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- Herausgeber: John Wiley & Sons
- Kategorie: Ratgeber
- Sprache: Englisch
Aspiring international real estate investors--expand your portfolio today! The real estate world can be a particularly difficult place to do business, and this book helps aspiring international investors of all skill levels avoid some of the pitfalls first-timers often make. Expert author Nicholas Wallwork opens your eyes to how accessible international real estate can be and provides an excellent introduction to some of the main strategies and nuances when investing at home or away. Investing in International Real Estate For Dummies covers expert strategies for investing in international real estate, going beyond the more obvious tactics like buy-to-lease and flipping houses. It gives you a solid roadmap for successful property investing that actually works in any market. It lays out checklists of tasks and offers step-by-step guidance and advice based on over a decade of in-the-trenches experience working in the international real estate investment sector. * Learn previously unseen expert strategies * Find out how to choose which countries to invest in * Easily navigate your way around lease options * Build an in-country network of reliable contacts * Manage your new assets with ease * How to build the mindset of a top real estate investor Looking to start or expand your international real estate portfolio? Everything you need is at your fingertips!
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Seitenzahl: 647
Veröffentlichungsjahr: 2019
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Investing in International Real Estate For Dummies®
Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com
Copyright © 2019 by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
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Library of Congress Control Number: 2019933833
ISBN 978-1-119-52752-7 (pbk); ISBN 978-1-119-52755-8 (ebk); ISBN 978-1-119-52754-1 (ebk)
Investing in International Real Estate For Dummies®
To view this book's Cheat Sheet, simply go to www.dummies.com and search for “Investing in International Real Estate For Dummies Cheat Sheet” in the Search box.
Table of Contents
Cover
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Beyond This Book
Where to Go from Here
Part 1: Building a Successful Real Estate Portfolio
Chapter 1: Introducing Real Estate Investment Strategies
Taking Your Real Estate Investments to the Next Level
Focusing on Investment Strategies That You Can Use Internationally
Running Your Property Portfolio as a Business
Getting Your Financial Ducks in a Row
Blending Real Estate Strategies to Create a More Robust Portfolio
So Which Strategies Are Right for You?
Chapter 2: Investing at Home or Abroad: Which Is Right for You?
Deciding Whether to Invest Abroad: It’s Not All about the Numbers
Considering Your Budget
Assessing Your Risk Profile
Figuring Out How You’ll Manage Your Property
Drilling Down to the Right Market for You
Focusing Your Attention on One or Two Key Markets
Chapter 3: Treating Your Real Estate Portfolio as a Business
Aiming for Passive Income as the Ultimate Goal
Drafting a Dream Team
Investing in Systems and Technology to Grow Your Business
Promoting Your Real Estate Business
Managing Your Cash Flow Like a Boss
Getting the Right Insurance
Chapter 4: Protecting Yourself against Market Fluctuations
Diversifying Your Portfolio with Multiple Revenue Streams
Finding Strategies That Work Well in a Boom Market
Finding Strategies That Work Well in a Credit Crunch
Doing the Opposite of What the Mass Market Is Doing
Tailoring Your Funding to Economic Fluctuations
Considering Foreign Exchange Rate Risks
Chapter 5: Getting into the Mind-set of a Successful International Real Estate Investor
Continually Improving through Education
Networking in the Right Places
Setting Your Goals
Cultivating a Positive Mental Attitude
Visualizing for Success
Harnessing the Law of Attraction
Meditating to Manage Stress and Risk
Part 2: Money, Money, Money
Chapter 6: Weighing Traditional Finance Options
Finance as a Key Element of Success and Growth
Considering the Main Financing Factors
Assessing a Range of Traditional Finance Products
Finding the Right Product for You
Dipping into International Finance versus Domestic Finance
Chapter 7: Understanding Property Valuation
Defining Value and Real Estate Valuation
Seeing Why Valuation Is Fundamental to Property Success
Looking at the Three Main Valuation Methods
Knowing Which Method Is Best for You and How Much an Investment Is Worth
Special Considerations for Valuing Property Abroad
Chapter 8: Looking at More Creative Financing Options
You Down with OPM? Investing with Other People’s Money
Joining Up with a Joint Venture
Securing Private Lending
Crowdfunding Your Way to Real Estate Success
Getting Control of a Property Instead of Owning It
Applying Creative Financing Strategies Overseas
Part 3: One-Off and Shorter-Term Income Strategies
Chapter 9: Developing Properties
Knowing What Property Development Means
Deciding Which Development Strategy Is Best for You
Sourcing Development Opportunities
Financing Your Development Projects
Managing the Development
Five International Locations Where This Strategy Would Work
Chapter 10: Dealing in Property Information
Dealing in Investment Property Leads: The Five-Minute Lowdown
Generating and Selling Property Leads
Acting as a Retained Buyer’s Agent
Five International Locations Where This Strategy Would Work
Part 4: Ongoing and Passive Income Strategies
Chapter 11: Making Rent-to-Rent Work for You
Defining Rent-to-Rent: The One-Minute Rundown
