Jay & Marc White
The White Group with Keller Williams Ballantyne-Area
White Property Management
There are a lot of great reasons to invest in real estate as a part of your overall wealth-building strategy: you only need a small portion of the investment upfront, tenants pay down the debt on the property, the investment steadily appreciates over time, it is tangible, and there are numerous tax advantages. The only issue stopping most people from taking advantage of this strategy is lack of cash available for the initial down payment – or at least that is what most Americans think without consulting their real estate professional.
I believe that some people are overlooking their easiest source of money – their existing home. You see, in many cases, homeowners can qualify for their next home without selling their current property. I would like to outline a strategy that is gaining in popularity: beginning your real estate investment career with your current home. We have been utilizing this strategy successfully with our clients over the past few years.
First, work with your agent, property manager, and mortgage professional to determine where you want to live next and if you will be able to make the move financially without selling your current property. Refinancing your mortgage might be required in order to “cash out” some of the equity from your current property to cover your down payment on a new home. You can typically take out up to 80% without paying for private mortgage insurance (PMI). A property manager should be able to determine whether or not the property would have a positive cash flow at your new payment, should you decide to refinance the mortgage.
Now that you have determined the feasibility, the next step is to decide if being a landlord, particularly in a house that was your home, is right for you. Understand that tenants are not going to care for the property in the same manner you did. At the same time, it is not going to be your home any longer, it is now an investment and has to be treated as such. It is imperative to be able to take emotions out of decision-making.
The next step is to find a great property manager. Sure, you can manage the property yourself, but it is harder than you probably think. Professionals help handle all the stress and craziness that comes with owning a rental property. They collect rent, oversee maintenance, find tenants, and complete lease agreements. A good property manager can make rental income feel automatic. The biggest value a property manager provides is keeping a buffer between you and the tenants.
Keep in mind that a good property manager is hard to find. Work off of references from friends that have investment properties and interview potential candidates thoroughly. Read their reviews online, but keep in mind if any complaints you find come from tenants or other landlords. If you do not feel you can trust them in the first interview, move on! These people will be handling your property and your money; you want to be sure you are comfortable with them.
As you can tell, the process is not as easy or stress free as throwing up a “For Rent” sign and finding a tenant. But doing all this work upfront will make your years as an investor much, much easier. Good luck and onward!
Jay White is the CEO & President of The White Group with Keller Williams Realty, in Charlotte, NC. His team consistently ranks in the top one percent of all real estate agents, nationwide. Jay is a Keller Williams University Instructor, teaching and coaching across the country, and joined forces with his brother, Marc White, as partners in their property management business, White Property Management.