Business & Investment

How to start investing in real estate

In 2015, Sahil Mehta helped sell her first property in Berkeley, California at the age of 18, earning a commission of about $ 2,000.It solidified interest in his pursuit Real estate sales and investment, This grew only in the next few years.

“It felt great, not because of the amount of money, but because of the sense of accomplishment,” Mehta told CNBC Make It.

Currently, at just 25 years old, Mehta shares five investment properties with his brother, worth about $ 9.4 million. He also works full-time at Golden Gate Sotheby’s to help manage and complete sales.

To save his first fortune, Mehta worked at Sotheby’s while attending the University of California, Berkeley. In 2017, he and his brother, his business partner, bought their first home for $ 950,000. The brothers rent four properties to college students and their families, one of which runs as Airbnb. After mortgage payments and property taxes, they earn about $ 25,000 a month from rent and divide it evenly.

Meta says she was lucky to get a job at Sotheby’s in college. This allowed him to save a healthy amount of money when he was still young. This year he is on track to earn about $ 350,000 from his daily routine. He apparently buys real estate, saying that potential investors need a lot of money to participate in the game and can split costs with someone else that not everyone can. I admit that it’s easier to do.

He also learned some expensive lessons along the way. Mehta planned to buy a duplex in January 2020 and turn it into a single-family home, but local housing ordinances banned it. He estimates that he lost tens of thousands of dollars before renting the property on Airbnb, and now he’s always investigating before buying.

Mehta and his brother plan to add more properties to their portfolio in the coming years. They are also saving homes near them in California to buy their mom and dad. Meta says there is little that can be done for parents who have moved from India to the United States and worked hard to provide their children with a stable future.

“There’s nothing I can do for what they did for us,” he says. “That said, without any conditions, we do what we can for them.”

Here are four tips from Mehta for those interested in real estate investment.

1. Select a lane

The most important steps in real estate investment occur before you actually buy something, Mehta says.

“It’s all in the pre-planning stage and we close the deal when the pieces fit,” he says.

First, find what you really want to buy. There are different types of real estate investment. Single-family homes, apartments, commercial real estate, REIT (Real Estate Investment Trust), To give a few examples. And within each category, there are different ways to make money, such as flipping and house hacking.

Each strategy comes with different costs and risks. Investing in a REIT is similar to buying an investment trust, for example, and requires much less time and energy than renting a house. Purchasing real estate “gives more control and responsibility.” This is risky, but it can also be more profitable, says Mehta.

“Choose the right option based on your current financial position, risk appetite, experience, and the amount you want to get involved,” says Mehta.

When choosing, it helps to understand your “reason,” he says. If you do, choose a strategy that suits you. “Everyone has different motivations and goals. A clear definition of what it is for you will help you overcome the noise.”

2. Do math

Not all real estate makes money automatically. Mehta states that every investor needs to “become an expert in cash flow calculations and potential equity realization.” I learned this from my work at Sotheby’s.

Real estate cash flow is the difference between real estate income and expenses. You might think of this as rent minus mortgage payments, but for example, it’s not the only cost you need to explain for a rental property. There are also operating costs and savings for future improvements and emergency repairs, says Mehta.

Mehta is also looking at how much value can be added to a property through physical improvements. This may include kitchen updates and bathroom mods. Mehta and his brothers are currently adding double-deckers and units to one of their property’s backyards. He estimates that this will add about $ 1.5 million to the total value of the property.

3. Unconventional

Everyone has access to Zillow, Redfin and other online listing sites. If you’re bidding on a property with many others, you’re unlikely to get the best deal, Mehta says. “To gain a competitive edge, you need to think and work out of the box,” he says.

Mehta suggests contacting the seller directly. “I personally bought the first two properties off-market. I drove through my favorite neighborhood streets and saw a sign for sale set up before the house actually hit the market. rice field.”

Mehta also proposes to connect with local realtors. They often know what is listed before it is actually listed.

4. Play cool

How to start investing in real estate How to start investing in real estate

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