Addressing Rent-to-Rent’s Image Problem
Applying Rent-to-Rent across a Range of Properties and Strategies
Margin in the Middle: Understanding the Rent-to-Rent Financial Model
Sourcing the Ideal Rent-to-Rent Property (and Landlord)
Sorting Out Your Rental Agreement
Finding Tenants and Managing the Property
Identifying Five International Markets Where This Strategy Would Work
Chapter 12: Leveraging Lease Options
Understanding Lease Options and How They Work
Understanding the Financial Model for Lease Options
Knowing What’s in It for the Property Owner
Sourcing Lease-Option Opportunities
Negotiating the Deal and Contract
Identifying Five International Locations Where This Strategy Would Work
Chapter 13: Delving into Houses in Multiple Occupation
Introducing HMOs
Breaking Down the HMO Financial Model
Sourcing HMO Properties
Deciding Who You Want to Rent To
Finding the Best Location for Your HMO
Staying on the Right Side of the Law
Managing Your HMO
Scaling Up Your HMO Portfolio
Identifying Five International Locations Where This Strategy Would Work
Chapter 14: Renting to Students and Low-Income-Housing Tenants
Knowing What’s Involved in Renting to Students and Low-Income-Housing Tenants
Looking at the Pros and Cons of Renting to These Tenant Groups
Sourcing the Right Kinds of Property for Students and Low-Income-Housing Tenants
Marketing Your Property and Finding Tenants
Drafting the Tenancy Agreement
Physically Preparing Your Property for Use
Managing Your Property Effectively
Looking at Five International Locations Where This Strategy Would Work
Chapter 15: Providing Serviced Accommodation
Defining Serviced Accommodation
Looking at the Pros and Cons of Serviced Accommodation
Deciding What Level of Service to Offer
Sourcing Serviced Accommodation Properties
Preparing Your Property for Serviced Accommodation Use
Navigating Planning and Regulatory Restrictions
Getting the Right Business Processes and Systems in Place
Managing Your Serviced Accommodation Business on an Ongoing Basis
Identifying Five International Locations Where This Strategy Would Work
Chapter 16: Providing Vacation Rentals, at Home and Abroad
Knowing the Difference Between Vacation Rentals and Serviced Accommodation
Choosing the Right Location for You
Planning for Costs, Cash Flow, and Variations in Occupancy
Sourcing the Ideal Property for Vacation Rentals
Preparing Your Property for Use
Marketing Your Vacation Rental
Managing Your Vacation Rental
Identifying Five International Locations Where This Strategy Would Work
Part 5: The Part of Tens
Chapter 17: Ten (Or So) Practical Ways to Get into the Mind-Set for Success
Tapping Into Education Resources
Using Productivity Apps and Tools
Learning to Be in the Here and Now
Cementing Your Goals Using a Vision Board or Goal List
Trying Out a Visualization Exercise, Real Estate Style
Incorporating Positive Affirmations into Your Day
Recognizing and Giving Thanks for Your Successes
Downloading Helpful Apps
Chapter 18: Ten (Or So) Other Real Estate Strategies to Consider
Delving into Buy-to-Rent (Single-Tenant) Properties
Flipping Houses
Running a Bed-and-Breakfast, Guesthouse, or Hotel
Owning or Running a Care Home
Becoming a Real Estate Agent, Rental Agent, or Property Manager
Investing in Real Estate Investment Trusts
Offering Emergency Housing Accommodation
Getting into Commercial Property
Trading in Freeholds
Index
About the Author
Advertisement Page
Connect with Dummies
End User License Agreement
List of Tables
Chapter 8
TABLE 8-1 Sample Deal Calculation for Approaching JV Investors
Chapter 9
TABLE 9-1 Example Cost Breakdown for a Refurbishment Project
Chapter 15
TABLE 15-1 Comparing Serviced Accommodation to Standard Rentals
List of Illustrations
Chapter 6
FIGURE 6-1: Growth with leverage.
Chapter 9
FIGURE 9-1: Example schedule for a refurbishment project.
Guide
Cover
Table of Contents
Begin Reading
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Introduction
Welcome to Investing in International Real Estate For Dummies, and thank you for choosing me to guide you through the process of building a successful real estate portfolio. I’m so excited to be sharing this journey with you!
If I were a betting man, I’d wager that you’re drawn to real estate because you want the chance to create financial security — and, over time, real wealth. You love the idea of working for yourself, of being in charge of your own destiny, of being liberated from the boring, 9-to-5 routine. You want to feel excited about what you do every day.
Those were certainly the things that attracted me to real estate more than 15 years ago. Back then, I had a good, grown-up job at an investment bank in the City of London. I was earning fantastic money for a young, single guy. I was doing all the things I thought I was supposed to do with my life, the way I had been taught and the way that society suggested. But I was miserable. I was desperate to escape it all and work for myself. Real estate seemed a tangible, achievable way to do that. I wasn’t wrong.
I started small, renting out a room in my own house to start with. Then I rented out another room after that. Then I converted the garage to make another room, until I’d maximized that first house. Then I took on another rental property, and another after that. Pretty soon, I was expanding into other real estate strategies — and that was when things started to get really exciting. Within ten years, I’d built up a diverse, robust real estate portfolio worth more than £20 million (or more than $25 million), and I was running my own group of successful real estate businesses transacting many millions worth of property each and every year.
