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Benefits of Real Estate To Investors

How to Become a Real Estate Investor: A Comprehensive Guide

May , 20
How to Become a Real Estate Investor: A Comprehensive Guide

Becoming a real estate investor can seem like a daunting task, but with the right approach and mindset, it is entirely achievable. By learning from the experiences of successful investors like my friend Ester and my mentor Rose, you can navigate the complexities of real estate investing with confidence. Their journeys highlight the importance of financial stability, strategic planning, and resilience in the face of setbacks. Let’s explore their stories and uncover the lessons that can guide you to become a successful real estate investor.

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Leveraging Financial Stability and Good Credit

Both Ester and Rose began their real estate journeys by leveraging their stable jobs and good credit to secure favorable loan terms. Ester used her credit to acquire a pinch-by-pinch payment plan for an off-plan property, while Rose secured a first-time homebuyers loan that required a minimal down payment.

Ester’s Real Estate Investor Story

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I sat there watching my friend Ester as she flawlessly sold a four-bedroom maisonette for as high as 230 million naira in Ikoyi, a property she had paid half that price for. The best part was the pinch-by-pinch payment plan of 12 months. Two weeks later, she was telling me how she made it all happen. She used the money from the sold property to pay off the construction company that built the house she just sold. Ester was one of the first buyers of that property as an off-plan project. She confessed to me later that the total amount she paid was 110 million naira, which she was paying monthly until the project was completed. She was able to pay 80 million from loans, but immediately after the project was completed, she put it up for sale and used the profit to complete the payment to the construction company, a balance of 30 million naira, pay back her loan, and still had 90 million naira as profit.

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Rose’s Real Estate Investment Story

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Rose, my mentor, began her journey with a stable job and good credit, which allowed her to secure a first-time homebuyers loan. This loan program was crucial because it did not require a large down payment, making it accessible for a first-time buyer. Rose’s first place was a two-bedroom condo for $95,000 that she got into with only $3,800 out of pocket thanks to the loan program and her decent credit. A couple of years later, she sold it and bought a real house. This was in 2003 when the market was very strong, and the house appreciated in value rapidly.

Lesson: If you have a stable job and decent credit, look for first-time homebuyer programs or favorable payment plans that can help you get started with minimal upfront costs. These programs are designed to make homeownership more accessible and can be a great entry point into real estate investing.

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Building Equity: Upgrading and Refinancing

Ester sold her maisonette for 230 million naira after completing the payments and used the proceeds to pay off her loans and the construction company. This strategic move left her with a 90 million naira profit. Similarly, Rose upgraded from her initial condo to a house during a strong market period, allowing her to build significant equity. She then refinanced the house, taking out $16,000 in equity, which she used as a down payment for her first rental property.

Lesson: Upgrading to a new property during a strong market can help you build equity quickly. Refinancing your home to access this equity can provide the funds needed to invest in additional properties. This strategy can help you expand your real estate portfolio without requiring large cash reserves.

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Expanding the Portfolio: Using Equity to Acquire More Properties

Over the years, both Ester and Rose used the increasing values of their properties to acquire more investments. Ester leveraged her profits to buy additional properties, while Rose continued to take out equity to purchase more rental properties, eventually owning eight.

Rose’s Continued Real Estate Growth

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Over the years, as the values continued increasing, Rose took out equity from those properties to buy more properties. Eventually, she had eight. However, some of those properties were bad investments. When the market collapsed, she lost three of them, and her credit was destroyed. From 2012 to 2016, nobody would give her a loan. Eventually, however, she did recover. She refinanced a couple of the properties and bought her first two new houses since the bust. A year later, she sold the first rental she bought, the one-bedroom condo. In the 13 years she had owned it, it survived the bust and then more than doubled in value from $105,000 to $275,000. Her original $16,000 investment returned $180,000 in cash! She used that to buy two more houses each with 25% down. This was conservative leverage, less growth, but better cash flow to help if the market busts again.

Lesson: Using equity from existing properties to acquire new ones can accelerate the growth of your real estate portfolio. However, it is crucial to be mindful of the risks involved and to ensure that each new investment is sound and sustainable.

Facing Setbacks: Surviving the Market Collapse

Rose faced significant setbacks when the market collapsed, losing three properties and damaging her credit. From 2012 to 2016, she couldn’t secure any loans. Ester also faced challenges but remained resilient and strategic in her investments.

Lesson: Real estate investing comes with risks, and market downturns can lead to substantial losses. It’s essential to have a contingency plan and to be prepared for tough times. Diversifying your investments and maintaining a healthy cash reserve can help mitigate these risks.

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Recovery and Growth: Strategic Investments Post-Recovery

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Despite the setbacks, both women recovered and continued to grow their portfolios. Rose refinanced her remaining properties and bought two new houses. She sold her first rental property, which had more than doubled in value, and used the proceeds to purchase two more houses with conservative leverage, focusing on cash flow rather than aggressive growth.

Lesson: Recovery from setbacks is possible with perseverance and strategic planning. Focus on conservative leverage and cash flow to build a more resilient portfolio that can withstand market fluctuations.

Looking Ahead: Transitioning to Commercial Properties

As their portfolios grew, both women realized the limitations of residential properties in terms of scalability. Ester plans to transition to commercial properties, which offer better scalability and potential returns. Rose also recognized that commercial real estate could provide higher returns and better scalability.

Lesson: While residential properties are a great starting point, consider transitioning to commercial properties as your portfolio grows. Commercial real estate can offer higher returns and better scalability, allowing you to achieve your investment goals more efficiently.

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Become a Real Estate Investor

Key Advice for Aspiring Investors

  1. Invest Based on Numbers: Always base your investment decisions on financial performance rather than emotional appeal. Ensure that your investments can withstand economic downturns.
  2. Take Action: The most critical step is to start. Even if you make mistakes along the way, taking action and learning from your experiences will propel you forward much more than staying on the sidelines.

Conclusion

The journey to becoming a real estate investor is filled with opportunities and challenges. By following the lessons from Ester’s story and Rose’s experiences, you can navigate the complexities of real estate investing with greater confidence. Remember, the key is to start, learn continuously, and adapt to the changing market conditions. CARRILLION Real Estate, with its extensive expertise and dedication, can guide you through this journey, ensuring you make informed and strategic decisions.

For more inquiries and to start your investment journey with CARRILLION, please contact us at:

  • 09085555333
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  • 09074442222
  • 08185320000
  • 08076827683

Trust CARRILLION to be your partner in transforming your real estate dreams into reality.

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