What is the Easiest way to invest in Real Estate?

Fellow Real Estate Investor,

I had lunch with a friend today who asked if I thought he should buy some multi-family real estate as an investment. He said that he would even consider leaving his job to invest in Real Estate full time. John has been in the corporate world most of his life. He has done very well for himself, moving up the ladder in his industry and increasing his earnings to the point that he now has a fairly substantial amount of cash to invest. He could easily continue in his chosen field and create a nest egg that anyone would be happy with. John has never owned rental real estate, or even worked in any type of small business. He does not seem like the kind of person that would enjoy the day to day challenges of dealing with “tenants and toilets”. Also, since he cannot count on real estate quickly going up in value, he would have to own a lot of units (150+) to replace his current income. This would surely require more than he has built up in savings and would therefore have to be his only investment.

Real Estate should always be only one part of a well-diversified portfolio of investments. I’m not sure what type of Real Estate opportunities would be the right ones for any particular person without knowing their situation, skills, or preferences. You may prefer to own a smaller property outright and manage it yourself or a larger property and hire a management company to run it. The best direction for you depends on several factors including:

• how hands-on you’d like to be;
• what kind of return vs. risk you’d prefer;
• how much you have available to invest; and
• how quickly you might wish to cash out.

Real estate should always be one of the investments in your portfolio, but perhaps it would be better to use a method that has very little personal involvement and could give you similar returns.

Through the past 33+ years, my brother and I have bought and sold many properties from single family homes to 4 family properties in the Rochester NY area. We have both held these properties long term and “fixed and flipped” many of them. Fixing and flipping a property requires a great deal of skills, time, and money for only a reasonable return. You are basically buying yourself a “job.” Holding one to four families creates a decent longer term return, but there is also great deal of personal effort and financial investment involved in holding these smaller properties. They can be very difficult to find at a reasonable price, may require a lot of work, can be expensive to manage, and can be more risky due to the potential for vacancies. Even if only one unit is empty, the property would be 100% vacant if it is a single family home, or it would have a high percentage of vacancy if there are only a few units in the property. This could make it difficult to pay the mortgage, taxes, and other expenses and you may even have to come out of pocket to keep the property “above water.”

We still own a number of these smaller properties, but we now prefer to invest long term in much larger (20+ unit) properties in the upstate New York area. When done properly, the long term returns on a larger property can be much more stable and secure with even less effort or risk. The larger and more stable the property, as well as the longer the property is held, the more secure the investment is. This is because the value of a larger property is determined almost exclusively by the income that it generates and not by the market ups and downs that affect the smaller properties.

We are always actively looking for the best properties to purchase through Realtors and by directly contacting owners. We have a fairly substantial amount of our own funds ready to invest. We have a number of private lenders on our existing properties earning nice returns secured by a mortgage on that property (typically in increments of 50,000). We also have several lenders ready for us to find the next opportunity that may interest them. If we get the right opportunity in a very large property (100+ units), we would also be able to put together a partnership that would include ownership equity. Please contact me if you know of any properties available like these in Upstate New York, or if you are interested in investing in any opportunities like these that may come up.

The only real answer to the question "What is the Easiest Way to invest in Real Estate?" is that it all depends on you:

• your management skills;
• your available cash,
• the amount of your spare time,
• your long term goals (both personally and professionally) and
• ultimately your comfort level being a landlord and dealing with tenants, contractors, city inspectors, property managers and many other advisors and service providers.

If dealing with these types of people and situations is not in your comfort zone, then investing cash with an existing Real Estate Investor may be your best option.

If you’d like to try your hand at owning a property yourself, we have our finger on the pulse of the market (I am also a NYS associate real estate broker through Select Realty), and could help you with all kinds of things along the way (locating and purchasing a property, physical and financial property analysis, finding good tenants and good contractors, etc.). If you’d like to try an easier, less hands on, investment approach that may give you similar returns, we can help with that too. Whichever direction you take is entirely up to you. If you think you, or someone you know (in New York State) would be interested in working together in some way, I would love to get together to discuss the best approach to accomplish your goals. Let me know the direction you are interested in, and I will do anything I can to help you along your path to financial freedom.

Randy Haller

Real Estate Investor and Fund Manager

585-264-1977