The Best Practical Real Estate Investment Advice (from Ford Brown, Greg Garrett, Lock Paret)

Introduction

How do you make money when you sleep? When you start making passive income, you can retire. Retirement is doing what you want.

There are 3 ways to make passive income: starting a business, investing in the stock market, and real estate. Starting a business doesn’t generate passive income in the first 3–5 years, and is risky. When investing in mutual funds, you need to pay the broker, the market makers fee, mutual fund company fee, and every company in that mutual fund first, and you are the only person taking the risk. So we are left with real estate.

In real estate, you can safely leverage the bank’s money and harness the earning power of the leverage.

Advice on Real Estate by FORD BROWN

1. When you buy your first real estate, you should buy it for investment- aka producing income for you. If you’re single, buy an owner occupied duplex, triplex, four-plex. If you live in one room, other people pays the mortgage as well.
2. Commercial or residential? Commercial real estates’ risks is that during economic downturn, the vacancies would pop up for year or more. For residential, people always need a place to live. So pick resisdential.
3. Do you buy and hold, fix and flips, or do for closure? Do “Buy and hold”. “Fix and flips” is not a passive income, and you’re inducing risks in sitting empty. And for closures, it goes to the people expert in that field. And the real estate is usually in a bad condition and a bad location. You want to buy a property with tenants in it the day you buy it. Every month when the mortgage fee is due, the rent pays the mortgage.
4. Money spitting boxes. You are buying an income stream. You are actually buying bedrooms- 3 bedrooms are more expensive than 2 bedrooms. When you’re looking for a house, you are looking for the price per bedroom. You are looking for a “box”(bedroom) that makes $800 per month.
5. When you are buying real estate, you are buying the land and the bedrooms. You want to buy a lot of bedrooms on a little amount of land- so duplex, triplex, four-plex. Don’t go above 4 units of bedrooms, or you get into commercial real estate lending. Commercial loans are more expensive with higher interest rate.
6. Choose high-end. 2 million-dollar-houses over 50 50,000-property. Higher quality tenants. Less maintenance. And get more rent. Lower vacancy rate.
7. Geography-restricted area. Choose area where the supply is always lower than the demand.
8. Choose your tenant. Best tier owns their houses. 2nd tier working people, get a lot of transition- baby, change their jobs etc. I pick high-end colleague students, because they are backed by colleague fund.

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