Market Daily

How Real Estate Investors Can Find Money to Buy Properties

Market Daily Staff Market Daily Staff on December 27, 2022

There is an old saying you’ve probably heard that “it takes money to make money,” which is true. But that money doesn’t necessarily have to come from your personal bank account. 

I discuss many of the different ways you can invest in real estate in my book, Replace your Income: A Lawyer’s Guide to Finding, Funding, and Managing Real Estate Investments. There is no magic number that you need to have set aside for real estate investing before you get started. You can actually have no money to start, and while that isn’t one of my top recommendations, there are ways to do it. Here are just a few of them:

Find a Partner

The simplest way to obtain an ownership stake in a property without any money of your own is to find a money person – that is, someone who has money to invest, but who may not have the time to take care of all the other tasks associated with finding, buying, and managing an investment property. That’s where you can contribute. If you are not bringing money to the table, here is what you can do:

  • Drive neighborhoods in search of potential properties to purchase
  • Regularly combing MLS listings to see what’s available or new to the market
  • Sending out mailers to property wonders in certain areas
  • Underwriting a property to make sure all the numbers work and that the property has profit potential
  • Renovating a property to get it ready to rent or sell
  • Cleaning a property in between renters
  • Managing a property to keep it in the best possible condition and ensure that tenants or renters are happy

Find a deal

How do you find such a deal? There are a number of places where you can connect with people who may need your time and skills, such as:

  • BiggerPockets Meetups
  • Local real estate investing group meeting
  • Facebook groups for real estate inventors
  • Local real estate agents and property managers

These are just a few starting points. You need to create your own network of people who can refer you to investors who need property managers or maintenance people, or who need someone to check out a neighborhood or property. That can be formed through your existing friends and acquaintances network. 

Another way that someone who doesn’t have money to invest can contribute and earn equity is by managing the property once it’s purchased. If you’re the property manager, you’re the person who picks up the phone when tenants call about a leaky toilet or a refrigerator that won’t keep food cold, as well as the person who goes to investigate and repair the toilet and refrigerator, or who makes arrangements for someone else to come out and repair them. You’re the laborers, while your partner is the money. In exchange, you’ll receive, on average, about 5% of the profit each month, or whatever percentage you’re able to negotiate. 

Crowdfunding

If you have a little bit of money to invest, you might want to consider crowdfunding platforms like Fundrise, which allow individuals and businesses to pool their money together in order to finance larger purchases such as real estate properties. Using these platforms, anyone can become an investor by contributing any amount they choose, from small amounts all the way up to large sums of money. 

Crowdfunding provides several benefits for real estate investments, including quick access to capital, low barriers to entry, limited paperwork and compliance costs, and reduced risk due to diversification among multiple investors. Additionally, it enables more people—including those without the financial means—to participate in real estate investments that would otherwise not be accessible to them. Finally, it allows you to leverage your network of contacts by tapping into their expertise and connections, which can help you find better deals or better manage your properties once purchased.  

Best of all, no previous experience is required. One of the biggest advantages of using a platform like Fundrise is that you don’t need any prior experience or knowledge in real estate to start investing. All you need is an internet connection and the willingness to take a risk on an investment opportunity. The platform provides you with all the tools and resources you need to get started, including a comprehensive overview of each investment opportunity and detailed information about expected returns and risks. This makes it easy for even beginner investors to get involved in this lucrative market without spending too much time learning the ins and outs of real estate investing. 

Ask 

Remember, when it comes to real estate investing, you don’t have to have a ton of money set aside in savings, but you must ask people about deals. Don’t sit on the couch; get out there and meet people through Meetups, at the gym, or at the coffee shop. Real estate investors are some of the best people you can meet; they want you to succeed, so tap into that resource and knowledge and ask. You can get in the game with very little, so look around and take advantage of those opportunities that are just waiting for you. 

About Brian T. Boyd, Esq.

As a lawyer in Nashville, Tennessee, Brian Boyd helps clients with real estate, construction, and business matters. It is with that knowledge that he and his wife, Dawn, have grown their portfolio to a six-figure income. Brian earned his BA from the University of Tennessee—Chattanooga, a JD from Samford University’s Cumberland School of Law, and an LLM in Taxation from Georgetown University Law Center. When not practicing law or working with Dawn on their real estate ventures, Brian can be found on the Brazilian Jiu-Jitsu mats at his local gym. His newest book is Replace Your Income: A Law

 

New York City Multifamily Housing Markets to Watch in 2023

Market Daily Staff Market Daily Staff on December 27, 2022

The opportunity to invest in multifamily housing in New York City has never been greater, according to Lazer Sternhell, CEO and co-founder of one of the tri-state area’s fastest-growing commercial multifamily real-estate firms, Cignature Realty.

