Today’s article was originally going to be an economic review of Trump’s first year. In light of what’s going on in Minneapolis, it doesn’t feel right to analyze his handling of the economy. It feels like I’d be trying to shift the conversation away from immigration. The safety of people tops the economy.
Fortunately, an old college friend called, and she inspired this pivot. I hadn’t talked to her in several months. We talked about a variety of topics, but of course, I wouldn’t be writing this if we hadn’t gotten to personal finance.
She lamented that she and her husband didn’t really have the savings she expected. They are 46 and still working ridiculously hard. For a pair of doctors*, I can imagine why there is some disappointment. She analyzed it on the call – she doesn’t like to take risks. The husband sounds like he’s always been willing to take more risks. So they are looking to make a change.
She mentioned two paths they are considering. One is opening their own practice. I don’t know much about that area, but the start-up costs for equipment must be a lot. The other was investing in real estate. She didn’t know that we had rental properties for 20 years now. When she learned that, she was curious to learn more – “How has it worked out?” My short answer is that we made a good amount of equity, around $800,000. However, it’s work, and we currently have a property that has been vacant for about 10 months. We put $35,000 into fixing it up and haven’t been able to collect the $20,000 rent that we normally would if we could have someone in it. (Some of the 10 months were renovation. The rest may be attributable to Newport, RI being EXTREMELY seasonal.)
I told her that I’d send her some resources to get started. (Yep, I’m reusing much of that email as a blog post. Score me a rack of Lazy aura points!**)
Real Estate Investing for Beginners
I decided to go with a multimodal approach and focused on three areas:
Best Beginner Real Estate Investing Book (and Support)
A great beginner book is: How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started by the Bigger Pockets duo of Brandon Turner and Joshua Dorkin. All the Bigger Pockets books are great, but this is literally the “Beginner’s Guide.” Of course, I couldn’t mention Bigger Pockets without mentioning the incredible community forum on their website. (The book is an affiliate link. I might make a few dollars if you sign up.)
Best Beginner Real Estate Course
Financial guru Paula Pant also has a well-known course, Your First Rental Property. I still remember when she introduced herself to me at the first FinCon and explained that her website Afford Anything doesn’t mean Afford Everything. Now, 15 years ago, and now she’s huge – even has her own Netflix show. I talked with her every year at that conference for a number of years, and she always had the coolest story to tell about some adventure she went on. I warned her that the course isn’t cheap. However, I think she’s been running for 10 years now, and the lifetime membership is a good value given that. Then again, when you are entering something with the idea of making hundreds of thousands of dollars, it’s a drop in the bucket – as long as you use it.
(Note: That’s not an affiliate link. I don’t make anything if you buy the program.)
Best Real Estate Investing Tool
Maybe this isn’t the best, but this is my favorite. If you know of a better one, please leave it in the comments.
The best way that I’ve found to know if it’s a good time to buy is to use the NAHB/Wells Fargo Index. Just scroll down to the chart, and you’ll see that it dropped before the housing crash in 2007-8 and rose before the run-up around 2020. The average is 50. I’d look to buy when it is 30 and consider selling when it is 70. That’s an oversimplification, and buying and selling real estate isn’t just a few clicks on a website like your brokerage’s.
Of course, real estate is local. The national average is fine, but they also have regional numbers. The link just under the chart downloads an Excel spreadsheet with those numbers. I’m sure there are other great tools, but I never see people talking about this one.
Final Thoughts
I ended the email to my friend by saying I can provide some similar reading on investing in the stock market. That wasn’t an area that she had mentioned. Also, my stock market indicators, unlike the real estate ones, say it’s the worst time to buy stock in the past hundred years. Indicators can be wrong, and they have been for about a year now. I was happy to avoid that topic completely for now.
* They aren’t MDs, but doctors, like a dentist or a pharmacist. I am trying to keep things a little vague to keep anonymity.
** I’m practicing my Gen Z slang, so I can talk all the coolness out of how my kids talk. This roughly means that I’m being very lazy, which is “on brand.”
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