The Top Real Estate Investment Strategies for 2019

David Hicks,
CEO and President of HomeVestors of America

One of the major forces that helped to shape the national real estate market in 2018 has started to shift. The appeal of higher-priced, larger properties is withering. The demand for smaller, less expensive homes, on the other hand, is growing. Despite this, real estate developers have continued to build big houses in moderate-to-pricey neighborhoods.

The result, David Hicks, CEO and President of HomeVestors®, says, is a kind-of “pent up demand” among buyers who have the means to purchase a home in middle-to-lower priced areas, but few houses to choose from. There was already so much demand in this particular sector by the latter half of 2018, he notes, that the HomeVestors® franchisees who maintained a focus on this lower end of the market could sell virtually all of the houses they bought—and, fast—if they chose to. In fact, fewer of the properties purchased in many low-priced markets were put into rental portfolios because the franchisees were able to sell properties at a premium.

Since the demand among home buyers in entry-level markets shows no sign of slowing down, I asked David whether he thought that this trend should influence my real estate investment strategies in 2019. As an independently owned and operated HomeVestors® franchisee, I rely on David’s foresight to help keep my business on top and feel lucky to have access to his expertise. He answered absolutely. But, he also said that keeping an eye toward buying, renovating, and selling houses in more affordable pockets around the country wouldn’t be the only key factor to keeping some green in my pocket in the coming year. I was all ears. If you want to stay on top in 2019, you should be, too.

Real Estate Investment Strategies To Keep You on Top

Whether you buy residential investment property to wholesale, rehab and sell, or hold to rent out, the success of your business in the coming year will invariably hinge on the investment strategies you choose to implement as a part of your business model. And, just as there are decisions that have the potential to make, or break, your bottom line on any one deal, there are overall strategies that can either support your long-term career goals or sacrifice them to speculative get-rich-quick schemes. When it comes to building a successful real estate investing career, David always says, it’s the strategies that focus on the long view that’ll get you closer to staying on top year after year. David recommends several real estate investing strategies that will be particularly salient for 2019.

Don’t Necessarily Believe the Hype

First and foremost, you’ll have to steel yourself against crafting your business decisions around rumors—especially those about a coming recession. It may help to remember that there is usually significantly less volatility in real estate investing than other types of investing, even during recessions. “When you look at property values over time, even taking into consideration what happened in 2008-09,” David says, “the housing market has shown the most consistent growth of any market.” Part of the reason, according to him, is that there are almost always first-time homebuyers entering the market who are looking for smaller, affordable homes. So, though a recession could continue to slow sales in some sectors—like luxury housing—and cause prices to adjust downward in those areas, it isn’t likely to have a big impact on small, entry-level properties. If anything, David muses, “a recession could help to create a good, solid, normal-priced market.”

It may also weed out the less professional and more timid investors, as recessions—and rumors of recessions—often do. And, that’s a good thing for those who’ve put in the time and effort to make a good business out of flipping houses, owning rentals, or wholesaling. With less investor competition saturating the market, there could be more opportunities for those who stick around. Right now, David says:

There are a lot of people who stick their toe in the real estate investing business and buy a house. Maybe, they go to a seminar because they want to learn how to buy more. But, they haven’t made the decision to become a professional investor yet. It’s those people who will be scared away by reports of a recession.

Single-family Houses Deliver the Best Opportunity

You might be one of those investors tempted to put your money toward other investment vehicles but single-family homes continue to have advantages over other types of real estate investment opportunities. The main advantage, according to David, is control—something every entrepreneur craves. Real Estate Investment Trusts (REITs), apartment complexes, and commercial buildings—as potentially lucrative as they may seem—are examples of options that leave little, if any, room for control. That often takes your exposure to risk out of your hands. With a REIT, for example, you give your money to someone else to invest. A third party chooses which properties to buy and manage with your backing, not you. “It’s an arm’s length transaction completely,” warns David.

Other types of real estate investments are a mix of hands-on, hands-off transactions. Apartment complexes are a great example of an investment opportunity that falls somewhere in the middle. Usually, you have to hire a firm that manages the building or have an apartment manager on site to collect the rent, find new tenants, make repairs, and handle other day-to-day operations. The same holds true for commercial properties. Additionally, with commercial investments, you’re typically only investing in part of a building. That only gives you partial control of what happens to it or in it—and, how and whether you make a profit owning it.

With a residential property that needs a rehab, however, you have more control. David adds, “You control whether you buy it or not, how much money you put into it, and what kind of money you want to make on it. Then, you control what you do with it. You have several options.” The bottom line is that, when buying single-family homes as investment properties, your results—and returns—are easier to predict and manage because you’ve stayed in control of your choices.

Focus on the Fixer-Upper

Though there can be some overlap on what constitutes a distressed property and what is called a “fixer-upper,” understanding the distinction can make a big difference to your bottom line. And, it’s the fixer-upper that should draw your focus. David explains why:

When we talk about a “distressed property,” we are typically referring to a situation in which the homeowner is behind on their mortgage payments or facing foreclosure. The fixer-upper, on the other hand, is a house that someone may actually own outright. The homeowner is not always financially distressed. They simply might have a home that they can’t fix up and want to get out of.

It’s these differences that can make buying a distressed property harder than it needs to be David continues:

The problem with buying distressed properties, whether they’re in pre-foreclosure, foreclosure, or have been repossessed by the bank, is that you have to spend time and energy dealing with the lender. There is a lot of paperwork and it’s a big hassle. Whereas, when you buy fixer-uppers, you only have to deal with the homeowner.

