Grow At Your Own Pace
When I finally decided I would start investing in real estate I have visions of quitting my job, staying home with the kids, gardening while they were away at school and doing the occasional property rehab. I would finally be able to let them walk home after school and not have to send them to after-school care. This vision was short-lived once I became more familiar with the numbers and finances behind real estate investing.
The thing is to buy real estate, you need to have or have access to: 1) money; 2) good credit; and 3) reserves or collateral. You are probably thinking “what about those books and seminars that say you can buy real estate with no money down?” I have heard them too, but I sleep better at night knowing I'm not over-extending my finances or buying a house just because it's a "deal". I have a family, a nice house, good retirement savings…all of which I wasn’t going to jeopardize. Yes, I could have cashed in all my retirement savings, but I wasn’t going to do that. I could have gotten hard money loans, but since I was a novice, that didn’t seem like a wise approach. I don’t ask family members for loans, so that was out. And I wasn’t going to sell my house and move my family of 4 into a tiny apartment…we like our space and are settled into our home. All of these strategies are perfectly acceptable if they fit your life. They are useful ways to accelerate real estate investing. I’m just saying they aren’t for me and my family.
So where does that leave me? Well, that leaves me with building a low-risk investment portfolio slower than other investors. I’m ok with that. I am not buying 20 units (or 200 for that matter) a year. My goal is 2-3 units per year. Sounds boring right? Actually I find it the opposite. To me this slow growth allows me to stay true to my strategies, target properties, and neighborhoods. I am very selective in what I buy and I don’t feel pressured to grow for the sake of amassing a large portfolio.
However, I still continually look for ways to accelerate. I finally got comfortable with using the equity in my own home to gain access to more cash for investing at a low interest rate. I am looking at potential partnerships to complement my growth. I am looking for available cash in my retirement portfolio that is free of penalties and taxes for early withdrawals.
I still work full time and invest in real estate on the side. For me, building my real estate portfolio means I put 20-25% down in cash for each property. It means I don’t continually refinance one property to buy the next one. It means that I don’t use hard money loans. It means that my portfolio has a slow growth strategy and I hope to have them all paid off by the time I retire. And this helps me sleep at night.
So as you enter your real estate journey, know that it is ok to grow at a pace that you are comfortable with. Many investors love to talk about how many hundreds of properties they own. If that’s not you, no worries. You are in good company.