One of my retired neighbors sells cars. Used cars. He is good at it. He buys cars on his own and sells to individuals (sometimes neighbors), who are among his biggest assets. That’s because he is honest. He tells you if something is wrong with his used autos. And his prices are reasable.
But he does not want to sell cars. He wants to spend his time buying and selling real estate.
So at an advanced age, he is sort of switching careers. So he wants to know how to start moving down the road in this new direction.
My neighbor, John, knows a lot about carbueators and automatic transmissions but knows nothing about real estate. But he is willing to learn. So he asked me what should be his first buy to try out his new career in real estate?
I could answer, of course, that it depends on how much money he has, how much he is willing to risk and many other factors. But I won’t. Instead, in return for selling me a used 2007 Honda Accord EX-L (leather seats, sunroof, and of course, air conditioning and with four cyliner, it gets up to 34 miles a gallon), I told him specifically how to start his new career.
Why he wants to do this is no mystery. Selling a car is a one-time proposition. John pockets his profit and then has to find another car.
Real estate holdings are geneally onvoing investments. You raise the money, buy the property, make money on it while it (hopefully) appreciates in value and sell at a profit.
We started with a couple of general concepts. Buy something nearby so that he can get to it easily (and do it himself) if it needs repairs, for example.
But another key element, of course, is location. And for some people such as my neighbor, a vacation home is often the best way to start on a real estate investment career.
My neighbor lives in a popular vacation spot, which is the very first qualification of why this works best for him. I won’t get into other pluses and minuses other than to note that vacation homes can get a premium rental rate, though the obvious drawback is that you have to keep it rented as much as possible (no one-year or longer leases).
The second best investment bet (and this applies more to the vast majority of investors who live in Detroit or other non-tourist areas) is a small condo, one-bedroom, that you can rent out. Basic housing is the preferred choice here. But you open your market to a broad range: singles, young couples, divorced middle-agers and retired widows and widowers.
It’s easy to manage (in part because it’s small, of course). Your risk financially is less than if you bought a small apartment or other real estate investment. Your tenants should be reasonably long-term and reliable, though there are no guarantees like the kind you might expect from a car dealer. But that does not really guarantee a reliable car either, does it?