Real Estate Investment Advice Partner with a local bank. “Use local banks that specialize in real estate lending, not mortgage bankers. We’re close to our bankers, and they know our business,” says Steve Jordan of Rebuilding America, in Pensacola, Fla. John McCloskey, of J. Francis Co. in Pittsburgh, says that setting up a line of credit can also be helpful — and possibly using the equity in your primary residence.
Work with a tax specialist. They are especially helpful in setting up the best way to invest. In addition, says Andy Wright, of WrightBuilt in Grass Valley, Calif., they can advise you on depreciation, repair deductions, and capital improvements.
Negotiate and lowball offers. McCloskey often offers 20% less than the asking price. He says that real estate agents like to sell properties to him because it’s a quick sale without contingencies. Craig Deimler, who manages Deimler & Sons Construction in Harrisburg, Pa., and his father work with real estate agents or find houses for sale by owner. Jordan often markets directly to homeowners in the community where he wants to buy. He offers to pay cash and close escrow in 30 days or less.
Learn to manage the rental properties or hire an outside firm. Jordan says that the true income on the properties is rental income. He has four full-time staff who collect rent and schedule maintenance. McCloskey hired a property management firm to handle the leases, credit checks, and maintenance on his rental properties, as well as to pay the mortgage and utility bills. “I also have the option of retaining them to fill each unit,” he says. The firm charges a percentage of the gross rent for each property. McCloskey has even found good subcontractors for his remodeling business through the property management firm.
Maintain the development company as a separate entity from the remodeling firm. “The more space and protection you can give to yourself, the better,” Craig says. Financial consultant Steve Maltzman says remodelers should view this type of investment as they would any investment, such as a stock purchase or mutual funds. “Look at risk versus return,” he advises.
Begin by purchasing an office for use by your remodeling company. “Becoming your own landlord is smart. Buy bigger than you need now, rent out part of the space, and grow into the building,” Jordan says.