Alan Corey, a real estate entrepreneur and podcaster, is the co-founder of House Money Media, an organization committed to empowering and supporting aspiring real estate investors who are entering the field for the first time.
At the age of 22 in 2001, He left his mother’s basement in Atlanta and relocated to a sublet in the housing projects of Manhattan. He secured a position as a technical support operator, earning an annual salary of $45,000. Despite the laughter from his friends and family when He shared his aspirations of achieving wealth through real estate investing, He remained determined.
However, He defied everyone’s expectations and silenced the skeptics. He decided to invest a significant portion of his earnings from his 9% to 50% job into the real estate market. Today, at the age of 45, He proudly stands as a self-made millionaire with a remarkable portfolio comprising 366 units. His Journey to the first million involved employing unconventional investment strategies that capitalized on a robust real estate market.
Now, let he share with you four invaluable secrets that can propel your wealth to new heights:
1. Transition smoothly between mortgages
Residential mortgages come with remarkably low down payment requirements and interest rates compared to other types of loans. To retain your residential mortgage, it is typically necessary to occupy the property for the initial year of ownership. However, beyond that, you often don’t need to refinance in order to convert your home into a rental property.
This means that you have the opportunity to purchase a single-family or multi-family home (with up to four units per year) using a residential mortgage and a down payment as low as 3.5% to 5%. As time goes on, you can then transition to a new primary residence while maintaining your existing property as an investment.
As a result, a trail of properties is formed, each acquired with cost-effective mortgages that can be utilized for rental purposes, covering all expenses and potentially generating additional cash flow. By meeting the criteria for a USDA loan, a mortgage designed for low- or moderate-income individuals seeking homes in eligible rural areas, or a VA loan, accessible to service members, veterans, and their spouses, you have the opportunity to secure financing of up to 100% of the property’s value.
2. Transition between rooms strategically
By having a minimum of two units, you can optimize your cash flow through short-term rentals by strategically adjusting your occupancy. Take advantage of platforms like Airbnb, VRBO, and other rental portals by listing all of your units, including the one you currently reside in. Adopting a flexible lifestyle is key, and it can be supported by maintaining a “go-bag” containing your essential belongings, enabling you to seamlessly transition between your short-term rental units based on the nightly vacancies.
A popular starting point is to offer a spare room within your own home as a short-term rental, or alternatively, you can consider parking a camper or RV in your driveway as an additional option for guests (or for yourself when your primary unit is already booked). This approach allows you to diversify your rental offerings and maximize your earning potential.
3. Attain housing cost elimination
In 2022, renters typically allocated around 30% of their income towards rent. By eliminating this expense, you have the opportunity to substantially enhance your wealth.
Make it a priority to have your housing costs offset themselves. Consider options such as taking on a roommate to share expenses, utilizing your basement as storage space for rent, leasing a parking space to a neighbor, or transforming your fenced yard into a dog run for rental purposes.
Harness the financial advantage gained from these endeavors to either cover your mortgage payments or invest in properties that generate consistent cash flow. By redirecting the funds previously allocated to rent, you can accelerate your path towards financial prosperity.
4.Observe and learn from landlords
If purchasing real estate is currently beyond your financial means, consider discussing the possibility of subleasing your current rental to a higher-paying tenant for short-term or mid-term stays with your landlord. In this arrangement, you would then divide the resulting proceeds.
Alternatively, if your landlord is seeking a property manager, you can propose a partnership wherein you manage their vacant property as a short-term rental, and in return, you receive a portion of the generated income. Previous experience in property management may not be necessary if you already have a solid relationship with your landlord.
Engaging in these opportunities allows you to gain valuable experience and knowledge in the realm of property management before venturing into real estate ownership. Additionally, building networks and partnerships in this manner may open doors for future collaborative investment opportunities, such as jointly investing in and sharing the returns of a property.