There’s nothing particularly special about me. I don’t have a larger-than-average brain (at least, I don’t think I do!). I didn’t come from a background of notable wealth or privilege. And I had no real estate experience (beyond being a homeowner) when I started out. But I was very determined, and I was willing to invest the assets I had in abundance — namely, my passion, drive, time, and energy — in immersing myself in the world of real estate. If you have the same drive and willingness to commit to your continual education, you, too, can build a successful real estate portfolio. This book shows you how to start or get to the next level.
About This Book
Many investors start out by buying a property and renting it out to a tenant or household (the standard single-tenant model). That’s all well and good — and if that’s your main interest in real estate, I recommend you also read Eric Tyson and Robert Griswold’s excellent book, Real Estate Investing For Dummies (Wiley).
This book, however, is designed to go beyond simply renting out a property on a single-tenant basis, toward building a portfolio that encompasses different real estate strategies (such as renting out a property on a room-by-room basis or providing serviced accommodation). Why? Because I believe there are better ways to maximize your real estate income than the standard single-tenant model.
To put it another way, this book is designed to inspire you to grow as a real estate investor, beyond the standard route into real estate investing, and build real wealth for you and your loved ones. With that in mind, this book is built around the following core concepts:
By building a robust real estate portfolio — one that incorporates different strategies and multiple revenue streams — you’re much better placed to ride out market fluctuations and invest for both the short and long term.
Passive income is the key to building real wealth and security — not to mention the freedom to live life your way. So, wherever possible, you want your investments to be as passive (hands-off) as possible. In the early days, this may not be entirely possible, but as your expertise and your portfolio grow, you’ll be able to take a step back and devote more time to growing further, instead of focusing on the nitty-gritty day-to-day stuff.
Most real estate books tend to focus on one geographic location or another (typically, the United States or the United Kingdom), when, in fact, many real estate strategies can be successfully deployed anywhere in the world. If investing overseas doesn’t appeal to you, that’s fine — a number of the strategies in this book will almost certainly work just as well in your home country.
Continually investing in your own education and maintaining the right mind-set is critical for success as a real estate investor. In fact, one of the unique features of this book is that it devotes two whole chapters (
Chapters 5
and
17
) to key mind-set techniques. I believe your mind is what differentiates you from any other human being, and if you can learn to harness your mind (through education and mind-set techniques), you can do absolutely anything you want. Just dream big!
One final thing to note about this book: Within this book, you may note that some web addresses break across two lines of text. If you’re reading this book in print and want to visit one of these web pages, simply key in the web address exactly as it’s noted in the text, pretending as though the line break doesn’t exist. If you’re reading this as an e-book, you’ve got it easy — just click the web address to be taken directly to the web page.
Foolish Assumptions
During the writing process, most authors have a specific type of reader or audience in mind. I’m no different. So, while I was writing this book, I made some simple assumptions about you as a reader:
You’re looking to progress beyond the standard renting-out-a-property model and build a real estate portfolio that’s diverse and robust.
You don’t necessarily know which strategy or strategies are best suited to you as an investor.
You may not have a lot of money to invest in growing your real estate portfolio, and you’re looking for creative ways to expand and progress, without breaking the bank.
You aren’t sure which geographic location is best for you (whether you should invest in properties at home or overseas).
If that all sounds about right (and I hope it does!), this book is for you.
Icons Used in This Book
To help you navigate this book, I use the following helpful, eye-catching icons. Here’s what each of the icons is used for:
I use the Remember icon to highlight critical information that you should keep in mind on your real estate journey.
The Tip icon draws your eye to handy hints and insider tips that will save you time or effort, or generally make your life as a real estate investor a little bit easier.
As with any form of investing, mistakes can be costly. I use the Warning icon to highlight advice on what to avoid or common mistakes that many investors make (so you don’t have to make them!).
Sometimes I get into the weeds a bit and give you information that’s a little more technical than you absolutely need. When I do, I mark it with the Technical Stuff icon. If you’re in a rush, feel free to pass by anything marked with this icon.
Beyond This Book
In addition to the book you have in your hand, you can access some helpful extra content online. Check out the Cheat Sheet for further tips on becoming a real estate pro. Just go to www.dummies.com and enter Investing in International Real Estate For Dummies Cheat Sheet in the search box.
I’ve also developed online courses that go into more detail and provide extra content to help you improve your real estate education further. You can find these courses at www.propertyforum.com/real-estate-courses.
Where to Go from Here
So, where do you want to start?
One of the great things about For Dummies books is that they’re designed to be read in any way that works for you. So, if you want to read the entire book from cover to cover, go for it (in fact, I encourage you to do just that for maximum inspiration).
But if what really excites you is vacation rentals, you can turn straight to Chapter 16 and dive right in. Looking for creative ways to fund your investors? Chapter 8 is for you. Or if renting to students is your preferred niche, head to Chapter 14. In other words, you can pick and choose the chapters that appeal to you as a growing real estate investor, so scan through the table of contents and find what catches your eye.
And if you aren’t sure where to begin, simply turn the page and see what comes next!
Part 1
Building a Successful Real Estate Portfolio
IN THIS PART …
Dip into the vast range of real estate strategies available to investors.
