A lot of people have asked me recently how to start their own real estate business. Over the last few entries I have tried to give a good overview of how I got into the business. Today I want to share some key differences between real estate investing and personal home buying. It is very important that anyone approaching one or the other understand how they are different.
Personal home buying represents turning a house into a home. In this situation you are looking through a very personal lens. If you like finished basements or large kitchens, you need to look for a house that either can be completely redone or that comes close to meeting your needs. You go in expecting to put in several years (or more) worth of work to get things just the way you like it. Have you ever wondered why some houses have more bathrooms than bedrooms or why the walls are pink under that wallpaper? The answer is simple; everyone who moves into a house makes it a home.
The goal of real estate investment buying is almost the opposite. In this situation you are taking a home and turning it into a blank canvas for future renters or buyers. Those flower window dressings you like so much, might not appeal to perspective tenants. Additionally, while you might be able to live with that hole in the door, future buyers might see that as a sign of disrepair. Most importantly, the properties you look for will be diamonds in the rough. Properties with broken doors and windows, but fairly new appliances, a good foundation, and an intact furnace make excellent investments.
Good investors have great vision. They know how to separate buying a home from buying a house. These investors know how to change little things to make a big impact. New door knobs, a new address sign, freshly cut grass, and a few shrubs in the front can turn a house completely around.
New investors need to keep this in mind as they approach an opportunity. The quickest way to kill a return is with expensive upgrades that you fall in love with. A keen understanding of personal home buyers is important. Home buyers expect to purchase or rent a house and make changes to fit their lifestyle (not yours). Save money by providing them a blank canvas and let them create the vision.