To some real estate is a mystery. There are many myths that surround real estate involvement but, you should not be intimidated. Here are some we will debunk: 1. It takes a lot of money to get into real estate 2. It will take too much of my time 3. It is difficult to understand.
It Takes a lot of money– I bought my first house when I was 23 years old as I moved to my permanent Air Force duty station in Ohio. I heard something about a VA (veterans) loan with no money down. It was a brand-new townhome about 1600 square feet, 3-bedroom 2.5 bath home with a rear yard and carport. Brand new and zero down, wow. It was just that easy and presto I was a new homeowner. But what if I am not a Veteran? How do I get on the real estate merry-go-round? The government does offer low down payment FHA loans with as little as 3% down.
Closing costs can be expensive and many first-time real estate owners borrow those funds from relatives or parents, or save in advance. And, because residential real estate is on fire today, once you are in as an owner you are nearly assured of appreciation of your investment in most every stable market. Appreciation is the gain over purchase price which happens over time (some times short time) by increased prices for comparable homes and by retiring a portion of your mortgage every month with your payment to the bank. In these low interest times, I recommend a 15-year self-amortizing loan if you can afford it. The principal reduction which creates appreciation is faster. Two years after I bought my first home, I sold it for a $3,000 profit. I was on my way.
It takes too much time – Real estate like anything else does require a certain amount of attention and maintenance. Some items like lawn service and pool maintenance can be done by hiring specialists- usually weekly or monthly. Some communities are part of a homeowner’s association (HOA) that takes care of lawns, irrigation, exterior painting and roofs. In my first townhome this was the case. Another lament is, it takes too long to shop for real estate.
Years ago, before the internet a point could be made about search time. However, today with powerful real estate websites like Zillow, Trulia, Realtor.com and even on-line tax appraiser websites searches from your own phone, desktop or laptop computer are just seconds away- literally. These sites have become so user friendly and so packed with pictures and facts that even Grandpa can search through the site with ease.
It is difficult to understand– Like anything real estate has its own lingo, closing costs, title insurance, escrow, P & I (principal and insurance) and amortization to name a few. Let’s take baseball as a new quest. Words like first base, home plate, balls, strikes and home run. How long does it take to understand the lingo of a sport, something fun? After your first game of playing baseball, you will know the basics of the game and its lingo. Think of real estate as a game.
Once you have completed your first real estate transaction the words, we just mentioned will become second nature. In other words, a piece of cake or easy peasy. Some people are so taken by real estate and its profits, appreciation and pride of ownership they become addicted. We call them “deal junkies.” No matter what your participation level real estate can be rewarding financially and a great way to make a living. Embrace the unknown, don’t fear it.
Stephen Gravett has been a real estate developer for over 45 years and was most recently CEO of Kennedy Homes for the past 11 years and is still CEO of Kennedy Development Partners (KDP). He is also full time Director of Operations for 5 Star Developers. He is a state licensed broker and since 1980 a State licensed General Contractor Unlimited. He flew B-52’s in the US Air Force during the Vietnam war.