Weigh up whether you want to invest at home or overseas.
Run your real estate portfolio as a successful business.
Ride market fluctuations by diversifying your portfolio.
Learn critical mind-set-related skills for success as a real estate investor.
Chapter 1
Introducing Real Estate Investment Strategies
IN THIS CHAPTER
Growing as a real estate investor and progressing beyond standard buy-to-rent properties
Considering the international angle
Incorporating different strategies into your portfolio for maximum success
Real estate is an asset that pretty much anyone can understand. Unlike the more complex worlds of stocks, bonds, retirement savings, and the like, real estate is a rare type of investment because it’s something you have an inherent basic understanding of. It’s what you live in and vacation in, day in and day out. You already know what makes a home attractive, inviting, and desirable. You already have a good understanding of your local real estate market, because you’ve already bought or rented in that market. In other words, you get it.
Real estate is the natural choice for many investors. They’re initially attracted by
Relatively fewer market fluctuations compared to, say, twitchy and volatile stock exchanges
Healthy cash flow with regular income coming your way
The ability to achieve capital growth (by selling a property and pocketing the profit) on top of a steady income
The potential to be fairly hands off and earn “passive” income
However, just because you understand real estate, doesn’t mean you’ll be a successful real estate investor. You won’t achieve financial security and real wealth by renting out one property; to be successful and secure, you need to build a diverse portfolio of real estate investments, and develop an understanding of the full range of real estate strategies on offer. In this chapter, I explain what that means in practice.
Taking Your Real Estate Investments to the Next Level
Many books out there show you how to rent a property and become a landlord, including the very thorough Real Estate Investing For Dummies, by Eric Tyson and Robert S. Griswold (Wiley). That’s not my goal in this book.
This book is designed to help you go beyond the basics so that you can progress as an investor and grow your real estate portfolio — wherever you are in the world, and wherever you want to invest.
The idea for this book grew out of my own experience as an investor. Early in my real estate career, it quickly became apparent that there were tons of different strategies out there, beyond the obvious routes, for making money from property. And unlike the conventional path of buying a property and renting it out, some of the new strategies I was discovering required very little capital to get started.
I just didn’t know, back then, which strategies were right for me. I could have used a one-stop guide to the various strategies out there, something to help me decide how to take my portfolio to the next level. That’s where this book comes in.
Comparing property to other asset classes
I believe real estate is a much better, much more achievable route to wealth than, say, stocks or bonds. That’s because property is
Tangible:
You can literally touch bricks and mortar, which, for many people, makes it easier to understand.
Highly controllable:
You have total control over your strategy, the properties you buy, the location you buy in, and the types of tenant you decide to target. With other asset classes, you may not get the same level of control (for example, in the case of a fund investment, someone else will be making the investment decisions for you).
More accessible in terms of knowledge:
Most people have a pretty good basic understanding of property.
More accessible in terms of money:
You need serious capital if you want to make serious money with stocks. But with property, you can deploy a variety of strategies with little upfront capital, and leverage is available (in the form of mortgages and loans) to help you gear up.
Less vulnerable to short-term market risk:
Because you’re in control, you can shift your strategy and make different investment decisions in line with what’s happening in the market. If you take a longer-term view (which is sensible in property investment), then the market fluctuations are more likely to iron themselves out over time with the inherent underlying asset still holding significant value even in “bad times.”
Personally, I don’t get as involved in stocks or other securities like currency. There are too many factors beyond my control for my liking, I don’t feel like I have enough of an understanding of macro- and microeconomic factors to do it well, and, frankly, it’s just too technical. And I say that as someone who used to work in the City of London on a trading floor alongside hundreds of traders! That doesn’t mean you can’t make great investments through stock trading, but it takes a lot more dedication and precise knowledge, as well as more risk, in my opinion.
What was really interesting to me, working alongside traders, was that very few of them invested in stocks outside of their “day job.” Despite their detailed working knowledge of the markets, my colleagues preferred to invest their own money in other assets, specifically property. That was very telling.
But even though property is, for me, head and shoulders above other types of investments, the comparison is useful because it reminds us that property is, above all, an asset. Real estate investments should be selected with all the care and attention that a stock investor uses when assessing which companies to invest in — and should be managed extremely carefully, like a diligent trader keeping a watchful eye on the markets.
An asset is only an asset if it makes you money. If it’s not making you money, it’s a drain on your finances, time, and energy — in other words, it’s a liability. Just like any other asset class, if you neglect your investment, take your eye off the ball, and become complacent, a property can become a liability pretty quickly.
In practice, that means if you mismanage a property or neglect it to a point where people no longer want to live in it, you’ll have a liability on your hands. That’s why, for the strategies in this book, I give lots of tips to help you manage your investments proactively so that they continue to be assets and make money.
Going beyond fixer-uppers and straightforward buy-to-rents
So, what’s wrong with fixing up and flipping a property or owning one rental property as a retirement nest egg? Absolutely nothing at all. Done well, flipping is a decent way to make some short-term profit, and renting out a property as a standard single rental (rented to one tenant or one family) will bring in a regular monthly income with little effort required.
