What’s that one thing that’s stopping you from getting into real estate investing?
I’ve met all kinds of people in my 30+ years of real estate professional experience. Women, in particular, are pretty hesitant about getting into debt to get a headstart on real estate investing.
In today’s second episode of Women Creating Wealth, I share the biggest and most common fears in real estate investing and how one of my friends overcame them.
Stay tuned if your fears stop you from getting a step closer to your financial freedom.
Let’s get started!
Real Estate Investing vs. Stocks
With everything just at the tip of your fingers, it’s easier to purchase stocks than ever before, especially if you have the money.
New companies are popping up now and then, intending to bring it into public offering (IPOs) to gain more considerable capital and mirror some of the biggest stock market success stories in history like Facebook, Microsoft, Google, or Apple.
So let’s say you want to buy $200,000 worth of Apple stocks. How much money do you need?
Of course, $200,000 (and probably a little more because of broker fees).
But now, let’s say that instead of investing in stocks, you want to invest in real estate.
How much money do you need?
That’s a tricky question!
You don’t need to have the full amount to buy a $200,000 property.
You can get away with as little as a $7,000 down payment. Yep, that’s a thing!
That is just one of the many reasons I love real estate as an investment.
Good Debt vs. Bad Debt
You’re probably familiar with this saying…
“It takes money to make money.”
And now you’re going to say, “Chris, if I put $7,000 down on a $200,00 house, then I now have $193,000 worth of debt“.
Debt is such an ugly word… Honestly, who wants debt?
But if you’ve read Robert Kiyosaki’s popular book Rich Dad Poor Dad, you’ll know that there is a difference between “good debt” and “bad debt”.
Just put it this way…
Good debt makes you money. Bad debt takes it away.
So how CAN you turn that debt into a money making machine?
How My Friend Overcame Her Fears and Got Into Real Estate Investing
My friend AnneMarie’s success story in real estate investing is just proof that even if you’re in your 40s, you can still win big. You just have to overcome your fears and get started.
AnneMarie worked for Air Canada as a desk person, where she got screamed at for complaints about missed flights. Not to mention that she had to be at work at 5:30 in the morning.
As you’d imagine, she didn’t really love her job. But she didn’t see a lot of opportunities to do anything else.
On top of that, she has been renting a house for ten years and driving a 12-year old Ford Escort wagon.
Then came that ONE glimpse of opportunity that turned her life around.
When her dad passed away, he left her with some stocks, and for years she’d just been sitting on them. She wasn’t sure what to do with them because it didn’t feel like that much money for her.
And one day, we got to talking about it and she realized that she had enough money to buy an investment property, where she could also live.
Her First Property: A Three-Family House in Boston
So we started looking around and found a three-family house in Boston that cost almost $500,000.
Even with all the fears and doubts in her head, she put a 3% downpayment from her father’s stock money and still had some left to fix the place.
The plan was that she would live in the middle unit and rent out the top and bottom units. Lucky her, the property already had existing tenants in those two units.
The Biggest Fear in Real Estate Investing
But it wasn’t like a walk in the park. Putting up a down payment was just the start.
One of the biggest fears in real estate investing is people don’t want to get into huge debt to buy a property.
In AnneMarie’s case, she had to talk to her tenants about raising their rent right out of the gate so she could sort out the mortgage dilemma.
Even though she felt intimidated and afraid these tenants would leave, she plucked up her courage and informed them.
Fast forward to about six years now, she’s living on that property, and the property has DOUBLED (or even more) its value!
And her tenants above and below were almost completely covering the mortgage payments.
She went from paying almost $2,000 a month in rent to about $140 for her mortgage because of her current real estate property set-up.
Every year she raises their rents a little bit, and now she’s reaping the reward – her property is paying all of her mortgage! And it even pays the lease on her Mercedes!
Dealing with What-Ifs
What if all my tenants move out?
What if I lose my job?”
What if I lose this property to the bank?
What are my options?
These are just a few questions on every new real estate investor’s mind.
But I’ll tell you what…
You need to figure out first the amount of mortgage you’re comfortable paying.
For AnneMarie, we figured out that her mortgage would be about the same as her current rent. So she knew that even if all her tenants moved out of her house, she would still be able to pay the mortgage.
And the best thing about real estate investing is that there are many different ways to get started, including leveraging the real estate property you own.
In my case, I bought myself a 1200-square-foot house. I divided the house into two – one as a rental property and one as my own, which I’ve been paying off. My initial investment of $60,000 grew into eight times more than that amount by doing this!
Building Your Go-to House Maintenance Experts
Now that you know how to leverage your debt, the next thing is to find the right people you can call to help with house maintenance.
What are the things that you should look for in building your go-to experts:
- Find people that you can trust.
- They must know what they’re doing.
- And they need to respect you.
So, where can you find these trustworthy people?
- Ask for referrals from your real estate agent.
- A home inspector can also give you some idea of who to call.
- Ask your neighbors. I’m pretty sure they have someone on their contact list.
Once you find this expert team, make sure to get in touch. Even if you’re not having any plumbing problems, give them a call to ensure that you’re still on their radar.
That way, you can be sure that whenever you or your tenants call them, they’ll be available to get the job done.
Stay tuned for more of our episodes as I introduce you to women who are rocking it and who, in many cases, just like you who, were a little bit intimidated, a little bit afraid, a little bit uncertain. But once they got it going, it just took on a life of its own!
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See you next week!