From Construction to Owning Rental Properties
Renters Warehouse Blog
If there’s one thing that Matt McKinney knows about real estate –it’s that investing early on can really pay off.
Matt’s journey began like so many other investors: with excitement, and a great deal of apprehension. After all, no one in his family had invested in real estate before –it wasn’t exactly the road well-traveled. Matt was a construction engineer –investing was outside of his usual job description. But he’d seen first-hand some of the benefits that real estate investing offered. At the time, he was working with a Realtor who flipped houses, and part of his job was going to the homes and inspecting them, to make sure they’d be able to turn a profit.
It was during his job working alongside that Realtor –that Matt first began toying with the idea of investing himself. After all, he had made a few good connections through his work –people he could turn to for help remodeling, should the properties that he’d purchase end up needing some repairs. Additionally, he’d seen for himself the type of returns that could be made through real estate investing and was interested in the long-term financial security that real estate, particularly rental property, offered.
When he first suggested income property to his wife, Michelle, she was naturally a bit apprehensive. After all, diving headfirst into real estate –at first glance, sounds daunting. And when it comes to long-term security, isn’t that what your 401(k) is for?
“We save as much as we can; investing for our retirement,” said Matt, “But everything that we saved, 401(k), funds that we invested in, everything was tied to the stock market.”
But after careful deliberation, and much discussion –Matt and Michelle were in agreement: why not buy one property, rent it out, and see how it went?
They decided to buy local. They were already familiar with nearby neighborhoods that performed better than others, so they had an idea about where they wanted to invest. They also set out to establish their ideal property criteria: 4 bedrooms, 2 bathrooms, with a 2-car garage; something that Matt said they eventually deviated from, once they were sure that other properties were able to generate decent returns as well.
“Diversity was really the appealing reason for us to try something different,” Matt continued, “And it just happened at the time that I had the right connections, and the right experience to be able to do this.”
It turns out that Matt had more than his contacts on his side –he also had timing. That first property was purchased in 2011, during the recession.
Matt and Michelle didn’t just strike gold once, though. “We actually purchased three that year,” said Matt. “It was a big year.”
Even though he wasn’t exactly trying, Matt couldn’t have timed the market better. It was only up from there on out. Once they got the houses renovated, they rented quickly and were soon generating cash flow –not to mention the forecast for the properties looked great as well. And according to Matt, the overall investing process ended up being less challenging, as well.
“Getting used to the idea was the biggest obstacle to overcome,” said Matt “…It seems like a big thing to take that first step and buy a house.”
Matt and Michelle would go on to invest in two more properties –in 2015 and 2017, bringing their total to five.
Today, Matt and Michelle have been in the real estate game for eight years.
Everyone’s real estate investing journey looks different. Some people have the right team from the start, maybe they know people or have the right connections –but the truth is that anyone can invest. Even those who don’t have connections can network and assemble a winning team. It starts by determining who you need –and then going out and finding those people; an investor-friendly real estate agent, good contractors –and a property manager, if you’re planning to outsource the job of management.
“Find the right people you can trust,” said Matt. “The second biggest thing? Is finding the right tenant.”
While there’s always a temptation to fill your property as quickly as you can, to minimize vacancies –it’s important to ensure that you take the time to find the best applicant. One strategy that Matt uses to find qualified tenants, is pricing his rental just below the market value. This approach gives him more applicants to choose from, allowing him to select the most qualified.
Matt also mentions the importance of budgeting for things in the right way –and running rentals like a business. This involves budgeting, knowing what your income is and what your costs are.
“You have to know what your income is, what your costs are, what your taxes are, you have to anticipate a certain amount of maintenance throughout the year,” said Matt.
It’s important to set aside money for these expenses so that when they come up, you’re not left paying for them out of pocket.
You don’t have to have a long-standing history with real estate, or even know everything about it to get started.
Investing can be daunting –but with the right approach, it doesn’t have to be. By doing your research, assembling your team, and laying the groundwork necessary for success; you can give yourself the confidence to take the first step.
Everyone has to start somewhere. Get started today!
“I have no doubt fifteen years from now, I’m going to be saying “I wish in 2019, that I’d bought two more,” said Matt.
The best time to buy is always ten years ago –but the second-best time is now; especially if you’re buying SFR as part of a long-term investing strategy.
Overall, Matt’s very happy with his real estate investments, and the long-term security that they provide.
“We know that once we get to retirement, we’re going to have an income from it, and not touch the asset,” said Matt. “That’s really attractive. It’s real estate, so property maintains its value. We feel that it’s actually a pretty safe investment.”
Are you on the fence about investing? See what you should know before you dive in! Be sure to check out our helpful article on retiring with single-family rentals –and see how rental investments can help you to build financial security for the future.
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