But if you want to become a serious real estate investor, perhaps to the point where you can afford to give up your day job and concentrate on your real estate business, owning one rental property or flipping a house once in a while isn’t going to cut it. You’re going to have to dream bigger. One of our family mottos is “Always dream big.” Why don’t you make it one of yours?
Introducing multi-tenant strategies
You can grow your portfolio by having 12 properties across town that you rent out to 12 families or individuals. That’s certainly one way to grow. But is it the smartest way? Maybe not. If you instead rented out your property on a room-by-room basis to young professionals or students, you’d earn significantly more rental income than you would on a standard single rental. Multiply that by multiple properties and you’re really cooking.
For example, say you have a three-bedroom house that you rent to a nice young couple. You’re earning $1,000 per month from your rental, and it requires little effort from you to keep the income coming in.
Now, imagine that same house is turned into a four-bedroom house for young professionals to share (four bedrooms because you’ve turned the dining room into an extra rental bedroom to maximize income). And each tenant is paying you $500 a month for his room. Now you have $2,000 per month coming in.
Sure, it’s a little more work to find and manage four tenants than it is to deal with one nice young couple, but, in return for that little bit of extra effort, you’ve doubled your rental income. And that’s without making expensive upgrades to the property.
Exploring other high-earning strategies
Multi-tenant strategies are a great way to turbo-boost your income, which allows you to grow your portfolio more quickly. But there are also plenty of other strategies on the table to maximize your income.
For example, you could invest in apartments that are rented as serviced accommodation by the night (like an Airbnb). You’ll earn significantly more in rental income than renting out the same apartments on standard 12-month contracts (albeit it with higher costs and a higher risk of void periods, where the property sits empty).
Some of the strategies in this book will be more appealing to you than others. Some will play to your strengths. And some will work better in your chosen location than others. The critical thing is to be aware of the wide range of options available to you as a real estate investor, so that you give yourself the best chance of building a successful real estate portfolio and achieving your goals. This book gives you that grounding, so that you can build a portfolio that’s right for you and your needs.
Focusing on Investment Strategies That You Can Use Internationally
The vast majority of real estate books that I’ve come across are entirely focused on one country’s real estate market, typically the United States or the United Kingdom. They go into great detail on filing your tax return and understanding local property management regulations to the point that the guidance is unusable outside that market and the book is out of date within a year as the tax rules and property regulations evolve.
This approach has always puzzled me. As someone who runs my real estate portfolio as a serious business, I’m not going to be poring over tax guidelines and filing my own tax returns. That’s not the best use of my time as a business owner. Instead, I work with an awesome accountant and tax advisor who can help me manage my tax position and my finances in the most efficient way.
What’s more, most real estate strategies can be used successfully in a huge range of countries around the world, and in fact, lots of investors are actively drawn to the idea of investing overseas. Whether it’s the thought of more affordable house prices, exciting returns delivered by emerging markets, or just a passion for a particular country or region, real estate markets around the world have been attracting overseas buyers for years.
This book is intended to be a more inclusive guide to real estate strategies, one that’ll help you build a strong real estate portfolio at home or overseas, wherever you are in the world.
Chapter 2 helps you decide whether you should invest in your home country or internationally. As part of this decision-making process, you may
Start with a real estate strategy from this book that appeals to you and then investigate the best market for you to deploy that strategy (not forgetting the fact that the best market may well be your domestic one)
Start from a passion or personal interest in a specific country (again, your passion may lie close to home), and then spend time getting to know that market to find the most suitable strategy or strategies for that area
If, after careful consideration, you do decide to invest in property overseas, expert local help will be vital. You’ll need to build a network of trustworthy, reliable experts who can help you manage your portfolio and individual properties. This will include a local accountant, attorney, real estate agents, and people to manage and maintain your properties. Read more about this in Chapter 3.
Running Your Property Portfolio as a Business
The fact that you’ve picked up this book and you haven’t yet put it back on the shelf tells me that your ambitions go beyond holding one or two investment properties as a little retirement nest egg. You’re looking to build a serious real estate portfolio — potentially including international investments — and generate real wealth and financial independence.
That means you need to think of yourself as a professional real estate investor and run your portfolio as a proper business. It’s not a side project. It’s not something you dabble in. It’s a professionally run operation, and you’re the entrepreneur at the helm.
Some of the key aspects of running your portfolio as a business include
Focusing on passive income, wherever possible:
If you’re doing this to escape the rat race and be free to live life your way, the last thing you want is to be working 14 hours a day managing your properties. So, as your portfolio grows, you may want to think about automating and delegating tasks when you can, just as the CEO of a company does. Read more about passive income in
Chapter 3
.
Having the right people (I call it your “dream team” of experts), business processes, and tools in place:
This enables you to make sure your business runs like a well-oiled machine. Again, you can read more about this in
Chapter 3
.
Future-proofing and protecting your business against market changes:
You can do this by building a varied, robust portfolio of investments. There’s more on this coming up later in the chapter and in
Chapter 4
.
Cultivating the right habits for success:
I’m a big believer in the power of mind-set and self-help. If you create the right mind-set for success, through positive habits like networking, educating yourself, thinking positive thoughts, setting goals, meditating, and so on, you’ve got a strong foundation that’ll serve you well on your entrepreneurial journey. Turn to
Chapter 5
for some powerful mind-set-boosting techniques.
