If you’re thinking about getting into real estate, it's still a great time, but you have to know a few things.
We are in an up market, which means I get asked the following question a lot…
“David, how do I protect myself against another downturn like we had back in 2008-10?”
Great question. Here’s the short answer.
I stay fully invested in real estate, either as a lender or as an equity owner of property, and you can, too.
But you've got to know the right property segments to invest in.
For now, let’s stick specifically with single-family. I don’t want to get complicated and talk about multi-family or commercial.
You can stay really safe in single-family.
I like the price band between $80k-$150k.
That's all-in. That's my acquisition, plus any rehab or renovation.
Why do I like that price band? #1: Because it attracts the kind of tenants I want.
These are going to be good houses in good neighborhoods.
3-bedroom, 2-bath, 2-car garage homes in neighborhoods where there's access to schools and access to jobs — the neighborhoods where you can walk down the street on a Saturday night and feel safe.
#2: Because the rental income relative to those price points is rock solid.
In fact, you should get at least 1% per month of the total value of that property.
An $80k property should produce $800/month — though, typically, they’ll produce more than that — and a $150k property should produce at least $1,500/month.
That's where you want to be.
Realize this: When the markets reset — when there's a downturn — you're in the price band where people want to be.
People will ratchet down a little bit if there's a higher price point property. They’ll ratchet down, right into that band.
It's good people, good tenants, and it's the right place to be.
If you do that, use safe leveraging, and have great management on the back end, it can't go wrong.
But you've got to know how to access those right deals. That's the key.