The ABC’s of Real Estate Investing
Author: Ken McElroy
I’ve read in quite a few books and heard from quite a few people that the way to achieve true wealth is through the use of investment properties. It’s actually an amazing idea if you think about it. Buy an apartment building or complex, people move into the units and pay you rent money. What a way to make a living! The thing is, I haven’t found too many books that explain the process of acquiring an investment property. In this particular book, however, McElroy covers what I believe to be the entire spectrum of attaining properties.
Build A Financial Team
McElroy states that having a team behind you when you are building your real estate empire is one of, if not the, most important part. The team may not be cheap, but if you aren’t an expert in the realm of real estate investing, paying the money for people who are will most often save you a lot of money. When you have experts on your team, you’ll be prepared for whatever surprises are to come. The members of your financial team should include the following:
- Your own attorney
- Your own accountant
- Real estate broker
- Property manager
- Lender or mortgage broker
- Contract/rehab specialist
- Insurance agent
- Property tax consultant
- Income tax consultant
- Estate Planner
- Structural Engineer
It may not be necessary to have every single one of these members on your team, but they are all people you should be thinking about.
Real Estate Investing is a Business
McElroy points out that many people who get into the investment property world believe that once they purchase a property and it starts generating some revenue, they can just forget about it. It doesn’t work like that. If and when you do purchase your first property, you must never get complacent. Your team will only work as hard as you work.
3 Types of Income
When looking at an investment property, there are three types of income to consider before making a decision.
- Actual Income: The total income the property has generated over the last twelve months.
- Actual Potential Income: The total income the property could have generated in the last twelve months had the units been 100% percent occupied and the owner taken advantage of all other income opportunities.
- Future Potential Income: The total income the property could generate at today’s market rents, at 100% occupancy, and by taking full advantage of all other income opportunities.
Although knowing all three income types is necessary, McElroy says you should only make a decision on the property based on the actual income.
I’ve had thoughts of getting into the real estate investing world for a while now but was unsure how or where to start. Although there are still a few other hurdles I’ll need to get over before I do start that venture, Ken McElroy has definitely helped me draw out a useful map.
Have you read this book too? Are you in the real estate investing world? Let’s hear what you have to say about it!