Last Updated on April 28, 2020
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In this article, we got a chance to interview an experienced real estate investor, Sean Pan! Check out his awesome insights below.
My name is Sean Pan and I’m a real estate investor based out of the Silicon Valley, Bay Area. I specialize in flipping homes in the Bay Area and I own a few rentals in Jacksonville Florida.
How Can A Beginner Invest In Real Estate?
The best way for a beginner to get involved in real estate investing is to attend their local real estate investing meetup groups to create connections in the industry. Actively participating in these groups will give you the guidance and confidence that you need to take action to do your first deal.
There are many ways to make money with real estate investing and no single strategy is “the best”, they all work. If you’re interested in purchasing properties and living off of the cash flow, you could do the buy and hold strategy. Properties in the East Coast and the Midwest can be purchased for under $100,000 and command rents over $1000/month. This massive price to rent ratio allows you to pay for all expenses and the mortgage, while still giving you a profit every month.
Some investors prefer doing short term projects like wholesaling and flipping. Many investors in the Bay Area are making at least $100,000 in net profit per deal. We did a project in Sunnyvale where we purchased the property for $1,075,000 and instantly sold it to another investor for $1,200,000 netting us $125,000 without doing any work on the property.
What are the secrets to success in real estate?
I’ve learned that this business is all about the quality of the relationships that you have. I don’t think that I could have negotiated the price of the property in the previous example to $1,075,000, and I don’t think that I would have been able to sell it for $1,200,000 to another investor. But by partnering with the right people, we were able to make a great profit. Likewise, if you partner with the wrong people, then you can get into deep trouble. Your projects can be delayed, and you may end up having a property that sits on the market for months.
I also learned that you need to think BIG! I got really lucky on my first deal and netted over $300,000! The tax on that project was more than my base salary for the year. Why would I ever work at a company for just a salary ever again?
What are the risks?
That being said, you can also LOSE a lot of money as well. I made the mistake of purchasing a property that was beyond my capabilities in early 2018. When the market turned, I wasn’t able to sell the property at our expected price and ended up losing a lot of money. One of the main issues with the home was that it didn’t have a garage. This made our home undesirable and it ended up sitting on the market for months. If you want to be successful in this business, you need to be able to handle these setbacks without letting it impede your progress.
Anyone can be in this business, but if you have a bad mental attitude and if you’re a constant worrier, then it might not be for you. In Ray Kroc’s (the founder of McDonald’s) autobiography “Grinding It Out”, Ray Kroc tells us how his father passed away at an early age because he lost everything during the great depression of 1929. His real estate holdings were all underwater and the stress got to him. You need to be able to handle adversity like a boss.
I’m fortunate that I haven’t had to deal with any lawsuits or tenant issues so far. My property management team in Jacksonville has been very good at screening our tenants before leasing out the units. Some say real estate is the most litigated field, and if you haven’t gotten sued it just means that you haven’t done enough deals. There are many services that specialize in asset protection management, but to be honest, I don’t think it’s necessary unless you build up a massive portfolio that’s worth protecting.
I’ve definitely learned a lot from my experiences in the past few years like I mentioned before, the best way to get started is to go to meetups and to find mentors who can help you in your real estate investing journey. I created a real estate investing podcast called “The Everything Real Estate Investing Show” that focuses on finding the best tips and tricks from successful real estate investors. After interviewing over 100 real estate investors and professionals, I’ve compiled a short handbook that summarizes the best tips. You can get your free copy at https://everythingrei.com
After growing a small following of real estate investors, I was looking for more ways to help them. That’s why I started helping people finance their projects as a hard money lender. If you’re looking to purchase an investment property and need help financing it, you can contact me at firstname.lastname@example.org
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