You’ll also need to manage your finances (both everyday cash flow and ways to finance your investments) as strictly as any business.
Getting Your Financial Ducks in a Row
My real estate portfolio didn’t really take off until I began to fully grasp and take advantage of the full range of financing options and products that are available to investors.
Understanding financing options and valuation
In Chapter 6, I explore traditional financing options, like mortgages, commercial loans, and bridge loans. These are typically the first considerations for most investors, but there are other, much more creative routes to financing your investments.
For example, if you have little upfront capital for a deposit on a mortgage, or you’re investing in a nonstandard project that main-street lenders won’t touch, you need to be able to think outside the box and find other means of financing your projects if you don’t want to miss out on great opportunities. What’s more, being fully aware of the wide range of financing options can enable you to move faster and secure financing quicker than other buyers — which is handy in a fast-moving market or when you’re up against other investor buyers.
Chapter 8 looks at less traditional, yet still entirely achievable, financing options, including joint ventures, private lending, and crowdfunding. All these options are about investing with other people’s money (OPM). Technically, even a regular mortgage is just another form of OPM, but with these more creative options, you’re generally approaching partners and private lenders directly, rather than going to the bank. This creative route is about building win–win partnerships with fellow investors that will hopefully lead to many other successful projects in the future.
Whatever financing route you choose, it’s really important to get a good handle on property valuation or real estate appraisals. Knowing which valuation method a particular lender is using can make all the difference when you’re searching for the most appropriate financing. Head to Chapter 7 for more on valuation.
Getting the expert help you need
Whenever you’re considering your finance options, I strongly recommend you work with an expert, independent broker. Having a great broker on my side has saved me time, money, and many, many headaches over the years — a good broker will not only help you evaluate financing options and narrow down the field of lenders, but also help you pull together and file the necessary paperwork. A good broker is worth his weight in gold.
So, too, is an accountant and/or tax advisor who specializes in real estate investments and who understands your goals. She’ll be able to help you stay on top of your cash flow, manage costs, and ensure that your real estate portfolio is as financially efficient as possible — a lean, mean, profit-producing machine, if you will.
Blending Real Estate Strategies to Create a More Robust Portfolio
Real estate is generally seen as a safe bet, investment-wise (“safe as houses” as the saying goes), but property markets are subject to change and fluctuations, just as any market is. Sure, the fluctuations in the real estate market may be less pronounced and unpredictable than, say, stock exchanges, but they can still hit an investor hard.
That’s why, over the course of your real estate career, you’ll ideally look to build a varied real estate portfolio that isn’t reliant on one strategy alone. Why? Because a varied portfolio is more robust and better able to withstand market blips or changes.
If a local bubble bursts, for example, and you’re not able to sell a property that you’ve refurbished, your immediate cash flow will suffer enormously. But if you have some income-generating rental properties as part of your portfolio, you’ll be able to keep the lights on (quite literally) until the market for sales recovers. You can find more on protecting your real estate portfolio against market fluctuations in Chapter 4.
Broadly speaking, real estate investment strategies can be broken down into two categories. Ultimately, both categories may form part of your portfolio:
Shorter-term strategies that are designed to deliver periodic capital growth (see
Part 3
of this book):
Property development, assuming the property is sold for a profit after the development is finished, is an ideal example of this.
Longer-term strategies that center on owning or controlling a property for the long haul so that you can earn a regular income from it (see
Part 4
):
Residential rental properties are the prime example of this.
In this section, I give a brief overview of the specific real estate strategies included in this book, from developing properties to running vacation rentals. I’ve personally selected the strategies that I think are best for maximizing returns and creating a varied, healthy portfolio.
Keeping an open mind about different strategies
Before we get to the strategies themselves, let me start with a pro tip: Even if a strategy isn’t right for you at this point in your investment career, don’t discard it from your memory altogether.
I’ve found that successful real estate investing is often a case of pairing the right strategy with certain scenarios or potential clients (or buyers or investors) as they come your way. So, just knowing that a strategy exists can be valuable to you — you never know when an opportunity to use that knowledge will arise.
Here’s a great example of what I mean: Say you’ve been sourcing development opportunities to turn into luxury family homes. As part of your search, you come across some properties that perhaps aren’t right for your needs, but the sellers are motivated so you file them and their properties away in your brain under “could be useful for the future.”
Two weeks later, you’re chatting with a fellow investor at one of your regular networking events (see Chapter 5 for the importance of networking), and she mentions that she’s looking to invest in a certain type of property — and, thanks to your recent research, you have just the right sort of properties in mind. You can potentially act as a buyer’s agent (subject to licensing rules that may apply in your country — see Chapter 10), and help pair this buyer with the right property, for a fee.
If you hadn’t been aware of the buyer’s agent strategy, in this case, you may have missed out on an opportunity to deepen your relationship with your fellow investor (which can, in turn, lead to other projects in the future) and earn a commission in the process.
So, be sure to keep an open mind about the various strategies as you read this book. Just because something isn’t suitable for your portfolio right now, doesn’t mean it won’t work for you in future.