And, when you only have to deal with the homeowner, you can end up with a better deal, too. It’s buying fixer-upper homes that give you the opportunity to take an older, smaller house that needs repairs and add value to it by simply making improvements. “You can literally create equity in the house with your efforts,” David reminds us. That’s not always possible when you buy a short sale or foreclosure auction home that you weren’t allowed to inspect and that may come with liens, uncooperative tenants, or other undisclosed issues. To drive the point home, David asks, rhetorically, “Would you rather spend time dealing with the bureaucracy of the banks or fixing a house?”

Flexibility Remains Key

Keep in mind that a strong career built on flipping houses doesn’t always start—or stay—there. Current national trends, such as higher homeownership demand in lower-priced markets, may certainly influence the direction you take, but so should your local market, level of experience, and access to capital. When we look at local markets, for example, Baltimore, Maryland was considered one of the best places to buy rental property in 2018. And, with property taxes still high and the influx of new residents still low, the buy-and-hold strategy remains strong for 2019, so shouldn’t be abandoned despite what’s trending elsewhere. But, if you’re an investor in a city like Indianapolis, you’ll find that opportunities to flip houses and hold rentals are on the rise. That means, you can, and probably should, adjust your exit strategy according to the profile of a specific house or neighborhood—and, the needs of your portfolio.

When we consider how one size doesn’t fit all when it comes to investing expertise and goals, the importance of being flexible becomes clear. For example, assuming you’ve got a great real estate lead generation system, as a newer investor you may find yourself getting more leads on properties in 2019 than you can realistically rehab. Should this happen, David recommends that you renovate one house at a time to gain experience and wholesale the rest to build an income. Then, as your expertise and cash reserves grow, so will the number of properties you can repair. Once you’ve been at this for a while, you’ll come to realize, as David says, that “real estate investors don’t make a killing on one house.” So, you may need to pivot again and learn to find ways to buy multiple investment properties quickly in order to consistently make a good living.

Retool Your Resources

The best way to support where you are on the experience spectrum is to ensure you have access to state-of-the-art tools and a variety of resources to support every stage of your business’ growth. So, this may be the year you also overhaul your real estate investment toolbox and your team. If you don’t already use one, investing in a real estate investment valuation tool that helps you correctly calculate all the numbers is going to be critical in 2019, but so is a software system that helps you track and manage your leads—particularly if you plan on shifting where you invest, need to change up the kind of properties you invest in, or simply want to build up your investment portfolio. To give you an idea of the level of technical, and professional, support you should have in your toolbox, David explains what professional real estate investors who join HomeVestors have access to:

We have a lot of different tools to help franchisees at the local level. One, of course, is ValueChek®, which helps our franchisees pinpoint the value of a house that they’re looking to buy. And, there’s MAPS, which manages homeowner leads and tracks all communication with them. Additionally, we have an online portal to help franchisees identify potential lenders. So, instead of trying to find financing by going to one lender at a time, they send their deal out to several lenders that meet their qualifications. That way, they can determine quickly which lender will give them the best rates—and, potentially, help them close a deal faster.

But, the biggest ace you can have in your pocket, according to David, is a real estate investing mentor. A seasoned, successful investor who is willing to work with you one-on-one can make all the difference in whether you start out on the right foot as well as whether you’re able to stay on track. Mentors can help first-time investors avoid the most common rookie mistakes, like paying too much for a house or underestimating the amount of time and effort it takes to perform a rehab. But, they can also help a more experienced investor save a shaky deal or turn a good business into a great one. One-on-one coaching is a resource not everyone thinks they need—until they do. And, if there is a recession coming down the pipe in 2019, or you want to adjust the way you do business so that you can succeed in any market, having a mentor can keep you ready for anything.

In fact, the concept of mentorship is so important to David that he helped to integrate the Development Agent into the HomeVestors®’ business model. “We actually assign every new franchisee a mentor—a Development Agent—who helps them get their business started and coaches them through those first few months” But, because franchisees have access to their Development Agent for the life of their franchise, they can lean on them for any number of issues that may arise, even after they’ve gotten years of experience under their belt. And, it’s having a DA—that ace in their pocket—that gives franchisees of all experience levels the flexibility to shift as necessary and succeed.

Strategize Your Investing With the Nation’s Top Franchise Team

The final real estate investment strategy you may want to consider to help keep you on top in 2019 is to join the nation’s top real estate investment franchise: HomeVestors of America®. HomeVestors has been growing steadily since 1996 and, with it, the reach of independently owned and operated HomeVestors® franchisees, like me. What began as five franchises in the Dallas area now includes more than 1,000 in 160 different markets across 46 states. And, more than half of those franchises are the direct result of franchisee word-of-mouth. This can be attributed, in large part, to just how successful we are—as a team and as individual professional investors. Collectively, we’ve bought over 95,000 homes nationwide. As word has spread about the “We Buy Ugly Houses®” national brand, proven business model, and the success of the real estate investment strategies behind it, so has interest in becoming a part of the team.

And, if you join the team, you’ll have access to the same benefits that every HomeVestors® franchisee does. Our tools, resources, and support systems are designed to help you do whatever it takes to stay in business—for as long as you want to. “All of the investors who’ve learned how to make a living with the professional real estate investment strategies that our franchisees use,” David says in closing, “just keep on trucking along, through good times and bad. That’s what being a franchisee can do for you.”

Just ask around. Then, contact the “We Buy Ugly Houses®” team to ask how you can position your professional real estate investing business for success in 2019—and, beyond.

Each franchise office is independently owned and operated.

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