: Ghana vs. the U.S.
A conversation with Tessa from Ghana provides valuable insights into the differences between buying property in Ghana and the U.S. In Ghana, access to credit is limited, and interest rates can be as high as 30%. This makes saving and paying cash for properties the norm, unlike the relatively accessible credit market in the U.S.
The Benefits of U.S. Financing Options
In the U.S., the ability to secure low-interest loans and use credit cards effectively opens up numerous opportunities for real estate investors. Tessa highlights the ease of obtaining credit in the U.S., which contrasts sharply with the challenges faced in Ghana.
Conclusion
The real estate market in 2024 presents both challenges and opportunities. Investors are adapting their strategies to navigate higher interest rates and shifting market conditions. Whether through multifamily investments, creative financing, house hacking, or transitioning to commercial properties, successful investors are those who remain flexible and innovative.
