Making More Money Than You Can Count with Real Estate Investing

Banking Benjis with Real Estate Investing

‘There is a boat load of money to be made in real estate investing if you do it right.’ – Mindy Jensen

Queer Money by Mass Mutual

Listen to Real Estate Investing with Mindy Jensen

If you’re interested in retiring early – and who isn’t? – then it’s in your best interest to focus less on retirement savings accounts and more on a developing a CASHFLOW strategy. (Thank you, Robert Kiyosaki.) A recent Queer Money guest, Todd Tresidder of Financial Mentor, suggested incorporating real estate investing into your portfolio, and the Debt Free Guys’ inbox blew up with questions about how to get started with real estate investing. Enter Mindy Jensen, real estate investor extraordinaire.

In addition to being Mrs. 1500, the better half of the 1500 Days to Freedom blog, and the perennial lead story on CNBC Money, Mindy is the Community Manager for BiggerPockets, an online real estate investing network that just reached the 800,000-member mark. BiggerPockets functions as a resource for real estate professionals, investors, and homeowners, and its associated podcast is the top real estate show on iTunes.

Mindy’s been real estate investing since 1998, and she found her niche in the live-in, flip space. She and her husband have been wildly successful working toward their goal of early retirement, building a portfolio of $1M and no debt in just 28 months and sharing their saving and investment strategies at 1500 Days to Freedom.

Today Mindy offers her advice on finding your niche in the real estate investing market, choosing properties in and near gentrified neighborhoods, and how long a first-time home buyer should wait before investing in a second property. Listen in and learn how to incorporate real estate investment into your portfolio and achieve financial freedom!

Topics Covered on Real Estate Investing

Mindy’s advice for getting started in real estate investing

  • Find your niche among the different ways to invest
  • Go ‘an inch wide and a mile deep’

Mindy’s niche in the real estate investing market

  • Live-in flip
  • No capital gains taxes if primary residence for two years

How Mindy discovered the benefits of the live-in flip

  • Bought condo in Illinois for $49,000 in 1998
  • Dad helped with upgrades
  • Sold for $75,000
  • Inspired to continue
  • Made $100,000 profit on next investment

How Mindy leverages the IRS rule around capital gains taxes

  • Rehab house for two years
  • Rent for three
  • Sell without having to pay capital gains taxes

The division of labor in Mindy’s home rehab projects

  • ‘Handy by necessity’
  • Contract out drywall, roofing
  • Do finishing work themselves (painting, tile, wood floors, plumbing, electrical, etc.)
  • Usually legal to DIY if primary residence (check city statutes)

Other real estate investing niches

  • Turnkey investing
  • Pay for property
  • Collect rent checks
  • Use 1% rule to verify profitability
  • Fix and flip

Why Mindy is considering an investment in Cheyenne, WY

  • Oil and gas work with six-month employment
  • Traveling nurses program with three-month contracts
  • Military base
  • State capital

Mindy’s take on real estate investing in the most desirable cities (i.e.: San Francisco) versus third- or fourth-tier cities

  • Cities like San Francisco are unaffordable
  • Can get a 3BR house for $50,000 in less desirable markets
  • Weigh in the city’s job market, weather and availability of services

The appropriate percentage of income you should spend on housing

  • No more than 30%
  • Many Americans ‘living beyond their means’

How to select property in or near neighborhoods experiencing gentrification

  • Opportunity not as high in already gentrified neighborhoods
  • Make most money when can force appreciation
  • Follow the ‘path of progress,’ choose property near hot neighborhood
  • Invest in the ugliest house on the street and boost its curb appeal
  • After-repair value based on other homes sold recently in area
  • Research with local real estate agent before making offer (access to MLS)

Mindy’s advice around finding deals in a tough market like Denver

  • Connect with real estate agent
  • Learn market (gain immunity to sticker shock)
  • Walk around neighborhoods, write down addresses
  • Send personalized ‘yellow letter’ to home owners

Mindy’s opinion of the current real estate investing market

  • Yes, it’s overpriced (people paying more than properties worth)
  • Only matters what people willing to pay

The difference between a balanced and ‘bubbly’ market

  • Homes in ‘bubbly’ market like Denver almost instantly under contract, sell within three weeks of listing
  • Denver has only one month of inventory
  • Balanced market has six months of inventory

Mindy’s view on the chances of another housing crisis

  • 2008 brought on by series of bad events
  • Reform has tightened lending criteria
  • Another crisis unlikely

Why the uptick in interest rates is not a bad thing

  • Mindy’s first investment in 1998 had 7% interest rate
  • Current rates ‘ridiculously low’
  • If secure very low rate, pay off slowly for better return

How long first-time home buyer should wait before investing in second property

  • Owner-occupied loans come with one-year requirement
  • Ensure you can afford both mortgage payments at same time
  • Banks look for a six-month cushion (if property without renters)
  • Factor in an 8% vacancy rate, accounting for all expenses
  • Take advantage of the two-year rule to eliminate capital gains taxes

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