Mindy Jensen – co-host BiggerPockets Money Podcast and co-author of The First Home Buyer, The Complete Newbie Mistake Prevention Guide. She is also a licensed real estate agent in Colorado and has been buying and selling homes since 1998. She is passionate about helping buyers make smart and informed home buying decisions.
Voted one of the most influential in money by GOBankingRates, here she talks about the types of properties investors should avoid, why you shouldn’t fall in love with a potential investment property, and how to start investing in real estate if you’re short. for capital.
What advice would you give yourself when you were young about investing in real estate?
START! Get your license and start working as a real estate agent. Dive into your market and learn everything you can about it. Why are houses in excellent condition being sold? Why are they selling in a terrible state? What is the labor market? Why rent a house?
Having learned all this, I started buying houses – old houses in expensive markets for renovation and sale, more beautiful houses in stable markets for renting out to excellent tenants. I would also advise myself to avoid condos, townhouses and houses in neighborhoods where HOA rules are in place, or in neighborhoods where high association fees are charged. I want to control my spending.
What are the biggest mistakes people make when investing in real estate?
Do not make calculations and do not make sure that there is enough money left on their investments to get a decent profit.
Falling in love with property – there are others, no less wonderful. If the numbers don’t work, don’t buy property.
Lack of a large reserve fund or the ability to generate funds for repairs and mortgage payments. If [the COVID-19 pandemic] taught us anything, it needs to be well funded.
Robert Kiyosaki, author of Rich Dad Poor Dad: You should never say, “I can’t afford it.”
What rules of thumb do you follow when choosing investment property?
Use multiple exit strategies. The market can change in a split second. Your sale can go wrong at the last minute. Be prepared for anything and be able to turn around in circumstances beyond your control.
If a property has no more than one way to make money, this is not the best investment.
NEVER buy strange. Weird, unique, unusual are all four-letter words in real estate. When you buy a home, you want normal, traditional, interesting, but ordinary.
What advice would you give to those who want to invest in real estate, but may not have the capital for such a large investment?
If you want to start investing without a lot of money, you start from a weak position. How are you going to deal with emergency repairs? How are you going to pay your mortgage if your tenant doesn’t pay rent? There are ways to reduce your exposure to risk, such as “burglary” – renting an extra room (s) in your home – or remodeling your home when you actually live in the home while you renovate it. (Additional tax benefits for living in an apartment: If you have lived / owned it for two of the past five years, you pay $ 0 in Capital Gains Tax, up to $ 250,000 if you are single, and $ 500,000 if you are married.)
There are other ways to do without capital, such as partnering with someone who does have money. If you go this route, make sure you get everything in writing before you enter into a partnership. Everyone is friends before the deal, but not always after. Write the investment / partnership “rules” while still friendly.
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Jaime Catmell contributed to the reporting for this article.
Last update: Jul 13, 2021
This article first appeared on GOBankingRates.com: Real estate investment guru Mindy Jensen advises avoiding this type of property