There’re so many strategies to real estate. You can do wholesaling; you can do a fix and flip company. You can do a construction company. What do you want to do? A land development company was my favorite in 2021. Tons of people, especially young folks that want to jump into real estate, want to do the arbitrage model.
So, essentially, arbitrage and wholesaling are similar. Arbitraging in Airbnb would be where you find a whole bunch of property owners that want to Airbnb or short-term retail their properties, and you can go out and find and market for the people who want to rent. Now, if you want just the connection, that’s maybe eight to ten percent. If you do all the work, and become the management company of it, where you go in and you clean between the different clients that come in and out every weekend. One of the women I work with, she makes 22 percent, because she does it all.
You can be in the middle and not have to have the capital, you could just get started more service based. It’s huge. I tell tons and tons of my younger folks, who don’t have the credit or the capital, or even the experience, because you’re going to get experience.
So, having a real estate company, or a real estate investment company, is not difficult, it’s just different. And you’ve got to grow into it, you’ve got to start building a portfolio. The question is, do you want commercial, or do you want residential? What do you want and how do you want it to grow?
All of my students will start in single family, they’ll move to Airbnb. Actually, some of them need to start with fixing and flipping as a starter point, or wholesaling as a starter point, which I’m not a big fan of. I’d rather see you flix and flip, get some money, get some credit. Go again, and then start building a portfolio, and then move up into commercial, or just go straight to commercial. You get more doors. From a four-plex to an eight-plex, to a sixteen-plex right away, and more rent.
So, what’s the benefits of this? Well, obviously, financial freedom. I want to make you a millionaire, it’s always my goal to make you a millionaire. The tax benefits of being in real estate, because of the depreciation schedules, and if you even look a loss, your ability to carry losses forward for future tax returns, is enormous. You can control your own investment, and you can start building a big portfolio. It’s one of the fastest ways to grow well, and most wealthy people have real estate.
How do you start? Well, first of all, I would hire a coach, and I would be a great one. I have a whole team of real estate experts. I’ve been a real estate millionaire since 1999. I love engaging in it. I don’t do it alone. I do it on teams of people who do a lot of fieldwork. I call them field partners. You’re going to partner with money. You can partner with experience. I would say experience is vital for you beginners.
So, you research a market. Where do you want to be? Which category, which strategy? There’re two kinds of things when I research a market. Where do you want to be? You want to think about growing a portfolio over time.
What defines you as a real estate company is the structure. The tax structure you live in. Are you an LLC? Are you an S Corp? Are you a C Corp? When you build it all right, you’re going to have one of each, if not more. Typically, there’s a structure of 5-10 corporations and structures held in trust, that oversee it all. That’s a real estate company, and that’s a real estate investment company. So, that’s not where you’re going to start. You’re going to start with one LLC.
Once you have a coach, you’ve got to figure out, again, where you’re going to be, the strategy you want to implement. So, where’s your market? What strategy do you want to go for? And then, I would get a local field partner team. People who are really going to be partners, and I legally make them partners, because I don’t want a management company that’s going to be miles and miles away. If something happened, or they just decide to quit, guess what? You’re getting on a plane and going across the country. These “done for you” real estate deals, where they’re going to buy the property, rehab, manage, and do it all. Some of them are structured illegally, they’re really securities. They’re not just a real estate deal, those are different. So, you really want to know what you’re doing. So, again, get a coach, get a mentor.
Once you get a portfolio, three, four, of these properties you’re going to be able to get funding. You’ll be able to have corporate credit, and the ability to get OPM and OPC, which is other people’s money and other people’s credit.
How do you get funding? I’m a huge fan of traditional finance. You can become a real estate professional. So, that means you have to put in several hours. I think 750 is the current requirement. So, 750 hours a year to become a professional, and it’s going to be a huge tax advantage to you, having your real estate company. It’s a checkbox on your tax form. Your CPA tax strategist should know about it.
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