Anyone who’s thinking about getting into real estate but don’t think they have the know how or resources needs to hear Zamir Kazi’s story. Starting out with minimal cash and industry knowledge, Kazi purchased a $60K house. He then built up a real estate portfolio of over 200 properties within a year and more than 400 properties within three years. He is now in the middle of raising a $25-million real estate fund to purchase $100-million worth of property, after only about four years of actively working in real estate.
Kazi has executed real estate just about as well as any entrepreneur could hope for. Similar to most entrepreneurs, he notes that while just getting going can be difficult, it is the most important step, and that most of the problems will solve themselves with experience. He offered these four tips as the most powerful methodologies real estate entrepreneurs need to internalize.
#1 Watch for Changes in Income
Most people will note that San Francisco and New York have seen massive spikes in rents, and many will conclude these markets are in bubble territory. This may be true, but, as Kazi notes, an important factor that drives home values is the demographic that is buying in those neighborhoods.
San Francisco and New York have both seen spikes in average income as technology and financial firms recruit more people at higher incomes.
Shifts in income can be a helpful indicator for whether a market is poised for sustained growth. Since a wealthier demographic, whose high salary is contingent on living in a certain area, means more income allotted for housing, income shifts are an important indicator of where house prices and rent values should be heading.
#2 Watch for Price Fluctuations
Irrational exuberance can drive up prices just as much as income shifts do. Regions such as Las Vegas and Phoenix have cheap land and can easily build more homes, whereas San Francisco and New York both have caps on construction and limited land to begin with. This means that, as prices increase in regions with easy construction, overproduction and a crash in prices become more likely, as seen in 2008 housing bubble.
At a smaller level, in Kazi’s work in Los Angeles real estate, he has identified certain neighborhoods that are getting bid up in price and noted that his target demographics are shifting interest to more affordable areas. These signs tell Kazi to sell his properties in the high-priced neighborhood, clear his profits and invest in properties in the new desirable area. Be cautious about buying expensive properties and hoping for continued gains, because usually once an area appreciates in price it means a different neighborhood is the better investment.
#3 Neighborhoods Are Products
When you purchase a home, whether you are a 30-something or 40-something, you have certain tastes and preferences you are looking for. Additionally, if you are aiming for tech workers, families or any other kind of real estate demographic, each will come with a certain set of tastes that you need to understand. As you track these traits, you’ll begin to understand the value of various neighborhoods within a city.
For instance, tech employees in LA tend to want to live in Santa Monica or Venice Beach, while people in the entertainment business want to live near West Hollywood or Beverly Hills. Every neighborhood goes through changes, whether it is the stores, restaurants, public art or general culture, and as these change, your demographics will shift interest to new up-and-coming neighborhoods. That is the perfect time to buy property.
#4 Find a Mentor
As with any business endeavor, you should proceed with caution. Many of the mistakes Kazi made starting out were simple things he eventually learned the hard way, finding the answers on YouTube, Google and via mentors. Whether it is teaching you what repairs typically cost or how to look at different markets and neighborhoods, a mentor can provide valuable information.
Since most people in real estate started out with their own mentor and the assistance is not too intensive, many experienced real estate professionals are eager and willing to help newcomers. Kazi even noted that he would rather work with a hungry young entrepreneur than a complacent, but more experienced, older entrepreneur. When you are starting out, leverage your age and drive and you should be able to easily find a mentor.
Real estate is an asset class that offers potentially huge returns for those who can navigate it effectively. Getting started with even a small amount of money and looking for ways to add value to homes is a great avenue to enter real estate and begin building a portfolio of your own.
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