What I Wish I Knew When I Started Investing in Real Estate
It was the kind of day that every working professional fears. The company I worked for, was going through a massive round of layoffs in anticipation of filing for bankruptcy. Supposedly my job was safe, but the blinking red light on my desk phone indicated that might not be the case. After about 15 seconds of imagining the worst, I took a deep breath and listened to the voicemail.
It was the end of 2008 and I was working for General Motors as we prepared to go into a structured bankruptcy. After listening to that voicemail a few thoughts went through my head, but the most important one was that I hated the feeling of unease and panic. I never wanted to be in the position again. After a few moments, I remembered a little purple book I had read years earlier, “Rich Dad, Poor Dad” by Robert Kiyosaki.
In the book, he talks about the importance of creating assets that generate income and the pitfalls of only having a salary. Those words rang true in that moment.
Real estate investing is one of the core philosophies in the book and I had been interested in investing for some time but decided to continue to wait as I wasn’t sure how long I would be in Detroit. A couple of years later I moved to Chicago and finally started investing in real estate.
Two things I wish I knew before I started investing.
1. You don’t have to wait and you are not limited to the market where you live.
What I wish I knew then is that I didn’t have to wait to invest and I wasn’t limited to buying in Detroit. I could invest in any city, especially those with strong fundamentals. I was familiar with strong Midwest markets like Indianapolis, Cincinnati, and Columbus, and bustling Southeast markets like Atlanta, Charlotte, and Orlando. Even better, I could invest passively through turnkey rentals or apartment syndications.
Since I was spending most of my time on my corporate career, this would have been an ideal way to begin investing, gain some experience, and remain focused on my priorities. It would have allowed me to ease into real estate and decide if and when I wanted to be more active.
However, the route we actually took led us to do everything on our own. In 2012, my wife and I bought a two-unit building and house-hacked it. That’s when you live in one unit and rent out the other units. This worked well and allowed us to save a significant portion of our paychecks. From there we bought a three-unit building, before eventually acquiring an eight-unit apartment property.
While we were adding to our portfolio, we also were growing our family. With full-time jobs, two young kids, and a 13-unit multifamily portfolio, we found ourselves getting pulled in opposing directions. Instead of generating a passive income to insulate me from a potential job loss, I had created a part-time job in real estate along with additional strain and stress on my family.
Reflecting on my situation, I thought back to the voicemail I received years earlier. It was from a colleague who was laid off during the structured bankruptcy. He was the type that kept his head down and did his job. He had been with the company for over 20 years and was a dedicated and loyal employee. But at that moment, he was bewildered and angry. He was dealing with some medical issues and had no idea how he would pay for his meds and treatments.
I felt empathy for his situation as I was always told to “get a good job” and work it until you retire. Working at the headquarters for General Motors certainly fit that description. And if you’ve been with a company of that magnitude for two decades, you expect to exit through retirement, not a layoff.
I understood those emotions, the sense of betrayal, being misled, and having nothing to show for the years of service and dedication. I was determined to go a different route so I went hard in the other direction and focused on building my real estate portfolio. Except, that portfolio turned into another job and came with a whole other set of challenges.
2. Passive investing in real estate IS an option.
I also wish I had known that passive real estate investing was an option for me. At the time, I thought real estate investing meant buying rentals or fixing and flipping properties. I had no idea that you could invest passively in larger properties and get all the benefits of real estate without the headaches of being a landlord.
More than anything, I wish the colleague that left me the voicemail had a portfolio of passive real estate investments that could hold him over in his time of need. It’s one of the reasons we partner with busy professionals to give them an easy option to create passive income. This provides a safety net in case of job loss and can serve as a bridge for a professional or career transition. And unlike other investments, commercial real estate provides a unique blend of cash flow, appreciation, and tax benefits for investors.
Whether you are seeking a safety net, a bridge, or a savings fortress, consider how passive apartment investing can help you reach your goals. In fact, you may wish that you knew about it sooner.
John Casmon has helped families invest passively in over $90 million worth of apartments. He is also the host of the #1 rated multifamily podcast, Target Market Insights: Multifamily + Marketing. Prior to multifamily, John was a marketing executive overseeing campaigns for Buick, Nike, Coors Light, and Mtn Dew: casmoncapital.com
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.