Posts and pages about my Real Estate.
I am often asked what are the best Real Estate investments in Portugal (and my markets in particular), and how exactly I can reach almost 20% net ROI. This post will give you a good idea of what I do.
The most important question, for me, is buying multi unit properties. In Portugal, there are plenty of them. Let me show you an example:
(retrieved from Google Maps)
Having invested heavily into Real Estate in the past 2 years, I have learned a few lessons which I would like to share with you. Of course that in this article, I will be talking primarily about real estate in Portugal. Note that the lessons I will be sharing apply to the the Portuguese market only. You may think “Algarve Portugal real estate”, because that is very sexy and trendy, but I will actually be talking about real estate in Portugal as a whole. Note that the markets in Algarve and Lisbon are especially regulated, given that the majority of the leases are short-term leases.
My dear dudes,
If you subscribed to this blog, you have received awesome photos of the renovation of RP#3. Today, I want to expand more on the topic of real estate. Many of you ask me how can I buy Real Estate so cheap and yet have high appraisals.
Hey guys,
The concept of leveraging is very well known among investors; We prefer to use Other People’s Money (OPM) rather than our own money. The idea is simple: we can use our money to make more money and we use OPM to make more money too; the gains on our own money must be higher than the interest we pay on OPM.
Holding a PhD on Applied Mathematics, being type A personality and a little OCD, I typically estimate things very accurately and thoroughly (sometimes too much!). Turns out that I messed up big this time.
I am very proud of RP#3 – it will generate a 50% Cash on Cash return and I will add 6 units to my portfolio. This would not be very surprising if we weren’t talking about a <50k property…
When I bought it, I knew right away that I would have to spend serious dollars towards renovating it. However, I did underestimate what I was going to spend…
How it will look inside, soon…
I am sorry this heads up took a while more… I’ve been busy… if you follow my blog you’re aware that I bought rental property 3 (RP#3) and I was waiting for the official purchase to be confirmed, as the process when back and forth a few times. Well, I finally transferred it into my name. 🙂 This is sort of a game changer, so I need to explain this deal in detail.
This is a 6-unit rental property (yes I more than doubled my unit count)! Although extremely cheap, I will have to throw a LOT of dollars into it. I payed about €33k for it and I will have to throw another about $15k so it is ready to rent out. Total, I expect to invest about €48k in the purchase, renovation and furniture.
My contractor hasn’t picked up a hammer yet, and I’ve already thrown over €5k into it, distributed among requests to federal and local taxes and bank fees. 🙁
Either way, I added another 6 units to my portfolio and I am finally at 10 units! Shit, the dream is happening… with this rental property, I now have 10 units! I will probably be the landlord of about 25 people, assuming an average of 2,5 people per unit. And you know what? I like this game so much I just submitted another offer (more to come later on…).
Even though my buddy investors mock me with the fact that I bought my RP#1 all cash, I still believe that it was a great decision. First, it is a cash-cow which I don’t have to concern much with (it will still cash-flow). Second, it was such a great tool when I came to the bank asking for money. “Look fellas, I’ve got myself this nice property in cash. It nets me about €2400 a year. Don’t you think that I am creditworthy? Oh, and BTW, I am debt free.”
You should look at the bankers face when they saw this 27 years old who bought an apartment all cash, when they have been paying theirs for 20 years and ain’t done yet. Maybe I sound like a privileged prick right now, but that is not my intention. I am simply happy with the fact that this helps me negotiating with the bank (remember, Portuguese banks are very peculiar when it comes to lending money…).
As I said, RP#2 was in the works, and I finally have good news: I bought a building. Yes, a building. It has 3 rental units (three floors) and two of them are already rented out. I will use leverage as the two rented units will pay for the (20 years) mortgage. That means that the third unit will bring considerable cash flow (something between €200 and €250 a month) and will position me to buy more real estate.
I love this deal, and I will try to replicate it. Instead of condos / apartments, I will be looking for 2-4 unit buildings from now on. These are great for a variety of reasons. First, the price is not significantly higher than 1 condo. In essence, I get 3 condos for the price of 1. Second, I save a lot with maintenance and property management fees. Third, I dilute the risk: with 3-4 units I never end up in a binary situation.
From here on, I will only look for this type of deals. In particular, I hope to find buildings that get the mortgage covered when two units are rented (and the others bring cash flow). I will close the deal next month. Will keep you posted!
A lot of people ask this question in forums for real estate investing. Usually, they already have one cash funded property and they’re thinking about going and get credit for the following properties, but are afraid the strategy fails. Sometimes, they already have credit funded properties and wonder if their credit is too large. However, what is not trivial to see is that all these investors suffer from the same problem: fear. In theory, we only buy rental properties where the demand for them is high. So if we do believe we’ll have tenants, what would on earth stop us from buying all credit, other than not qualifying for more?
Long story short, all cash funded properties are incredible tools, and so, it does make sense to buy some properties all cash. Why? Two main reasons: first you increase your income, which enables you to qualify for more credit in the long run. Second, you can borrow against these properties.
I tried to solve the question of the post, and here’s what I came up with:
I was asked the other day what methods I use to find properties, and why it takes so long. “If your plan is to have 12 properties, why does it take you so much to find new ones?”
Well, I live in Germany and my RE is to be bought in Portugal. This limits my opportunities to actively look for new properties, but this is not what consumes the most time. It is actually the rules that I use to buy new properties. Remember, saving 20% now on a 40K property (8K) will have a tremendous impact in even 5 years from now. I am not just trying to get rich by doing smart financial decisions, I am on a hurry to retire! This means that I need to be extremely savvy and get the best of the best deals! I am also a goal setter, so I have a lot of goals to meet. Let us discuss what I do to buy new properties.
Studying the market is not an overnight job, but this is done and I know exactly what I am looking for. If you’re considering going into real estate, study and re-study your market (I will post something about this in the near future – stay tuned there is a lot to come up in March). So if I know my market, what else do I need? Here is what you need: