Investing in real estate may seem like a distant dream for many, especially with soaring home prices in cities like New York, Los Angeles, and Miami. However, a new strategy has emerged for those looking to build wealth without purchasing their first home. Kearvyn Arne, founder of Vynar Capital, explains that first-time real estate investing is not as out of reach as many think, even in today’s competitive market.
A New Way of Real Estate Investing
Traditionally, real estate investment involved purchasing a home to live in, but today, many are opting to rent while investing in smaller properties, such as multi-family homes or short-term rentals. Arne encourages aspiring investors to educate themselves about the market, financing options, and types of investment properties available. The first step, according to Arne, is to connect with experienced investors, attend seminars, and thoroughly analyze potential deals.
No Need to Save for a Down Payment
One of the most significant hurdles to investing in real estate is the down payment. However, Arne asserts that you don’t need to wait years to save up for a substantial down payment. With a steady income and good credit, it’s possible to leverage credit to secure funding for investments. Many loans, including FHA and conventional ones, require a down payment of only 3.5% to 20% of the property’s purchase price. Instead of saving for years, investors can focus on building their credit and using it strategically to invest in properties that generate income.
Buy an Investment Property, Not Your First Home
Arne recommends focusing on investment properties before buying a home for personal use. For those looking to build wealth, investing in properties such as multi-family homes or short-term rentals can generate steady income while you continue renting. This strategy allows you to grow your portfolio, eventually affording the property of your dreams. According to Arne, this approach often makes more financial sense than waiting to purchase a home that meets all your needs from the start.
Consider Suburbs and Nearby Towns
If investing in a major city feels out of reach, Arne suggests exploring properties in the suburbs or smaller towns. These areas may offer more affordable options for first-time investors while still providing strong rental demand. Gabriel Pincus, a registered investment advisor, shares his experience of purchasing properties about 50 miles outside Nashville, Tennessee. Pincus found that investing in more affordable locations outside the city helped reduce costs and align with his investment strategy, ultimately strengthening the neighborhood.
The Realities of Being a Landlord
Though Pincus has seen success, he learned that being a landlord requires substantial time and effort. After purchasing his first rental property, he quickly realized the work involved and opted to hire a property management company. Arne similarly suggests investing in luxury properties, such as one-bedroom condominiums with on-site maintenance, which offer a more hands-off approach for first-time investors.
Investing in Hotels
For those with more funds, Arne and others suggest considering investments in hotels, which can yield high rewards but also come with higher risks. Lorne Greenberg, a developer and entrepreneur, explains that unlike traditional rentals, hotels operate as businesses. Small operational changes—such as optimizing staff or improving service—can significantly impact revenue and guest satisfaction. Although the hotel industry involves active management and is subject to market fluctuations, a successful hotel investment can be very profitable.
Think Long-Term
Finally, Arne emphasizes that real estate investment is a long-term endeavor. “Patience and persistence are key,” he advises. “Always be willing to learn, and don’t rush into deals. Your first deal is often your most important learning experience.” By remaining patient and thorough in your research, you can build a solid foundation for long-term success in real estate investing.
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