Incorporating shorter-term strategies into your portfolio
A large part of becoming a successful, profitable real estate entrepreneur is the ability to add value to a property. Property development (Chapter 9) is a great way to add value.
Developing for success
Property development can mean many things, but it commonly refers to physically improving a property by renovating it so that it’s worth more, or adding value to a plot of land by building a property or properties on it.
However, property development can also cover changing the use of a property, such as turning an office block into luxury apartments, or simply changing the way a regular house is used (for example, making structural changes or changing the layout so that you can rent the property to more tenants).
Turning commercial property into residential property has proven a particularly lucrative strategy for me in recent years, although it does require a certain level of experience and expertise to successfully manage larger developments like this. If you’re new to development, small projects make a better starting point.
If property development appeals to you, it’s vital you start by thinking about your end goal or exit strategy. Are you going to sell the property to a family or keep it and rent it out to young professionals? Is it going to be rented as a vacation home? Everything about the development process — from what kind of property you buy, to how you finance it, to how you physically develop it — will depend on your end strategy.
Another key ingredient for success as a developer is being able to source the right kind of properties — in fact, I’ve found that sourcing properties directly, properties that aren’t yet on the market, has been a particularly valuable technique and this is something you may like to try. (Find out how in Chapter 9.) You also need to be a master at project management and communication if your development projects are to be completed on time, on budget, and without any major hiccups. I’ve had my fair share of hiccups and delays so I speak from many experiences of “learning the hard way.”
Low-capital, shorter-term strategies
But what if you don’t have the capital to develop property, but you still want to build a career in real estate? If that sounds like you, then head to Chapter 10, where you’ll learn about sourcing property leads and acting as a retained buyer’s agent.
Whether you’re a property sourcer or buyer’s agent, you’re effectively trading in information or leads by bringing together people who have a property to sell and investors who are looking to buy that exact type of property. In a way, it’s a bit like being a niche real estate agent who specializes in a particular type of property for investor buyers only. And like a real estate agent, you earn commission for each sale you facilitate.
Meanwhile, you’re learning the market from the inside and constantly developing your own network of buyers and sellers — all of which will pay dividends if you one day want to take on your own investment projects.
Exploring longer-term strategies for earning a regular income
The thing that really drew me to property (apart from all those addictive property shows on TV) was the ability to earn a regular income from renting out property, so that I could quit the rat race and work for myself. Indeed, the ability to earn a steady income is what draws most of us investors into the real estate game.
Investing for rental income is a smart move because it gives you a certain amount of security and freedom to live life your way. Each of the strategies in Part 4 is designed to help you achieve that financial security and freedom by delivering steady returns, now and for many years to come. In this section, I give a whistle-stop tour of these income-producing strategies.
Low-capital rental strategies for cash-strapped investors
The obvious barrier to entry for real estate investors is capital, or rather, lack of it. If you haven’t got the money to buy a property, how on earth can you earn money by renting it out?
But, actually, ownership isn’t as important as you may think. What matters is control of a property. If you’re managing a property that someone else owns, there’s still money to be made.
Rent-to-rent (Chapter 11) is a prime example of how controlling or managing a property that you don’t own can deliver a healthy monthly income. With this strategy, you rent a property from a landlord and (with the landlord’s permission) sublet the property to your own tenants, typically on a room-by-room basis for maximum returns.
You earn profit by managing the property more intensively, and your landlord is happy because he no longer has to manage the property himself. Creating win–win scenarios like this is one of the things I love most about real estate.
Alternatively, you may consider negotiating a lease option (see Chapter 12). This is very similar to rent-to-rent in that you sublet the property to your own tenants, but, as part of the deal with the landlord, you also negotiate the option to buy the property in the future. That gives you income in your pocket now, and the potential for capital growth in the future. However, finding an open-minded landlord and negotiating the terms of the lease option can be complex. Turn to Chapter 12 for more on making lease options work for you.
Rent-to-rent and lease options can have a bit of an unsavory reputation; rent-to-rent because it implies slum landlords squeezing far too many people into a crappy property, and lease option because it implies taking advantage of distressed sellers who are unable to sell through other means. It’s important you establish yourself as an ethical, professional operator and conduct your business accordingly. Chapters 11 and 12 show you how.
Adding value by changing how the property is used
Rather like developing properties, the income-producing rental strategies in Part 4 are all about adding value to a property so that you can optimize your rental income. Two awesome ways to add value to a rental property are
Changing the use so that instead of renting to one tenant or household as in the standard single-tenant model, you rent to multiple tenants in the same property, on a room-by-room basis: Why should you consider renting to multiple tenants in one property? Two reasons spring immediately to mind:
You’ll earn more.
There’s enormous demand for this type of accommodation these days, and from different types of tenants, too.
You could, for example, be renting to young professionals in expensive, desirable cities who couldn’t dream of having a place of their own at this stage in their lives. Or you could be renting to students, who generally embrace the house-sharing model as a way to get the most out of college life. Or you could be renting to low-income-housing tenants and satisfying a local need for comfortable housing on a tight budget.
With multi-tenant strategies like these, there’s definitely more work for you (or your team) in terms of proactively managing tenants (after all, there are more of them). And you need to be on your game when it comes to keeping up with regulations, such as health and safety, and planning/zoning restrictions. But the reward is significantly higher monthly returns.
In Chapter 13, I look at renting to professionals in a house in multiple occupation arrangement. A house in multiple occupation is effectively a house shared by multiple tenants, but it’s a very specific legal term in the United Kingdom (where this strategy is huge, and growing) and is covered by strict landlord rules. Even if you’re not in the United Kingdom and subject to these strict house in multiple occupation rules, you’ll still find plenty of helpful advice on renting to professionals in this chapter.
In Chapter 14, I look at renting to students and low-income-housing tenants, including practical, effective solutions to overcome the negative connotations that typically surround these tenant groups.
Changing the use so that instead of renting on a standard 12-month lease, you rent the property on a nightly or weekly basis as serviced accommodation or a vacation rental: Both of these options involve renting on a short-term basis, typically by the night or week, which will earn you much more in rental income than a standard 12-month rental agreement. I look at serviced accommodation in Chapter 15 and vacation rentals in Chapter 16.
There’s a lot of work involved in setting up and running these two types of hospitality businesses. More guests means more wear and tear on the property, for example. What’s more, whether you’re running a large apart-hotel, a small Airbnb apartment, or a luxury beachside villa, you absolutely need to be committed to delivering an outstanding service to each and every guest.
In Chapters 15 and 16, I give lots of practical tips for providing a thoughtful, top-notch service, whatever type of hospitality accommodation you’re running.
Avoiding spreading yourself too thin
As you can tell, there are many different real estate strategies out there and I’m openly advocating a varied real estate portfolio that doesn’t rely on one single strategy.
The potential downside of this is that investors can take a scattershot approach to their portfolios, dipping their toes into multiple strategies at once without really mastering any of them, thereby never really maximizing their potential for returns — and, at worst, losing money because of lack of research or poor decisions. To be clear, that’s absolutely not what this book is about.
It takes time and effort to really learn and master any real estate strategy, and it’s important to focus that learning on one strategy at a time, instead of trying to take on three different strategies at once. Take your time to learn one strategy, establish yourself in that field, and make a success of your investments in that strategy before you even think about exploring another strategy.
So Which Strategies Are Right for You?
Done well, all the strategies I mention up to this point have the potential to make you money. But some strategies deliver higher returns than others, some are more work than others, some will be better suited to your individual skills than others, and some will be better suited to current market conditions than others. In other words, not all investment strategies are created equal. So, how can you tell which strategies are right for you and where you should you focus your initial efforts?
A good starting point is to think about your passions, interests, and goals (both from an investment sense and your personal goals). I talk more about these factors in the next chapter, but before you head there, take a moment now to ask yourself this: Why are you drawn to property? What is it about real estate that excites you?
For example, is it the creative aspect of visualizing something and bringing that vision to life? If so, property development sounds like your bag. Is it that your kid is going off to college and you’ve been introduced to the potentially very lucrative world of student housing? With your direct knowledge, you’re well placed to rent to students. Or is it just that you want to be more entrepreneurial and quit your 9-to-5 job? If that’s the case, high-income (and high-effort) strategies like serviced accommodation or vacation rentals may be for you.
It doesn’t really matter what your initial reasons are. What matters is that you’re driven by an underlying passion or goal, and that will inform your choices as you read this book and get better acquainted with the various strategies.
Another question to ask yourself is: What sort of tenants, buyers, or clients do you honestly want to do business with? Renting to students or low-income-housing tenants can be a good earner, but dealing with those tenant groups may not appeal to you. And that’s fine. I prefer to rent to professionals myself, so that’s where I focus the majority of my rental properties.
Budget constraints are another important factor to consider at this early stage. If you’re short on capital but you have plenty of time and energy, then a rent-to-rent or lease-option strategy may be a good starting point for you.
The beauty of real estate is that there are so many options, you’re bound to find at least one that works for your interests, goals, and passions — and your budget.
Chapter 2
Investing at Home or Abroad: Which Is Right for You?
IN THIS CHAPTER
Deciding whether investing internationally is right for you
Factoring in your finances
Weighing risks
Considering how you’ll manage your property
Identifying the best market for you
Narrowing your focus
One of the decisions you’ll face when first developing your real estate portfolio is which market, or markets, to invest in. Many people take their first step into property investing in their local market — an area they know well and feel comfortable in. But that’s not always the case. Sometimes, budget, curiosity, or personal aspirations lead people to invest farther afield.
Depending on the market and strategy you choose, investing abroad can deliver attractive returns on your investment, particularly in property markets that are less established or expensive than back home.
We all love those property shows about buying a place in the sun. You know the ones I mean: A couple jets off to where the sun shines brighter and the beer is always colder, to view beautiful properties that seem as cheap as chips. Those TV shows provide a wonderful bit of escapism, but when you go beyond buying a holiday home or retiring to the south of France, investing in international markets is hard, serious work and something that needs careful thought. This chapter is designed to help you decide whether it’s the right step for you.
Deciding Whether to Invest Abroad: It’s Not All about the Numbers
When choosing whether to invest abroad, I always ask budding investors to consider two simple questions:
Do you have a passion or affinity for a particular country?
If so, how much do you know about that market?