This may come as a surprise, since recent headlines have emphasized a downturn in housing markets nationwide. “Housing Market Activity is Crashing,” Fortune announced on October 25, the same day that Forbes declared a “Housing Market Collapse.” 

For Sternhell, however, falling prices signal opportunity. “Prices are dropping daily,” he said. “They are the lowest I’ve seen personally in the last 15 to 16 years, and they’re down about 60 to 65 percent from where they were four years ago. Some investors who can see the long-term opportunities are now getting more active in the market, taking advantage of these lower prices.”

The top market: Manhattan

Manhattan tops Sternhell’s list of top multifamily housing markets for 2023. “Manhattan has always had the most value,” he said, “so logic would dictate based on historical data that my number one pick will be Manhattan.”

Why does Manhattan consistently end up on top?

First of all, Sternhell points to the neighborhood’s prestige. “Manhattan has an unparalleled reputation around the world,” he said. “Living in Manhattan is a statement that you have arrived.”

He also credits trendy neighborhoods, specifically naming Greenwich Village, Gramercy Park, and Hudson Yards. “There’s a unique vibe to these neighborhoods, and they have good restaurants,” he said. 

According to Sternhell, potential investors in multifamily housing should consider Manhattan in particular because it has more free-market apartments — as opposed to rent-controlled units — than the other boroughs.

“That allows more turnover,” he explained. “If someone is in a rent-stabilized apartment, they try not to vacate. With free market apartments, when the lease is up, the owner has the ability not to renew that lease. So, there’s always more turnover, which translates into increases in rents in Manhattan.”

Second place: Brooklyn

According to Sternhell, while Brooklyn’s multifamily housing market may have taken off more recently, it now constitutes a “close second” to Manhattan.

“Several years ago, the people who were priced out of these trendy neighborhoods in Manhattan started moving over to Brooklyn,” Sternhell observed. “Brooklyn has developed its own vibe with a strong food atmosphere and nightlife. Young people and single professionals are building a community there.” 

In addition to offering less expensive housing than Manhattan, Brooklyn offers myriad virtues, including a family-friendly atmosphere, ample parks, less crowded public transportation, and majestic views of Manhattan from across the East River — all important selling points for prospective tenants.

The bronze medal goes to Queens

Sternhell had many compliments for Queens, which he ranked third.

“Queens has an interesting dynamic to it,” Sternhell said. “It’s very diversified with different people from around the world. Many ethnicities and types of communities are there, so lots of people feel comfortable moving to Queens. We call it the United Nations.”

Queens is also an important transportation hub. “Queens offers good transportation routes to Manhattan,” Sternhell remarked. “Most people work in Manhattan, so that’s another reason why people like to live there — it’s easy to get back and forth. This makes Queens quite convenient. It also has good housing stock and nice buildings that tend to be larger,” he added, “so the apartments can be larger, as well.”

Finally, Sternhell noted that Queens tends to be less expensive than both Brooklyn and Manhattan. 

Factors to weigh while considering investment

For Sternhell, the most important factor for potential buyers of multifamily housing to consider is the purchase price. “It’s all about the price,” he said. “Now that prices are down, things are making more sense. If you can pay your mortgage and expenses and still have some money left over at the end of the month, then you’re in business, and businesses make attractive investments.”

Despite recent concerns about the effects of rising interest rates on mortgages, Sternhell emphasized their continued role in commercial real estate.

“As a business, real estate leverages mortgages,” he explained. “Let’s say you buy a $1 million building, and the bank gives you $750,000. When you sell it next year for $2 million, you make a million dollars, $750,000 of which came from the bank. That money didn’t even come out of your pocket.”

Sternhell recommends considering the stock market’s performance and other possible investments when deciding how much to invest in multifamily housing.

“Usually, when someone buys a multifamily investment property, the bank will lend them 60 to 75 percent of the purchase price, and they will have to come up with the remainder,” he explained. “If you’re going to buy for 100 percent, this asset will make money, but if the bank is willing to lend you 75 percent, you would only have to invest 25 percent in the property. Then, you can use the other 75 percent to buy other deals or to put into the stock market.”

When asked if any markets in the tri-state area are likely to cool in 2023, Sternhell answered in the negative. All things considered, he is bullish on New York City’s multifamily housing markets. 

“Traditionally, the markets are cyclical,” he said. “They rise and dip, but they always go back up. Every time they do, they go back higher than they were before.”

As a result, investors who choose multifamily housing in 2023 can expect to reap significant profits in years to come.